Ff25
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| ☒ | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended March 31, 2023
| ☐ | Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from __________ to__________
Commission File Number: 000-56239
Quality Industrial Corp.
(Exact name of registrant as specified in its charter)
| Nevada | 35-2675388 | |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
315 Montgomery Street
San Francisco, CA 94104
(Address of principal executive offices)
800-706-0806
(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.
[X] Yes [ ] No
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). [X] Yes [ ] No
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 | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☒ | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
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: common shares as of May 19, 2023
| 1 |
TABLE OF CONTENTS
| Page | ||
| PART I – FINANCIAL INFORMATION | ||
| Item 1: | Financial Statements | 3 |
| Item 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4 |
| Item 3: | Quantitative and Qualitative Disclosures About Market Risk | 8 |
| Item 4: | Controls and Procedures | 8 |
| PART II – OTHER INFORMATION | ||
| Item 1: | Legal Proceedings | 9 |
| Item 1A: | Risk Factors | 9 |
| Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds | 9 |
| Item 3: | Defaults Upon Senior Securities | 9 |
| Item 4: | Mine Safety Disclosures | 9 |
| Item 5: | Other Information | 9 |
| Item 6: | Exhibits | 10 |
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Our financial statements included in this Form 10-Q are as follows:
| F-1 | Consolidated Balance Sheets as of March 31, 2023 (Unaudited) and December 31, 2022; | |
| F-2 | Consolidated Statements of Operations for the three months ended March 31, 2023, and 2022 (Unaudited); | |
| F-3 | Consolidated Statement of Stockholders’ Equity (Deficit) for the periods ended March 31, 2023, and 2022 (Unaudited); | |
| F-4 | Consolidated Statements of Cash Flows for the three months ended March 30, 2023, and 2022 (Unaudited); and | |
| F-5 | Notes to Consolidated Financial Statements (Unaudited). |
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, 2023 are not necessarily indicative of the results that can be expected for the full year.
| 3 |
QUALITY INDUSTRIAL CORP.
CONSOLIDATED BALANCE SHEETS
| March 31, 2023 | December 31,2022 | |||||||||||
| (Unaudited) | (Audited) | |||||||||||
| ASSETS | ||||||||||||
| Current assets | ||||||||||||
| Cash and cash equivalents | 4 | $ | 1,229,893 | $ | 1,312,565 | |||||||
| Other current assets | 5 | 108,990,839 | 110,289,356 | |||||||||
| Total Current Assets | 110,220,732 | 111,601,921 | ||||||||||
| Non- Current assets | ||||||||||||
| Goodwill | 6 | 56,387,027 | 56,387,027 | |||||||||
| Property Plant & Equipment | 7 | 1,661,429 | 1,365,585 | |||||||||
| Capital WIP | 2,292,846 | 1,884,569 | ||||||||||
| Furniture, Fixtures & Office Equipment | 156,370 | 156,370 | ||||||||||
| Lease Hold Improvements & Building | 17,390,067 | 17,390,067 | ||||||||||
| Right of Use assets | 8 | 11,906,654 | 11,906,654 | |||||||||
| Total Non-current assets | 89,794,393 | 89,090,272 | ||||||||||
| TOTAL ASSETS | $ | 200,015,125 | $ | 200,692,193 | ||||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||||
| Current liabilities | ||||||||||||
| Accounts payable and accrued liabilities | 38,921,357 | 44,551,407 | ||||||||||
| Other Current Liabilities | 9 | 102,872,556 | 100,134,714 | |||||||||
| Total current liabilities | 141,793,913 | 144,686,121 | ||||||||||
| Long Term liabilities | ||||||||||||
| Convertible Notes | 10 | 1,300,000 | 1,100,000 | |||||||||
| Other long-term liabilities | 11 | 28,013,108 | 28,028,680 | |||||||||
| Total Long-Term Liabilities | 29,313,108 | 29,128,680 | ||||||||||
| Total Liabilities | 171,107,021 | 173,814,801 | ||||||||||
| Stockholders' Equity | ||||||||||||
| Preferred stock; par value; shares authorized; and shares issued and outstanding as of as of December 31, 2022, and December 31, 2021, respectively | 12 | |||||||||||
| Common stock; par value; shares authorized; and shares issued and outstanding as of March 31, 2022, and December 31, 2022, respectively | 12 | 102,886 | 102,886 | |||||||||
| Additional paid-in capital | 12,174,975 | 12,174,975 | ||||||||||
| Stock Payable | 395,101 | 395,101 | ||||||||||
| Retained Earnings/ accumulated Deficit | (8,422,921 | ) | (9,438,315 | ) | ||||||||
| Minority Interest | 13 | 24,658,063 | 23,642,745 | |||||||||
| Total stockholders' Equity | 28,908,104 | 26,877,392 | ||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 200,015,215 | $ | 200,692,193 | ||||||||
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, 2023 | March 31, 2022 | ||||||
| Revenue | 18,157,850 | ||||||
| Cost of revenues | 12,704,819 | ||||||
| Gross profit | 5,453,031 | ||||||
| Operating expenses | |||||||
| Professional fees | 60,404 | 146,917 | |||||
| General and administrative | 2,371,006 | 37,511 | |||||
| Total operating expenses | 2,431,410 | 184,428 | |||||
| Profit/ loss from Operations | 3,021,621 | (184,428) | |||||
| Other Non-Operating expense | |||||||
| Interest on Convertible Notes | 19,523 | ||||||
| Gain on forgiveness of accrued salary | 120,000 | ||||||
| Interest expense | 971,388 | (1,012) | |||||
| Loss on License Agreement | (104,550) | ||||||
| Total other expense | 990,911 | 14,438 | |||||
| Other Non-Operating Income | |||||||
| Net loss/ profit | 2,030,710 | (169,990) | |||||
| Net profit per common share - basic and diluted | 0.02 | (0.00) | |||||
| Weighted average common shares outstanding | 102,833,709 | 106,981,487 | |||||
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 | |||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-in Capital | Stock Payable | Minority Interest | Accumulated Deficit | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | 102,833,709 | 102,886 | 12,174,975 | 395,101 | 23,642,745 | (9,438,315 | ) | 26,877,392 | ||||||||||||||||||||||||||||||||
| Common stock issued for cash | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued for license agreement | ||||||||||||||||||||||||||||||||||||||||
| Imputed Interest | ||||||||||||||||||||||||||||||||||||||||
| Net Income | 1,015,318 | 1,015,394 | 2,030,710 | |||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | 102,833,709 | 102,886 | 12,174,975 | 395,101 | 24,658,063 | (8,422,921 | ) | 28,908,104 | ||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-in Capital | Stock Payable | Stock Receivable | Minority Interest | Accumulated Deficit | Total Stockholders' Equity | |||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | 94,738,209 | 94,740 | 11,904,190 | 395,101 | (12,763,038 | ) | (369,007 | ) | ||||||||||||||||||||||||||||||||
| Common stock issued for cash | 3,000,000 | 3,000 | 66,549 | (11,725 | ) | 57,824 | ||||||||||||||||||||||||||||||||||
| Common stock issued for license agreement | 2,550,000 | 2,550 | 102,000 | 104,550 | ||||||||||||||||||||||||||||||||||||
| Imputed Interest | 745 | |||||||||||||||||||||||||||||||||||||||
| Net Loss | (169,990 | ) | (169,990 | ) | ||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | 100,288,209 | 100,290 | 12,073,484 | 395,101 | (11,725 | ) | (12,933,028 | ) | (375,878 | ) | ||||||||||||||||||||||||||||||
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, 2023 | March 31, 2022 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net profit | 2,030,710 | (169,990 | ) | |||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Finance Cost | 971,388 | |||||||
| Common stock issued on license agreement | 104,550 | |||||||
| Imputed Interest | 745 | |||||||
| Changes in Current assets | 1,298,517 | 208,591 | ||||||
| Related party advance | 797,504 | — | ||||||
| Changes in Current Liabilities | (2,892,208 | ) | (198,079 | ) | ||||
| Net cash used in operating activities | 2,205,911 | (54,183 | ) | |||||
| Cash Flows from Investing Activities | ||||||||
| Changes in Non- Current Assets | (704,119 | ) | ||||||
| Changes in Non- Current Liabilities | ||||||||
| Net cash used in investing activities | (704,119 | ) | ||||||
| Cash Flows from Financing Activities | ||||||||
| Issuance of Convertible Note | 200,000 | |||||||
| Finance Cost | (971,388 | ) | ||||||
| Payment of related party advance | (797,504 | ) | (10,000 | ) | ||||
| Related party line of credit | 5,000 | |||||||
| Long term borrowing | (15,572 | ) | ||||||
| Proceeds from issuance of common stock | 57,824 | |||||||
| Net cash from financing activities | (1,584,464 | ) | 52,824 | |||||
| Net increase (decrease) in Cash | (82,672 | ) | (1,359 | ) | ||||
| Beginning cash balance | 1,312,565 | 15,659 | ||||||
| Ending cash balance | $ | 1,229,893 | 14,300 | |||||
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. ORGANIZATION, HISTORY AND NATURE OF BUSINESS
Quality Industrial Corp. (“we”, “our”, the "Company") was incorporated in the state of Nevada in May 1998 as Sensor Technologies Inc. We aim to be a global leader in the manufacture and assembly of industrial equipment and precision engineered technology for the Industrial, Oil & Gas, and Utility sectors.
In March 2006 the Company changed its name to Bixby Energy Systems Inc. The Company changed its name to Power Play Development Corporation in September 2006. In April 2007 the Company changed its name to National League of Poker, Inc. In October 2011 the Company changed its name back to Power Play Development Corporation. In March 2018 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. Rasmus Refer was previously the CEO of the Company until August 31, 2020, and Director of the Company until November 30, 2020, where Carsten Kjems Falk was appointed as CEO and Paul C. Quintal sole director were appointed thereafter as described in detail below.
On the 28th of May 2022, we changed ownership, when on May 28, 2022, Ilustrato Pictures International Inc. (“ILUS”) acquired 77% of the outstanding shares in our Company. Modern Art Foundation Inc. (“Modern Art”), Rene Lauritsen and Fastbase Holding Inc. agreed to transfer shares of common stock in the Company to Ilustrato Pictures International Inc. (“Ilustrato”). Pursuant to a Stock Transfer Agreement, Ilustrato purchased the shares for an aggregate amount of . Mr. Nicolas Link, who is the CEO of ILUS, is the beneficial owner.
Consequently, ILUS is now able to unilaterally control the election of our board of directors, all matters upon which shareholder approval is required and, ultimately, the direction of our Company.
Quality Industrial Corp. is the Industrial and Manufacturing subsidiary of ILUS. 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. Also, during 2022, Mr. Nicolas Link, beneficial owner of ILUS, was appointed as our Chairman of the Board, Mr. John-Paul Backwell was appointed as our Chief Executive Officer, Mr. Carsten Falk was appointed as our Chief Commercial Officer, Mr. Krishnan Krishnamoorthy was appointed as our Chief Financial Officer and finally, Mrs. Louise Bennett was appointed Chief Operations Officer. The Officers and Director of the Company have an employee agreement with the parent Company ILUS. The agreements also govern their employee agreements in Quality Industrial Corp. All salaries are paid by ILUS, and stock-based compensation is as a combination from both companies.
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 now a public company focused on the Industrial, Oil & Gas and Utility Sectors, and is a subsidiary to ILUS.
| F-5 |
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 subsidiaries 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. Further, while preparing consolidated financial statements, all the U.S. GAAP principles of consolidation have been followed and non-controlling interest have been recorded separately in the Consolidated Balance sheets.
Use of estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 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 and accrued expenses, and debt approximate their fair values because of the short-term nature of these instruments. Management believes the Company is not exposed to significant interest or credit risks arising from these financial instruments.
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). Accordingly, revenue is recognized when control of the goods or services promised under a contract are transferred to the customer in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for the goods or services.
| F-6 |
Service Contracts
The company recognizes service contract revenue over time, as performance obligations are satisfied, due to the continuous transfer of control to the customer. Service contracts are generally accounted for as a single unit of account (a single performance obligation) and are not segmented between types of services. The company recognizes revenue based primarily on contract cost incurred to date compared to total estimated contract cost (an input method). The input method is the most faithful depiction of the company’s performance because it directly measures the value of the services transferred to the customer. Changes to total estimated contract cost or losses, if any, are recognized in the period in which they are determined as assessed at the contract level. Pre-contract costs are expensed as incurred unless they are expected to be recovered from the client. Project mobilization costs are generally charged to project costs as incurred when they are an integrated part of the performance obligation being transferred to the client. Customer payments on service contracts are typically due in advance, depending on the contract.
For service contracts in which the company has the right to consideration from the customer in an amount that corresponds directly with the value to the customer of the company’s performance completed to date, revenue is recognized when services are performed and contractually billable. Service contracts that include multiple performance obligations are segmented between types of services. For contracts with multiple performance obligations, the company allocates the transaction price to each performance obligation using an estimate of the stand-alone selling price of each distinct service in the contract. Revenue recognized on service contracts that have not been billed to clients is classified as a current asset under contract assets on the Consolidated Balance Sheet. Amounts billed to clients in excess of revenue recognized on service contracts to date are classified as a current liability under contract liabilities. Customer payments on service contracts are typically due within 30 days of billing, depending on the contract.
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.
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. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive.
Long-lived Assets
In accordance with the Financial Accounting Standards Board ("FASB") Accounts Standard Codification (ASC) ASC 360-10, "Property, Plant and Equipment," the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.
| F-7 |
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.
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.
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.
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 $1,229,893 and $1,312,565 in cash and cash equivalents as of March 31, 2023 and December 31, 2022, respectively.
NOTE 5. CURRENT ASSETS
| Other Current Assets |
| Year | March 31,2023 | December 31, 2022 | ||||||
| Inventories | 1,249,374 | 1,202,674 | ||||||
| Work-in-Progress | 44,575,751 | 57,433,535 | ||||||
| Margin Deposits | 1,036,019 | 1,036,019 | ||||||
| Retention Receivables | 2,800,611 | 2,800,611 | ||||||
| Accounts Receivables | 48,548,233 | 37,835,611 | ||||||
| Amount Due from a Related Party | 2,571,722 | 1,794,218 | ||||||
| Advances to subcontractors | 7,539,940 | 7,539,940 | ||||||
| Guarantee Deposits | 344,143 | 344,143 | ||||||
| Other misc current assets | 181,929 | 179,488 | ||||||
| Deposits | 123,117 | 123,117 | ||||||
| Total | 108,990,839 | 110,289,356 | ||||||
| F-8 |
Accounts Receivable:
Accounts receivable 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 Quality International. The duration of such receivables extend from 60 days beyond 12 Months. Payments are received only when a project is completed, and approvals are obtained. Provisions are created based on the estimated irrecoverable amounts determined by referring to past default experience. The majority of accounts receivable extend beyond 12 months and are guaranteed by a shareholder.
Work In Progress:
Work In Progress only reflects the value of products in intermediate production stages and excludes the value of finished products being held as inventory in anticipation of future sales and raw materials not yet incorporated into an item for sale.
Other Misc. Current Assets:
Other Misc. Current Assets as mentioned in the above table includes advances paid in connection with the operations of the company.
Related party Advances:
As of March 31, 2023, and March 31, 2022, the Company had amounts due from Ilustrato Pictures International Inc, a majority shareholder of the Company, of $797,504 and $0, respectively.
NOTE 6. 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 acquirer's balance sheet.
The Company acquired 52% of Quality International for $82,000,000 now owning 52% of the net assets of Quality International. The Net Assets of Quality International was $49,255,718 on December 31, 2022. The remaining $56,387,027 of the purchase price is therefore part of the Company’s Goodwill.
NOTE 7. 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. Depreciation of property, plant and equipment is recognized over the estimated useful lifespan of the respective assets using the straight-line method.
The estimated useful lifespans are as follows:
| Years | ||
| Buildings, related improvements & land improvements | 5-25 | |
| Machinery & Equipment | 3-15 | |
| Computer hardware & software | 3-10 | |
| Furniture & Fixtures | 3-15 |
Expenditure that extends the useful lifespan of existing property, plant and equipment are capitalized and depreciated over the remaining useful lifespan of the related asset. Expenditure 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.
| F-9 |
NOTE 8. RIGHT OF USE ASSETS
The Company’s subsidiaries have entered into commercial leases of land for offices, manufacturing yards and storage facilities. The Company determines whether an arrangement contains a lease at inception. A lease liability and corresponding right of use (ROU) asset are recognized for qualifying leased assets based on the present value of fixed and certain index-based lease payments at lease commencement. To determine the present value of lease payments, the Company uses the stated interest rate in the lease, when available, or more commonly a secured incremental borrowing rate that reflects risk, term, and economic environment in which the lease is denominated. The Company has elected not to recognize ROU assets or lease liabilities for leases with a term of twelve months or less. Expense is recognized on a straight-line basis over the lease term for operating leases.
NOTE 9. OTHER CURRENT LIABILITIES
Other Current Liabilities as mentioned in the below table includes short term liabilities payable to Quality International, lease liabilities, short term bank borrowings and other miscellaneous liabilities. Short term bank borrowings relate to credit-lines and bank borrowings by the company’s subsidiary Quality International to meet asset financing and working capital requirements for orders that are in production.
| Other Current Liabilities | March 31, 2023 | December 31, 2022 |
| Short Term Bank Borrowings | 19,716,635 | 18,220,315 |
| Lease Liabilities | 835,820 | 836,382 |
| Accrued Interest on Convertible note | 51,378 | 31,855 |
| Payable QI | 81,000,000 | 81,000,000 |
| Misc. Liabilities | 1,268,723 | 46,162 |
| Total | 102,872,556 | 100,134,714 |
NOTE. 10. CONVERTIBLE NOTES
| 1. | On August 3, 2022, the Company issued a two year convertible promissory note in the principal amount of $1,100,000 to RB Capital Partners Inc. The Note bears interest at 7% per annum. The Company has the right to prepay the Note at any time. All principal on the Note is convertible into shares of our common stock after six months from issuance at the election of the holder at a conversion price equal $1.00 per share. |
| 2. | On March 17, 2023, the Company issued a two year convertible promissory note in the principal amount of $200,000 to RB Capital Partners Inc. The Note bears interest at 7% per annum. The Company has the right to prepay the Note at any time. All principal on the Note is convertible into shares of our common stock after six months from issuance at the election of the holder at a conversion price equal $1.00 per share. |
NOTE 11. OTHER LONG-TERM LIABILITIES
As of March 31, 2023, and December 31, 2022, the Company had Other Long-Term Liabilities of $28,013,108 and $28,028,680 respectively. The Company has outstanding lease liabilities and long-term bank borrowings through its subsidiary Quality International.
| Particulars | March 31, 2023 | December 31, 2022 |
| Lease liabilities - Noncurrent portion | 13,703,606 | 13,696,729 |
| Bank Borrowings - noncurrent portion | 12,371,221 | 12,378,098 |
| End of service benefits | 1,938,281 | 1,953,853 |
| Total | $28,013,108 | $28,028,680 |
| F-10 |
On June 1, 2020, the Company entered into a loan agreement with Fastbase Inc, in the amount of $30,215. The amount bears no interest and is due upon request.
On September 1, 2020, the Company entered into a loan agreement with Fastbase Inc, in the amount of $15,000. The note bears an interest rate of 4.25% and is due on September 1, 2022.
On October 24, 2020, the Company entered into a loan agreement with Fastbase Inc in the amount of $7,875. The note bears an interest rate of 4.25% and is due on January 1, 2023. On April 29, 2022, the Company paid the loan in full as well as accrued interest of $506. As of December 31, 2022, the balance of principal owed was $0.
On December 3, 2020, the Company entered into a loan agreement with Fastbase Inc. in the amount of $10,000. The note bears an interest rate of 4.25% and is due on January 1, 2023. On January 20, 2022, the Company paid the loan in full as well as accrued interest of $477.
On May 15, 2022, the Company entered into a loan agreement with Fastbase Inc in the amount of $37,000. The note bears an interest rate of 3% and is due on January 1, 2024. On May 25, 2022, the loan was forgiven in full as well as accrued interest of $30, and a gain on forgiveness of debt of $37,030 was recorded.
On May 25, 2022, we entered into a Debt Conversion Agreement (the “Agreement”) with our prior officer and director, Rasmus Refer. Pursuant to the Agreement, we transferred our 51% interest in Etheralabs LLC to Mr. Refer. In exchange, Mr. Refer agreed to cancel $300,041 in loans including interest owed by our company to Mr. Refer.
On July 28, 2022, Company entered into a Debt Conversion agreement with Enza International and converted the full amount of Debt $82,570 into of Common Stock.
NOTE 12. STOCKHOLDERS’ EQUITY
The Company’s authorized capital stock consists of shares of common stock and shares of preferred stock, par value per share.
As of March 31, 2023, and December 31, 2022, there were and shares of common stock issued and outstanding, respectively.
As of March 31, 2023 and December 31, 2022, there were and shares of preferred stock of the Company issued.
Net assets of the Quality International as per December 31, 2022, was $49,255,718 with 48% Minority Interest valued at $23,642,745. See note 5, Goodwill.
Below is the list of Common Stock issuances during the year ending December 31, 2022. During the first Quarter of 2023, there was no new issuance of common stock. However, the transactions thereafter are disclosed under subsequent events.
| · | On January 3, 2022, the Company issued shares of common stock for $20,523 cash. |
| · | On January 10, 2022, the Company issued shares of common stock for $15,975 cash. |
| · | On March 10, 2022, the Company issued shares of common stock for $7,688 cash. |
| · | On March 21, 2022, the Company issued shares of common stock for $13,638 cash. | |
| · | On March 29, 2022, the Company issued shares of common stock for $11,725 cash. | |
| · | On February 28, 2022, the company entered into a definitive agreement to acquire 51% of Etheralabs LLC for of the Company’s common stock valued at $104,550. See note 10 for additional information. |
| · | On May 10, 2022, the Company issued shares of common stock for $27,017 cash. |
| · | On July 28, 2022, the company entered into Debt conversion agreement and issued shares of common stock. |
| F-11 |
NOTE 13. MINORITY INTEREST:
The Company acquired 52% of Quality International for $82,000,000, now owning 52% of net assets of Quality International. Net Assets of Quality International was $49,255,718 on December 31, 2022. The remaining $56,387,027 of the purchase price is a part of the Company’s Goodwill (see note 6). Furthermore, 48% of the current quarter earnings of the subsidiary Quality International have been transferred to Minority Interest.
NOTE 14. 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 could be misleading.
On April 19, 2023, the Company issued a warrant to Exchange Listings LLC of 200,000 shares of the Company’s Common Stock with an Exercise Price of $.58 per share.
On May 4, 2023, the Company issued to Exchange Listings LLC 1,543,256 shares of our common stock for $1,543 for consultancy services for the planned uplist to NYSE.
On May 4, 2023, the Company issued to Nicolas Link 2,750,000 shares of our common stock with a grant-date and fair value of the award as of June 1, 2022, at $0.0721 pursuant to his employee contract.
On May 4, 2023, the Company issued to John-Paul Backwell Link 2,250,000 shares of our common stock with a grant-date and fair value of the award as of June 1, 2022, at $0.0721 pursuant to his employee contract.
On May 4, 2023, the Company issued to Carsten Kjems Falk 2,250,000 shares of our common stock with a grant-date and fair value of the award as of June 1, 2022, at $0.0721 pursuant to his employee contract.
On May 4, 2023, the Company issued to Krishnan Krishnamoorthy 2,250,000 shares of our common stock with a grant-date and fair value of the award as of June 1, 2022, at $0.0721 pursuant to his employee contract.
On May 4, 2023, the Company issued to Louise Bennett 1,000,000 shares of our common stock with a grant-date and fair value of the award as of June 1, 2022, at $0.0721 pursuant to her employee contract.
| F-12 |
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
We aim to be a global leader in the manufacture and assembly of industrial equipment and precision engineered technology for the Industrial, Oil & Gas, and Utility sectors. We strive to be the leading global manufacturer of next-generation equipment needed to support the world’s growing need for high-quality, sustainable energy solutions.
We changed ownership on the 28th of May 2022, when Ilustrato Pictures International Inc. (“ILUS”) acquired 77.4 % of the outstanding shares in our Company. Consequently, ILUS is now able to unilaterally control the election of our board of directors, all matters upon which shareholder approval is required and, ultimately, the direction of our Company. Also, during the year, Mr. Nicolas Link, beneficial owner of ILUS, was appointed as our Chairman of the Board, Mr. John-Paul Backwell was appointed as our Chief Executive Officer and Mr. Carsten Falk was appointed as our Chief Commercial Officer.
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 now a public company focused on the Industrial, Oil & Gas and Utility Sectors and a subsidiary to ILUS.
On March 9, 2023, we changed our SIC code of the Company to SIC 3590 – Misc. Industrial & Commercial Machinery and Equipment to reflect the new business direction.
| 4 |
Factors Affecting Our Performance
The primary factors affecting our results of operations include:
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 geopolitical instability created by wars and military conflicts, such as the war in Ukraine, are among other factors that can impact our financial performance. In particular, changes in the U.S. economic climate and global macroeconomic factors, can impact the demand for our products and solutions. The Industrial and Manufacturing sectors are impacted by the overall economic environment. This could lead to tenders or orders being cancelled or postponed and lead times for manufacturing can be affected which could result in cancellation of orders if not delivered on time.
Impact of Acquisitions
A significant component of our growth is through the acquisition and consolidation of operating companies in our targeted sectors. We typically incur upfront costs as we incorporate and integrate acquired businesses into our company. This includes the consolidation of operating procedures, supplies and raw materials, logistics and production processes as well as sales synergies within the operating businesses with the aim to expand globally. The benefits of these integration efforts may not positively impact our financial results within the short-term but is expected to do so in the medium to long-term future.
Plan of Operations
First Half of 2023
QIND acquired 52% of Quality International Co Ltd FCZ (QI) on January 18, 2023, and 51% of Petro Line FZ-LLC on January 27, 2023. Quality International Co Ltd FCZ currently has signed purchase orders exceeding $180M in various stages of the manufacturing process and an additional $250M in expected orders.
QIND will continue to allocate resources to our recently acquired subsidiaries with the aim to increase efficiency, drive increased sales and positively impact their financial results. Allocated personnel will primarily focus on driving increased sales as well as optimizing the margins of supplies and raw materials, logistics and production processes for overall increased operational efficiency.
On April 19, 2023, QIND engaged with Exchange Listings LLC as strategic advisors to pursue the company’s goal of completing a successful uplisting to a major stock exchange in conjunction with a simultaneous debt financing and/or registration statement.
Second Half of 2023
In the second half of 2023, QIND anticipates acquiring an additional company in the industrial and manufacturing sectors and will continue with the integration and optimization of its current operating companies. With the group’s expansion and growth, we also anticipate hiring board members, executives, and key personnel with significant industry experience to streamline our financial reporting, compliance, Investor Relations and to improve our corporate governance in line with our anticipated uplist to a major stock exchange.
| 5 |
Results of Operation for the Three Months Ended March 31, 2023, and 2022
Revenues
We earned $18,157,850 in revenue for the three months ended March 31, 2023, compared with $0 in revenue for the three months ended March 31, 2022. The increase in revenue is a result of revenue from our acquisition of Quality International.
Operating Expenses
Operating expenses increased from $184,428 for the three months ended March 31, 2023, to $2,431,410 for the three months ended March 31, 2022.
Our operating expenses in Q1 2023 were mainly as a result of administrative and operating costs associated with the business activities of our subsidiary Quality International. Our operating expenses in Q1 2022 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 our acquisitions. The increase will be attributable to administrative and operating costs associated with our business activities and the professional fees associated with our reporting obligations.
Other Expenses
We had other expenses of $990,911 for the three months ended March 31, 2023, as compared $14,438 in other expenses for the same period ended 2022. Our other expenses in Q1 2023 were mainly the result of Finance Costs and Interest on Convertible notes. Our other expenses in Q1 2022 were mainly the result of Loss on license agreement, however the same was offset by gain on forgiveness of debt/ accrued salaries.
Net Income/Net Loss
We incurred Net Income of $ 2,030,710 for the three months ended March 31, 2023, compared to a net loss of $169,990 for the three months ended March 31, 2022. The increase in Net Profit for the quarter resulted in a Net Profit per common share (Earnings Per Share – EPS) for the three months ended March 31, 2023, of $0.02, with an annualized EPS value of $0.08 per common share, and a trailing P/E ratio of 7.27 based upon a share price of $0.5745 as of March 31, 2023.
Liquidity and Capital Resources
As of March 31, 2023, we had total current assets of $110,220,732 and total current liabilities of $141,793,913 which include the payable amount of $81,000,000 as part of the purchase consideration for the acquisition of our operating company, Quality International. We had a working capital deficit of $31,573,181 as of March 31, 2023. This compares with a working capital deficit of $33,084,200 as of December 31, 2022.
Operating activities provided $2,205,911 in cash for the three months ended March 31, 2023, as compared with $54,183 provided in cash for the three months ended March 31, 2022. Our positive operating cash flow for Q1 2023 was mainly the result of growth in core business activities being higher operating profit.
Investing activities used $704,119 in cash for the three months ended March 31, 2023, as compared with $0 used in cash for the three months ended March 31, 2022. Our negative investing cash flow for Q1 2023 was mainly the result of investing in long term assets for the company’s growth.
Financing activities provided $1,584,464 in cash for the three months ended March 31, 2023, as compared with $52,824 in cash provided for the same period ended 2022. Our financing cash flow for Q1 2023 was mainly the result of Finance costs and issuance of a convertible note.
| 6 |
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 matters that are inherently uncertain. 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 December 31, 2022, 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 December 31, 2022. 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.
| 7 |
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, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| 8 |
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
Item 1A: Risk Factors
See risk factors included in our Annual Report on Form 10-K/A for the year ended December 31, 2022, filed on May 8, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933.
On March 17, 2023, the Company issued to RB Capital Partners Inc. a two-year convertible promissory note in the principal amount of $200,000. The Note bears interest at 7% per annum. The Company has the right to prepay the Note at any time. All principal on the Note is convertible into shares of our common stock after six months from issuance at the election of the holder at a conversion price equal $1.00 per share.
On May 4, 2023, the Company issued to Exchange Listings LLC 1,543,256 shares of our common stock for $1,543 for consultancy services for the planned uplist to NYSE.
On May 4, 2023, the Company issued to Nicolas Link 2,750,000 shares of our common stock with a grant-date and fair value of the award as of June 1, 2022, at $0.0721 pursuant to his employee contract.
On May 4, 2023, the Company issued to John-Paul Backwell Link 2,250,000 shares of our common stock with a grant-date and fair value of the award as of June 1, 2022, at $0.0721 pursuant to his employee contract.
On May 4, 2023, the Company issued to Carsten Kjems Falk 2,250,000 shares of our common stock with a grant-date and fair value of the award as of June 1, 2022, at $0.0721 pursuant to his employee contract.
On May 4, 2023, the Company issued to Krishnan Krishnamoorthy 2,250,000 shares of our common stock with a grant-date and fair value of the award as of June 1, 2022, at $0.0721 pursuant to his employee contract.
On May 4, 2023, the Company issued to Louise Bennett 1,000,000 shares of our common stock with a grant-date and fair value of the award as of June 1, 2022, at $0.0721 pursuant to her employee contract.
The sales and issuances of the securities described above were made pursuant to the exemptions from registration contained in Section 4(a)(2) of the Securities Act and Regulation D under the Securities Act. Each purchaser represented that such purchaser’s intention to acquire the shares for investment only and not with a view toward distribution. We requested our stock transfer agent to affix appropriate legends to the stock certificate issued to each purchaser and the transfer agent affixed the appropriate legends. Each purchaser was given adequate access to sufficient information about us to make an informed investment decision.
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
Item 5. Other Information
None
| 9 |
Item 6. Exhibits
| 10 |
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 19, 2022 | |
| By: | /s/ John-Paul Backwell | |
| John-Paul Backwell | ||
| Title: | Chief Executive Officer (principal executive) | |
| By: | /s/ Krishnan Krishnamoorthy |
| Krishnan Krishnamoorthy | |
| Title: | Chief Financial Officer (principal accounting, and financial officer) |
| 11 |
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE 1933 ACT, OR AN OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER HEREOF, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT AS SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND APPLICABLE LAWS IS AVAILABLE.
WARRANT TO PURCHASE
COMMON STOCK OF
QUALITY INDUSTRIAL CORP.
| Date of Issuance: April 19, 2023 | Warrant No. _________ |
This certifies that, for value received, Quality Industrial Corp., a Nevada corporation (the “Company”), grants Exchange Listing LLC, or its registered assigns (the “Registered Holder”), the right to subscribe for and purchase from the Company, at the Exercise Price (as defined herein), from and after 9:00 a.m. New York Time on April 19, 2023 (the “Issuance Date”) and to and including 5:00 p.m., New York Time, on April 19, 2028 (the “Expiration Date”), 200,000 the shares of Common Stock (the “Warrant Shares”), par value $0.58 per share (the “Common Stock”), subject to the provisions and upon the terms and conditions herein set forth. The “Exercise Price” for each share of Common Stock issuable to the Registered Holder shall be $.58 per share.
Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Securities Purchase Agreement.
Section 1. Recordation on Books of the Company. The Company shall record this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Records”), in the name of the Registered Holder. The Company may deem and treat the Registered Holder as the absolute owner of this Warrant for the purpose of any exercise hereof or any distribution to the Registered Holder.
Section 2. Registration of Transfers and Exchanges.
(a) Subject to Section 9 hereof, the Company shall register the transfer of this Warrant, in whole or in part, upon records to be maintained by the Company for that purpose, upon surrender of this Warrant, with the Form of Assignment attached hereto completed and duly endorsed by the Registered Holder, to the Company at the office specified in or pursuant to Section 3(b). Upon any such registration of transfer, a new Warrant, in substantially the form of this Warrant, evidencing the Common Stock purchase rights so transferred shall be issued to the transferee and a new Warrant, in similar form, evidencing the remaining Common Stock purchase rights not so transferred, if any, shall be issued to the Registered Holder.
(b) This Warrant is exchangeable, upon the surrender hereof by the Registered Holder at the office of the Company specified in or pursuant to Section 3(b) hereof, for new Warrants, in substantially the form of this Warrant evidencing, in the aggregate, the right to purchase the number of Warrant Shares which may then be purchased hereunder, each of such new Warrants to be dated the date of such exchange and to represent the right to purchase such number of Warrant Shares as shall be designated by the Registered Holder at the time of such surrender.
Section 3. Duration and Exercise of this Warrant.
(a) This Warrant shall be exercisable by the Registered Holder as to the Warrant Shares at any time during the period commencing on the Issuance Date and ending on the Expiration Date. At 5:00 p.m., New York Time, on the Expiration Date, this Warrant, to the extent not previously exercised, shall become void and of no further force or effect.
| 1 |
(b) Subject to Section 7 hereof, upon exercise or surrender of this Warrant, with the Form of Election to Purchase attached hereto completed and duly endorsed by the Registered Holder, to the Company at 315 Montgomery Street, San Francisco, CA 94104, Attention: John-Paul Backwell, CEO, or at such other address as the Company may specify in writing to the Registered Holder, or via e-mail to *******@*******.com and upon payment of the Exercise Price multiplied by the number of Warrant Shares then issuable upon exercise of this Warrant in lawful money of the United States of America, all as specified by the Registered Holder in the Form of Election to Purchase, the Company shall promptly issue and cause to be delivered to or upon the written order of the Registered Holder, and in such name or names as the Registered Holder may designate, a certificate for the Warrant Shares issued upon such exercise. Any person so designated in the Form of Election to Purchase, duly endorsed by the Registered Holder, as the person to be named on the certificates for the Warrant Shares, shall be deemed to have become holder of record of such Warrant Shares, evidenced by such certificates, as of the Date of Exercise (as defined below) of such Warrant.
(c) The Registered Holder may pay the applicable Exercise Price pursuant to Section 3(b), at the option of the Registered Holder, either (i) by cashier’s or certified bank check payable to the Company, or (ii) by wire transfer of immediately available funds to the account which shall be indicated in writing by the Company to the Registered Holder, in either case, in an amount equal to the product of the Exercise Price multiplied by the number of Warrant Shares being purchased upon such exercise (the “Aggregate Exercise Price”). The “Date of Exercise” of any Warrant means the date on which the Company shall have received (i) this Warrant, with the Form of Election to Purchase attached hereto appropriately completed and duly endorsed, and (ii) payment of the Aggregate Exercise Price as provided herein.
(d) Cashless Exercise. In lieu of exercising this Warrant by payment of cash by wire transfer or check payable to the order of the Company, Registered Holder may elect to receive the number of Warrant Shares equal to the amount of this Warrant (or the portion thereof being exercised), by surrender of this Warrant to the Company, together with the exercise form attached hereto, in which event the Company shall issue to the Registered Holder, Warrant Shares in accordance with the following formula:
X = Y(A-B)
A
Where,
| X | = | The number of Shares to be issued to Registered Holder; | |
| Y | = | The number of Shares for which the Warrant is being exercised; | |
| A | = | The fair market value of one Share; and | |
| B | = | The Exercise Price. |
For purposes of this Section 3.1(d), the fair market value of a Share is defined as closing price on the Company’s primary exchange or the over-the-counter trading platform on the day prior to the Date of Exercise or if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Company’s Board of Directors.
(e) This Warrant will be exercisable either in its entirety or, from time to time, for part, only of the number of Warrant Shares which are issuable hereunder. If this Warrant shall have been exercised only in part, the Company shall, at the time of delivery of the certificates for the Warrant Shares issued pursuant to such exercise, deliver to the Registered Holder a new Warrant evidencing the rights to purchase the remaining Warrant Shares, which Warrant shall be substantially in the form of this Warrant.
Section 4. Payment of Expenses. The Company will pay all expenses (other than any federal or state taxes, including without limitation income taxes, or similar obligations of the Registered Holder) attributable to the preparation, execution, issuance and delivery of this Warrant, any new Warrant and the Warrant Shares.
Section 5. Mutilated or Missing Warrant Certificate. If this Warrant is mutilated, lost, stolen or destroyed, upon request by the Registered Holder, the Company will issue, in exchange for and upon cancellation of the mutilated Warrant, or in substitution for the lost, stolen or destroyed Warrant, a substitute Warrant, in substantially the form of this Warrant, of like tenor, but, in the case of loss, theft or destruction, only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of this Warrant and, if requested by the Company, indemnity also reasonably satisfactory to it.
| 2 |
Section 6. Listing and Issuance of Warrant Shares.
(a) The Company will, at its expense, use it best efforts to cause such shares to be included in or listed on (subject to issuance or notice of issuance of Warrant Shares) all markets or stock exchanges in or on which the Common Stock is included or listed not later than the date on which the Common Stock is first included or listed on any such market or exchange and will thereafter maintain such inclusion or listing of all shares of Common Stock from time to time issuable upon exercise of this Warrant.
(b) Before taking any action which could cause an adjustment pursuant to Section 7 hereof reducing the Exercise Price below the par value of the Warrant Shares, the Company will take any corporate action which may be necessary in order that the Company may validly and legally issue at the Exercise Price, as so adjusted, Warrant Shares that are fully paid and non-assessable.
(c) The Company covenants that all Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be (i) duly authorized, fully paid and nonassessable, and (ii) free from all liens, charges and security interests.
(d) The Company shall not effect the exercise of this Warrant, and the Registered Holder shall not have the right to exercise this Warrant, to the extent that after giving effect to such exercise, the Registered Holder (together with such Registered Holder's affiliates) would beneficially own in excess of 4.99% of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such Registered Holder and its affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercised portion of this Warrant beneficially owned by such Registered Holder and its affiliates and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by such Registered and its affiliates (including, without limitation, any convertible notes or convertible preferred stock or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein.
Section 7. Adjustment of Number of Warrant Shares.
(a) The number of Warrant Shares to be purchased upon exercise hereof is subject to change or adjustment from time to time as hereinafter provided:
(i) Reverse Stock Split. In the event that the Company undertakes a reverse split prior to or simultaneous with the Senior Exchange Listing, the warrants shall have reverse split protection so that the Consultant shall receive 200,000 warrants exercisable for five years at $0.58 per share after the reverse split;
(ii) Adjustments for Consolidation, Merger, Sale of Assets, Reorganization, etc. In case the Company (a) consolidates with or merges into any other corporation and is not the continuing or surviving corporation of such consolidation of merger, or (b) permits any other corporation to consolidate with or merge into the Company and the Company is the continuing or surviving corporation but, in connection with such consolidation or merger, the Common Stock is changed into or exchanged for stock or other securities of any other corporation or cash or any other assets, or (c) transfers all or substantially all of its properties and assets to any other corporation, or (d) effects a capital reorganization or reclassification of the capital stock of the Company in such a way that holders of Common Stock shall be entitled to receive stock, securities, cash and/or assets with respect to or in exchange for Common Stock, then, and in each such case, proper provision shall be made so that, upon the basis and upon the terms and in the manner provided in this subsection 7(a)(iii), the Registered Holder, upon the exercise of this Warrant at any time after the consummation of such consolidation, merger, transfer, reorganization or reclassification, shall be entitled to receive to 200,000 shares at $0.58 per share, in lieu of shares of Common Stock
| 3 |
issuable upon such exercise prior to such consummation, the stock and other securities, cash and/or assets to which such holder would have been entitled upon such consummation if the Registered Holder had so exercised this Warrant immediately prior thereto (subject to adjustments subsequent to such corporate action as nearly equivalent as possible to the adjustments provided for in this Section).
| (c) | Other Notices. In case at any time: |
| (i) | the Company shall declare any cash dividend on its Common Stock; |
(ii) the Company shall pay any dividend payable in stock upon its Common Stock or make any distribution (other than regular cash dividends) to the holders of its Common Stock;
(iii) the Company shall offer for subscription pro rata to all of the holders of its Common Stock any additional shares of stock of any class or other rights;
(iv) the Company shall authorize the distribution to all holders of its Common Stock of evidences of its indebtedness or assets (other than cash dividends or cash distributions payable out of earnings or earned surplus or dividends payable in Common Stock);
(v) there shall be any capital reorganization, or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another corporation (other than a subsidiary of the Company in which the Company is the surviving or continuing corporation and no change occurs in the Company’s Common Stock), or sale of all or substantially all of its assets to another corporation; or
(vi) there shall be a voluntary or involuntary dissolution, liquidation, bankruptcy, assignment for the benefit of creditors, or winding up of the Company;
then, in any one or more of said cases the Company shall give written notice, addressed to the Registered Holder at the address of such Registered Holder as shown on the books of the Company, of (1) the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights, or (2) the date (or, if not then known, a reasonable approximation thereof by the Company) on which such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, bankruptcy, assignment for the benefit of creditors, winding up or other action, as the case may be, shall take place. Such notice shall also specify (or, if not then known, reasonably approximate) the date as of which the holders of Common Stock of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, bankruptcy, assignment for the benefit of creditors, winding up, or other action, as the case may be. Such written notice shall be given (except as to any bankruptcy proceeding) at least five (5) days prior to the action in question and not less than five (5) days prior to the record date or the date on which the Company’s transfer books are closed in respect thereto. Such notice shall also state that the action in question or the record date is subject to the effectiveness of a registration statement under the 1933 Act, or to a favorable vote of stockholders, if either is required.
(d) Statement on Warrants. The form of this Warrant need not be changed because of any change in the Exercise Price or in the number or kind of shares purchasable upon the exercise of a Warrant. However, the Company may at any time in its sole discretion make any change in the form of the Warrant that it may deem appropriate and that does not affect the substance thereof and any Warrant thereafter issued, whether in exchange or substitution for any outstanding Warrant or otherwise, may be in the form so changed.
(e) Fractional Interest. The Company will not be required to issue fractional Warrant Shares on the exercise of the Warrants. The number of full Warrant Shares which shall be issuable upon such exercise shall be computed on the basis of the aggregate number of whole shares of Common Stock purchasable on the exercise of the Warrants so presented. If any fraction of a share of Common Stock would, except for the provisions of this Section 7(c) be issuable on the exercise of the Warrants (or specified proportion thereof), the Company shall pay an amount in cash calculated by it to be equal to the then fair value of one share of Common Stock, as determined by the Board of Directors of the Company in good faith, multiplied by such fraction computed to the nearest whole cent.
| 4 |
Section 8. No Rights or Liabilities as a Stockholder. The Registered Holder shall not be entitled to vote or be deemed the holder of Common Stock or any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, the rights of a stockholder of the Company or the right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or give or withhold consent to any corporate action or to receive notice of meetings or other actions affecting stockholders (except as provided herein), or to receive dividends or subscription rights or otherwise, until the Date of Exercise shall have occurred. No provision of this Warrant, in the absence of affirmative action by the Registered Holder hereof to purchase shares of Common Stock, and no mere enumeration herein of the rights and privileges of the Registered Holder, shall give rise to any liability of such holder for the Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
Section 9. Transfer Restrictions; Registration of the Warrant and Warrant Shares.
(a) Neither the Warrant nor the Warrant Shares have been registered under the 1933 Act. The Registered Holder, by acceptance hereof, represents that it is acquiring this Warrant to be issued to it for its own account and not with a view to the distribution thereof, and agrees not to sell, transfer, pledge or hypothecate this Warrant, any purchase rights evidenced hereby or any Warrant Shares unless a registration statement is effective for this Warrant or the Warrant Shares under the 1933 Act, or in the opinion of such Registered Holder’s counsel reasonably satisfactory to the Company, a copy of which opinion shall be delivered to the Company, such registration is not required as some other exemption from the registration requirement of the 1933 Act and applicable laws is available.
(b) Subject to the provisions of the following paragraph of this Section 9, each Certificate for Warrant Shares shall be stamped or otherwise imprinted with a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE 1933 ACT, AN OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER HEREOF, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT AS SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND APPLICABLE LAWS IS AVAILABLE.
(c) The restrictions and requirements set forth in the foregoing paragraph shall apply with respect to Warrant Shares unless and until such Warrant Shares are sold or otherwise transferred pursuant to an effective registration statement under the 1933 Act or are otherwise no longer subject to the restrictions of the 1933 Act, at which time the Company agrees to promptly cause such restrictive legends to be removed and stop transfer restrictions applicable to such Warrant Shares to be rescinded.
(d) Whenever the Company proposes to register any of its securities under the Securities Act, the Company will give prompt written notice to the Registered Holder of its intention to effect such registration and will include in such registration all Common Stock underlying this Warrant with respect to which the Company has received a written notice from the Registered Holder for inclusion therein within 15 days after the receipt of the Company’s notice.
Section 10. Notices. All notices and other communications relating to this Warrant shall be in writing and shall be deemed to have been duly given if delivered personally or sent by United States certified or registered first-class mail, postage prepaid, return receipt requested, or overnight air courier guaranteeing next day delivery to the parties hereto at the following addresses or at such other address as any party hereto shall hereafter specify by notice to the other party hereto:
| 5 |
(a) If to the Registered Holder of this Warrant or the holder of the Warrant Shares, addressed to the address of such Registered Holder or holder as set forth on books of the Company or otherwise furnished by the Registered Holder or holder to the Company.
(b) If to the Company, addressed to:
Quality Industrial Corp.
315 Montgomery Street
San Francisco, CA 94104
Attn: John-Paul Backwell
Email: *******@*******.com
A notice or communication will be effective (i) if delivered in person, by e-mail or by overnight courier, on the business day it is delivered, and (ii) if sent by registered or certified mail, the earlier of the date of actual receipt by the party to whom such notice is required to be given or three (3) days after deposit in the United States mail.
Section 11. Binding Effect. This Warrant shall be binding upon and inure to the sole and exclusive benefit of the Company, its successors and assigns, and the holder or holders from time to time of this Warrant and the Warrant Shares.
Section 12. Survival of Rights and Duties. This Warrant shall terminate and be of no further force and effect on the earlier of (i) 5:00 p.m., New York Time, on the Expiration Date and (ii) the date on which this Warrant and all purchase rights evidenced hereby have been exercised, except that the provisions of Sections 6(c) and 9 hereof shall continue in full force and effect after such termination date.
Section 13. Governing Law. This Warrant shall be governed and controlled as to the validity, enforcement, interpretations, construction and effect and in all other aspects by the substantive laws of the State of Florida. In any action between or among any of the parties, whether arising out of this Warrant or otherwise, each of the parties irrevocably consents to the exclusive jurisdiction and venue of the federal and state courts located in Broward County, Florida.
Section 14. Section Headings. The Section headings in this Warrant are for purposes of convenience only and shall not constitute a part hereof.
[Signature Page to Follow]
| 6 |
IN WITNESS WHEREOF, Quality Industrial Corp. has caused this Warrant to be duly executed in its corporate name by the manual signature of its Chief Executive Officer.
| QUALITY INDUSTRIAL CORP. | ||
| By: /s/ John-Paul Backwell | ||
| John-Paul Backwell, CEO | ||
| Date: 19 April 2023 |
| 7 |
FORM OF ELECTION TO PURCHASE
(To Be Executed Upon Exercise of this Warrant)
To Quality Industrial Corp.:
The undersigned, the record holder of this Warrant (Warrant No. ___________), hereby irrevocably elects to exercise the right, represented by this Warrant, to purchase ____________of the Warrant Shares and herewith and hereby tenders payment for such Warrant Shares to the order of [NAME] of $__________, representing the full purchase price for such shares at the price per share provided for in such Warrant and the delivery of any applicable taxes payable by the undersigned pursuant to such Warrant.
or
In lieu of exercising this Warrant by payment of cash by wire transfer or check payable to the order of the Company, Holder may elect to receive the number of Warrant Shares equal to the value of this Warrant (or the portion thereof being exercised), by surrender of this Warrant to the Company, in exchange for Warrant Shares in accordance with the following formula:
X = Y(A-B)
A
Where,
| X | = | The number of Shares to be issued to Holder; | |
| Y | = | The number of Shares for which the Warrant is being exercised; | |
| A | = | The fair market value of one Share; and | |
| B | = | The Exercise Price. |
The undersigned requests that certificates for such shares be issued in the name of:
(Please print name and address) Social Security or Tax Identification No.
In the event that not all of the purchase rights represented by the Warrant are exercised, a new Warrant, substantially identical to the attached Warrant, representing the rights formerly represented by the attached Warrant which have not been exercised, shall be issued in the name of and delivered to:
(Please print name and address) Social Security or Tax Identification No.
Dated: ______________ |
Exchange Listing LLC | |
| By: _____________________ | ||
| (Name): _________________ | ||
| (Title): ___________________ |
| 8 |
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, ______________hereby sells, assigns and transfers to each assignee set forth below all of the rights of the undersigned under the attached Warrant (Warrant No. ) with respect to the number of shares of Common Stock covered thereby set forth opposite the name of such assignee unto:
| Number of Shares of | ||
Name of Assignee |
Address | Common Stock |
If the total of said purchase rights represented by the Warrant shall not be assigned, the undersigned requests that a new Warrant Certificate evidencing the purchase rights not so assigned be issued in the name of and delivered to the undersigned.
Dated: ______________ |
Name of Holder (Print): | |
| (Signature of Holder) |
| 9 |
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the “Agreement”) is dated as of April 19, 2023 by and between the Exchange Listing, LLC (the “Purchaser”) having its principal place of business at 515 E. Las Olas Blvd, Suite 120, Fort Lauderdale, Florida 33301 and Quality Industrial Corp. having its principal place of business at 315 Montgomery Street, San Francisco, CA 94104 (the “Seller”). The Purchaser and Seller may hereinafter be referred to as the “Parties” and each, a “Party.”
WHEREAS, the Seller authorized the sale and issuance of 1,543,256 shares of the Seller’s common stock (equal to 1.5% percent of the current issues and outstanding shares of the Company) at a price of .001 per share (the “Shares”) to the Purchaser pursuant to a Consulting Agreement dated April 19, 2023;
WHEREAS, this Agreement is to memorialize the purchase of the Shares pursuant to the terms hereunder and for the consideration set forth herein;
NOW THEREFORE, in consideration of the mutual promises, covenants and representations contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and subject to the terms and conditions hereof, the Parties hereby agree as follows:
ARTICLE I PURCHASE AND SALE
| 1.1 | Purchase and Sale; Purchase Price. |
(a) Subject to the terms and conditions set forth in this Agreement, Seller shall sell to Purchaser, and Purchaser shall accept from Seller, the Shares in exchange for $1,543 (the “Purchase Price”).
(b) The Shares shall be sold, assigned and transferred to and purchased by Purchaser upon execution of this Agreement, as of the date first indicated above (the “Closing”), in consideration for the Purchase Price.
| 1.2 | Closing. |
| (a) | Upon Closing, Seller shall deliver to Purchaser the following: |
(i) fully executed documentation, including, without limitation, the Agreement, that completely effectuates the sale of the Shares; and
| (ii) | stock certificate(s) and/ or Book Entry Statement for the Shares. |
| (b) | Upon Closing, Purchaser shall deliver to Seller the following: |
(i) fully executed documentation, including, without limitation, the Agreement, that completely effectuates the purchase of the Shares; and
| (ii) | the Purchase Price. |
ARTICLE II REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Seller. Seller hereby makes the following representations and warranties to Purchaser:
(a) Full Power and Authority. Seller has full power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Seller and constitutes the legal, valid and binding obligation of Seller, enforceable in accordance with its terms;
(b) No Violation or Conflict; Consent. The execution, delivery and performance by Seller of this Agreement and consummation by Seller of the transactions contemplated hereby do not and will not: (i) violate any decree or judgment of any court or other governmental authority applicable to or binding on Seller or (ii) violate any contract to which Seller is bound, or conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which Seller is a party;
(c) Title. With respect to the sale of the Shares, (i) Seller is the sole record and beneficial owner of the Shares, free and clear of any taxes and liens, security interests, adverse claims or other encumbrances of any character whatsoever (“Encumbrances”), other than restrictions on resales of the Shares or other restrictions that may exist under applicable securities laws; (ii) the Shares, when delivered and paid for in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable, free from all taxes and Encumbrances; (iii) the Shares to be delivered are not and will not be as of the Closing Date subject to any transfer restriction, other than the restriction that the Shares have not been registered under the Securities Act and, therefore, cannot be resold unless it is registered under the Securities Act or in a transaction exempt from or not subject to the registration requirements of the Securities Act (“Permitted Transfer Restriction”); (iv) upon the transfer of the Shares to Purchaser, Purchaser will acquire good and marketable title thereto, and will be the legal and beneficial owner of such the Shares, free and clear of any Encumbrances or transfer restrictions, other than the Permitted Transfer Restriction;
(v) there are no outstanding rights, options, subscriptions or other agreements or commitments obligating Seller with respect to the Shares, and Seller has not granted any person a proxy that has not expired or been validly withdrawn;
2.2 Representations and Warranties of Purchaser. Purchaser hereby makes the following representations and warranties to Seller:
(a) Full Power and Authority. Purchaser has full power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. This Agreement has been
| 2 |
duly and validly executed and delivered by Purchaser and constitutes the legal, valid and binding obligation of Purchaser, enforceable in accordance with its terms;
(b) Restricted Securities. Purchaser understands that the Shares are characterized as “restricted securities” under the Securities Act inasmuch as they were acquired from Seller in a transaction not registered under the Securities Act; and
(c) Investment Intent. Purchaser is acquiring the Shares for his own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the Securities Act.
ARTICLE III MISCELLANEOUS
3.1 Entire Agreement. The Agreement contains the entire understanding of the Parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters.
3.2 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by Seller and Purchaser or, in the case of a waiver, by the Party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either Party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.
3.3 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.
3.4 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the Parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person or entity.
3.5 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Florida, without regard to the principles of conflicts of law thereof. Each Party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Florida for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper. Each Party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery). Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each Party irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any
| 3 |
legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either Party shall commence an action or proceeding to enforce any provisions of the documents contemplated herein, then the prevailing Party in such action or proceeding shall be reimbursed by the other Party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
3.6 Survival. The representations, warranties, agreements and covenants contained herein shall not survive the Closing.
3.7 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each Party and delivered to the other Party, it being understood that the Parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof.
3.8 Severability. In case any one or more of the provisions of this Agreement shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affecting or impaired thereby and the Parties will attempt to agree upon a valid and enforceable provision which shall be a reasonable substitute therefore, and upon so agreeing, shall incorporate such substitute provision in this Agreement.
3.9 Notices. All notices or other communications required or permitted by this Agreement shall be in writing and sent to the other Party at the address set forth in the preamble hereto or to such other address as may be specified by any such Party to the other Party pursuant to notice given by such Party in accordance with the provisions of this Section 3.9, and shall be deemed to have been duly received:
| (a) | if given by courier, messenger or other means, when received or personally delivered; |
(b) if given by certified or registered mail, return receipt requested, postage prepaid, three business days after being deposited in the U.S. mails; and
(c) if given by fax, when transmitted and the appropriate confirmation received, as applicable, if transmitted on a business day and during normal business hours of the recipient, and otherwise on the next business day following transmission
3.10 Headings. The headings used in this Agreement are for convenience of reference only and shall not be deemed to limit, characterize or in any way affect the interpretation of any provision of this Agreement.
3.11 Registration Rights. The Seller agrees to include the Shares in any registration statement filed by the Seller with the Securities and Exchange Commission.
[Signature page follows]
| 4 |
IN WITNESS WHEREOF, the Parties have caused this Stock Purchase Agreement to be duly executed as of the date first indicated above.
| SELLER: | ||
| QUALITY INDUSTRIAL CORP. | ||
| /s/ John-Paul Backwell | ||
| By: John-Paul Backwell | ||
| PURCHASER: | ||
| EXCHANGE LISTING, LLC | ||
| /s/ Peter Goldstein | ||
| By: Peter Goldstein |
| 5 |
EXHIBIT 31.1
CERTIFICATIONS
I, John-Paul Backwell, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023, of Quality Industrial Corp.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: | |
| a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and; | |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions); | |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.
| |
| Quality Industrial Corp. | |||
| Dated: May 19th, 2023 | By: | /s/ John-Paul Backwell | |
| John-Paul Backwell | |||
| Chief Executive Officer (principal executive) | |||
EXHIBIT 31.2
CERTIFICATIONS
I, Krishnan Krishnamoorthy, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023, of Quality Industrial Corp.; | |||
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |||
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |||
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: | |||
| a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |||
| b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |||
| c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |||
| d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and; | |||
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions); | |||
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |||
| b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.
| |||
| Dated: May 19th, 2023 | Quality Industrial Corp. | ||
| By: | /s/ Krishnan Krishnamoorthy | ||
| Krishnan Krishnamoorthy | |||
| Chief Financial Officer (principal accounting, and financial officer) | |||
EXHIBIT 32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Quality Industrial Corp. (the “Company”) for the fiscal quarter ended March 31, 2023, as filed with the Securities and Exchange Commission (the “Report”), I, John-Paul Backwell, and I Krishnan Krishnamoorthy certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Quality Industrial Corp. | |||
| Dated: May 19th, 2023 | By: | /s/ John-Paul Backwell | |
| John-Paul Backwell | |||
| Chief Executive Officer (principal executive) | |||
| Quality Industrial Corp. | |||
| By: | /s/ Krishnan Krishnamoorthy | ||
| Krishnan Krishnamoorthy | |||
| Chief Financial Officer (principal accounting, and financial officer) | |||
This certification accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.