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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 September 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: 102,883,709 common shares as of November 14, 2022

 

 

  
Table of Contents 

  

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  
   
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 9

 

 2 
Table of Contents 

 

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 September 30, 2022 (unaudited) and December 31, 2021 (audited);
  F-2 Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (unaudited);
  F-3 Statement of Stockholders’ Equity (Deficit) for the periods ended September 30, 2022 and 2021 (unaudited);
  F-4 Statements of Cash Flows for the nine months ended September 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 September 30, 2022 are not necessarily indicative of the results that can be expected for the full year.

 

 3 
Table of Contents 

 

QUALITY INDUSTRIAL CORP.

CONSOLIDATED BALANCE SHEETS

       
   September 30, 2022  December 31, 2021
ASSETS          
Current assets          
Cash and cash equivalents   4,064    15,659 
Other current assets   37,444,265    178 
Total current assets   37,448,329    15,837 
           
Other assets          
Investment in Subsidiary (Quality International)   1,000,000       
Prepaid expenses - long term         210,293 
Total other assets   1,000,000    210,293 
           
Total Assets  $38,448,329   $226,130 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
Current liabilities          
Accounts payable and accrued liabilities   33,136,266    207,421 
Other Current Liabilities   94,571    387,716 
Total current liabilities   33,230,837    595,137 
           
Long Term liabilities          
Convertible Notes   1,100,000       
Total Long-Term Liabilities   1,100,000       
           
Stockholders' Equity          
Preferred stock; $0.001 par value; 1,000,000 shares authorized; 0 and 0 shares issued and outstanding as of as of September 30, 2022, and December 31, 2021, respectively            
Common stock; $0.001 par value; 200,000,000 shares authorized; 102,883,709 and 94,738,209 shares issued and outstanding as of September 30, 2022, and December 31, 2021, respectively   102,886    94,740 
Additional paid-in capital   12,174,975    11,904,190 
Stock Payable   395,101    395,101 
Retained Earnings/ accumulated Deficit   (10,986,585)   (12,763,038)
Net Income   2,431,115       
Total stockholders' Equity   4,117,492    (369,007) 
           
Total liabilities and stockholders' Equity  $38,448,329   $226,130 

 

The accompanying notes are an integral part of these consolidated financial statements. 

 

 F-1 
Table of Contents 

 

QUALITY INDUSTRIAL CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

                                 
   For the Three Months Ended  For the Nine Months Ended
   September 30, 2022  September 30, 2021  September 30, 2022  September 30, 2021
             
Revenue   19,126,800          37,342,800       
                     
Cost of revenues   12,481,550          25,310,550       
                     
Gross profit   6,645,250          12,032,250       
                     
Operating expenses                    
Professional fees   37,272    84,297    255,111    253,651 
General and administrative   3,756,616    4,534,832    7,092,061    4,775,223 
Total operating expenses   3,793,888    4,619,129    7,347,172    5,028,874 
                     
Profit from Operations   2,851,362    (4,619,129)    4,685,078    (5,028,874
                     
Other Non-Operating expense                    
Interest on Convertible Notes   12,447          12,447        
Interest expense   407,800    1,123    817,584    3,335 
Loss on License Agreement               104,550        
Total other expense   420,247    1,123    934,581    3,335 
 Other Non-Operating Income                    
Gain on forgiveness of debt               457,071       
Net loss/ profit   2,431,115    (4,620,252   4,207,568    (5,032,209
                     
Net profit per common share - basic and diluted   0.024    (0.051   0.042    (0.055
Weighted average common shares outstanding   99,928,693    91,379,241    99,928,693    91,379,241 

  

 

The accompanying notes are an integral part of these consolidated financial statements.

  

 F-2 
Table of Contents 

 

QUALITY INDUSTRIAL CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT 

 

For the Nine Months Ended September 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    2550    102000                      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                                             1,946,443    245,443
Balance, June 30, 2022               100,883,709    100,886    12,094,375    395,101          (10,986,585)   (1,603,777)
Common stock issued               2,000,000    2,000    80,600                      82,600
Net Income                                             2,431,115    2,431,115
Balance, September 30,2022               102,883,709    102,886    12,174,975    395,101          (8,555,470)    4,117,492

 

 

 

 

 

For the Nine Months Ended September 30, 2021

 
    Preferred Stock    Common Stock                         
    Shares    Amount    Shares    Amount    

Additional 

Paid-in Capital 

    Stock Payable    Stock Receivable    Accumulated Deficit    Total Stockholders' Equity
Balance, December 31, 2020        $      104,964,265   $104,966   $7,232,305   $223,226   $     $(7,583,538)  $(23,041)
Common stock 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)
Common stock 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)
Common stock issued for services               1,686,111    1,686    4,457,703    34,375                4,493,764
Imputed interest                           761                      761
Common stock issued for cash               162,000    162    28,100          (8,262)         20,000
Net loss                                             (4,620,252)   (4,620,252)
Balance, September 30, 2021        $      92,837,376   $92,839   $11,783,842   $360,726   $(8,262)  $(12,615,747)  $(386,602)

    

The accompanying notes are an integral part of these consolidated financial statements.  

 

 F-3 
Table of Contents 

QUALITY INDUSTRIAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

                 
   For the Nine Months Ended
   September 30,2022  September 30,2021
Cash Flows from Operating Activities          
Net profit  $4,207,568   $(5,032,209)
Adjustments to reconcile net loss to net cash used in operating activities:          
Finance Cost   830,031       
Loss on license agreement   104,550       
Stock Based Compensation         4,646,389 
Gain on settlement of loss   457,071       
Increase in Current assets   (37,444,087)   1,549 
Increase in Accounts payable   32,635,700    55,034 
Net cash used in operating activities   (123,309)   (329,237) 
           
Cash Flows from Investing Activities          
Net cash used in investing activities   (789,707)      
    (789,707)   —   
Cash Flows from Financing Activities          
Issuance of Convertible Note   1,100,000       
Finance Cost   (830,031)      
Loss on license agreement   (104,550)      
Gain on settlement of loss   457,071       
Stock redemption for cash         (1)
Related party line of credit         295,000 
Proceeds from issuance of common stock   278,931    20000 
Net cash from financing activities   901,421    314,999 
           
Net increase (decrease) in Cash   (11,595)   (14,238)
           
Beginning cash balance   15,659    19,564 
Ending cash balance  $4,064   $5,326 

  

The accompanying notes are an integral part of these consolidated financial statements.

 

 F-4 
Table of Contents 

QUALITY INDUSTRIAL 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 process manufacturing and engineering 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 77,669,078 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 $500,000. 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 77,669,078 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. Quintal 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.

 

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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.

 

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.

 

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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.

 

Stock-based compensation

 

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.

 

Earnings (loss) per share

 

The Company reports earnings (loss) per share in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 260-10 “Earnings Per Share,” which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. 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.

 

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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 2,550,000 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

 

As of September 30, 2022 and December 31, 2021, the Company had amounts owed by Ilustrato Pictures International Inc, a majority shareholder of the Company, of $22,875 and $0, respectively.

 

6. ADVANCES PAYABLE

 

As of September 30, 2022, the Company has no advance payable.

 

7. LINE OF CREDIT

 

On December 30, 2020 the company entered into a $1,000,000 revolving note agreement. The note carries a 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. 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 September 30, 2022 and December 31, 2021, the note had a balance of $0 and $295,000, 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 $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 September 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 September 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 September 30, 2022 the balance of principal owed was $0.
   
As of September 30, 2022, and December 31, 2021, the Company had loans payable of $0 and $63,090 respectively. The Company entered into a Debt Conversion agreement on 28th July 2022 and converted the full amount of Debt into 2,000,000 of Common Stock.

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9. NOTES PAYABLE

 

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. 

 

10. STOCKHOLDERS’ EQUITY

 

The Company’s authorized capital stock consists of 200,000,000 shares of common stock and 1,000,000 shares of preferred stock, par value $0.001 per share. As of September 30, 2022 and December 31, 2021, there were 102,883,709 and 94,738,209 shares of common stock issued and outstanding, respectively.

 

As of September 30, 2022 and December 31, 2021, there were 0 and 0 shares of preferred stock of the Company issued and outstanding, respectively. 

 

Common Stock issuances during the Nine months ending September 30, 2022

    • On January 3, 2022, the Company issued 500,000 shares of common stock for $20,523 cash.
     
    • On January 10, 2022, the Company issued 500,000 shares of common stock for $15,975 cash.
     
    • On March 10, 2022, the Company issued 500,000 shares of common stock for $7,688 cash.
     
    • On March 21, 2022, the Company issued 750,000 shares of common stock for $13,638 cash.
     
    • On March 29, 2022, the Company issued 750,000 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 2,550,000 of the Company’s common stock valued at $104,550. See note 4 for additional information.
     
   •  On May 10, 2022 the Company issued 595,500 shares of common stock for $27,017 cash.
     

 

 

 • On July 28, 2022 the company entered into a Debt conversion agreement and issued 2,000,000 shares of common stock.

 

11. SUBSEQUENT EVENTS

 

On October 21, 2022, Carsten Falk resigned as our Chief Executive Officer and John-Paul Backwell resigned as our Chief Commercial Officer. Our board of directors appointed Mr. Backwell as our Chief Executive Officer and Mr. Falk as our Chief Commercial Officer.

  

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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 and Chairman 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 75.5 % 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. Quintal 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 ILUS.

 

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Change in Business Direction

 

Quality Industrial Corp. is the Industrial and Manufacturing subsidiary of ILUS. QIND has planned future acquisitions that are contemplated in this division. We intend to disclose these acquisitions, as they happen, in our ongoing reports with the Securities and Exchange Commission.

 

On June 30, 2022, ILUS signed a binding Letter of Intent for the Company to acquire a 51% interest in Quality International Co Ltd FCZ (QI), 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.

 

The agreed Purchase Price for the 51% of outstanding shares of QI which is linked to financial performance of the company, is up to $135,000,000, with payments scheduled in tranches, of which the first tranche payment of $1,000,000 million was made to QI on August 4, 2022, pursuant to the binding Letter of Intent.

 

On August 3, 2022, we issued 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 Nine Months Ended September 30, 2022 and 2021

 

Revenues

 

We earned USD 37,342,800 revenues for the nine months ended September 30, 2022, or 2021. The increase in revenue is a result of revenue from work in progress. We recently entered into a binding letter of intent to acquire an international process engineering company and therefore, the company will generate revenues for the remainder 2022 as a result of the consolidation of the acquisition into our financial results.

 

Operating Expenses

 

Operating expenses increased from $5,028,874 for the nine months ended September 30, 2021, to $7,347,172 for the nine months ended September 30, 2022. The operating expenses for the nine months correspond to actual operating expenses incurred to achieve the revenue. However, 2021 expenses include major portion of Stock based compensation. This year so far company have not issued any stock for services.

 

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

 

$352,521 was earned for the nine months ended September 30, 2022, as compared with no other income 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.

 

Net Income/Net Loss

 

We incurred Net Income of $4,207,568 for the nine months ended September 30, 2022, compared to a net loss of $5,032,209 for the same period ended September 30, 2021. Quarter on Quarter (QoQ) we saw a 20.5% increase in Net Income of $412.971 from $2,018,144 in Q2 to $2,431,115 in Q3. The main driver was a decrease in cost of revenue QoQ resulting in a Net Income margin improvement from 11% to 12.7% QoQ. 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 September 30, 2022 of $0.024 with an annualized EPS value of $0.1 per common share.

 

Liquidity and Capital Resources

 

As of September 30, 2022, we had total current assets of $ 37,448,329 and total current liabilities of $33,230,837. We had a working capital Surplus of $4,217,492 as of September 30, 2022. This compares with a working capital deficit of $579,300 as of December 31, 2021.

 
Net cash used in operating activities was $123,309 for the nine months ended September 30, 2022, as compared with $329,237 in cash for the same period ended 2021.

 

Financing activities provided $901,421 in cash for the nine months ended September 30, 2022, as compared with $314,999 in cash provided for the same period ended 2021.

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.

 

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 instantly but has historically been the case in future periods.

 

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.

 

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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 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 September 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 July 28, 2022, the company entered into a Debt conversion agreement and issued 2,000,000 shares of common stock.
  On August 3, 2022, we issued to an accredited investor a two-year convertible promissory note in the principal amount of $1,100,000. The note is convertible into common stock at the rate of $1.00 and bears 7% interest per annum.

 

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

  

None

 

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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 September 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:  November 14, 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)  

 

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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 September 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: November 14, 2022   /s/ John-Paul Backwell  
    John-Paul Backwell  
    Chief Executive Officer  
   

(principal executive officer)

 

 

CERTIFICATIONS

 

I, Krishnan Krishnamoorthy, certify that;

 

1.   I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 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: November 14, 2022

 

/s/ Krishnan Krishnamoorthy

By: Krishnan Krishnamoorthy

Title: 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 September 30, 2022 as filed with the Securities and Exchange Commission (the “Report”), I, John-Paul Backwell, Chief Executive Officer, 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: November 14, 2022   /s/ John-Paul Backwell  
    John-Paul Backwell  
    Chief Executive Officer  
   

(Principal executive officer)

 

 

 

Dated: November 14, 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.