QIND.OIDQuality Industrial CORP
10-Q: Quality Industrial Corp. Sells Legacy Assets and Reports Q1 2024 Results
Sentiment:
Quarterly Report
Quality Industrial Corp. divests its legacy assets and reports a profitable first quarter of 2024, driven by the acquisition of Al Shola Gas.
Capital raiseThe company issued 480,000 common shares to Rasmus Refer as consideration for the purchase of legacy assets.The company issued convertible promissory notes to various parties, including RB Capital Partners Inc., Jefferson Street Capital LLC, Sky Holdings Ltd., 1800 Diagonal Lending Ltd., Exchange Listing LLC, and Sean Levi.The company issued shares of common stock to Jefferson Street Capital LLC for $15,000 on multiple occasions.The company issued shares of common stock to employees as part of their compensation packages.The company is in discussions for a planned uplisting to a National Exchange through a merger, which may involve further capital raising.
Better than expectedThe company's net income of $758,440 is a significant improvement compared to a net loss of $84,536 in the same period last year.The company's revenue increased from $0 to $3,086,519 due to the acquisition of Al Shola Gas.The company's working capital improved from a deficit of $3,425,442 to a positive balance of $48,480.
Summary
- Quality Industrial Corp. (QIND) has entered into an asset purchase agreement to sell its legacy assets to Rasmus Refer for 480,000 common shares valued at $0.10 each, totaling $48,000.
- The company reported a net income of $758,440 for the quarter ended March 31, 2024, a significant turnaround from a net loss of $84,536 for the same period in 2023.
- This profit is primarily attributed to the acquisition of Al Shola Gas and the reversal of interest on loan agreements with Mahavir and Artelliq.
- QIND's revenue for Q1 2024 was $3,086,519, compared to no revenue in Q1 2023, due to the inclusion of Al Shola Gas's operations.
- Operating expenses increased to $673,310 in Q1 2024 from $65,013 in Q1 2023, mainly due to the costs associated with Al Shola Gas.
- The company's total assets were $17,230,949 and total liabilities were $14,766,444 as of March 31, 2024.
- QIND had a positive working capital of $48,480 as of March 31, 2024, compared to a working capital deficit of $3,425,442 as of December 31, 2023.
- The company is unwinding its previous agreement with Quality International, aiming to recover its $1,500,000 investment, but a write-off may be necessary if recovery is not possible.
- QIND plans to allocate resources to increase efficiency and sales at Al Shola Gas and invest in new vehicles for bulk LPG supply.
- The company is in discussions for a planned uplisting to a National Exchange through a merger.
Sentiment
Score: 7
Explanation: The document shows a significant improvement in financial performance with a return to profitability and strong revenue growth. However, there are still risks and challenges related to the integration of acquisitions, potential write-offs, and the need for further capital raising. The positive momentum and strategic direction are encouraging, but the company needs to execute its plans effectively.
Positives
- The company achieved a significant turnaround in profitability, reporting a net income of $758,440 in Q1 2024.
- Revenue increased substantially to $3,086,519 in Q1 2024, driven by the acquisition of Al Shola Gas.
- The company's working capital improved from a deficit to a positive balance of $48,480.
- The reversal of interest on loan agreements contributed to the positive financial results.
- The company is actively planning for growth through investments in its subsidiary and a potential uplisting.
Negatives
- Operating expenses increased significantly to $673,310 in Q1 2024.
- The company is still in the process of unwinding the Quality International transaction and may need to write off a $1,500,000 investment.
- The company's ability to continue as a going concern is dependent on generating sufficient revenue and raising capital.
- The company has a significant amount of current liabilities at $7,194,393.
Risks
- The company's ability to continue as a going concern is dependent on generating sufficient revenues and raising capital.
- The company faces risks related to integrating acquired businesses and managing increased operating expenses.
- The potential write-off of the $1,500,000 investment in Quality International could negatively impact future financial results.
- The company is exposed to general macroeconomic conditions and global instability that could affect its performance.
- The company has a significant amount of current liabilities at $7,194,393.
Future Outlook
The company plans to allocate resources to increase efficiency and sales at Al Shola Gas, invest in new vehicles for bulk LPG supply, and is in discussions for a planned uplisting to a National Exchange through a merger. Management plans to use borrowings and security sales to mitigate the effects of cash flow deficits.
Management Comments
- Management believes that the operating results for the interim period ended March 31, 2024, are not necessarily indicative of the results that can be expected for the full year.
- Management plans to use borrowings and security sales to mitigate the effects of cash flow deficits.
- Management is aiming to recover the investment or parts of it from the Quality International transaction.
- Management expects operating expenses to increase as the company undertakes its expansion plan associated with the acquisition of Al Shola Gas.
Industry Context
The company's shift towards the industrial, oil & gas, and utility sectors reflects a strategic move to capitalize on the demand for industrial solutions. The acquisition of Al Shola Gas aligns with this strategy, providing a foothold in the LPG industry in the U.A.E. The company's focus on manufacturing and fabrication of steel products and pressure vessels is consistent with the needs of these sectors.
Comparison to Industry Standards
- The company's revenue growth from $0 to $3,086,519 in one year is a significant improvement, but it is difficult to compare directly to industry standards without knowing the specific market size and growth rates of the company's niche.
- The company's operating expenses increased significantly due to the acquisition of Al Shola Gas, which is a common occurrence during integration phases. However, the company will need to manage these costs to ensure profitability.
- The company's positive working capital of $48,480 is a positive sign, but it is still relatively low compared to established companies in the industrial sector. Companies like Caterpillar (CAT) and Deere & Company (DE) typically have much higher working capital due to their scale and established operations.
- The company's goodwill of $8,475,395 is a result of the Al Shola Gas acquisition, and its value will depend on the future performance of the acquired business. Companies like Honeywell (HON) and General Electric (GE) have significant goodwill on their balance sheets due to numerous acquisitions, but they also have a long history of successful integration and value creation.
- The company's reliance on convertible notes for financing is a common practice for smaller companies, but it can be risky if the company's stock price does not perform well. Larger companies typically have access to more traditional forms of financing, such as bank loans and bond issuances.
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| CEO | Carsten Kjems Falk | John-Paul Backwell | August 4, 2022 | Change in control and business direction |
| Chief Commercial Officer | NA | Carsten Kjems Falk | August 4, 2022 | Change in control and business direction |
| Executive Chairman of the Board | NA | Nicolas Link | August 4, 2022 | Change in control and business direction |
Legal Proceedings
- The company is not involved in any material, existing or pending legal proceedings.
Related Party Transactions
- The company had amounts due from Ilustrato Pictures International, Inc. (ILUS), a majority shareholder, of $436,988 and $333,133 as of March 31, 2024, and December 31, 2023, respectively, related to an intercompany loan agreement.
- The company issued shares of common stock to Nicolas Link, John-Paul Backwell, Carsten Kjems Falk, Krishnan Krishnamoorthy, and Louise Bennett pursuant to their employee contracts.
Stakeholder Impact
- Shareholders will benefit from the company's return to profitability and revenue growth.
- Employees may see increased job security and opportunities due to the company's expansion plans.
- Customers of Al Shola Gas will benefit from the company's investment in new vehicles for bulk LPG supply.
- Suppliers may see increased business opportunities due to the company's growth.
- Creditors may be concerned about the company's reliance on convertible notes and the potential need for further capital raising.
Next Steps
- The company will allocate resources to increase efficiency and sales at Al Shola Gas.
- The company plans to invest in new vehicles for bulk LPG supply at Al Shola Gas.
- The company will continue to unwind the Quality International transaction and attempt to recover its investment.
- The company will continue discussions for a planned uplisting to a National Exchange through a merger.
- The company will monitor and manage its operating expenses to ensure profitability.
Key Dates
| Date | Description |
|---|---|
| May 4, 1998 | The Company was incorporated in the state of Nevada under the name Sensor Technologies, Inc. |
| March 2006 | The Company changed its name to Bixby Energy Systems Inc. |
| September 2006 | The Company changed its name to Power Play Development Corporation. |
| April 2007 | The Company changed its name to National League of Poker, Inc. |
| October 2007 | The Company changed its name back to Power Play Development Corporation. |
| October 2011 | The Company changed its name to Bluestar Technologies, Inc. |
| March 2018 | The Company changed its name to Wikisoft Corp. |
| May 2016 | The Companys Board of Directors terminated the services of all prior officers and directors and the board appointed Robert Stevens as the Board Appointed Receiver for the Company. |
| April 16, 2019 | Robert Stevens resigned from all of his positions with the Company and the board-appointed receivership was concluded. Rasmus Refer was appointed as the Companys CEO and Director. |
| April 11, 2019 | The Company entered into an Agreement and Plan of Merger with WikiSoft Acquisition Corp. and WikiSoft Corp. |
| April 24, 2019 | Merger Sub merged with and into WikiSoft DE. |
| March 19, 2020 | The Company entered into an Agreement and Plan of Merger with WikiSoft DE. |
| March 25, 2020 | WikiSoft DE merged with and into the Company. |
| August 31, 2020 | Carsten Kjems Falk was appointed as CEO. |
| December 1, 2021 | Paul C Quintal was appointed as the sole director of the Company. |
| May 28, 2022 | ILUS acquired 77.4% of the outstanding shares in the Company. |
| August 4, 2022 | The Company changed its name to Quality Industrial Corp. with the ticker QIND. |
| June 28, 2022 | ILUS signed a binding letter of intent for the Company to acquire control of Quality International. |
| August 3, 2022 | The Company issued a two-year convertible promissory note in the principal amount of $1,100,000 to RB Capital Partners Inc. |
| March 9, 2023 | The Company changed the SIC code to SIC 3590 Misc. Industrial & Commercial Machinery and Equipment. |
| March 17, 2023 | The Company issued a two-year convertible promissory note in the principal amount of $200,000 to RB Capital Partners Inc. |
| April 19, 2023 | The Company issued a common share purchase warrant to Exchange Listing LLC. |
| May 4, 2023 | The Company issued shares of common stock to Nicolas Link, John-Paul Backwell, Carsten Kjems Falk, Krishnan Krishnamoorthy, and Louise Bennett pursuant to their employee contracts. |
| May 23, 2023 | The Company issued a one-year convertible promissory note in the principal amount of $220,000 to Jefferson Street Capital LLC and a common share purchase warrant to Jefferson Street Capital LLC. |
| June 16, 2023 | The Company issued to Sky Holdings Ltd. a six-month convertible promissory note in the principal amount of $550,000. |
| July 27, 2023 | The Company borrowed from Mahavir Investments Limited, the principal amount of $3,000,000. |
| July 31, 2023 | The Company issued to 1800 Diagonal Lending Ltd. a promissory note in the principal amount of $174,867. |
| August 15, 2023 | The Company issued to 1800 Diagonal Lending Ltd. a promissory note in the principal amount of $118,367. |
| August 21, 2023 | The Company signed a share purchase and buy back agreement with Artelliq Software Trading. |
| August 25, 2023 | The Company issued to Artelliq Software Trading 6,410,971 shares of common stock for $2,000,000. |
| September 15, 2023 | The Company issued shares of common stock to Nicolas Link, John-Paul Backwell, Carsten Kjems Falk, and Louise Bennett pursuant to their employee contracts. |
| December 20, 2023 | The Company issued a two-year convertible promissory note in the principal amount of $100,000 to RB Capital Partners Inc. and a one-year convertible promissory note in the principal amount of $100,000 to Sean Levi. |
| January 11, 2024 | The Company issued 281,426 shares of common stock to Jefferson Street Capital LLC for $15,000. |
| January 19, 2024 | The Company issued 307,692 shares of common stock to Jefferson Street Capital LLC for $15,000. |
| February 6, 2024 | The Company issued a six-month convertible promissory note to Exchange Listing LLC in the principal amount of $35,000. |
| February 15, 2024 | The Company issued 307,692 shares of common stock for $15,000 to Jefferson Street Capital LLC. |
| February 28, 2024 | The promissory note issued to 1800 Diagonal Lending Ltd. on July 31, 2023, matured. |
| March 8, 2024 | The Company issued a one-year convertible promissory note Jefferson Street Capital LLC in the principal amount of $118,367. |
| March 12, 2024 | The Company issued a convertible promissory note to 1800 Diagonal Lending LLC in the principal amount of $118,367. |
| March 27, 2024 | The Company signed a definitive Share Purchase Agreement with Al Shola Gas LLC. |
| March 31, 2024 | End of the reporting period for the quarterly report. |
| April 1, 2024 | The Purchase Agreement with Quality International was terminated. |
| April 26, 2024 | The Company entered into an asset purchase agreement with Rasmus Refer. |
| April 30, 2024 | The Mahavir Loan matured. |
| May 7, 2024 | The Company issued 416,141 shares of common stock to Jefferson Street Capital LLC for $15,000. |
| May 13, 2024 | The Company issued 150,000 shares of common stock to Paul Keely for services. |
| May 14, 2024 | Latest practicable date for share count: 128,592,644 common shares outstanding. |
| May 15, 2024 | Date of the quarterly report and certifications. |
| May 30, 2024 | The promissory note issued to 1800 Diagonal Lending Ltd. on August 15, 2023, matures. |
| December 15, 2024 | The convertible promissory note issued to 1800 Diagonal Lending LLC on March 12, 2024, matures. |
Keywords
asset purchase, acquisition, Al Shola Gas, financial results, net income, revenue, operating expenses, working capital, convertible notes, legacy assets, uplisting
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