QIND 10-Q
Quality Industrial Corp. (QIND)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
For the transition period from __________ to__________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number)
____________
(Former name, former address, and former fiscal year, if changed since last report)
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. ☒
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
| ☐ Large accelerated filer | ☐ Accelerated filer | |
| ☒ | ||
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 the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). ☐ Yes
Securities registered pursuant to Section 12(b) of the Act: None
State the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable date:
TABLE OF CONTENTS
| Page | ||
| PART I – FINANCIAL INFORMATION | ||
| Item 1: | Financial Statements | 1 |
| Item 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 2 |
| Item 3: | Quantitative and Qualitative Disclosures About Market Risk | 5 |
| Item 4: | Controls and Procedures | 5 |
| PART II – OTHER INFORMATION | ||
| Item 1: | Legal Proceedings | 6 |
| Item 1A: | Risk Factors | 6 |
| Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds | 6 |
| Item 3: | Defaults Upon Senior Securities | 6 |
| Item 4: | Mine Safety Disclosures | 6 |
| Item 5: | Other Information | 6 |
| Item 6: | Exhibits | 6 |
i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Our financial statements included in this Form 10-Q are as follows:
These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended March 31, 2024, are not necessarily indicative of the results that can be expected for the full year.
1
QUALITY INDUSTRIAL CORP.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, (Unaudited) |
(Audited) | |||||||||||
| ASSETS | ||||||||||||
| Current Assets | 5 | |||||||||||
| Cash and Cash Equivalents | ||||||||||||
| Inventory | ||||||||||||
| Accounts Receivable | ||||||||||||
| Deposits, Prepayments, & Advances | ||||||||||||
| Other Current Assets | ||||||||||||
| Total Current Assets | ||||||||||||
| Non-Current Assets | 6 | |||||||||||
| Long Term Investments | ||||||||||||
| Property, Plant & Equipment | ||||||||||||
| Goodwill | 7 | |||||||||||
| Total Non-current Assets | ||||||||||||
| Total Assets | ||||||||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||
| Current Liabilities | 8 | |||||||||||
| Accounts Payable | ||||||||||||
| Other Current Liabilities | ||||||||||||
| Total Current Liabilities | ||||||||||||
| Non-Current Liabilities | 9 | |||||||||||
| Convertible Notes | ||||||||||||
| Other Non-Current Liabilities | ||||||||||||
| Total Long-Term Liabilities | ||||||||||||
| Total Liabilities | ||||||||||||
| Stockholders’ Equity | 10 | |||||||||||
| Preferred stock; $ | ||||||||||||
| Common stock; $ | ||||||||||||
| Additional paid-in capital | ||||||||||||
| Retained Earnings/ accumulated Deficit | ( | ) | ( | ) | ||||||||
| Minority Interest | 11 | |||||||||||
| Total stockholders’ Equity | ||||||||||||
| Total liabilities and stockholders’ Equity | ||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-1
QUALITY INDUSTRIAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended | ||||||||||||
| March 31, 2024 | March 31, 2023 | |||||||||||
| Revenue | ||||||||||||
| Cost of revenues | ||||||||||||
| Gross profit | ||||||||||||
| Operating expenses | 12 | |||||||||||
| Professional fees | ||||||||||||
| General and administrative | ||||||||||||
| Total Operating Expenses | ||||||||||||
| Profit/ loss from Operations | ( | ) | ||||||||||
| Non-Operating expense | 13 | |||||||||||
| Depreciation | ||||||||||||
| Interest on Convertible Notes | ||||||||||||
| Other Non-Operating Expenses | ||||||||||||
| Total Non-Operating expenses | ||||||||||||
| Non-Operating Income | 14 | |||||||||||
| Net loss/ profit | $ | ( | ) | |||||||||
| Net income Minority interests | ||||||||||||
| Net profit Parent | ||||||||||||
| ( | ) | |||||||||||
| Weighted average common shares outstanding | ||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-2
QUALITY INDUSTRIAL CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited)
| Preferred Stock | Common Stock | Additional Paid-in | Minority | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Interest | Deficit | Equity | |||||||||||||||||||||||||
| Balance, December 31, 2023 | ( | ) | ||||||||||||||||||||||||||||||
| Common stock issued for conversion of notes | — | |||||||||||||||||||||||||||||||
| Minority Interest | — | — | ||||||||||||||||||||||||||||||
| Net Income | — | — | ||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | ( | ) | ||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance, December 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Common stock issued for cash | — | — | ||||||||||||||||||||||||||
| Common stock issued for license agreement | — | — | ||||||||||||||||||||||||||
| Imputed Interest | — | — | ||||||||||||||||||||||||||
| Net Loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-3
QUALITY INDUSTRIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Three Months Ended | ||||||||
March 31, 2024 | March 31, 2023 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net profit | ( | ) | ||||||
| Adjustments in operating activities: | ||||||||
| Finance Cost | ||||||||
| Depreciation | ||||||||
| Non-Operating Income | ( | ) | ||||||
| (increase)/decrease in current assets | ||||||||
| Inventories | ( | ) | ||||||
| Accounts Receivable | ||||||||
| Other Current Assets | ( | ) | ( | ) | ||||
| (increase)/decrease in current liabilities | ||||||||
| Contract and other payables | ( | ) | ||||||
| Net cash used in Operating Activities | ( | ) | ||||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of Property, Plant and Equipment | ( | ) | ||||||
| Net cash used in Investing Activities | ( | ) | ||||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from Issuance of Convertible Note | ||||||||
| Finance Cost | ( | ) | ( | ) | ||||
| Proceeds/repayment of Bank Borrowings | ||||||||
| Movement in shareholders current account | ( | ) | ||||||
| Net cash from financing activities | ( | ) | ||||||
| Net increase (decrease) in Cash | ( | ) | ( | ) | ||||
| Consolidated Cash and cash equivalents at the beginning of the period | ||||||||
| Consolidated Cash and cash equivalents at the end of the period | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-4
QUALITY INDUSTRIAL CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1: OUR HISTORY
The Company was incorporated in the state of Nevada under the name Sensor Technologies, Inc. on May 4, 1998. In March 2006 the Company changed its name to Bixby Energy Systems Inc. In September 2006, the Company changed its name to Power Play Development Corporation. In April 2007, the Company changed its name to National League of Poker, Inc. In October 2007 the Company changed its name back to Power Play Development Corporation. In October 2011 the Company changed its name to Bluestar Technologies, Inc. In March 2018, the Company then changed its name to Wikisoft Corp.
In May 2016, the Company’s Board of Directors terminated the services of all prior officers and directors and the board appointed Robert Stevens as the Board Appointed Receiver for the Company. This was a private receivership where the receiver was appointed by the board to act on behalf of the Company and no court filings were ever made in connection with the receivership. On April 16, 2019, in connection with the Merger described below, Robert Stevens resigned from all of his positions with the Company and the board-appointed receivership was concluded. At that time Rasmus Refer was appointed as the Company’s CEO and Director, and he resigned from such positions in August and November 2020, respectively. On August 31, 2020, Carsten Kjems Falk was appointed as CEO, and Paul C Quintal was on December 1, 2021, appointed as the sole director of the Company.
On April 11, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with WikiSoft Acquisition Corp., a Delaware corporation which was then the Company’s wholly-owned subsidiary (“Merger Sub”) and WikiSoft Corp., a privately held Delaware corporation (“WikiSoft DE”). In connection with the closing of this merger transaction, Merger Sub merged with and into WikiSoft DE (the “Merger”) on April 24, 2019. Pursuant to the Merger, the Company acquired WikiSoft DE which then became its wholly owned subsidiary.
On March 19, 2020, the Company entered into an Agreement and Plan of Merger (the “Short Form Merger Agreement”) with WikiSoft DE, pursuant to which it was agreed that the Company would merge with and into WikiSoft DE, with the Company surviving. Thereafter, on March 25, 2020, WikiSoft DE merged with and into the Company, with the Company (i.e., WikiSoft Corp. - the NV corporation) surviving pursuant to a Certificate of Ownership and Merger filed in with Delaware Secretary of State, whereby the then wholly owned subsidiary (WikiSoft DE) merged with and into the Company, with the Company surviving. On March 25, 2020, the Company filed Articles of Conversion in Nevada, whereby the then subsidiary (WikiSoft DE) merged with and into the Company, with the Company surviving. Prior to the Merger, the Company did not have any business operations, and at the closing of the Merger, the Company’s business was as described in detail below.
Wikisoft Corp. had a vision to become one of the largest portals of information for businesses and business professionals. Built on open-source software, the portal wikiprofile.com, was initially launched in January 2018, and the portal was relaunched in June 2021.
We changed ownership on May 28, 2022, when
ILUS at the time, acquired
In line with the change in control and business direction, our Company changed its name to Quality Industrial Corp. with the ticker QIND, with a market effective date of August 4, 2022. As a result of these transactions, Quality Industrial Corp. is a public company focused on the industrial, oil & gas and utility sectors and a subsidiary to ILUS. The Company filed articles of merger with the Secretary of State of Nevada in order to effectuate a merger with our wholly owned subsidiary, Quality Industrial Corp. Shareholder approval was not required under Section 92A.180 of the Nevada Revised Statutes. As part of the merger, our board of directors authorized a change in our name to “Quality Industrial Corp.” and our Articles of Incorporation have been amended to reflect this name change. Our common stock trades under the symbol “QIND.”
After ILUS acquired control of QIND, on May 28, 2022, ILUS signed a binding letter of intent on June 28, 2022, for the Company to acquire control of Quality International, an international process manufacturing company, manufacturing custom solutions for the oil & gas, petrochemical & refinery, chemical & fertilizer, power & desalination, water & wastewater, and offshore industries.
F-5
On March 9, 2023, we changed the SIC code of the Company to SIC 3590 - Misc. Industrial & Commercial Machinery and Equipment to reflect the new business direction.
On March 27, 2024, the Company signed a definitive Share Purchase Agreement with Al Shola Gas LLC (“ASG”). ASG is an Engineering and Distribution Company in the LPG Industry in the U.A.E. and was established in 1980. The company are one of the leading suppliers & contractors of LPG centralized pipeline systems. Al Sholas gas LLC has been consolidated as of Q1 2024.
On April 1, 2024, after several failed effort negotiations with the purpose of restructuring the deal and obtaining information from the selling shareholders of Quality International, the QI Purchase Agreement with Quality International was terminated by Quality International and subsequently the Board of Directors of the Company approved the cancellation of the agreement with Quality International Co Ltd FZC signed on January 18, 2023, and amended on July 27, 2023. Quality International Co Ltd FZC which is no longer consolidated with our financial statements. The company is in the process of unwinding the transaction, with management aiming to recover the investment or parts of it. However, if recovery proves unattainable, the investment may need to be written off in the later years.
NOTE 2. SUMMARY OF SIGNIFICANT POLICIES
Basis of Presentation and Principles of consolidation
The accompanying consolidated financial statements represent the results of operations, financial position, and cash flows of QIND and all of its majority-owned or controlled subsidiary are prepared in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP). All significant inter-company accounts and transactions have been eliminated.
Use of estimates
A critical accounting estimate is an estimate that: (i) is made in accordance with generally accepted accounting principles, (ii) involves a significant level of estimation uncertainty and (iii) has had or is reasonably likely to have a material impact on the Company’s financial condition or results of operations.
The Company’s Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and judgments that affect reported amounts and related disclosures. On an ongoing basis, management evaluates and updates its estimates. Management employs judgment in making its estimates but they are based on historical experience and currently available information and various other assumptions that the Company believes to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results could differ from those estimates. Management believes that its judgment is applied consistently and produces financial information that fairly depicts the results of operations for all periods presented.
Significant estimates include estimates used to review the Company’s, impairments and estimations of long-lived assets, revenue recognition of Contract-based revenue, allowances for uncollectible accounts, and the valuations of non-cash capital stock issuances. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Fair value of financial instruments
The carrying value of cash, accounts payable, warrants, accrued expenses, and debt, short term as well as long term, is recorded at fair value. Management believes the Company is not exposed to significant interest or credit risks arising from these financial instruments.
F-6
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable.
| ● | Level 1. Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets. |
| ● | Level 2. Quoted prices for similar assets and liabilities in active markets; quoted prices included for identical or similar assets and liabilities that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. These are typically obtained from readily available pricing sources for comparable instruments. |
| ● | Level 3. Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own beliefs about the assumptions that market participants would use in pricing the asset or liability, based on the best information available in the circumstances. |
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC 606).
The principal activity of the Company is to engage in general trading, manufacturing and fabrication or steel and steel products and mainly manufacturing of pressure vessels, tanks, heat exchangers and construction of storage tanks and piping. Revenue from contracts with customers is recognized when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company has generally concluded that it is the principal in its revenue arrangements because it typically controls the goods or services before transferring them to the customer.
Stock-based compensation
The Company recognizes all stock-based compensation using the fair value provisions prescribed by ASC Topic 718, Compensation - Stock Compensation. Accordingly, compensation costs for awards of stock-based compensation settled in shares are determined based on the fair value of the share-based instrument at the time of grant and are recognized as expense over the vesting period of the share-based instrument, net of estimated forfeitures.
In accordance with ASC 718, the Company will generally apply the same guidance to both employee and non-employee share-based awards. However, the Company will also follow specific guidance for share-based awards to non-employees related to the attribution of compensation cost and the inputs to the option-pricing model for expected term. Non-employee share-based payment equity awards are measured at the grant-date fair value of the equity instruments, similar to employee share-based payment equity awards.
The Company calculates the fair value of option grants and warrant issuances utilizing the Binomial pricing model. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. ASC 718 requires forfeitures to be estimated at the time stock options are granted and warrants are issued to employees and non-employees, and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeiture” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered stock option or warrant. The Company estimates forfeiture rates for all unvested awards when calculating the expenses for the period. In estimating the forfeiture rate, the Company monitors both stock option and warrant exercises as well as employee termination patterns. The resulting stock-based compensation expense for both employee and non-employee awards is generally recognized on a straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period.
F-7
Earnings (loss) per share
The Company reports earnings (loss) per share in
accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 260-10
“Earnings Per Share,” which provides for calculation of “basic” and “diluted” earnings per
share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders by
the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities
that could share in the earnings of an entity.
| Particulars | March 31, (unaudited) | March 31, 2023 | ||||||
| Basic and diluted EPS* | ||||||||
| Numerator | ||||||||
| Net income/(loss) | ( | ) | ||||||
| Net Income attributable to common stockholders | ( | ) | ||||||
| Denominator | ||||||||
| Weighted average shares outstanding | ||||||||
| Number of shares used for basic EPS computation | ||||||||
| Basic EPS | ( | ) | ||||||
| Number of shares used for diluted EPS computation* | ||||||||
| Diluted EPS | ( | ) | ||||||
| * |
Income taxes
The Company accounts for income tax positions in accordance with Accounting Standards Codification Topic 740-10-50, “Income Taxes” (“ASC Topic 740”). This standard prescribes a recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There was no material impact on the Company’s financial position or results of operations as a result of the application of this standard. Deferred tax assets have not been created the majority of the company’s income belongs to the subsidiary, which is registered in an income tax-free jurisdiction since any losses incurred cannot be utilized in the future, rendering deferred tax assets irrelevant, The profits of a foreign subsidiary corporation are ordinarily not subject to tax in the United States as in accordance with the general Internal Revenue Service rule, foreign subsidiaries are not considered U.S. corporations even if they are wholly owned.
Inventories
In accordance with ASC 330, the Company states inventories at the lower of cost or net realizable value. Cost, which includes material, labor and overhead, is determined on a first-in, first-out basis. The Company makes adjustments to reduce the cost of inventory to its net realizable value, if required, for estimated excess, obsolete, zero usage or impaired balances. Factors influencing these adjustments include changes in market demand, product life cycle and engineering changes.
Recently issued accounting pronouncements
The Company has evaluated all other recent accounting pronouncements and believes that none of them are expected to have a material effect on the Company’s financial position, results of operations or cash flows.
Off-Balance Sheet Arrangements
We have no significant 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 are material to stockholders.
F-8
NOTE 3. GOING CONCERN
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.
Management evaluated all relevant conditions and events that are reasonably known or reasonably knowable, in the aggregate, as of the date the consolidated financial statements are issued and determined. The Company’s ability to continue as a going concern is dependent on the Company’s ability to continue to generate sufficient revenues and raise capital within one year from the date of filing.
QIND has planned future acquisitions, and we intend to disclose these acquisitions, as they happen, in our ongoing reports with the Securities and Exchange Commission. Over the next twelve months management plans to use borrowings and security sales to mitigate the effects of cash flow deficits; however, no assurance can be given that debt or equity financing, if and when required, will be available.
NOTE 4. CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, in
accordance with ASC 230-10-20 the Company considers all highly liquid investments and short-term debt instruments with original maturities
of three months or less to be cash equivalents. There was $
NOTE 5. CURRENT ASSETS
| Year | March 31, (unaudited) | December 31, | ||||||
| Accrued Discount on Convertible notes | ||||||||
| Buy Back Commitment | ||||||||
| Related Party advances (ILUS) | ||||||||
| Total other current assets | $ | $ | ||||||
Accounts Receivables:
Accounts receivables are recorded at face value less an allowance for credit losses. The allowance is an estimate based on historical collection experience, current and future economic and market conditions, and a review of the current status of each customer’s trade accounts receivable. Management evaluates the aging of the accounts receivable balances and the financial condition of its customers and all other forward-looking information that is reasonably available to estimate the amount of accounts receivable that may not be collected in the future and before recording the appropriate provision.
Accounts receivable arises
from our subsidiary Al Shola Gas consolidated as of March 31, 2024. The duration of such receivables extends from 30 days to beyond
90 days. Payments are received only when a project is completed, and approvals are obtained.
| Accounts Receivables Ageing Al Shola Gas | March 31, 2024 (unaudited) | |||
| 1-30 days | ||||
| 31-60 days | ||||
| 61-90 days | ||||
| +90 days | ||||
| Total | $ | |||
F-9
Deposits, Prepayments, & Advances
Advances have been paid to the suppliers and subcontractors in the ordinary course of business for the procurement of specialized material and equipment required in the process of designing, engineering and installing Central Gas distribution and monitoring systems. The company is engaged in the design, engineering, supply and monitoring of Central Gas systems supplying and installing equipment such as pressure regulators, pipelines, safety equipment, tapping points, metering units, valves and storage tanks. To undertake these projects, the company is required to make upfront investments in materials and machinery. These projects involve many processes and take substantial time to complete.
Related party advances
As of March 31, 2024, and December 31,
2023, the Company had amounts due from Ilustrato Pictures International, Inc. (“ILUS”), a majority shareholder of the Company,
of $
On May 4, 2023, the Company issued to
Nicolas Link
On May 4, 2023, the Company issued to
John-Paul Backwell
On May 4, 2023, the Company issued to
Carsten Kjems Falk
On May 4, 2023, the Company issued to
Krishnan Krishnamoorthy
On May 4, 2023, the Company issued to
Louise Bennett
On September 15, 2023, the Company
issued to Nicolas Link
On September 15, 2023, the Company
issued to John-Paul Backwell
On September 15, 2023, the Company
issued to Carsten Kjems Falk
On September 15, 2023, the Company
issued to Louise Bennett
NOTE 6. NON-CURRENT ASSETS
The company holds long-term investments of
$
The company is in the process of unwinding the
remaining $
F-10
Property, Plant & Equipment
Property, Plant and Equipment are recorded at cost,
except when acquired in a business combination where property, plant and equipment are recorded at fair value.
| Property, Plant and Equipment | Years | |||
| Plant & Machinery | ||||
| Vehicles | ||||
| Furniture, Fixtures & Office Equipment |
Expenditures that extend the useful life of existing property, plant and equipment are capitalized and depreciated over the remaining useful life of the related asset. Expenditures for repairs and maintenance are expensed as incurred. When property, plant and equipment are retired or sold, the cost and related accumulated depreciation is removed from the Company’s balance sheet, with any gain or loss reflected in operations.
Depreciation
Depreciation of property, plant and equipment is recognized over the estimated useful lives of the respective assets using the straight-line method. Depreciation expense for the period ended March 31, 2024, belongs to Depreciation accounted for on Plant, Property and Equipment obtained as part of our subsidiary acquisition.
| Plant & Machinery | Furniture, Fixtures & Office Equipment | Vehicles | Total | |||||||||||||
| Carrying value as of January 1, 2024 | ||||||||||||||||
| Addition during Q1 2024 | ||||||||||||||||
| Charged Depreciation Q1 2024 | ||||||||||||||||
| Carrying value March 31, 2024 | ||||||||||||||||
NOTE 7. GOODWILL
Goodwill represents the cost of acquired companies in excess of the fair value of the net assets at the acquisition date and is subject to annual impairment. Goodwill is the excess of the purchase price paid for an acquired entity and the amount of the price not assigned to acquired assets and liabilities. It arises when an acquirer pays a high price to acquire a business. This asset only arises from an acquisition, and it cannot be generated internally. Goodwill is an intangible asset, and so is listed within the long-term assets section of the acquirers’ balance sheet.
The Company accounts for business combinations by estimating the fair value of consideration paid for acquired businesses and assigning that amount to the fair values of assets acquired and liabilities assumed, with the remainder assigned to goodwill. If the fair value of assets acquired and liabilities assumed exceeds the fair value of consideration paid, a gain on bargain purchase is recognized. The estimates of fair values are determined utilizing customary valuation procedures and techniques, which require us, among other things, to estimate future cash flows and discount rates. Such analyses involve significant judgments and estimations.
The Company follows the guidance prescribed in Accounting Standards Codification (“ASC”) 350, Goodwill and Other Intangible Assets, to test goodwill and intangible assets for impairment annually if an event occurs or circumstances change which indicates that its carrying amount may not exceed its fair value.
The Company acquired
F-11
NOTE 8. CURRENT LIABILITIES
Other Current Liabilities
| Other Current Liabilities | March 31, 2024 (unaudited) | December 31, 2023 | ||||||
| Salary Payable to CCO | ||||||||
| Accrued Interest on Convertible note | ||||||||
| Mahavir Loan | ||||||||
| Artelliq loan | ||||||||
| Payable Al Shola Gas | ||||||||
| Current portion of Bank Borrowings | ||||||||
| Provision Audit Review fee | ||||||||
| Total | $ | $ | ||||||
On July 27, 2023, our Company borrowed from
Mahavir Investments Limited, the principal amount of $
On August 25, 2023, the Company issued
to Artelliq Software Trading
The loan agreements with Mahavir and Artelliq have been unwound with the cancellation of the agreement with Quality International and is not a liability by the Company as of March 31, 2024, including accrued interest.
The payable for the acquisition of Al Shola Gas
with a total of $
Short-term
Borrowings amounting to $
Current Liabilities
| Al Shola Gas Accounts Payables Ageing | March 31, 2024 (unaudited) | |||
| 0-30 days | ||||
| 31-60 days | ||||
| 61-90 days | ||||
| +90 days | ||||
| Total | ||||
F-12
NOTE 9. NON-CURRENT LIABILITIES
| Other Non-Current Liabilities | March 31, 2024 (unaudited) | December 31, 2023 | ||||||
| Convertible Notes | ||||||||
| Long term Payable Al Shola Gas | ||||||||
| Non-Current portion of Bank Borrowings | ||||||||
| Employee end of Service Benefits | ||||||||
| Total | $ | $ | ||||||
The payable for the acquisition of Al Shola Gas
with a total of $
Long-term
bank Borrowings amounting to $
Employee end of service benefits Al Shola Gas | March 31, 2024 (unaudited) | |||
| Balance at Beginning | ||||
| Add: charge for the period | ||||
| Less: Settlement for the period | ||||
| Balance at the end of the period | ||||
Convertible Notes
On August 3, 2022, the Company issued a two-year
convertible promissory note in the principal amount of $
On March 17, 2023, the Company issued a two-year
convertible promissory note in the principal amount of $
On May 23, 2023, the Company issued to Jefferson
Street Capital LLC a one-year convertible promissory note in the principal amount of $
On June 16, 2023, the Company issued to Sky
Holdings Ltd. a six-month convertible promissory note in the principal amount of $
On July 31, 2023, the Company issued to 1800
Diagonal Lending Ltd. a promissory note in the principal amount of $
F-13
On August 15, 2023, the Company issued to
1800 Diagonal Lending Ltd. a promissory note in the principal amount of $
On December 20, 2023, the Company issued a
two-year convertible promissory note in the principal amount of $
On December 20, 2023, the Company issued a
one-year convertible promissory note in the principal amount of $
On February 6, 2024, we issued a six-month
convertible promissory note to Exchange Listing LLC in the principal amount of $
On March 8, 2024, we issued a one-year convertible
promissory note Jefferson Street Capital LLC in the principal amount of $
Options and Warrants
In accordance with ASC 470, warrants have been classified as a liability and recorded at their exercise price.
On April 19, 2023, the Company issued a common
share purchase warrant to Exchange Listing LLC (the “Exchange Common Share Purchase Warrant”). The holder is entitled, upon
the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date of issuance
hereof, to purchase from the Company,
On May 23, 2023, the Company issued a common
share purchase warrant to Jefferson Street Capital LLC (the “Jefferson Common Share Purchase Warrant”). The holder is entitled,
upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date of
issuance hereof, to purchase from the Company,
NOTE 10. STOCKHOLDERS’ EQUITY
The Company’s authorized capital stock consists
of
As of March 31, 2024, and December 31,
2023, there were
As of March 31, 2024, and December 31, 2023,
there were
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On March 17, 2023, the Company issued to RB
Capital Partners Inc. a two-year convertible promissory note in the principal amount of $
On January 11, 2024, the Company issued
On January 19, 2024, the Company issued
On February 6, 2024, we issued a six-month
convertible promissory note to Exchange Listing LLC in the principal amount of $
On February 15, 2024, the Company issued
On March 12, 2024, we issued a convertible promissory
note to 1800 Diagonal Lending LLC in the principal amount of $
NOTE 11. MINORITY INTEREST
The Company acquired
NOTE 12. OPERATING EXPENSES
| General and Administrative Expenses | March 31, 2024 (unaudited) | March 31, 2023 | ||||||
| Office Expenses | ||||||||
| Human resource expenses | ||||||||
| Repair & maintenance | ||||||||
| Discount allowed | ||||||||
| Rent & leases | ||||||||
| Utilities | ||||||||
| Fuel | ||||||||
| Travelling | ||||||||
| Management Remuneration ASG | ||||||||
| Sponsor fees | ||||||||
| Labor accommodation | ||||||||
| Registration & Renewal Trade License | ||||||||
| Rebate Against Utility Operations | ||||||||
| G&A QIND* | ||||||||
| Total | $ | $ | ||||||
| * | Stock-based compensation to staff for the quarter ended March 31, 2024, and 2023, was $ |
F-15
NOTE 13. NON-OPERATING EXPENSES
| Other Non-Operating Expenses | March 31, 2024 (unaudited) | March 31, 2023 | ||||||
| Discount on Convertible Notes | | |||||||
| Conversion fees | ||||||||
| Total | $ | $ | ||||||
NOTE 14. NON-OPERATING INCOME
The Company Earned other income of $
| Non-Operating income | March 31, 2024 (unaudited) | March 31, 2023 | ||||||
| Reversal of Interest - Loan Agreements Mahavir & Artelliq | ||||||||
| Total | $ | $ | ||||||
Misc. Income:
NOTE 15. SUBSEQUENT EVENTS
In accordance with ASC 855-10-50 the company lists events which are deemed to have a determinable significant effect on the balance sheet at the time of occurrence or on the future operations, and without disclosure of it, the financial statements would be misleading.
On April 26, 2024, we entered into an asset purchase
agreement with Mr. Refer, the previous owner of the legacy business. Mr. Refer bought the intangible legacy assets of Wikisoft for a
total consideration of
On May 7, 2024, the Company issued
On May 13, 2024, the Company issued
F-16
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include but are not limited to changes in economic conditions, incorporating acquisitions, changes in the supply chain for raw materials, effects of Covid and wars, including the Ukraine war, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
General
The following is a discussion by management of its view of the Company’s business, financial condition, and corporate performance for the past year. The purpose of this information is to give management’s recap of the past year, and to give an understanding of management’s current outlook for the near future. This section is meant to be read in conjunction with the Financial Statements of this Quarterly Report on Form 10-Q.
Overview
QIND is a Nevada Corporation which is majority-owned by ILUS. ILUS functions as QIND’s parent company, and as such it concentrates on providing strategic management oversight that includes financial, administration, marketing, and human resources support to its operating companies. QIND functions as the Industrial & Manufacturing subsidiary of ILUS.
Factors Affecting Our Performance
The primary factors affecting our results of operations include but not limited to:
General Macro Economic Conditions
Our business is impacted by the global economic environment, employment levels, consumer confidence, government, and municipal spending. Global instability in securities markets and the Russian invasion of Ukraine are among other factors that can impact our financial performance. In particular, changes in the U.S. economic climate can impact the demand of our product range. The Industrial and Manufacturing sectors are impacted by the overall economic environment as addressed in the risk factors. Tenders can be withdrawn and lead times for the manufacturing can be affected which can result in cancellation of orders if not delivered on time.
Recent Developments
On March 27, 2024, we entered into a definitive Stock 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 has been consolidated into the financials for the quarter ended March 31, 2024.
On April 1, 2024, after several failed effort negotiations with the purpose of restructuring the deal and obtaining information from the selling shareholders of Quality International, the Purchase Agreement with Quality International was terminated by Quality International and subsequently the Board of Directors of the Company approved the cancellation of the agreement with Quality International Co Ltd FZC signed on January 18, 2023, and amended on July 27, 2023. The company is in the process of unwinding the transaction, with management aiming to recover the investment or parts of it. However, if recovery proves unattainable, the investment may need to be written off in the later years.
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Planned Developments
In the first half of 2024, the Company will allocate resources to our subsidiary to increase efficiency, drive increased sales and positively impact their financial results. We also plan to invest in new vehicles for our subsidiary Al Shola Gas to increase their Bulk LPG supply, We anticipate that our operating expenses will increase as we undertake our expansion plan associated with our acquisition. The increase will be attributable to administrative and operating costs associated with our business activities.
We aim to hire a new Chief Financial Officer before a planned uplisting to a National Exchange through a merger, for which the company is currently in ongoing discussions with a National Exchange listed company.
Results of Operation for the Three Months Ended March 31, 2024, and 2023
Revenues
We earned $3,086,519 in revenue for the three months ended March 31, 2024, compared with $0 in revenue for the three months ended March 31, 2023. The increase in revenue is a result of revenue from our acquisition of Al Shola Gas.
Operating Expenses
Operating expenses increased from $65,013 for the three months ended March 31, 2023, to $673,310 for the three months ended March 31, 2023. Our operating expenses in Q1 2024 were mainly as a result of administrative and operating costs associated with the business activities of our subsidiary Al Shola Gas. Our operating expenses in Q1 2023, were mainly the result of Professional fees and operating expenses.
We anticipate that our operating expenses will increase as we undertake our expansion plan associated with operating business Al Shola Gas. The increase will be attributable to administrative and operating costs associated with our business activities and the professional fees associated with our reporting obligations.
Non-Operating Expenses & Income
We had other non-operating expenses of $92,044 for the three months ended March 31, 2024, as compared $19,523 in other expenses for the same period ended 2023. The increase in other operating expenses in Q1 2024, were mainly the result of Depreciation on Fixed assets and Interest on Convertible notes.
Non-Operating Income
We had other non-operating income of $379,554 for the three months ended March 31, 2024, as compared $0 for the same period ended 2023. Our other income in Q1 2024 was a result of reversal of interest payments on the loan agreements with Mahavir and Artelliq which has been unwound with cancellation of the agreement with Quality International.
Net Income/Net Loss
We incurred Net Income of $758,440 for the three months ended March 31, 2024, compared to a net loss of $84,536 for the three months ended March 31, 2023. The increase in Net Profit for the quarter ended March 31, 2024, is a result of Net Income from our acquisition of Al Shola Gas and reversal of interest payments on the loan agreements with Mahavir and Artelliq.
Liquidity and Capital Resources
As of March 31, 2024, we had total current assets of $7,242,873 and total current liabilities of $7,194,393 which include the payable amount of $5,500,000 as part of the purchase consideration for the acquisition of our operating company, Al Shola Gas, which will be paid over the next 12 months. We had a positive working capital of $48,480 as of March 31, 2024. This compares with a working capital deficit of $3,425,442 as of December 31, 2023.
Operating activities provided $1,274,470 in cash for the three months ended March 31, 2024, as compared with $180,477 provided in cash for the three months ended March 31, 2023. Our positive operating cash flow for Q1 2023 was mainly the result of growth in core business activities being higher operating profit and in the accounts receivables.
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Investing activities used $3,116 in cash for the three months ended March 31, 2024, as compared with $0 used in cash for the three months ended March 31, 2023. We expect our investing cash flow will grow upon uplist to a national exchange as result of investing in long-term assets for the company’s growth.
Financing activities used $1,300,820 in cash for the three months ended March 31, 2024, as compared with $180,769 in cash provided for the same period ended 2023. Our financing cash flow for Q1 2024 was mainly the result of Finance costs, proceeds from the issuance of convertible notes and movement in the shareholder’s current account.
Going Concern
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.
Management evaluated all relevant conditions and events that are reasonably known or reasonably knowable, in the aggregate, as of the date the consolidated financial statements are issued and determined. The Company’s ability to continue as a going concern is dependent on the Company’s ability to continue to generate sufficient revenues and raise capital within one year from the date of filing.
Over the next twelve months, management plans to use borrowings and security sales to mitigate the effects of cash flow deficits; however, no assurance can be given that debt or equity financing, if and when required, will be available.
Impact of Acquisitions
Historically a significant component of our growth has been through the acquisition of businesses in our targeted sectors. We typically incur upfront costs as we incorporate and integrate acquired businesses into our operating philosophy and operational excellence. This includes consolidation of supplies and raw materials, optimized logistics and production processes, and other restructuring and improvements initiatives. The benefits of these integration efforts and upcoming planned acquisitions may not positively impact our financial results in the short term but has historically been the case in the medium to long term.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of inherently uncertain matters. Our critical accounting policies are disclosed in the Notes of our unaudited financial statements included in this Quarterly Report on Form 10-Q.
Goodwill
The Company continues to review its goodwill for possible impairment or loss of value at least annually or more frequently upon the occurrence of an event or when circumstances indicate that a reporting unit’s carrying amount is greater than its fair value. On March 31, 2024, we performed a goodwill impairment evaluation. We performed a qualitative assessment of factors to determine whether it was necessary to perform the goodwill impairment test. Based on the results of the work performed, the Company has concluded that no impairment loss was warranted on March 31, 2024. Factors including non-renewal of a major contract or other substantial changes in business conditions could have a material adverse effect on the valuation of goodwill in future periods and the resulting charge could be material to the future periods’ results of operations.
Off-Balance Sheet Arrangements
We have no significant 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 are material to stockholders.
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Recently Issued Accounting Pronouncements
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the accounting for goodwill impairments by eliminating step two from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. ASU 2017-04 also clarifies that an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The new standard is effective for fiscal years beginning after December 15, 2019, for both interim and annual reporting periods. The Company is currently assessing the potential impact of the adoption of ASU 2017-04 on its consolidated financial statements.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
A smaller reporting company is not required to provide the information required by this Item.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
As required by SEC Rule 15d-15, our management carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q.
Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during the quarter ended March 31, 2024, that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.
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Part II: Other Information
Item 1 - Legal Proceedings
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers, or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interests.
Item 1A. Risk Factors
There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
Item 5. Other Information
Item 6. Exhibits
| * | Incorporated by reference to the Registration Statement on Form 10-K filed with the Securities and Exchange Commission on March 31, 2023 |
| ** | Provided herewith |
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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 thereunto duly authorized.
| Quality Industrial Corp. | ||
| Date: | May 15, 2024 | |
| By: | /s/ John-Paul Backwell | |
| John-Paul Backwell | ||
| Title: | Chief Executive Officer (principal executive and principal accounting and financial officer) | |
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