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 June 30, 2022
| ☐ | 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 August 12, 2022
| 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 | 7 |
| Item 4: | Controls and Procedures | 7 |
| PART II – OTHER INFORMATION | ||
| 8 | ||
| Item 1: | Legal Proceedings | 8 |
| Item 1A: | Risk Factors | 8 |
| Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds | 8 |
| Item 3: | Defaults Upon Senior Securities | 8 |
| Item 4: | Mine Safety Disclosures | 8 |
| Item 5: | Other Information | 8 |
| Item 6: | Exhibits | 8 |
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Our financial statements included in this Form 10-Q are as follows:
| F-1 | Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021 (audited); | |
| F-2 | Statements of Operations for the three and six months ended June 30, 2022 and 2021 (unaudited); | |
| F-3 | Statement of Stockholders’ Equity (Deficit) for the periods ended June 30, 2022 and 2021 (unaudited); | |
| F-4 | Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (unaudited); and | |
| F-5 | Notes to Financial Statements. |
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 June 30, 2022 are not necessarily indicative of the results that can be expected for the full year.
| 3 |
QUALITY INDUSTRIAL CORP.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| June 30, 2022 | December 31, 2021 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 14,446 | $ | 15,659 | ||||
| Prepaid and other current assets | 8,967 | 178 | ||||||
| Total current assets | 23,413 | 15,837 | ||||||
| Other assets | ||||||||
| Prepaid expenses - long term | 210,293 | |||||||
| Total other assets | 210,293 | |||||||
| Total assets | $ | 23,413 | $ | 226,130 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | 15,795 | 207,421 | ||||||
| Line of credit - related party | 295,000 | |||||||
| Related party advances | 30,000 | — | ||||||
| Loans Payable | 45,215 | 63,090 | ||||||
| Advances payable | 29,626 | 29,626 | ||||||
| Total current liabilities | 120,636 | 595,137 | ||||||
| Total liabilities | 120,636 | 595,137 | ||||||
| Stockholders' deficit | ||||||||
| Preferred stock; par value; shares authorized; and shares issued and outstanding as of as of September 30, 2021 and December 31, 2020, respectively | ||||||||
| Common stock; par value; shares authorized; and shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | 100,886 | 94,740 | ||||||
| Additional paid-in capital | 12,094,375 | 11,904,190 | ||||||
| Stock payable | 395,101 | 395,101 | ||||||
| Stock Receivable | ||||||||
| Accumulated deficit | (12,687,585 | ) | (12,763,038 | ) | ||||
| Total stockholders' deficit | (97,223 | ) | (369,007 | ) | ||||
| Total liabilities and stockholders' deficit | $ | 23,413 | $ | 226,130 | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-1 |
QUALITY INDUSTRIAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Professional fees | 70,922 | 131,095 | 217,839 | 240,391 | ||||||||||||
| General and administrative | 19,734 | 89,955 | 57,245 | 169,354 | ||||||||||||
| Total operating expenses | 90,656 | 221,050 | 275,084 | 409,745 | ||||||||||||
| Loss from operations | (90,656 | ) | (221,050 | ) | (275,084 | ) | (409,745 | |||||||||
| Other expense | ||||||||||||||||
| Gain on settlement and forgiveness of debt | 337,071 | 457,071 | ||||||||||||||
| Loss on license agreement | (104,550 | ) | ||||||||||||||
| Loss on foreign currency translation | (9 | ) | ||||||||||||||
| Interest expense | (972 | ) | (1,110 | ) | (1,984 | ) | (2,203 | ) | ||||||||
| Total other expense | 336,099 | (1,110 | ) | 350,537 | (2,212 | ) | ||||||||||
| Net income (loss) | $ | 245,443 | $ | (222,160 | ) | $ | 75,453 | $ | (411,957 | ) | ||||||
| Net loss per common share - basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||
| Weighted average common shares outstanding | 100,621,953 | 104,653,154 | 98,669,372 | 104,653,154 | ||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-2 |
QUALITY INDUSTRIAL CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
For the Six Months Ended June 30, 2022
| Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-in Capital | Stock Payable | Stock Receivable | 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 | 745 | ||||||||||||||||||||||||||||||||||||
| Net Income | (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 | ) | |||||||||||||||||||||
| Common stock issued for cash | 595,500 | 596 | 26,421 | 11,725 | 38,742 | |||||||||||||||||||||||||||||||||
| Imputed interest | 753 | 753 | ||||||||||||||||||||||||||||||||||||
| Reclassification of imputed interest | (6,283 | ) | (6,283 | ) | ||||||||||||||||||||||||||||||||||
| Net Income | 245,443 | 245,443 | ||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | 100,883,709 | $ | 100,886 | $ | 12,094,375 | $ | 395,101 | $ | (12,687,585 | ) | $ | (97,223 | ) | ||||||||||||||||||||||||
| For the Six Months Ended June 30, 2021 | ||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-in Capital | Stock Payable | Accumulated Deficit | Total Stockholders' Equity | |||||||||||||||||||||||||||||||
| Balance, December 31, 2020 | $ | 104,964,265 | $ | 104,966 | $ | 7,232,305 | $ | 223,226 | $ | (7,583,538 | ) | $ | (23,041 | ) | ||||||||||||||||||||||||
| Shares issued for services | 68,750 | 68,750 | ||||||||||||||||||||||||||||||||||||
| Redemption of common stock for cash | (14,000,000 | ) | (14,000 | ) | 13,999 | (1 | ) | |||||||||||||||||||||||||||||||
| Imputed interest | 745 | 745 | ||||||||||||||||||||||||||||||||||||
| Net loss | (189,797 | ) | (189,797 | ) | ||||||||||||||||||||||||||||||||||
| Balance, March 31, 2021 | $ | 90,964,265 | $ | 90,966 | $ | 7,247,049 | $ | 291,976 | $ | (7,773,335 | ) | $ | (143,344 | ) | ||||||||||||||||||||||||
| Shares issued for services | 25,000 | 25 | 49,475 | 34,375 | 83,875 | |||||||||||||||||||||||||||||||||
| Imputed interest | 754 | 754 | ||||||||||||||||||||||||||||||||||||
| Net loss | (222,160 | ) | (222,160 | ) | ||||||||||||||||||||||||||||||||||
| Balance, June 30, 2021 | $ | 90,989,265 | $ | 90,991 | $ | 7,297,278 | $ | 326,351 | $ | (7,995,495 | ) | $ | (280,875 | ) | ||||||||||||||||||||||||
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 Six Months Ended | ||||||||
| June 30, 2022 | June 30, 2021 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net income (loss) | $ | 75,453 | $ | (411,957 | ) | |||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Stock based compensation | 152,625 | |||||||
| Common stock issued for license agreement | 104,550 | |||||||
| Settlement and forgiveness of debt | (457,071 | ) | ||||||
| Imputed interest | 1,498 | 1,499 | ||||||
| Changes in assets and liabilities | ||||||||
| Increase in prepaid assets | 201,504 | (1,244 | ) | |||||
| Increase (decrease) in accounts payable | (77,838 | ) | 24,220 | |||||
| Net cash used in operating activities | (151,904 | ) | (234,857 | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Net cash used in investing activities | ||||||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from related party advances | 30,000 | |||||||
| Proceeds from loans | 37,000 | 1,909 | ||||||
| Payment of related party advances | (17,875 | ) | (1,909 | ) | ||||
| Stock redemption for cash | (1 | ) | ||||||
| Related party line of credit | 5,000 | 245,000 | ||||||
| Proceeds from issuance of common stock | 96,566 | |||||||
| Net cash from financing activities | 150,691 | 244,999 | ||||||
| Net increase (decrease) in Cash | (1,213 | ) | 10,142 | |||||
| Beginning cash balance | 15,659 | 19,564 | ||||||
| Ending cash balance | $ | 14,446 | $ | 29,706 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for tax | $ | $ | ||||||
| Reclassification of imputed interest to accrued interest | (6,283 | ) | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-4 |
QUALITY INDUSTRIAL CORP.
(formerly WIKISOFT CORP.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
Organization
Quality Industrial Corp. (“we”, “our”, the "Company") was incorporated in the state of Nevada in May
1998 as Sensor Technologies Inc. On June 27, 2022, the Company amended its articles of incorporation and changed its name from Wikisoft
Corp. to Quality Industrial Corp.
Nature of operations
The Company is a public M&A Company focused on the Industrial, Oil & Gas and Utility Sectors. 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.
Change of control
On May 28, 2022, 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 is CEO of Ilustrato who is the beneficial owner.
As a result of this transaction, there has been a change in control of the Company. The shares transferred amounts to 77% of the outstanding shares in our Company. Consequently, Ilustrato 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.
As a result of the Change of Control, Mr. Quintal resigned as Chairman of the Board, and Mr. Link was appointed as the Company's Chairman of the Board. There was no known disagreement with Mr. Qunital on any matter relating to our operations, policies or practices. There are no further arrangements known to the Company, the operation of which may, at a subsequent date, result in a change in control of the Company. There are no arrangements or understandings among Modern Art Foundation Inc. (“Modern Art”) Rene Lauritsen and Fastbase Holding Inc., Ilustrato and their associates with respect to election of directors or other matters.
2. SUMMARY OF SIGNIFICANT POLICIES
Basis of Presentation and Principles of consolidation
The accompanying condensed consolidated financial statements represent the results of operations, financial position and cash flows of the Company prepared on the accrual basis of accounting and conform to accounting principles generally accepted in the United States of America.
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. – On March 31, 2019, the Company, a Nevada corporation, entered into an Agreement and Plan of Merger with WikiSoft DE, a Delaware corporation, and WikiSoft Acquisition, Inc., a Delaware corporation. WikiSoft Acquisition, Inc. merged with and into WikiSoft DE (the “Merger”) on April 30, 2019, with the filing of Articles of Merger with the Delaware Secretary of State. All significant inter-company transactions and balances have been eliminated.
Use of estimates
The preparation of condensed 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.
| F-5 |
Fair value of financial instruments
| • | 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. |
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.
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606. The accounting policy on revenue recognition is provided below.
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 more than 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.
Cash and cash equivalents
For purposes of the statements of cash flows, the Company considers all highly liquid investments and short-term debt instruments with original maturities of six months or less to be cash equivalents.
| F-6 |
The Company follows the guidelines in FASB Codification Topic ASC 718-10 “Compensation-Stock Compensation,” which requires companies to measure the cost of employee services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period. The Company accounts for non-employee share-based awards in accordance with FASB ASC 505-50 under which the awards are valued at the earlier of a commitment date or upon completion of the services, based on the fair value of the equity instruments, and are recognized as expense over the service period.
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.
Income taxes
The Company accounts for its income taxes in accordance with FASB Codification Topic ASC 740-10, “Income Taxes”, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
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.
3. 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.
| F-7 |
4. PURCHASE OF MEMBERSHIP INTEREST IN ETHERALABS LLC
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. Etheralabs LLC is a New York City based venture lab and ecosystem that invests in, builds, and deploys disruptive technologies across the Blockchain space and the transaction includes a global access to Etheralabs´ full stack of technologies across the Blockchain and global funding landscape. Etheralabs ecosystem allows development and finance partnerships throughout the blockchain world and beyond, and connects the blockchain community, investors and venture capital to relevant data intelligence and direct investment opportunities. Wikisoft intends to ensure that Etheralabs future product and technology roadmap supports wikiprofile.com and the upcoming Wikifunding platform aiming to accelerate matching investors to startups. On May 25, 2022 the Company entered into an agreement to transfer its 51% ownership interest in Etheralabs LLC to settle $300,000 of Line of credit – related party debt, as well as $41 of interest.
5. RELATED PARTY TRANSACTIONS
Related party advances
As of June 30, 2022 and December 31, 2021, the Company had amounts due to Ilustrato Pictures International Inc, a majority shareholder of the Company, of $30,000 and $0, respectively. During the six months ended June 30, 2022 and 2021, the Company received advances in the amounts of $30,000 and $0, respectively, and the Company made payments on the advances in the amounts of $0 and $0, respectively.
6. ADVANCES PAYABLE
As of June 30, 2022 and December 31, 2021, the Company had amounts due to Fastbase Inc, of $29,626 and $29,626, respectively. During the six months ended June 30, 2022 and 2021, the Company received additional advances in the amounts of $0 and $0, respectively, and the Company made payments on the advances in the amounts of $0 and $0, respectively.
7. LINE OF CREDIT
On December 30, 2020 the company entered into a $1,000,000 revolving note agreement. The note carries and 0.01% interest rate and is due on the later of the date the Company has the funds to repay the note or 24 months. During the six months ended June 30, 2022, the Company borrowed $5,000 under the revolving note. On May 25, 2022 the balance of the line of credit was settled in full with the transfer of the Companys 51% ownership interest in Etheralabs LLC to the shareholder. As of June 30, 2022 and December 31, 2021, the note had a balance of $0 and $295,000, respectively. Interest expense related to the line of credit was $12 and $12 for the six months ending June 30, 2022 and 2021, respectively.
8. LOANS PAYABLE
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 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 June 30, 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. As of June 30, 2022 the balance of principal owed was $0.
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. As of June 30, 2022 the balance of principal owed was $0.
As of June 30, 2022 and December 31, 2021, the Company had loans payable of $45,215 and 63,090, respectively. Interest expense related to related party loans was $1,984 and $2,203 for the six months ending June 30, 2022 and 2021, respectively, of which $1,498 was imputed interest and recorded against additional paid in capital for the period ended June 30, 2022.
| F-8 |
9. 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 June 30, 2022 and December 31, 2021, there were and shares of common stock issued and outstanding, respectively.
As of June 30, 2022 and December 31, 2021, there were and shares of preferred stock of the Company issued and outstanding, respectively.
Common Stock issuances during the six months ending June 30, 2022
| • | 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 4 for additional information. |
| • | On May 10, 2022 the Company issued shares of common stock for $27,017 cash. |
10. SUBSEQUENT EVENTS
In accordance with ASC 855-10, we have analyzed our operations subsequent to June 30, 2022 through the date these financial statements and determined the following were material to these financial statements:
On August 3, 2022, the Company issued to an accredited investor a two year convertible promissory note in the principal amount of $1,100,000. 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 August 4, 2022, the Company authorized a change in our name to “Quality Industrial Corp.”.
| F-9 |
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, 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.
Business Overview
Change in Control
On May 28, 2022, Modern Art Foundation Inc. (“Modern Art”), Rene Lauritsen and Fastbase Holding Inc. agreed to transfer 77,669,078 shares of their common stock in our Company, Quality Industrial Corp., to Ilustrato Pictures International Inc. (“ILUS”). Pursuant to a Stock Purchase Agreement, ILUS purchased the shares for an aggregate amount of $500,000. Mr. Nicolas Link is CEO of ILUS which is the beneficial owner.
As a result of this transaction, there has been a change in control of our Company. The 77,669,078 shares transferred amounts to 77% 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.
As a result of the change of control, Mr. Quintal resigned as Chairman of the Board, and Mr. Link was appointed as the Company's Chairman of the Board. There was no known disagreement with Mr. Qunital on any matter relating to our operations, policies or practices.
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.
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 Ilustrato.
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Change in Business Direction
On June 30, 2022, ILUS signed a binding Letter of Intent for the Company to acquire a 51% interest in an International process Engineering Company and manufacturer of custom solutions for the Oil and Gas, Power/Energy, Water, Desalination, Wastewater, Offshore and Public Safety. It has Oil and Gas industry certifications in place and is on several global preferred vendor lists including but not limited to BP, Shell, Total, Chevron, Sonatrach, Sasol & Gasco.
In the agreed assumed equity valuation, subject to completion of financial due diligence and business valuation ,will be holding 51% of the shareholding of the International process engineering company. As payment, company will receive a combination of cash investment over a period exceeding one year after closing, with convertible preferred shares of QIND which will be tied to lock up and leak out clauses. Quality Industrial Corp. has the right of first refusal to purchase these shares back redeemable at $0.75 per share.
The Agreement is predicated upon the execution and delivery of a definitive Stock Purchase Agreement for the transaction. The transaction is expected to close within thirty (30) business days.
On August 3, 2022, we issue to an accredited investor a two year convertible promissory note in the principal amount of $1,100,000 (the “Note”). The Note bears interest at 7% per annum. We have 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.
The Company expects to continue to acquire and drive broad-based market awareness among both sections of our company focusing on the end user of our products. Our marketing channels continue to expand as our number of satisfied customers increase, creating additional referrals to augment our traditional print, online and social media efforts. We also rely heavily on our relationships with trade partners in the construction industry for involvement with their projects.
Our offices are located at 315 Montgomery Street, San Francisco, CA 94104, and our telephone number is 800-706-0806. Our website address is www.qualityindustrialcorp.com and our email address is info@ qualityindustrialcorp.com. Information contained on, or accessible through, the foregoing website is not a part of, and is not incorporated by reference into, this Quarterly Report on Form 10-Q.
Results of Operation for the Six Months Ended June 30, 2022 and 2021
Revenues
We earned no revenues for the six months ended June 30, 2022 or 2021. We recently entered into a binding letter of intent to acquire an International process Engineering Company and will generate revenues for the remainder of 2022 as a result of the consolidation into our financial results. The Company is revenue generating company and manufactures custom solutions for the Oil and Gas, Energy, Water Desalination, Waste-Water, Offshore and Public Safety sectors.
Operating Expenses
Operating expenses decreased from $409,745 for the six months ended June 30, 2021 to $275,084 for the six months ended June 30, 2022. The main reason for the decrease in operating expenses for the 2022 period was considerably less spent on general and administrative expenses and professional fees over the same period in 2021. We have not issued stock for services for the six month ended June 30, 2022.
We anticipate our operating expenses will increase as we undertake our plan of operations associated with the international process engineering company. The increase will be attributable to administrative and operating costs associated with our business activities and the professional fees associated with our reporting obligations.
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Other Income / Expense
We incurred other income of $350,537 for the six months ended June 30, 2022 as compare with other expense of $2,212 for the same period ended 2021. Our other income in 2022 was the result of a gain on settlement and forgiveness of debt, offset mainly by a loss on a license agreement. Our other expense in 2021 was mainly the result of interest expense.
Net Income/Net Loss
We incurred net income of $75,453 for the six months ended June 30, 2022, compared to a net loss of $411,957 for the same period ended June 30, 2021.
Liquidity and Capital Resources
As of June 30, 2022, we had total current assets of $23,413 and total current liabilities of $120,636. We had a working capital deficit of $97,223 as of June 30, 2022. This compares with a working capital deficit of $369,007 as of December 31, 2021.
Net cash used in operating activities was $151,904 for the six months ended June 30, 2022, as compared with $234,848 in cash for the same
period ended 2021.
Financing activities provided $150,691 in cash for the six months ended June 30, 2022, as compared with $249,999 in cash provided for the same period ended 2021. Most cash provided in 2022 was from our S-1 equity line with White Lion Capital, which was deregistered on June 22, 2022. The majority of cash provided in 2021 was proceeds from the Credit Agreement with Rasmus Refer, our former officer and director.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, liquidation of liabilities, the continued ability to raise capital as and when required, in the normal course of business.
Future Financings.
Because of our limited operating history, it is difficult to predict our capital needs on a monthly, quarterly or annual basis. We do not have financing in place at this time other than capital from our parent company Ilustrato Pictures International Inc.
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 Note 2 of our unaudited financial statements included in this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
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Recently Issued Accounting Pronouncements
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
No change in our system of internal control over financial reporting occurred during the period covered by this report, the period ended June 30, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We 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 for the year ended December 31, 2021 filed on April 25, 2022.
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 April 22, 2022, the Company issued 595,500 shares of common stock for $27,017 cash.
These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
Item 5. Other Information
As previously reported, on September 1, 2020, the Company entered into an employment agreement (the “Employment Agreement”) with Carsten Falk in his capacity as the Company’s Chief Executive Officer. Pursuant to the Agreement, Mr. Falk is to receive $15,000 per month to be paid on the last day of each month. Mr. Falk chose not to take all of these payments and has waived his right to receive the outstanding amounts for Q2 2022 of $45,000.
Item 6. Exhibits
| Exhibit Number | Description of Exhibit | |
| 31.1** | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2** | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1** | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101** | The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 formatted in Extensible Business Reporting Language (XBRL). | |
| **Provided herewith |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Quality Industrial Corp. | ||
| Date: | August 17, 2022 | |
| By: | /s/ Carsten Falk | |
| Carsten Falk | ||
| Title: | Chief Executive Officer (principal executive) | |
| By: | /s/ Krishnan Krishnamoorthy | |
| Krishnan Krishnamoorthy | ||
| Title: | Chief Financial Officer (principal accounting, and financial officer) |
| 9 |
EXHIBIT 31.1
CERTIFICATIONS
I, Carsten Kjems Falk, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2022 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: August 17, 2022 | /s/ Carsten Kjems Falk | ||
| Carsten Kjems Falk | |||
| Chief Executive Officer | |||
|
(principal executive officer, principal financial and accounting officer) |
| CERTIFICATIONS |
I, Krishnan Krishnamoorthy, certify that;
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 of Quality Industrial Corp. (the “registrant”); |
| 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 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 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 control over financial reporting. |
Date: August 17, 2022
/s/ Krishnan Krishnamoorthy
By: Krishnan Krishnamoorthy
Title: Chief 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 June 30, 2022 as filed with the Securities and Exchange Commission (the “Report”), I, Carsten Kjems Falk, Chief Executive Office, and I, Krishnan Krishnamoorthy, Chief Financial Officer of the Company 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. |
| Dated: August 17, 2022 | /s/ Carsten Kjems Falk | ||
| Carsten Kjems Falk | |||
| Chief Executive Officer | |||
|
(principal executive officer, principal financial and accounting officer) |
| Dated: August 17, 2022 | /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.