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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
OR
For the transition period from
Commission file number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $0.001 per share.
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
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. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | 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 ☐
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price
of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter $
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: shares as of August 18, 2023.
TABLE OF CONTENTS
As used in this Transition Report on Form 10-KT, unless the context otherwise requires, the terms the “Company,” “Registrant,” “we,” “us,” “our,” “Quality Industrial,” or “QIND” refer to Quality Industrial Corp., a Nevada corporation.
FORWARD-LOOKING STATEMENTS
Except for statements of historical fact, some information in this document contains “forward-looking statements” that involve substantial risks and uncertainties. You can identify these forward-looking statements by words such as “may,” “will,” “should,” “anticipate,” “estimate,” “plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend” or the negative of these words or other variations on these words or comparable terminology. The statements that contain these or similar words should be read carefully because these statements discuss our future expectations, contain projections of our future results of operations or of our financial position, or state other forward-looking information. We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able accurately to predict or control. Further, we urge you to be cautious of the forward-looking statements which are contained in this transition report because they involve risks, uncertainties and other factors affecting our operations, market growth, service, products and licenses. The factors listed in the sections captioned “Risk Factors” and “Description of Business,” as well as other cautionary language in this transition report and events in the future may cause our actual results and achievements, whether expressed or implied, to differ materially from the expectations we describe in our forward-looking statements. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all of those risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statement. The forward-looking statements in this transition report are based on assumptions management believes are reasonable. However, due to the uncertainties associated with forward-looking statements, you should not place undue reliance on any forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to publicly update any of them in light of new information, future events, or otherwise. The occurrence of any of the events described as risk factors or other future events could have a material adverse effect on our business, results of operations and financial position.
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PART I
| ITEM 1. | BUSINESS |
Overview
We are a leader in the manufacture and assembly of heavy engineering equipment and precision engineered technology for the Industrial, Oil & Gas, and Utility sectors.
Quality International is a leading turnkey provider of total integrated solutions to the global energy and infrastructure market with over twenty years of operating experience. The company is ISO Certified with international accreditations, specializing in Design, Engineering, Procurement, Fabrication, Testing, Construction, Manufacturing and Site Installation of Heavy Engineering Equipment, Process Skids and Modules, Pipe Spools and Piping Systems, Offshore Structures and Tank Farms. With a wide spectrum of services, the Company meets stringent customer demands through a broad range of competent, ultra-reliable engineering solutions and services.
Based in the United Arab Emirates (UAE), Quality International has manufacturing facilities in Sharjah, Fujairah and Abu Dhabi. The company has a total manufacturing area of over 900,000 square meters with approximately 220,000 square meters of that in a waterfront facility. This enables shipment of very large equipment/modules directly onto barges and ships.
Quality International designs projects and equipment as per customer-specific requirements in stainless steel, duplex, super duplex, carbon steel, alloy steel and clad construction. In addition to this, the company also manufactures equipment as per the ASME, PD 5500, TEMA, API 650, 620 and other international standards.
Quality International’s customers are engineering, procurement & construction (“EPC”) contractors, technology providers and multinational companies who are leaders in their respective industries. Representative customers include Total, Shell, BP, Chevron, Sasol McDermott, Technip Energies, Sonatrach, Worley, Doosan, Tecnimont, UTICO and Air Products.
We aim to become the global leader in the manufacture and assembly of equipment and technology for the wider Energy sector as it aims to reduce carbon in its operations and transition to greener forms of energy production. Quality International already manufactures infrastructure and equipment for the Hydrogen and Offshore Wind Industries and we aim to further expand our manufacturing of the vital infrastructure and equipment required for the production of low carbon energies, decarbonization solutions such as green hydrogen, and sustainable fuels.
We changed ownership on May 28, 2022, when, Ilustrato Pictures International Inc. (“ILUS”) acquired 77.4 % of the outstanding shares in our Company. Consequently, ILUS is now able to unilaterally control the election of our board of directors, all matters upon which shareholder approval is required and, ultimately, the direction of our Company. Also, during the year, Mr. Nicolas Link, beneficial owner of ILUS, was appointed as our Chairman of the Board, Mr. John-Paul Backwell was appointed as our Chief Executive Officer and Mr. Carsten Falk was appointed as our Chief Commercial Officer.
In line with the change in control and business direction, our Company changed its name to Quality Industrial Corp. with the ticker QIND, with a market effective date of August 4, 2022. As a result of these transactions, Quality Industrial Corp. is now a public company
Corporate Office
Our offices are located at 315 Montgomery Street, San Francisco, CA 94104, and our telephone number is 800-706-0806. Our website addresses are www.qualityindustrialcorp.com, http://qualityinternational.ae 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 Form 10-KT.
New Business Direction – Industrial & Manufacturing
Quality Industrial Corp. is the Industrial and Manufacturing subsidiary of ILUS. QIND has planned future acquisitions and we intend to disclose these acquisitions, as they happen, in our ongoing reports with the Securities and Exchange Commission.
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Quality International Co Ltd FZC
We signed a share purchase agreement to acquire a 52% interest in Quality International Co Ltd FZC on January 18, 2023.
Quality International specializes in the following industries and field of activities, as described below and illustrated in the graphics:
| · | Oil & Gas Industry |
| · | Refineries & Petrochemicals Industry |
| · | Chemical, Fertilizer, Metals & Mineral Processing Industry |
| · | Offshore Industry |
| · | Water & Wastewater Treatment Plant Industry |
| · | Power & Desalination Industry |
Quality International’s operations include the complimentary business of manufacturing process equipment, process skids & modular assemblies, pipe spools & piping system installations, heavy structures (jakets, flare trestles), tank farms and turnkey projects. The company’s services include design, detail engineering, procurement, fabrication, testing, and site installation & commercial assistance. The graphic below further visualizes this.
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Quality International manufactures the following types of products:
| 1. | Pressure Vessels, Reactors & Columns. All metallurgies with shell thickness up to 135 mm: |
| § | Carbon Steel / LTCS |
| § | Stainless Steel |
| § | Duplex & Super Duplex |
| § | Low Alloy Steel |
| § | Non-ferrous Alloys |
| § | Clad Steels (SS, Inconel, Incoloy, Ti) |
| § | CS Rubber Lined |
 |
2. Shell & Tube Heat Exchangers, Evaporators/Condensers & Re-boilers/Waste Heat Boilers:
Materials of Construction:
§ Carbon Steel / LTCS
§ Stainless Steel
§ Duplex & Super Duplex SS
§ Titanium
§ Non-ferrous Alloys
§ Clad Steels (SS, Inconel, Incoloy, Ti)
 |
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3. Pipe Spools Fabrication and Piping Systems:
Materials of Construction:
 |
 |
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4. Process Skids & Modular Assemblies:
§ Test Separators
§ Gas Refrigeration Modules
§ Fuel Gas Conditioning Skids
§ Gas Dehydration Modules
§ Filtration Skids
§ Desalination Plant Modules
§ Skidded Equipment
§ Process Modules
§ Pipe Rack Modules
 |
5. Process & Storage Tanks.
§ Warehouse Fabricated & Field Erected Metallic Tanks
§ With Fixed Cone Roof / Al Dome
§ With External Floating Roof
§ With internal Floating Deck & Al Dome
 |
 |
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6. Heavy structures (On-shore & Off-Shore)
§ Piles
§ Jackets
§ Decks
§ Bridges & Flare Trestles
§ Top Sides
§ Offshore Process Platform
§ Auxiliary Structures
 |
 |
7. Turnkey Projects & EPC Contracts. Full scope of work including Civil, Mechanical, Electrical and Instrumentation for:
§ Tank Farms
§ Lubricant Blending Plants
§ Process Plants
§ Pipeline and BOP Packages
 |
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Intellectual Property
Quality International does not own registered intellectual property rights. The Company’s intellectual property resides in its specific manufacturing processes, capability, compliance, and certifications that have made it a trusted manufacturer for many large global multinationals including but not limited to BP, Shell, Total, Chevron, Sonatrach, Sasol, Gasco, Doosan and Technip Energies.
Quality International has the following certifications:
| Category | Type | Reference |
| Certification | ISO 9001:2015 | Hamriyah Facility |
| Certification | ISO 14001:2015 | Hamriyah Facility |
| Certification | ISO 45001:2018 | Hamriyah Facility |
| Certification | Manufacturer and Welding Shop acc. To AD 2000-Code / DIN EN ISO 3834 | Hamriyah Facility |
| Certification | ASME U Certificate of Authorization for Pressure vessels | Hamriyah Facility |
| Certification | ASME U2 Authorization to Manufacture Class 1 and Class 2 pressure vessels | Hamriyah Facility |
| Certification | ASME S Authorization to manufacture and assembly of power boilers | Hamriyah Facility |
| Certification | National Board of Boiler & Pressure Vessel Inspectors – Accreditation of “R” Repair Organizations | Hamriyah Facility |
| Certification | National Board of Boiler & Pressure Vessel Inspectors – Authorised to apply “NB” mark and register pressure vessels. | Hamriyah Facility |
Competition
Quality International operates in what is currently a high growth, high demand sector, whereby several certified manufacturers of equipment and technology for the Industrial, Oil and Gas and Utility sectors compete for contracts. Manufacturing contracts are awarded by EPC Contractors, Technology Providers and Multinational companies for the manufacture of their required infrastructure and equipment.
A list of some of Quality International’s competitors is provided below:
| · | Charles Thompson Ltd (CTL), operates out of the United Kingdom and is an established process plant equipment engineering company, specializing in the mechanical design and manufacture of bespoke equipment for the hydrocarbon and process industries; namely: pressure vessels, shell and tube heat exchangers, filtration and drying equipment, pipework systems, columns, reactors and complete pre-packaged process systems for on and offshore applications. |
| · | ATB Group is an Italian manufacturer of process equipment for the Petrochemical industry, ammonia and urea production sector as well as for gas treatment plants. |
| · | Integrated Flow Solutions operates out of the United States and specializes in the design and manufacture of modular engineered-to-order (“ETO”) and configure-to-order (“CTO”) liquid and gas process systems. |
| · | HSM Offshore Energy is a large Dutch construction yard which manufactures platforms, modules and equipment for the Oil and Gas and Energy sectors. |
| · | Harris Pye is a global company headquartered in the United Kingdom. The company specializes in the repair, maintenance, upgrade and installation services for boilers, heat transfer and associated equipment within the marine, offshore, energy from waste, and associated onshore industrial sectors. |
| · | Aarya Engineering is a United Arab Emirates based steel fabrication and mechanical contracting company. The company manufactures Tanks and Pressure Vessels, Piping Systems, Furnace Packages, Turnkey Mechanical Solutions and Process Skids for the Oil and Gas, Water Treatment and Powerplant Industries. |
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Quality International’s advantages over competitors include but are not limited to:
| · | Over 20 years of manufacturing experience with an extensive track record of delivery to global multinational customers. |
| · | A total manufacturing area of over 900,000 square meters with approximately 220,000 square meters of that in a waterfront facility, enabling direct shipping to customers globally. |
| · | All required ISO, ASME and National Certifications are in place and equipment is manufactured as per the ASME, PD 5500, TEMA, API 650, 620 and other international standards |
| · | Ability to design and manufacturer bespoke customer specific requirements in in Stainless Steel, Duplex, Super Duplex, Carbon Steel, Alloy Steel and Clad construction |
| · | Flexibility to offer end-to-end manufacturing capability and shipment as completed units or delivery of modules to customers with assembly on-site. |
| · | The company is prequalified with the Abu Dhabi National Oil Company (ADNOC), Takreer Oil Refinining Company, GASCO, Borouge, Zakum Development Company, Fertil Ruwais, SABIC, Ma’aden, Kuwait National Petroleum Company and the Kuwait Oil Company. |
| · | An extensive list of past and present customers including but not limited to Total, Shell, BP, Chevron, Sasol McDermott, Technip Energies, Sonatrach, Worley, Doosan, Tecnimont, UTICO and Air Products. |
Employees
We have 6 employees in QIND and Quality International employs approximately 1350 full-time employees and up to 1750 in peak periods. The employees are currently not represented by a labor union or collective bargaining agreement. We believe that our relationship with our employees is good.
Corporate History
The Company was incorporated in the state of Nevada under the name Sensor Technologies, Inc. on May 4, 1998. In March 2006 the Company changed its name to Bixby Energy Systems Inc. The Company changed its name to Power Play Development Corporation in September 2006. In April 2007 the Company changed its name to National League of Poker, Inc. In October 2007 the Company changed its name back to Power Play Development Corporation. In October 2011 the Company changed its name to Bluestar Technologies, Inc. In March 2018, the Company then changed its name to Wikisoft Corp.
In May 2016, the Company’s Board of Directors terminated the services of all prior officers and directors and the board appointed Robert Stevens as the Board Appointed Receiver for the Company. This was a private receivership where the receiver was appointed by the board to act on behalf of the Company and no court filings were ever made in connection with the receivership. On April 16, 2019, in connection with the Merger described below, Robert Stevens resigned from all of his positions with the Company and the board appointed receivership was concluded. At that time Rasmus Refer was appointed as the Company’s CEO and Director, and he resigned from such positions in August and November 2020, respectively. On August 31, 2020, Carsten Kjems Falk was appointed as CEO, and Paul C Quintal was on December 1, 2021 appointed as the the sole director of the company.
On April 16, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with WikiSoft Acquisition Corp., a Delaware corporation which was then the Company’s wholly owned subsidiary (“Merger Sub”) and WikiSoft Corp., a privately held Delaware corporation (“WikiSoft DE”). In connection with the closing of this merger transaction, Merger Sub merged with and into WikiSoft DE (the “Merger”) on April 30, 2019. Pursuant to the Merger, the Company acquired WikiSoft DE which then became its wholly owned subsidiary.
On March 19, 2020, the Company entered into an Agreement and Plan of Merger (the “Short Form Merger Agreement”) with WikiSoft DE, pursuant to which it was agreed that the Company would merge with and into WikiSoft DE, with the Company surviving. Thereafter, on March 25, 2020, WikiSoft DE merged with and into the Company, with the Company (i.e. Wikisoft Corp. - the NV corporation) surviving pursuant to a Certificate of Ownership and Merger filed in with Delaware Secretary of State, whereby the then wholly owned subsidiary (WikiSoft DE) merged with and into the Company, with the Company surviving. On March 25, 2020, the Company filed Articles of Conversion in Nevada, whereby the then subsidiary (WikiSoft DE) merged with and into the Company, with the Company surviving. Prior to the Merger, the Company did not have any business operations, and at the closing of the Merger, the Company’s business as described in detail below.
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Wikisoft Corp. had a vision to become one of the largest portals of information for businesses and business professionals. Built on open-source software, the portal wikiprofile.com, was initially launched in January 2018, and the portal was relaunched in June 2021.
We changed ownership on May 28, 2022, when ILUS acquired 77.4 % of the outstanding shares in our Company. Consequently, ILUS is now able to unilaterally control the election of our board of directors, all matters upon which shareholder approval is required and, ultimately, the direction of our Company. Also, during the year, Mr. Nicolas Link, beneficial owner of ILUS, was appointed as our Chairman of the Board, Mr. John-Paul Backwell was appointed as our Chief Executive Officer and Mr. Carsten Falk resigned as our Chief Executive Officer and was appointed as our Chief Commercial Officer.
In line with the change in control and business direction, our Company changed its name to Quality Industrial Corp. with the ticker QIND, with a market effective date of August 4, 2022. As a result of these transactions, Quality Industrial Corp. is a public company focused on the Industrial, Oil & Gas and Utility Sectors and a subsidiary to ILUS. The Company filed Articles of Merger with the Secretary of State of Nevada in order to effectuate a merger with our wholly owned subsidiary, Quality Industrial Corp. Shareholder approval was not required under Section 92A.180 of the Nevada Revised Statutes. As part of the merger, our board of directors authorized a change in our name to “Quality Industrial Corp.” and our Articles of Incorporation have been amended to reflect this name change. Our common stock trades under the symbol “QIND.”
After ILUS acquired control of QIND, on May 28, 2022, the company signed a binding letter of intent on June 28, 2022, to acquire control of Quality International, an international process manufacturing company, manufacturing custom solutions for the Oil & Gas, Petrochemical & Refinery, Chemical & Fertilizer, Power & Desalination, Water & Wastewater and Offshore industries. Quality International has several required industry certifications in place and is on several global preferred vendor lists, with customers including but not limited to BP, Shell, Total, Chevron, Sonatrach, Sasol and Gasco.
To fund the first tranche of the purchase price for the interest in Quality International, 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 “August 2022 Note”). The August 2022 Note bears interest at 7% per annum. We have the right to prepay the August 2022 Note at any time. All principal on the August 2022 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 to $1.00 per share.
The Binding Letter of Intent with Quality International contemplated a period of due diligence followed by entry into a share purchase agreement. On January 18, 2023, we entered into a share purchase agreement with the shareholders of Quality International (the “QI Share Purchase Agreement”), which agreement provided for our purchase of 78 of the 150 (52%) outstanding shares of Quality International (the “QI Shares”), a freezone company under the regulations of Abu Dhabi General Markets and laws of United Arab Emirates. This entity is our majority owned subsidiary. All closing documents were executed for the transaction on March 6, 2023.
The purchase price for the acquisition shall be up to $137,000,000 in cash, paid in tranches, subject to achievement of financial milestones presented in a schedule of payments set forth in the QI Share Purchase Agreement which was filed with our Form 8-K dated January 18, 2023. Later on July 31, 2023, the parties to the Purchase Agreement entered into an amendment to the Purchase Agreement to revise the payment schedule for the acquisition. The Purchase Price shall remain at up to $137,000,000 in cash, but the schedule was amended, effective as of March 31, 2023.
On July 31, 2023, the parties to the QI Purchase Agreement entered into an amendment to the QI Purchase Agreement (the “Amended QI Purchase Agreement”) to revise the payment schedule for the acquisition to extend the payment timeline with smaller amounts due at each date. Moreover, break fees were introduced if the payments are not received by their respective due dates. In the event that the Company fails to meet any of the revised payment dates and/or the revised payment amounts, pursuant to the Amended Payment Schedule, the parties acknowledge and agree that the QI Shareholders shall have the right, but not the obligation, to, in their sole discretion, terminate the Amended QI Purchase Agreement and all associated agreements with us. Consequently, if terminated, the Company would be liable for the applicable break fee pursuant to the table in the Amended Payment Schedule, and the parties agreed to release each other from the performance of any obligations under the Amended QI Purchase Agreement, together with all related transaction documents, and the parties shall have no accrued rights under the same save as those which are intended to survive after such termination.
In the event that we fail to meet any of the Revised Payment Dates and/or the Revised Payment Amounts pursuant to Tranches 2.1, 2.2, 2.3 and Tranche 3.1 in the table above, the parties acknowledge and agree that the Shareholders shall have the right, but not the obligation, to, in their sole discretion, terminate the Purchase Agreement and all associated agreements with us. Consequently, we would be liable for the applicable break fee pursuant to the table above, and the parties agreed to release each other from the performance of any obligations under the Purchase Agreement, together with all related transaction documents, and the parties shall have no accrued rights under the same save as those which are intended to survive after such termination.
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Furthermore, payments for Tranches 4, 5 and 6 are linked and paid in proportion to the percentage of EBITDA target achieved against forecasted EBITDA targets and capped at 100% of EBITDA target. Any shortfall or surplus (as the case may be) on the EBITDA target of a particular Tranche shall be carried over to the subsequent Tranche and to be added to or deducted from (as the case may be) the subsequent EBITDA target. Any shortfall EBITDA existing after the expiration of time allotted for Tranche 6, shall be allowed to be delivered within an extended 6-month period until June 30, 2025, and be paid in proportion to the EBITDA target achieved and capped at 100% of EBITDA target. Any remaining shortfall existing after the expiration of time allotted for Tranche 6, shall be forfeit, resulting in a reduction to the Purchase Price.
The foregoing description of the Purchase Agreement is not complete and is qualified in its entirety by reference to the text of such documents, which are filed as Exhibits to this Form 10-KT.
On March 9, 2023, we changed our SIC code of the Company to SIC 3590 – Misc. Industrial & Commercial Machinery and Equipment to reflect the new business direction.
On June 22, 2023, the board of directors approved the granting of discretionary authority to the board of directors, at any time or times for a period of up to twelve months, to adopt an amendment (the “Amendment”) to the Company’s articles of incorporation, as amended (the “Articles of Incorporation”), to effect a reverse stock split (the “Reverse Stock Split”) with a ratio within the range of 1-for-2 to 1-for-20 (the “Reverse Stock Split Ratio”). On June 22, 2023, the Company received a written consent in lieu of a meeting by the holder of 77,669,078 shares of our common stock (the “Majority Stockholder”) authorizing the Reverse Stock Split and Reverse Stock Split Ratio for a period of up to twelve months conditional upon and concurrent with uplisting to a national stock exchange.
Smaller Reporting Company
The Company is a “smaller reporting company” as defined in Rule 12b-2 under the Exchange Act. There are certain exemptions available to us as a smaller reporting company, including: (1) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act; (2) scaled executive compensation disclosures; and (3) the requirement to provide only two years of audited financial statements, instead of three years. As long as we maintain our status as a “smaller reporting company”, these exemptions will continue to be available to us.
Emerging Growth Company
The Company qualifies as an “emerging growth company,” as defined in Section 2(a)(19) of the Securities Act, it may choose to follow disclosure requirements that are scaled for newly public companies. A company qualifies as an emerging growth company if it has total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year and, as of December 8, 2011, had not sold common equity securities under a registration statement.
For so long as we remain an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012, or the JOBS Act, we may take advantage of certain exemptions from various requirements that are applicable to public companies that are not “emerging growth companies.” In particular, as an emerging growth company we:
| · | are not required to obtain an attestation and report from our auditors on our management’s assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002; | |
| · | are not required to provide a detailed narrative disclosure discussing our compensation principles, objectives and elements and analyzing how those elements fit with our principles and objectives (commonly referred to as “compensation discussion and analysis”); | |
| · | are not required to obtain a non-binding advisory vote from our stockholders on executive compensation or golden parachute arrangements (commonly referred to as the “say-on-pay,” “say-on-frequency” and “say-on-golden-parachute” votes); | |
| · | are exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and CEO pay ratio disclosure; | |
| · | may present only two years of audited financial statements and only two years of related Management’s Discussion & Analysis of Financial Condition and Results of Operations (“MD&A”); and | |
| · | are eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act |
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Under the JOBS Act, we may take advantage of the above-described reduced reporting requirements and exemptions for up to five years after our initial sale of common equity pursuant to a registration statement declared effective under the Securities Act of 1933, as amended (the “Securities Act”), or such earlier time that we no longer meet the definition of an emerging growth company. In this regard, the JOBS Act provides that we would cease to be an “emerging growth company” if we have more than $1,070,000,000 in annual revenues, have more than $700 million in market value of our Common stock held by non-affiliates, or issue more than $1.0 billion in principal amount of non-convertible debt over a three-year period. We would cease to be an emerging growth company on the last day of the fiscal year following the date of the fifth anniversary of our first sale of common equity securities under an effective registration statement or a fiscal year in which we have $1 billion in gross revenues.
We intend to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. Therefore, our election to use the phase-in periods may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under §107 of the JOBS Act.
Our independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as we qualify as an “emerging growth company,” which may increase the risk that weaknesses or deficiencies in our internal control over financial reporting go undetected. Likewise, so long as we qualify as an “emerging growth company,” we may elect not to provide you with certain information, including certain financial information and certain information regarding compensation of our executive officers, that we would otherwise have been required to provide in filings we make with the SEC, which may make it more difficult for investors and securities analysts to evaluate our company. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions.
Additional Information
The public may read and copy any materials the Company files with the SEC in the SEC’s Public Reference Section, Room 1580, 100 F Street N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Section by calling the SEC at 1-800-SEC-0330. Additionally, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, which can be found at http://www.sec.gov.
| ITEM 1A. | RISK FACTORS |
An investment in our securities involves a high degree of risk. In addition to the other information contained in this Form 10-KT, prospective investors should carefully consider the following risks before investing in our securities. If any of the following risks actually occur, as well as other risks not currently known to us or that we currently consider immaterial, our business, operating results and financial condition could be materially adversely affected. As a result, the trading price of our common stock could decline, and investors may lose all or part of their investment in our common stock. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” in this Form 10-KT. In assessing the risks below, you should also refer to the other information contained in this Form 10-KT, including the financial statements and the related notes, before deciding to purchase any of our securities.
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Risks Relating to Macro Conditions and Our Financial Condition
We have a substantial amount of goodwill on our balance sheet. Future write-offs of goodwill may have the effect of decreasing our earnings or increasing our losses.
We have obtained growth through the acquisition of Quality International. Under existing accounting standards, we are required to periodically review goodwill assets for possible impairment. In the event that we are required to write down the value of any assets under these pronouncements, it may materially and adversely affect our operating results, financial condition and the price of our common stock. See the more detailed discussion appearing as part of our Management’s Discussion and Analysis of Financial Condition and Results of Operations and in our financial footnotes.
Our ability to generate the significant amount of cash needed to service our debt obligations and our ability to refinance all or a portion of our indebtedness or obtain additional financing depends on many factors, many of which may be beyond our control.
Our ability to make scheduled payments on, or to refinance our obligations under, our debt, will depend on our financial and operating performance, which, in turn, will be subject to prevailing economic and competitive conditions and to the financial and business factors, many of which may be beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations, that currently anticipated business opportunities will be realized on schedule or at all, or that future borrowings will be available to us in amounts sufficient to enable us to service our indebtedness and any amounts borrowed under future credit facilities, or to fund our other liquidity needs.
We will use cash to pay the principal and interest on our debt. These payments limit funds otherwise available for working capital, capital expenditures, acquisitions, collaborations, and other purposes. As a result of these obligations, our current liabilities may exceed our current assets. We may need to take on additional debt as we expand in our industry, which could increase our ratio of debt to equity. The need to service our debt may limit funds available for other purposes and our inability to service debt in the future could lead to acceleration of our debt and foreclosure on assets.
We cannot assure that we will be able to refinance any of our indebtedness or obtain additional financing as well as prevailing market conditions. As a result, we could face liquidity problems and might be required to dispose of material assets or operations to meet our indebtedness service and other obligations.
The lending documents restrict, and any agreements governing future indebtedness may restrict our ability to dispose of assets and use the proceeds from any such dispositions. Specifically, we intend to repay the Jefferson Note (defined further below) in full with the proceeds from an anticipated public offering. However, should the Jefferson Note not be fully repaid, we are obligated to file a registration statement by August 21, 2023, which is to be declared effective by the Securities and Exchange Commission by no later than November 19, 2023. Failure to comply with these deadlines could expose us to significant legal and financial risks. We cannot assure we will be able to consummate any asset sales, or if we do, what the timing of the sales will be or whether the proceeds that we realize will be adequate to meet indebtedness service obligations when due.
Our projections are subject to significant risks, assumptions, estimates and uncertainties, including assumptions regarding future legislation and changes in regulations of the jurisdictions in which we operate, or seek to operate, our business. As a result, our projected revenues, market share, expenses and profitability may differ materially from our expectations.
We operate in a rapidly evolving and highly competitive industry and our projections are subject to the risks and assumptions made by management with respect to this industry. Operating results are difficult to forecast because they generally depend on our assessment of factors that are inherently beyond our control and impossible to predict with certainty, such as the timing of adoption of future legislation and regulations by different jurisdictions. Furthermore, if we invest in the development of new products or distribution channels that do not achieve commercial success, whether because of competition or otherwise, we may not recover the often material “up front” costs of developing and marketing those products and distribution channels or recover the opportunity cost of diverting management and financial resources away from other products or distribution channels.
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Additionally, our business may be affected by reductions in customer acquisition, customer persistency and customer spending as a result of numerous factors which may be difficult to predict. This may result in decreased revenue levels, and we may be unable to adopt timely measures to compensate for any unexpected shortfall in income. Our profitability projections make numerous assumptions about the expected future levels of various expense items. Historically most of these expense items have been relatively stable or predictable either in absolute terms or in relation to revenue but there is no certainty that such stability or predictability will continue into the future. These inabilities could cause our operating results in a given period to be higher or lower than expected. If actual results differ from our estimates, analysts may negatively react, and our share price could be adversely impacted.
If we are unable to successfully identify, complete and integrate acquisitions, our results of operations could be adversely affected.
Acquisitions have been and will continue to be a significant component of our growth strategy, including the recent acquisition of Quality International. We seek to identify and complete acquisitions and may continue to make strategic acquisitions. Our previous or future acquisitions may not be successful or may not generate the financial benefits that we expected to achieve at the time of acquisition. In addition, there can be no assurance that we will be able to locate suitable acquisition candidates in the future or acquire them on acceptable terms or, because of competition in the marketplace and limitations imposed by the agreements governing our indebtedness or the availability of capital, that we will be able to finance future acquisitions. We may be unable to identify, negotiate, and complete suitable acquisition opportunities on reasonable terms.
Acquisitions involve special risks, including, without limitation, the potential assumption of unanticipated liabilities and contingencies, difficulty in assimilating the operations and personnel of the acquired businesses, disruption of our existing business, dissipation of our limited management resources and impairment of relationships with employees and customers of the acquired business as a result of changes in ownership. For instance, we considered acquiring a 51% interest in Petro Line FZ-LLC (“Petro Line”), entering into a share purchase agreement on January 27, 2023, (the “Petro Line Share Purchase Agreement”). However, the acquisition never materialized after a fire at a Petro Line factory. An investigation into the fire’s impact led us to subsequently terminate the Petro Line Share Purchase Agreement on July 31, 2023, and no payments to Petro Line were made. Such incidents can significantly affect our financial and operational outlook.
While we believe that strategic acquisitions can improve our competitiveness and profitability, these activities could have a material adverse effect on our business, financial condition, and operating results. We may incur significant costs such as transaction fees, professional service fees and other costs related to future acquisitions. We may also incur integration costs following the completion of any such acquisitions as we integrate the acquired business with the rest of our Company. Although we expect that the realization of efficiencies related to the integration of any acquired businesses will offset the incremental transaction and acquisition-related costs over time, this net financial benefit may not be achieved in the near term, or at all.
Risks associated with climate change and other environmental impacts, and increased focus and evolving views of our customers, shareholders, and other stakeholders on climate change issues, could negatively affect our business and operations.
The effects of climate change create short and long-term financial risks to our business, both in the UAE and globally. We have significant operations located in regions that have been, and may in the future be, exposed to significant weather events and other natural disasters. Climate related changes can increase variability in or otherwise impact natural disasters, including weather patterns, with the potential for increased frequency and severity of significant weather events (e.g., flooding, hurricanes, and tropical storms), natural hazards (e.g., increased wildfire risk), rising mean temperature and sea levels, and long-term changes in precipitation patterns (e.g., drought, desertification, and/or poor water quality). We expect climate change could affect our facilities, operations, employees, and communities in the future, particularly at facilities in coastal areas and areas prone to extreme weather events and water scarcity. Our suppliers are also subject to natural disasters that could affect their ability to deliver or perform under our contracts, including as a result of disruptions to their workforce and critical infrastructure. Disruptions also impact the availability and cost of materials needed for manufacturing and could increase insurance and other operating costs.
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Increased worldwide focus on climate change has led to legislative and regulatory efforts to combat both potential causes and adverse impacts of climate change, including regulation of greenhouse gas emissions. New or more stringent laws and regulations related to greenhouse gas emissions and other climate change related concerns may adversely affect us, our suppliers, and our customers. Some of our facilities are, for example, engaged in manufacturing processes that produce greenhouse gas emissions, including carbon dioxide, or rely on products from others that do so. We have worked for years to reduce our reliance on fossil-based energy sources, to decrease our greenhouse gas emissions, to reduce our consumption of water and production of waste, and to ensure our compliance with environmental regulations where we operate, enhancing our record of environmental sustainability. However, new, and evolving laws and regulations could mandate different or more restrictive standards, could require capital investments to transition to low carbon technologies, could adversely impact our ongoing operations, and could require changes on a more accelerated time frame. Our suppliers may face similar challenges and incur additional compliance costs that are passed on to us. These direct and indirect costs may adversely impact our results.
We may be adversely affected by the effects of inflation.
Inflation in wages, materials, parts, equipment, and other costs has the potential to adversely affect our results of operations, cash flows and financial position by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices, we charge our customers for our products and services. In addition, the existence of inflation in the economy has the potential to result in higher interest rates, which could result in higher borrowing costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects. The Company has currently experienced inflationary pressures on its supply chain due to increased shipping costs, increased energy prices for manufacture of our commercial products as well as increased prices from suppliers of raw materials. We have so far been able to offset inflationary pressure to consumers, but it cannot be guaranteed that that our results of operations will not be adversely affected by inflation in the future and could reduce sales and/or operating margins, and overall financial performance.
We are dependent on the availability of raw materials, parts, and components used in our products.
While the Company manufactures certain parts and components used in its products, the Company also requires substantial amounts of raw materials and purchases certain parts and components from suppliers. The availability of and prices for raw materials, parts and components may be subject to curtailment or change due to, among other things, suppliers’ allocations to other purchasers, interruptions in production by suppliers, including due to geopolitical or civil unrest, unfavorable economic or industry conditions, labor disruptions, supply chain disruptions, catastrophic weather events, natural disasters, the occurrence of a contagious disease or illness, changes in exchange rates and prevailing price levels. Any change in the supply of, or price for, these raw materials or parts and components could materially affect the Company and its financial condition, results of operations and cash flow.
Increases in the price of commodities could impact the cost or price of our products, which could impact our ability to sustain and grow earnings.
Our manufacturing processes consume significant amounts of raw materials, the costs of which are subject to worldwide supply and demand factors, as well as other factors beyond our control. Raw material price fluctuations may adversely affect our results. We purchase, directly and indirectly through component purchases, significant amounts of plastic, aluminum, steel, and other raw materials. In the past raw material prices have experienced volatility which has been unforeseen and unexpected. Commodity pricing has fluctuated over the past few years and may continue to do so in the future. Such fluctuations could have a material effect on our results of operations, balance sheets and cash flows and impact the comparability of our results between financial periods.
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We may be subject to loss in market share and market acceptance as a result of performance failures, manufacturing errors, delays or shortages.
There is a risk that for unforeseen reasons we may be required to repair or replace products in use or to reimburse customers for products that fail to work or meet strict performance criteria. To date, we have experienced some product failures related to electronic and mechanical components within equipment and vehicles. These are either repaired under warranty or at cost to the customer or under a maintenance agreement.
Other disruptions in the supply chain process or product sales and fulfilment systems for any reason, including equipment malfunction, failure to follow specific protocols and procedures, supplier facility shut-downs, defective raw materials, wars and conflict, natural disasters such as hurricanes, tornadoes or wildfires, property damage from riots, and other environmental factors and the impact of epidemics or pandemics, such as Covid-19, and actions by businesses, communities and governments in response, could lead to launch delays, product shortage, unanticipated costs, lost revenues and damage to our reputation.
We have taken steps to limit remedies for product failure to the repair or replacement of malfunctioning or non-compliant products or services, and also attempt to exclude or minimize exposure to product and related liabilities by including in our standard agreements warranty disclaimers and disclaimers for consequential and related damages as well as limitations on our aggregate liability. From time to time, in certain sales transactions, we may negotiate liability provisions that vary from such standard forms. There is a risk that our contractual provisions may not adequately minimize our product and related liabilities or that such provisions may be unenforceable. We intend to carry product liability insurance, but coverage we secure may not be adequate to cover potential claims. Moreover, to the extent we have to repair, reimburse, or expend funds to cover customer service issues, our results of operations will be negatively affected.
The markets the company operates in are highly competitive which could reduce sales and operating margins.
Most of the Company’s products are sold in competitive markets. Maintaining and improving a competitive position will require continued investment in manufacturing, engineering, quality standards, marketing, customer service and support and distribution networks. The Company may not be successful in maintaining its competitive position. The Company’s competitors may develop products and methods that are more efficient or may adapt quicker to new technologies or evolving customer requirements. The Company may not be able to compete successfully with existing competitors or with new competitors. Pricing pressures may require the Company to adjust the prices of products to stay competitive. Failure to continue competing successfully could reduce sales, operating margins, and overall financial performance.
The Company’s business operations may be adversely affected by information systems interruptions or cybersecurity intrusions.
The Company depends on various information technologies to administer, store, and support multiple business activities. If these systems are damaged, cease to function properly or are subject to cyber-security attacks, such as those involving unauthorized access, malicious software and/or other intrusions, the Company could experience production downtimes, operational delays, other detrimental impacts on operations or the ability to provide products and services to its customers, the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation or improper use of the Company’s systems or networks, financial losses from remedial actions, loss of business or potential liability, penalties, fines and/or damage to the Company’s reputation. While the Company attempts to mitigate these risks by employing a number of measures, including having hired an IT manager in ILUS assisting QIND with cyber security expertise, who reports directly to our management team overseeing the parent company and its subsidiaries, employee training, technical security controls and maintenance of backup and protective systems, the Company’s systems, networks, products, and services remain potentially vulnerable to known or unknown threats, any of which could have a material adverse effect on the Company and its financial condition or results of operations. Further, given the unpredictability, nature, and scope of cyber-security attacks, it is possible that potential vulnerabilities could go undetected for an extended period. We have currently not been subject to cybersecurity breaches in our supply chain, software, or services used in our products, services, or business. A severe future cybersecurity incident in our supply chain could however reduce sales, operating margins, and overall financial performance.
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Our long-term success depends, in part, on our ability to operate and expand internationally, and our business is susceptible to risks associated with international operations.
Currently, we only maintain operations in the United Arab Emirates, and plan to continue our efforts to expand globally, in jurisdictions where we do not currently operate. The Company expects international operations and export sales to continue to constitute the majority of our sales and assets in the foreseeable future. Managing a global organization is difficult, time consuming and expensive, and any international expansion efforts that we undertake may not be profitable in the near or long term. Although we have operating experience in many foreign jurisdictions, we must still continue to make significant investments to build our international operations. The Company’s sales from international operations and sales from export are both subject in varying degrees to risks inherent in doing business outside the U.S. These risks include the following:
· Costs, risks, and uncertainties associated with tailoring our services in international jurisdictions as needed to better address both the needs of customers, and the threats of local competitors.
· Risks of economic instability, including due to inflation.
· Uncertainties in forecasting revenues and expenses in markets where we have not previously operated.
· Costs and risks associated with local and national laws and regulations governing the industries in which we operate, health and safety, climate change and sustainability, and labor and employment.
· Operational and compliance challenges caused by distance, language, and cultural differences.
· Costs and risks associated with compliance with international tax laws and regulations.
· Costs and risks associated with compliance with the U.S. Foreign Corrupt Practices Act and other laws in the United States related to conducting business outside the United States, as well as the laws and regulations of non-U.S. jurisdictions governing bribery and other corrupt business activities.
· Costs and risks associated with human trafficking, modern slavery and forced labor reporting, training and due diligence laws and regulations in various jurisdictions.
· Being subject to other laws and regulations, including laws governing online advertising and other Internet activities, email and other messaging, collection and use of personal information, ownership of intellectual property, taxation, and other activities important to our online business practices.
· Currency exchange rate fluctuations and restrictions on currency repatriation.
· Competition with companies that understand the local market better than we do or that have preexisting relationships with regulators and customers in those markets.
· Adverse effects resulting from the U.K.’s exit from the European Union (commonly known as “Brexit”)
· Reduced or varied protection for intellectual property rights in some countries
· Disruption of operations from labor and political disturbances.
· Withdrawal from or renegotiation of international trade agreements and other restrictions on the trade between the United States and other countries
· Changes in tariff and trade barriers; and
· Geopolitical events, including natural disasters, climate change, public health issues, political instability (such as war between Ukraine and Russia), terrorism, insurrection, or war.
Entry into certain transactions with foreign entities now or in the future may be subject to government regulations, including review related to foreign direct investment by U.S. or foreign government entities. If a transaction with a foreign entity is subject to regulatory review, such regulatory review might limit our ability to enter into the desired strategic alliance and thus our ability to carry out our long-term business strategy.
Operating in international markets also requires significant management attention and financial resources. The investment and additional resources required to establish operations and manage growth in other countries may not produce desired levels of revenue or profitability and could instead result in increased costs without a corresponding benefit. We cannot guarantee that our international operations or expansion efforts will be successful.
Any of these events as well as related events not aforementioned, could have a materially adverse impact on the Company and its operations.
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Uncertainty Related to Environmental Regulation and Industry Standards, as well as Physical Risks of Climate Change, Could Impact the Company’s Results of Operations and Financial Position.
Increased public awareness and concern regarding environmental risks, including global climate change, may result in more international, regional and/or federal requirements or industry standards to reduce or mitigate global warming and other environmental risks. New climate change laws and regulations could require the Company to change its manufacturing processes or obtain substitute materials that may cost more or be less available for its manufacturing operations. Various jurisdictions in which the Company does business have implemented, or in the future could implement or amend, restrictions on emissions of carbon dioxide or other greenhouse gases, limitations or restrictions on water use, the production of single use plastics, regulations on energy management and waste management and other climate change-based rules and regulations, which may increase the Company’s expenses and adversely affect its operating results. In addition, the physical risks of climate change may impact the availability and cost of materials, sources and supply of energy, product demand and manufacturing and could increase insurance and other operating costs. The expected future increased worldwide regulatory activity relating to climate change could expand the nature, scope, and complexity of matters that the Company is required to control, assess, and report. If environmental laws or regulations or industry standards are either changed or adopted and impose significant operational restrictions and compliance requirements upon the Company, its suppliers, its customers or its products, or the Company's operations are disrupted due to physical impacts of climate change on the Company, its customers or its suppliers, the Company's business, results of operations and financial condition could be adversely impacted.
Significant Movements in Foreign Currency Exchange Rates May Harm the Company’s Financial Results.
The Company is exposed to fluctuations in foreign currency exchange rates, particularly with respect to the UAE which is pegged to the U.S. dollar. Any significant change in the value of the currencies of the countries in which the Company does business against the U.S. dollar could affect the Company’s ability to sell products competitively and control its cost structure, which could have a material adverse effect on results of operations.
A Significant or Sustained Decline in Commodity Prices Including Oil Could Negatively Impact the Levels of Expenditures by Certain Company Customers.
Demand for the Company’s products depends, in part, on the level of new and planned expenditures by certain of its customers. The level of expenditures by the Company’s customers is dependent on, among other factors, general economic conditions, availability of credit, economic conditions within their respective industries and expectations of future market behavior. The Company’s profitability may be adversely affected during any periods of unexpected or rapid increases in interest rates and volatility in commodity prices, including oil, can negatively affect the level of these activities and impact our subsidiary and can result in postponement of capital spending decisions or the delay or cancellation of existing orders. The ability of the Company’s customers to finance capital investment and maintenance may also be affected by the conditions in their industries. Reduced demand for the Company’s products could result in the delay or cancellation of existing orders or lead to excess manufacturing capacity, which unfavorably impacts the absorption of fixed manufacturing costs. This reduced demand could have a material adverse effect on the Company and its financial condition and results of operations.
We are dependent on financing for the continuation of our operations.
It can at times be difficult to predict our capital needs on a monthly, quarterly, or annual basis. Our future is dependent upon our ability to obtain profitable operations or financing. We reserve the right to seek additional funds through private placements of our common stock and/or through debt financing. We do not have financing in place at this time for all future planned acquisitions. We may not have access to financing or on terms that are acceptable to us. Any lack of funds from operations or fundraisings for any shortage could be detrimental to our ability to continue operations and negatively impact us and our financial condition, results of operations and cash flow.
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Risks Relating to Our Industry and Market
The success of our business depends on our ability to maintain and enhance our reputation and brand.
We believe that our reputation in our industry is of significant importance to the success of our business. A well-recognized brand is critical to increasing our customer base and, in turn, increasing our revenue. Since the industry is highly competitive, our ability to remain competitive depends to a large extent on our ability to maintain and enhance our reputation and brand, which could be difficult and expensive. To maintain and enhance our reputation and brand, we need to successfully manage many aspects of our business, such as cost-effective marketing campaigns to increase brand recognition and awareness in a highly competitive market. We cannot assure you, however, that these activities will be successful and achieve the brand promotion goals we expect. If we fail to maintain and enhance our reputation and brand, or if we incur excessive expenses in our efforts to do so, our business, financial conditions and results of operations could be adversely affected.
In the event that we are unable to successfully compete in our industry, we may see lower profit margins.
We face substantial competition in our industry. Due to our smaller size, it can be assumed that some of our competitors have greater financial, technical, and other competitive resources. Accordingly, these competitors may have already begun to establish superior technologies in our industry. We will attempt to compete against these competitors by developing technology that exceed what is offered by our competitors. However, we cannot assure you that our technology will outperform competing technology, or that our competitors will not develop new products or services that exceed what we provide. In addition, we may face competition based on price. If our competitors lower the prices on their products, then it may not be possible for us to market our products at prices that are economically viable. Increased competition could result in:
| • | Lower than projected revenues; | |
| • | Price reductions and lower profit margins. | |
Any one of these results could adversely affect our business, financial condition, and results of operations.
In addition, our competitors may develop competing products that achieve greater market acceptance. It is also possible that new competitors may emerge and acquire significant market share. Our inability to achieve sales and revenue due to competition will have an adverse effect on our business, financial condition, and results of operations.
If we are unable to successfully manage growth, our operations could be adversely affected.
Our progress is expected to require the full utilization of our management, financial and other resources. Our ability to manage growth effectively will depend on our ability to improve and expand operations, including our financial and management information systems, and to recruit, train and manage personnel. There can be no absolute assurance that management will be able to manage growth effectively.
If we do not properly manage the growth of our business, we may experience significant strains on our management and operations and disruptions in our business. Various risks arise when companies and industries grow quickly. If our business or industry grows too quickly, our ability to meet customer demand in a timely and efficient manner could be challenged. We may also experience development delays as we seek to meet increased demand for our services and platform. Our failure to properly manage the growth that we or our industry might experience could negatively impact our ability to execute on our operating plan and, accordingly, could have an adverse impact on our business, our cash flow and results of operations, and our reputation with our current or potential customers.
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If we are not able to design, develop and produce commercially competitive products and to implement commercially competitive services in a timely manner in response to changes in the market, customer requirements, competitive pressures, developments associated with climate change concerns and energy mix transition, and technology trends, our business and consolidated results of operations could be materially and adversely affected, and the value of our intellectual property may be reduced.
The market for our services and products is characterized by continual technological developments to provide better and more reliable performance and services. If we are not able to design, develop, and produce commercially competitive products and to implement commercially competitive services in a timely manner in response to changes in the market, customer requirements, competitive pressures, developments associated with climate change concerns and energy mix transition, and technology trends, our business and consolidated results of operations could be materially and adversely affected, and the value of our intellectual property may be reduced. Likewise, if our proprietary technologies, equipment, facilities, or work processes become obsolete, we may no longer be competitive, and our business and consolidated results of operations could be materially and adversely affected.
Trends in oil and natural gas prices affect the level of exploration, development, and production activity of our customers and the demand for our services and products, which could have a material adverse effect on our business, consolidated results of operations, and consolidated financial condition.
Demand for our services and products is particularly sensitive to the level of exploration, development, and production activity of, and the corresponding capital spending by, oil and natural gas companies. The level of exploration, development, and production activity is directly affected by trends in oil and natural gas prices, which historically have been volatile especially after the Russian invasion of Ukraine and are likely to continue to be volatile. Prices for oil and natural gas are subject to large fluctuations in response to relatively minor changes in the supply of and demand for oil and natural gas, market uncertainty, and a variety of other economic factors that are beyond our control. Given the long-term nature of many large-scale development projects, even the perception of longer-term lower oil and natural gas prices by oil and natural gas companies can cause them to reduce or defer major expenditures. Any prolonged reductions of commodity prices or expectations of such reductions could have a material adverse effect on our business, consolidated results of operations, and consolidated financial condition.
Factors affecting the prices of oil and natural gas include:
| • | the level of supply and demand for oil and natural gas; | |
| • | the ability or willingness of the Organization of Petroleum Exporting Countries and the expanded alliance collectively known as OPEC+ to set and maintain oil production levels; | |
| • | the level of oil production in the U.S. and by other non-OPEC+ countries; | |
| • | oil refining capacity and shifts in end-customer preferences toward fuel efficiency and the use of natural gas; | |
| • | the cost of, and constraints associated with, producing and delivering oil and natural gas; | |
| • | governmental regulations and other actions, including economic sanctions and policies of governments regarding the exploration for and production and development of their oil and natural gas reserves; | |
| • | weather conditions, natural disasters, and health or similar issues, such as COVID-19 and other pandemics or epidemics; | |
| • | worldwide political and military actions, and economic conditions, including potential recessions; and | |
| • | increased demand for alternative energy and use of electric vehicles and increased emphasis on decarbonization, including government initiatives, such as the variety of tax credits contained in the U.S. Inflation Reduction Act of 2022, to promote the use of renewable energy sources and public sentiment around alternatives to oil and gas. |
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Our business is dependent on capital spending by our customers, and reductions in capital spending could have a material adverse effect on our business, consolidated results of operations, and consolidated financial condition.
Our business is directly affected by changes in capital expenditures by our customers, and reductions in their capital spending could reduce demand for our services and products and have a material adverse effect on our business, consolidated results of operations, and consolidated financial condition. Some of the items that may impact our customers capital spending include:
| • | oil and natural gas prices, which are impacted by the factors described in the preceding risk factor; | |
| • | the inability of our customers to access capital on economically advantageous terms, which may be impacted by, among other things, a decrease of investors' interest in hydrocarbon producers because of environmental and sustainability initiatives; | |
| • | changes in customers' capital allocation, including an increased allocation to the production of renewable energy or other sustainability efforts, leading to less focus on oil and natural gas production growth; | |
| • | restrictions on our customers' ability to get their produced oil and natural gas to market due to infrastructure limitations; | |
| • | consolidation of our customers; | |
| • | customer personnel changes; and | |
| • | adverse developments in the business or operations of our customers, including write-downs of oil and natural gas reserves and borrowing base reductions under customers' credit facilities. |
Constraints in the supply of, prices for, and availability of transportation of raw materials can have a material adverse effect on our business and consolidated results of operations.
Raw materials essential to our operations and manufacturing, such as proppants (primarily sand), chemicals, metals, and gels, are normally readily available. Shortage of raw materials as a result of high levels of demand or loss of suppliers during market challenges can trigger constraints in the supply chain of those raw materials, particularly where we have a relationship with a single supplier for a particular resource. Many of the raw materials essential to our business require the use of rail, storage, and trucking services to transport the materials to our job sites. These services, particularly during times of high demand, may cause delays in the arrival of or otherwise constrain our supply of raw materials. These constraints could have a material adverse effect on our business and consolidated results of operations. In addition, price increases imposed by our vendors for raw materials and transportation providers used in our business, and the inability to pass these increases through to our customers, could have a material adverse effect on our business and consolidated results of operations.
We occassionally provide integrated project management services in the form of long-term, fixed price contracts that may require us to assume additional risks associated with cost over-runs, operating cost inflation, labor availability and productivity, supplier and contractor pricing and performance, and potential claims for liquidated damages.
We occassionally provide integrated project management services outside our normal discrete business in the form of long-term, fixed price contracts. Some of these contracts are required by our customers, primarily international oil companies. These services include acting as project managers as well as service providers and may require us to assume additional risks associated with cost over-runs. These customers may provide us with inaccurate information in relation to their reserves, which is a subjective process that involves location and volume estimation, that may result in cost over-runs, delays, and project losses. In addition, our customers often operate in countries with unsettled political conditions, war, civil unrest, or other types of community issues. These issues may also result in cost over-runs, delays, and project losses.
Providing services on an integrated basis may also require us to assume additional risks associated with operating cost inflation, labor availability and productivity, supplier pricing and performance, and potential claims for liquidated damages. We rely on third-party subcontractors and equipment providers to assist us with the completion of these types of contracts. To the extent that we cannot engage subcontractors or acquire equipment or materials in a timely manner and on reasonable terms, our ability to complete a project in accordance with stated deadlines or at a profit may be impaired. If the amount we are required to pay for these goods and services exceeds the amount we have estimated in bidding for fixed-price work, we could experience losses in the performance of these contracts. These delays and additional costs may be substantial, and we may be required to compensate our customers for these delays. This may reduce the profit to be realized or result in a loss on a project.
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Our ability to operate and our growth potential could be materially and adversely affected if we cannot attract, employ, and retain technical personnel at a competitive cost.
Many of the services that we provide and the products that we sell are complex and highly engineered and often must perform or be performed in harsh conditions. We believe that our success depends upon our ability to attract, employ, and retain technical personnel with the ability to design, utilize, and enhance these services and products. A significant increase in the wages paid by competing employers could result in a reduction of our skilled labor force, increases in the wage rates that we must pay, or both. If either of these events were to occur, our cost structure could increase, our margins could decrease, and any growth potential could be impaired.
Demand for the products we distribute could decrease if the manufacturers of those products were to sell a substantial amount of goods directly to end users in the markets we serve.
Our products are purchased through distributors and not directly from manufacturers. If those customers were to purchase the products that we sell directly from manufacturers, or if manufacturers sought to increase their efforts to sell directly to end users, our business, results of operations and financial condition could be materially and adversely affected. These or other developments that remove us from, or limit our role in, the distribution chain, may harm our competitive position in the marketplace and reduce our sales and earnings.
We may experience unexpected supply shortages.
We distribute products from a wide variety of manufacturers and suppliers. Nevertheless, in the future we may have difficulty obtaining the products we need from suppliers and manufacturers as a result of unexpected demand or production difficulties. Also, products may not be available to us in quantities sufficient to meet our customer demand. Our inability to obtain sufficient products from suppliers and manufacturers, in sufficient quantities, could have a material adverse effect on our business, results of operations and financial condition.
Price reductions by suppliers of products sold by us could cause the value of our inventory to decline. Also, such price reductions could cause our customers to demand lower sales prices for these products, possibly decreasing our margins and profitability on sales to the extent that our inventory of such products was purchased at the higher prices prior to supplier price reductions and we are required to sell such products to our customers at the lower market prices.
The value of our inventory could decline as a result of price reductions by manufacturers of products sold by us. We have been selling the same types of products to our customers for many years (and therefore do not expect that our inventory will become obsolete). However, there is no assurance that a substantial decline in product prices would not result in a write-down of our inventory value. Such a write-down could have a material adverse effect on our financial condition. Also, decreases in the market prices of products sold by us could cause customers to demand lower sale prices from us. These price reductions could reduce our margins and profitability on sales with respect to such lower-priced products. Reductions in our margins and profitability on sales could have a material adverse effect on our business, results of operations, and financial condition.
A substantial decrease in the price of steel could significantly lower our gross profit or cash flow.
We distribute many products manufactured, some of which may contain steel and, as a result, our business may be significantly affected by the price and supply of steel. When steel prices are lower, the prices that we charge customers for products may decline, which affects our gross profit and cash flow. The steel industry as a whole is cyclical and at times pricing and availability of steel can be volatile due to numerous factors beyond our control, including general domestic and international economic conditions, labor costs, sales levels, competition, consolidation of steel producers, fluctuations in the costs of raw materials necessary to produce steel, import duties and tariffs and currency exchange rates. When steel prices decline, customer demands for lower prices and our competitors’ responses to those demands could result in lower sale prices and, consequently, lower gross profit or cash flow.
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If steel prices rise, we may be unable to pass along the cost increases to our customers.
We maintain inventories of steel products to accommodate the lead time requirements of our customers. Accordingly, we purchase steel products in an effort to maintain our inventory at levels that we believe to be appropriate to satisfy the anticipated needs of our customers based upon historic buying practices, contracts with customers and market conditions. Our commitments to purchase steel products are generally at prevailing market prices in effect at the time we place our orders. If steel prices increase between the time we order steel products and the time of delivery of such products to us, our suppliers may impose surcharges that require us to pay for increases in steel prices during such period. Demand for the products we distribute, the actions of our competitors, and other factors will influence whether we will be able to pass such steel cost increases and surcharges on to our customers, and we may be unsuccessful in doing so.
We may not have adequate insurance for potential liabilities, including liabilities arising from litigation.
In the ordinary course of business, we have and in the future may become the subject of various claims, lawsuits and administrative proceedings seeking damages or other remedies concerning our commercial operations, the products we distribute, employees and other matters, including potential claims by individuals alleging exposure to hazardous materials as a result of the products we distribute or our operations. Some of these claims may relate to the activities of businesses that we have acquired, even though these activities may have occurred prior to our acquisition of such businesses. The products we distribute are sold primarily for use in the energy industry, which is subject to inherent risks that could result in death, personal injury, property damage, pollution or loss of production. In addition, defects in the products we distribute could result in death, personal injury, property damage, pollution or damage to equipment and facilities. Actual or claimed defects in the products we distribute may give rise to claims against us for losses and expose us to claims for damages.
We maintain insurance to cover certain of our potential losses, and we are subject to various self-retentions, deductibles and caps under our insurance. It is possible, however, that judgments could be rendered against us in cases in which we would be uninsured and beyond the amounts that we currently have reserved or anticipate incurring for such matters. Even a partially uninsured claim, if successful and of significant size, could have a material adverse effect on our business, results of operations and financial condition. Furthermore, we may not be able to continue to obtain insurance on commercially reasonable terms in the future, and we may incur losses from interruption of our business that exceed our insurance coverage. Finally, even in cases where we maintain insurance coverage, our insurers may raise various objections and exceptions to coverage which could make uncertain the timing and amount of any possible insurance recovery.
Our operations are subject to hazards inherent in the oil and gas industry and, as a result, we are exposed to potential liabilities that may affect our financial condition and reputation.
Risks inherent to our industry, such as equipment malfunctions and failures, equipment misuse and defects, explosions and uncontrollable flows of oil, natural gas or well fluids and natural disasters, can cause personal injury, loss of life, suspension of operations, damage to formations, damage to facilities, business interruption and damage to or destruction of property, equipment and the environment. These risks could expose us to substantial liability for personal injury, wrongful death, property damage, loss of oil and gas production, pollution and other environmental damages. The frequency and severity of such incidents will affect operating costs, insurability and relationships with customers, employees and regulators. In particular, our customers may elect not to purchase our services if they view our safety record as unacceptable, which could cause us to lose customers and substantial revenues. In addition, these risks may be greater for us because we may acquire companies that have not allocated significant resources and management focus to safety and have a poor safety record requiring rehabilitative efforts during the integration process.
Our customers could seek damages for losses associated with these errors, defects or other performance problems. Our insurance policies may not be adequate to cover all liabilities. Further, insurance may not be generally available in the future or, if available, insurance premiums may make such insurance commercially unjustifiable. Moreover, even if we are successful in defending a claim, it could be time-consuming and costly to defend.
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We are subject to increased risks associated with our investments in emerging markets, particularly in the Middle East region and specifically in the United Arab Emirates. These risks encompass significant political, social, and economic uncertainties in the region. Given the volatile nature of these markets, instabilities in these regions could significantly adversely affect the value of our investments.
Almost all of QIND’s operations are conducted, and almost of its assets are, as at the date of this document, located in the UAE, which is defined as an emerging market. While most of the countries in which QIND conducts business have historically not been affected by political instability, there is no assurance that any political, social, economic or market conditions affecting such countries in the Middle East region generally (as well as outside the Middle East region because of interrelationships within the global financial markets) would not have a material adverse effect on QIND’s business, results of operations and financial condition.
Specific risks in these countries and the Middle East region that may have a material impact on QIND's business, results of operations and financial condition include:
| · | ongoing macroeconomic uncertainty and disruption due to the COVID-19 pandemic; |
| · | an increase in inflation and the cost of living; |
| · | a devaluation in the currency of any country in which QIND has operations; |
| · | external acts of warfare and civil clashes or other hostilities involving nations in the region; |
| · | governmental actions or interventions, including tariffs, protectionism and subsidies; |
| · | difficulties and delays in obtaining governmental or other approvals, new permits and consents for QIND's operations or renewing existing ones; |
| · | potential lack of transparency or reliability in jurisdictions where QIND operates; |
| · | cancellation of contractual rights; |
| · | lack of infrastructure; |
| · | expropriation or nationalisation of assets; |
| · | inability to repatriate profits and/or dividends; |
| · | continued regional political instability and unrest, including government or military regime change, riots or other forms of civil disturbance or violence, including through acts of terrorism; |
| · | military strikes or the outbreak of war or other hostilities involving nations in the region; |
| · | a material curtailment of the industrial and economic infrastructure development that is currently underway across the Middle East region; |
| · | increased government regulations, or adverse governmental activities, with respect to price, import and export controls, the environment, customs and immigration, capital transfers, foreign exchange and currency controls, labour policies, land and water use and foreign ownership; |
| · | changing tax regimes, including the imposition of taxes in currently tax favourable jurisdictions; |
| · | arbitrary, inconsistent or unlawful government action, including capricious application of tax laws and selective tax audits; |
| · | limited availability of capital or debt financing; and |
| · | slowing regional and global economic environment. |
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Any unexpected changes in the political, social, economic or other conditions in which QIND operates or neighboring countries may have a material adverse effect on QIND's business, results of operations and financial condition.
It is not possible to predict the occurrence of events or circumstances such as or similar to those outlined above or the impact of such occurrences and no assurance can be given that QIND would be able to sustain its current profit levels if such events or circumstances were to occur.
Investors should also be aware that emerging markets are subject to greater risks than more developed markets, including in some cases significant legal, economic and political risks. Accordingly, investors should exercise particular care in evaluating the risks involved and must decide for themselves whether, in light of those risks, their investment is appropriate. Generally, investment in developing markets is only suitable for sophisticated investors who fully appreciate the significance of the risks involved.
To the extent that economic growth or performance in the countries in which QIND operates slows or begins to decline, or political conditions become sufficiently unstable to have a material adverse effect on QIND's operations, QIND's business, financial condition and results of operations may be materially adversely affected.
We are exposed to risks from potentially unpredictable legal and regulatory environments in the UAE and Middle East region.
QIND currently operates in an emerging market economy in the UAE, which are in various stages of developing institutions and legal and regulatory systems that are not yet as fully matured and as established as those of Western Europe and the United States. Some of these countries are also in the process of transitioning to a market economy and, as a result, are experiencing changes in their economies and their government policies (including, without limitation, policies relating to foreign ownership, repatriation of profits, property and contractual rights and planning and permit granting regimes) that may affect QIND's business in those countries. Such countries are also characterized by less comprehensive legal and regulatory environments and systems. Existing laws and regulations may be applied inconsistently with anomalies in their interpretation or implementation. Such anomalies could affect QIND's ability to enforce its rights under its contracts or to defend its business against claims by others.
There can be no assurance that if laws or regulations were imposed on the products and services offered by QIND it would not increase its costs, impact the costs that are associated with buying properties in Dubai and internationally, adversely affect the way in which QIND conducts its business or otherwise have a material adverse effect on its results of operations and financial condition.
Any of the above factors, alone or in combination, may have a material adverse effect on QIND's business, results of operations and financial condition.
We are exposed to risks arising from potential changes in the UAE's visa legislation, which could adversely impact the business operations of QIND.
A federal decision No. 281 of 2009 issued by the Minister of the Interior in May 2009 (the "Resolution"), which came into effect on 1 June 2009, standardized the terms of residency permits issued to expatriate residential property owners across the UAE. The decree allows expatriate property owners to apply for renewable multiple-entry visas with a validity of six months. The residency permit does not entitle the holder to work in the UAE and is in effect a long-term visit visa. In order to successfully apply for the new permit, expatriate property owners must satisfy certain criteria, including a minimum property valuation of at least AED 1 million, earning thresholds and the maintenance of appropriate insurance. While the Resolution was passed with the intention of standardizing the previous rules and stimulating the domestic market, it is not possible to assess whether the Resolution has had a positive or negative effect on levels of foreign investment in the UAE market. Separately, the Government, through the Dubai Land Department, has introduced a two-year residency visa for residential property owners in Dubai, and, while the criteria for obtaining this residency visa is similar to the residency permit, it provides the holder with UAE residency status, allowing the individual to obtain an Emirates ID card and a UAE driving license as well as to sponsor dependents (subject to meeting the relevant criteria for dependent sponsorship). The Government has introduced other new visa measures to make the UAE more appealing to investors, entrepreneurs, skilled personnel and outstanding students, including the 10-year “Golden” visa. However, any restrictive changes to the UAE's visa policies may discourage foreign nationals from investing in the UAE, which would have an adverse effect on QIND's business, results of operations and financial condition.
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We are subject to risks associated with potential unlawful or arbitrary governmental actions in the UAE, which could negatively impact our operations and financial performance.
Governmental authorities in the UAE in which QIND operates may have a high degree of discretion and, at times, act selectively or arbitrarily, without hearing or prior notice, and sometimes in a manner that is contrary to law or influenced by political or commercial considerations. Such governmental action could include, among other things, the withdrawal of building permits, the expropriation of property without adequate compensation or the forcing of business acquisitions, combinations or sales. Any such action taken may have a material adverse effect on QIND's business, results of operations and financial condition.
We are subject to the risk of international sanctions, which could significantly impact our business activities, results of operations and financial condition.
European, US and other international sanctions have in the past been imposed on companies engaging in certain types of transactions with specified countries or companies or individuals in those countries. Companies operating in certain countries in the Middle East region have been subject to such sanctions in the past. The UAE are not subject to such sanctions as at the date of this transition report. The terms of legislation and other rules and regulations which establish sanctions regimes are often broad in scope and difficult to interpret.
If the UAE were in the future to violate European, US or international sanctions, penalties could include a prohibition or limitation on the UAE’s ability to conduct business in certain jurisdictions or to access the US or international capital markets. Any such sanction could have a material adverse effect on QIND's business, results of operations and financial condition.
Risks Related to Legal, Accounting and Regulatory Matters
An Unfavorable Outcome of Any Pending Contingencies or Litigation Could Adversely Affect the Company.
The Company is currently not involved in pending legal proceedings arising in the ordinary course of business. Where it is reasonably possible to do so, the Company accrues estimates of the probable costs for the resolution of these matters. These estimates are based upon an analysis of potential results and settlement strategies. It is possible, however, that future operating results for any particular quarter or annual period could be affected by changes in assumptions. For additional details related to this risk, see “Legal Proceedings”.
The Sale of our Products involves Potential Product Liability and Related Risks that Could Expose us to Significant Insurance and Loss
Expenses.
We face an inherent risk of exposure to product liability claims if the use of our products results in, or is believed to have resulted in, illness or injury. Any product liability claim may increase our costs and adversely affect our revenue and operating income. Moreover, liability claims arising from a serious adverse event may increase our costs through higher insurance premiums and deductibles for our insurances and may make it more difficult to secure adequate insurance coverage in the future. In addition, our product liability insurance may fail to cover future product liability claims, which, if adversely determined, could subject us to substantial monetary damages. Quality International has General Liability Coverage.
Compliance with Changing Regulation of Corporate Governance and Public Disclosure May Result in Additional Expenses.
Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and new SEC regulations, are creating uncertainty for companies such as ours. These new or changed laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, we intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, our reputation may be harmed.
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If we Fail to Comply with the Rules under the Sarbanes-Oxley Act Related to Accounting Controls and Procedures, or if Material Weaknesses or Other Deficiencies are Discovered in our Internal Accounting Procedures, our Stock Price Could Decline Significantly.
Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal controls over financial reporting. We are in the process of documenting and testing our internal control procedures, and we may identify material weaknesses in our internal control over financial reporting and other deficiencies. If material weaknesses and deficiencies are detected, it could cause investors to lose confidence in our Company and result in a decline in our stock price and consequently affect our financial condition. In addition, if we fail to achieve and maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our Common Stock could drop significantly. In addition, we cannot be certain that additional material weaknesses or significant deficiencies in our internal controls will not be discovered in the future.
Failure To Comply with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act or Other Applicable Anti-bribery Laws Could Have an Adverse Effect on the Company.
The U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business. Recent years have seen a substantial increase in anti-bribery law enforcement activity with more frequent and aggressive investigations and enforcement proceedings by both the Department of Justice and the SEC, increased enforcement activity by non-U.S. regulators and increases in criminal and civil proceedings brought against companies and individuals. The Company’s policies mandate compliance with all anti-bribery laws. However, the Company’s subsidiary operates in the UAE which may be recognized as having governmental and commercial corruption. The Company’s internal control policies and procedures may not always protect it from reckless or criminal acts committed by employees or third-party intermediaries. Violations of these anti-bribery laws may result in criminal or civil sanctions, which could have a material adverse effect on the Company and its financial condition and results of operations.
Changes in Tax laws or Exposure to Additional Income Tax Liabilities Could have a Material Impact on our Company, the Results of Operations, Financial Conditions and Cash Flows.
We are subject to income taxes, as well as non-income-based taxes in the jurisdictions in which we operate, as well as jurisdictions such as the United States, in which we intend to have operations. The tax laws in these could change on a prospective or retroactive basis, and any such changes could adversely affect us and our effective tax rate.
Taxation regulation in territories around the world can also change very quickly, which may mean that all the implications for businesses may not have been fully thought through by the regulating authorities before final guidelines and laws are issued. Furthermore, any changes made by tax authorities, together with other legislative changes, to the mandatory sharing of company information (financial and operational) with tax authorities on both a local and global basis, could lead to disagreements between jurisdictions with respect to the proper allocation of profits between such jurisdictions. We therefore continuously monitor changes to tax regulation and double tax treaties between the territories in which we operate. We also maintain a comprehensive transfer pricing policy to govern the flow of funds between various tax territories.
We are further subject to ongoing tax audits in the various jurisdictions in which we operate. We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provisions. However, there can be no assurance that we will accurately predict the outcomes of these audits, which could have a material impact on the business, financial condition, results of operations, and cash flows.
While we have recorded reserves for potential payments to various tax authorities related to uncertain tax positions, the calculation of such tax liabilities involves the application of complex tax regulations in many jurisdictions. Therefore, any dispute with a tax authority may result in payment that is significantly different from our estimates. If the payment proves to be less than the recorded reserves, the reversal of the liabilities would generally result in tax benefits being recognized in the period when we determine the liabilities to be no longer necessary. Conversely, if the payment proves to be more than the reserves, we could incur additional charges, and these could have a materially adverse effect on the business, financial condition, results of operations, and cash flows.
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Laws and Regulations Governing International Business Operations Could Adversely Impact Our Company.
The US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), and the Bureau of Industry and Security at the US Department of Commerce (“BIS”) administer certain laws and regulations that restrict US persons and, in some instances, non-US persons, in conducting activities, transacting business with, or making investments in certain countries, governments, entities and individuals subject to US economic sanctions.
Our international operations subject us to these laws and regulations, which are complex, restrict business dealings with certain countries, governments, entities, and individuals, and are constantly changing. Further restrictions may be enacted, amended, enforced, or interpreted in a manner that materially impacts our operations.
Our subsidiary sell products, and may provide related services, to distributors and other purchasing bodies in such countries. These business dealings represent an insignificant amount of our consolidated revenues and income but expose us to a heightened risk of violating applicable sanctions regulations. Violations of these regulations are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts and revocations or restrictions of licenses, as well as criminal fines and imprisonment.
We have established policies and procedures designed to assist with compliance with such laws and regulations. However, there can be no assurance that these will prevent us from violating these regulations in every transaction in which we may engage. As such a violation could adversely affect our reputation, business, financial condition, results of operations and cash flows.
We are subject to changes in contract estimates in our Subsidiary.
We account for substantially all long-term contracts in our subsidiary utilizing the cost-to-cost method of percentage-of-completion accounting. This accounting requires judgment relative to assessing risks, estimating revenues and costs, and making assumptions regarding the timing of receipt of delivery orders from our customer and technical issues. Due to the size and nature of these contracts, the estimation of total revenues and costs is complicated and subject to many variables. We must make assumptions regarding for example expected increases in material costs, wages and employee benefits, engineering hours, productivity and availability of labor and allocated fixed costs. Changes to production costs, overhead rates, learning curves and/or supplier performance can also impact these estimates. Furthermore, under the revenue recognition accounting rules, we can only include units in our estimates of overall contract profitability after we have received a firm delivery order for those units. Because new orders have the potential to significantly change the overall profitability of cumulative orders received to date, particularly early in the contract when fewer overall units are on order, the period in which we receive those orders will impact the estimated life-to-date contract profitability. Changes in underlying assumptions, circumstances or estimates could have a material adverse effect on our net sales, financial condition and/or profitability.
Risks Related to our Management and Control Persons
Our largest shareholder, officer, director, Nicolas Link holds substantial control over the company and is able to influence all corporate matters, which could be deemed by shareholders as not always being in their best interests.
Nicolas Link, our Executive Chairman of the Board of Directors holds substantial control of our company with his approximately 74.4% of the outstanding shares of common stock through our parent company ILUS. By virtue of his ownership of common stock, Mr. Link is able to exercise significant influence over all matters requiring approval by our stockholders, including the election of directors, the approval of significant corporate transactions, and any change of control of our company.
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We are dependent on the continued services of our director and executive chairman and officers and if we fail to keep them or fail to attract and retain qualified senior executives and key technical personnel, our business may not be able to expand.
We are dependent on the continued availability of Executive Chairman, Nicolas Link, CEO, John-Paul Backwell, and CCO, Carsten Kjems Falk, and the availability of new executives to implement our business plans. The market for skilled employees is highly competitive, especially for employees in our industry. Although we expect that our planned compensation programs will be intended to attract and retain the employees required for us to be successful, there can be no assurance that we will be able to retain all our key employees or a sufficient number to execute our plans, nor can there be any assurance we will be able to continue to attract new employees as required.
Our lack of adequate D&O insurance may also make it difficult for us to retain and attract talented and skilled directors and officers.
In the future we may be subject to litigation, including potential class action and stockholder derivative actions. Risks associated with legal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. To date, we have not obtained directors and officers liability (“D&O”) insurance, but the company plans to obtain it concurrent with the uplist to a National Exchange. Without adequate D&O insurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to the Company could have a material adverse effect on our financial condition, results of operations and liquidity. Furthermore, our lack of adequate D&O insurance may make it difficult for us to retain and attract talented and skilled directors and officers, which could adversely affect our business.
The elimination of monetary liability against our directors, officers and employees under our Articles of Incorporation and the existence of indemnification rights to our directors, officers and employees may result in substantial expenditures by our Company and may discourage lawsuits against our directors, officers, and employees.
Our Articles of Incorporation contain provisions that eliminate the liability of our directors for monetary damages to our Company and shareholders. Our bylaws also require us to indemnify our officers and directors. We may also have contractual indemnification obligations under our agreements with our directors, officers, and employees. The foregoing indemnification obligations could result in our company incurring substantial expenditures to cover the cost of settlement or damage awards against directors, officers, and employees that we may be unable to recoup. These provisions and resulting costs may also discourage our company from bringing a lawsuit against directors, officers, and employees for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our shareholders against our directors, officers, and employees even though such actions, if successful, might otherwise benefit our Company and shareholders.
Our officers may voluntarily terminate their relationship with us at any time, and competition for qualified personnel is lengthy, costly, and disruptive.
If we lose the services of our officers and fail to replace them if they depart, we could experience a negative effect on our financial results and stock price. The loss and potential challenges in attracting, integrating, motivating, and retaining additional key employees could have a material adverse effect on our business, operating and financial results and stock price.
Certain officers and directors have other business pursuits that might interfere with their work on our business.
Our key management and board are also represented on the management and board of ILUS, our parent company. Our Executive Chairman Nicolas Link is also the Chairman of the Board of Directors of Dear Cashmere Holding Co. (“DRCR”) and the Chairman of the Board of Directors of CGrowth Capital, Inc. (“CGRA”). As a result, at certain points in time, these jointly represented companies may have members of key management and board concentrate their efforts on transactions that focus on one company over the other, which collectively would not amount to work for our company on a full-time basis. This and other conflicts of interest may arise between us and our officers and director in that they have other business interests currently, with respect to QIND, and in the future to which they devote their attention, such as in the case of acquisitions, and they may be expected to continue to do so although management time must also be devoted to our business. These competing interests could disrupt focus of our key management and board. As a result, conflicts of interest may arise that can be resolved only through exercise of such judgment as is consistent with each officer or director’s understanding of his or her fiduciary duties to our company.
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Currently we have only four officers and one director. We will seek to add additional officers and/or directors with industry experience prior to the planned uplisting to NYSE American.
In an effort to resolve potential conflicts of interest as between ILUS and QIND, our officers and directors have agreed that any opportunities that they are aware of independently or directly through their association with us would be presented by them solely to QIND, before determining whether to include the opportunities in ILUS or another subsidiary.
In general, our officers and director are required to present business opportunities to QIND, which may include ILUS, if:
| • | QIND could financially undertake the opportunity through ILUS; and |
| • | the opportunity is aligned with the business of ILUS. | |
| • | Potential investors should also be aware of the following potential conflicts of interest: |
None of our officers or director is required to commit his or her full-time to our company and, accordingly, may have conflicts of interest in allocating his or her time among various business activities. All officers will however, according to their current employment contract receive new contracts upon uplisting to a national exchange and the conflicts of interest could be mitigated by working full-time in QIND.
In the course of their other business activities, our officers and director may become aware of investment and business opportunities which may be appropriate for presentation to us as well as the other entities with which they are affiliated.
Our officers and director may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to the combination. QIND is however ILUS’ Industrial & Manufacturing division and business combinations in that industry would fall under QIND.
Below is a table summarizing the entities to which our executive officers and director currently have fiduciary duties or contractual obligations:
| Individual (1) | Entity(2) | Affiliation |
| Nicolas Link |
ILUS QIND DRCR CGRA |
Director & CEO Director Director Director |
| John-Paul Backwell |
ILUS QIND |
Managing Director CEO |
| Louise Bennett |
ILUS QIND |
COO COO |
| Krishnan Krishnamoorthy |
ILUS QIND |
CFO CFO |
| Carsten Kjems Falk |
ILUS QIND |
CCO CCO |
| (1) | Each person has a fiduciary duty with respect to the listed entities next to their respective names. Each of our officers only have employment contracts in QIND and our parent company ILUS. |
| (2) | Each of the entities listed by trading symbol in this table has priority and preference relative to our company with respect to the performance by each individual listed in this table of his obligations and the presentation by each such individual of business opportunities. |
We cannot provide assurances that our efforts to eliminate the potential impact of conflicts of interest will be effective. We are at risk that our officers and director will favor their other business interest over the needs of our company. These competing business interests could interfere with our ability to successfully implement our business plan.
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Risks Relating to our Securities.
We may conduct offerings of our equity securities in the future, in which case your proportionate interest may become diluted.
We may be required to conduct equity offerings in the future to finance our current projects or to finance subsequent projects that we decide to undertake. If our common stock shares are issued in return for additional funds, the price per share could be lower than that paid by our current shareholders but with the aim to increase overall value for all shareholders. We anticipate continuing to rely on equity sales of our common stock shares in order to fund our business operations. If we issue additional common stock shares or securities convertible into shares of our common stock, your percentage interest in us could become diluted.
Our common stock price may be volatile and could fluctuate, which could result in substantial losses for investors.
Our common stock is quoted on the OTC Market under the symbol, “QIND.” The market price of our common stock is likely to be volatile and could fluctuate in price in response to various factors, many of which are beyond our control, including:
· government regulation of our Company and operations.
· the establishment of partnerships.
· intellectual property disputes.
· additions or departures of key personnel.
· sales of our common stock.
· our ability to integrate operations, technology, products, and services.
· our ability to execute our business plan.
· operating results below expectations.
· loss of any strategic relationship.
· industry developments.
· economic and other external factors; and
· period-to-period fluctuations in our financial results.
In addition, the securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales could occur, could cause our stock price to fall.
The market price of our common stock could decline significantly as a result of sales of a large number of shares of our common stock. If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the contractual and securities law restrictions on resale of such common stock lapse, or after those shares become registered for resale pursuant to an effective registration statement, the trading price of our common stock could decline. As of June 30, 2023, a total of 114,576,965 shares of our common stock were outstanding. Of those shares, 22,051,323 were without restriction, in the public market. Upon the effectiveness of any registration statement, we could elect to file with respect to any outstanding shares of common stock, any sales of those shares or any perception in the market that such sales may occur could cause the trading price of our common stock to decline.
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The issuance of shares of our common stock upon conversion or exercise of convertible notes, will dilute ownership to existing shareholders and may cause our stock price to fall.
Any issuance of additional common stock by us in the future as a result of the conversion or exercise of convertible notes or debt settlements would result in dilution to our existing shareholders. Such issuances could be made at a price that reflects a discount or a premium to the then-current trading price of our common stock. Moreover, the perception in the public market that shareholders might sell shares of our stock or that we could make a significant issuance of additional common stock in the future could depress the market for our shares. These sales, or the perception that these sales might occur, could depress the market price of our common stock, or make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
We have issued shares of our common stock, as well as other securities such as convertible notes, which are convertible into shares of our common stock, in financing transactions that are deemed to be “restricted securities,” as that term is defined in Rule 144 promulgated under the Securities Act. From time to time, certain of our shareholders or derivative security holders may be eligible to sell all or some of their restricted shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, subject to certain limitations. The resale pursuant to Rule 144 of shares acquired from us in private transactions could cause our stock price to decline significantly.
Future issuance of additional shares of common stock and/or preferred stock could dilute existing stockholders. We have and may issue preferred stock that could have rights that are preferential to the rights of common stock that could discourage potentially beneficially transactions to our common stockholders.
Pursuant to our Articles of Incorporation, we currently have authorized 200,000,000 shares of common stock and 1,000,000 shares of preferred stock. Our board of directors has the ability to issue additional shares of common stock in the future for such consideration as the board of directors may consider sufficient. The issuance of any additional securities could, among other things, result in dilution of the percentage ownership of our stockholders at the time of issuance, result in dilution of our earnings per share and adversely affect the prevailing market price for our common stock.
An issuance of shares of preferred stock could result in a class of outstanding securities that would have preferences with respect to voting rights and dividends and in liquidation over our common stock and could, upon conversion or otherwise, have all of the rights of our common stock. Our Board of Directors’ authority to issue preferred stock could discourage potential takeover attempts or could delay or prevent a change in control through merger, tender offer, proxy contest or otherwise by making these attempts more difficult or costly to achieve. The issuance of preferred stock could impair the voting, dividend, and liquidation rights of common stockholders without their approval.
We have never declared or paid any cash dividends or distributions on our capital stock.
We have never declared or paid any cash dividends or distributions on our capital stock. While we may not anticipate paying a dividend in the short-term and we currently intend to retain short-term earnings for growth, we may do so in the medium to long-term future.
The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant. There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.
We may become involved in securities class action litigation that could divert management’s attention and harm our business.
The stock market in general has experienced extreme price and volume fluctuations. These fluctuations have often been unrelated or disproportionate to the operating performance of the companies involved. If these fluctuations occur in the future, the market price of our shares could fall regardless of our operating performance. In the past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation has often been brought against that company. If the market price or volume of our shares suffers extreme fluctuations, then we may become involved in this type of litigation, which would be expensive and divert management’s attention and resources from managing our business.
As a public company, we may also from time to time make forward-looking statements about future operating results and provide some financial guidance to the public markets. Projections may not be timely made and set at expected performance levels and could affect the price of our shares.
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Risk Related to COVID-19
Our business and future operations may be adversely affected by epidemics and pandemics, such as the COVID-19 outbreak.
We may face risks related to health epidemics and pandemics or other outbreaks of communicable diseases, which could result in a widespread health crisis that could adversely affect general commercial activity and the economies and financial markets of the world as a whole. For example, the outbreak of COVID-19, which originated in China, was declared by the World Health Organization to be a “pandemic,” and spread across the globe. A health epidemic or pandemic or other outbreak of communicable diseases, such as the COVID-19 pandemic, poses the risk that we, or our current and potential business partners may be disrupted or prevented from conducting business activities for certain periods of time, the durations of which are uncertain, and may otherwise experience significant impairments of business activities, including due to operational shutdowns or suspensions that may be requested or mandated by national or local governmental authorities or self-imposed by us, our users or other business partners. While it is not possible at this time to estimate the full impact that COVID-19 could have on our business, potential users, or other potential business partners, the continued spread of COVID-19, the measures taken by the local and federal government, actions taken to protect employees, and the impact of the pandemic on various business activities could adversely affect our results of operations and financial condition. COVID-19 has not recently had any material impact on our operations, supply chain, liquidity, or capital resources. During the lockdowns we however saw significant shipping delays, consumer orders on hold due to budgetary restrictions as well as a slow-down in our planned acquisitions due to flight restrictions limiting on site due diligence. The company has as a mitigant to future COVID-19 outbreaks increased its number of suppliers of raw materials to reduce the risk of production capabilities and order back-logs.
General Risk Factors
The Company’s Success Depends on Its Executive Management and Other Key Personnel.
The Company’s future success depends to a significant degree on the skills, experience and efforts of its executive management and other key personnel and their ability to provide the Company with uninterrupted leadership and direction. The loss of the services of any of the executive officers or a failure to provide adequate succession plans for key personnel could have an adverse impact on the Company. The availability of highly qualified talent is limited and the competition for talent is robust. However, the Company provides long-term equity awards and certain other benefits for its executive officers which provides incentives for them to make a commitment to the Company. The Company’s future success will depend on its ability to have adequate succession plans in place and to attract, retain and develop qualified personnel. A failure to efficiently replace executive management members and other key personnel and to attract, retain and develop new qualified personnel could have an adverse effect on the Company’s operations and implementation of its strategic plan.
Challenges with Respect to Labor Availability Could Negatively Impact the Company’s Ability to Operate or Grow the Business.
The Company’s success depends in part on the ability of its businesses to proactively attract, motivate, and retain a qualified and highly skilled workforce in an intensely competitive labor market. A failure to attract, motivate and retain highly skilled personnel could adversely affect the Company’s operating results or its ability to operate or grow the business. Additionally, any labor stoppages or labor disruptions, including due to geopolitical unrest, unfavorable economic or industry conditions, catastrophic weather events, natural disasters or the occurrence of a contagious disease or illness could adversely affect the Company’s operating results or its ability to operate or grow the business.
| ITEM 1B. | UNRESOLVED STAFF COMMENTS |
This information is not required for smaller reporting companies.
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| ITEM 2. | PROPERTIES |
Quality industrial Corp. has a virtual office at 315 Montgomery Street, 94104 San Francisco, CA, USA. The cost per month is $113 and is renewed annually.
Quality International Co Ltd FZC leases facilities at the addresses in the Hamriyah Free Zone, PO Box: 50622, Sharjah, UAE. set in table below with the square meter sizes and monthly leasing prices as indicated per facility. In total Quality International Co Ltd FZC leases properties exceeding 220,000 square meters.
| Plot No | Area SqM |
Annual Rent in USD (3,67 AED) | ||||||||
| 22C/1 | 10.090 | $ | 285.204 | |||||||
| 22C/2 | 10.844 | |||||||||
| 6C-01B | 6.989 | $ | 47.609 | |||||||
| 6C-02 | 81.791 | $ | 557.159 | |||||||
| 6C-03 | 46.179 | $ | 314.571 | |||||||
| 6C-04 | 16.000 | $ | 108.992 | |||||||
| HD-22D | 30.843 | $ | 588.286 | |||||||
| HD-22E | 15.000 | $ | 286.104 | |||||||
| HD-22F | 4.114 | $ | 78.469 | |||||||
| Total | 221.850 | $ | 2.266.393 | |||||||
| ITEM 3. | LEGAL PROCEEDINGS |
We are not currently involved in any actions, suits, proceedings, inquiries or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect; however, from time to time, we may become involved in various legal actions that arise in the normal course of business. We intend to defend vigorously against any future claims and litigation, but litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
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PART II
| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. |
Market Information.
Our common stock is quoted on the OTC Markets under the symbol “QIND” and has been quoted on the OTC since October 16, 2018. Previously, our common stock was quoted on the OTC Markets, under the symbol “WSFT.” There is currently limited liquid trading market for our common stock. There can be no assurance that a significant active trading market in our common stock will develop, or if such a market develops, that it will be sustained.
Holders
As of June 30, 2023, we had 306 shareholders of common stock per our transfer agent’s shareholder list with others held in street name.
Dividends
The Company has not paid any cash dividends to date and does not anticipate or contemplate paying any dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the growth of our business.
Equity Compensation Plan Information
We do not currently have an equity compensation plan in place.
Recent Sales of Unregistered Securities
From January 1, 2021, to December 31, 2021, we made the following issuances:
| · |
On April 30, 2021, Oscar Gensman resigned and agreed that all claims and obligations towards the company lapsed including the stock payable to Mr. Gensmann of $171,875. |
| · | On June 9, 2021, we issued 25,000 shares of our common stock for services to Triton Funds LP. The shares were valued on the date of issuance at $1.98 per share or $49,500. |
| · | On August 6, 2021, we issued 50,000 shares of our common stock for services to White Lion Capital LLC. The shares were valued on the date of issuance at $2.46 per share or $123,000. |
| · |
On August 19, 2021, we issued 25,000 shares of our common stock for services to Triton Funds LP. he shares were valued on the date of issuance at $0.90 per share or $22,500.
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| · | On September 10, 2021, the Company issued 1,500,000 shares the Company’s $0.001 par value common to the CEO Carsten Kjems Falk pursuant to his employee agreement. The shares were valued on the date of grant at $2.75 per share or $4,125,000. |
| · | On September 10, 2021, the Company issued 111,111 shares of the Company’s $0.001 par value common stock to the Executive Chairman Paul Quintal pursuant to his employee agreement. The shares were valued on the date of grant at $1.70 per share or $188,889. |
| · | On September 14, 2021, we issued 100,000 shares common stock for $20,000 cash. |
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| · | On September 27, 2021, we issued 62,000 shares common stock for $8,262 cash. |
| · | On October 7, 2021, we issued 170,000 shares common stock for $3,605 cash. |
| · | On October 27, 2021, we issued 500,000 shares common stock for $44,625 cash. |
| · | On November 10, 2021, we issued 200,000 shares common stock for $10,523 cash. |
| · | On November 24, 2021, the Company issued 438,333 shares of common stock for services by North Equities LTD. The shares were valued on the date of issuance at $.09 per share or $39,450. |
| · | On December 17, 2021, we issued 250,000 shares common stock for $10,859 cash. |
| · | On December 28, 2021, we issued 342,500 shares common stock for $12,425 cash. |
From January 1, 2022, to December 31, 2022, we made the following issuances:
| · | 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 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. |
| · | 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. As of March 31, 2022, the cash had not been received and was recorded as stock receivable. |
| · | On April 22, 2022, the Company issued 595,500 shares of common stock for $27,017 cash. |
| · | On July 28, 2022, the Company issued 2,000,000 shares of common stock for $82,572 cash for debt conversion. |
| · | On August 3, 2022, we issued a two-year convertible promissory note to RB Capital LLC 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. |
From January 1, 2023, to present, we made the following issuances:
| · | On March 17, 2023, we issued a two-year convertible promissory note to RB Capital LLC in the principal amount of $200,000. The note is convertible into common stock at the rate of $1.00 and bears 7% interest per annum. |
| · | On May 4, 2023, the Company issued to Nicolas Link 2,750,000 shares of our common stock with a grant-date and fair market value of the award as of June 1, 2022, at $0.0721 pursuant to his employee contract. |
| · | On May 4, 2023, the Company issued to John-Paul Backwell Link 2,250,000 shares of our common stock with a grant-date and fair market value of the award as of June 1, 2022, at $0.0721 pursuant to his employee contract. |
| · | On May 4, 2023, the Company issued to Carsten Kjems Falk 2,250,000 shares of our common stock with a grant-date and fair market value of the award as of June 1, 2022, at $0.0721 pursuant to his employee contract. |
| · | On May 4, 2023, the Company issued to Krishnan Krishnamoorthy 2,250,000 shares of our common stock with a grant-date and fair market value of the award as of June 1, 2022, at $0.0721 pursuant to his employee contract. |
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| · | On May 4, 2023, the Company issued to Louise Bennett 500,000 shares of our common stock with a grant-date and fair market value of the award as of June 1, 2022, at $0.0721 pursuant to her employee contract. |
| · | On May 8, 2023, the Company issued to Exchange Listing LLC 1,543,256 shares of our common stock for $1,543 for consultancy services for the planned uplist to NYSE. |
| · | On May 23, 2023, the Company issued to Jefferson Street Capital LLC a one-year convertible promissory note in the principal amount of $220,000 (the "Jefferson Note"). The Jefferson Note bears interest at 7% per annum. The Company has the right to prepay the Note at any time. All principal on the Jefferson 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 $0.35 per share. |
| · |
On June 1, 2023, the Company issued to Jefferson Street Capital LLC 150,000 shares of our common stock with a grant-date and fair market value of the award as of May 23, 2023, at $0.60 pursuant to a share purchase agreement signed on May 23, 2023.
|
| · | On June 16, 2023, the Company issued to Sky Holdings Ltd. a six-month convertible promissory note in the principal amount of $550,000. 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 $0.35 per share. |
| · | On July 26, 2023, 2023, the Company issued to Sky Holdings Ltd. 300,000 shares of our common stock with a grant-date and fair market value of the award as of June 16, 2023, at $0.42 pursuant to a share purchase agreement signed on June 16, 2023. |
| · | On July 31, 2023, the Company issued to 1800 Diagonal Lending Ltd. a promissory note in the principal amount of $174,867 (the “Diagonal Lending Note”). The Diagonal Lending Note had a one time interest amount of $22,732. The Company will prepay the Diagonal Lending Note in nine monthly payments each in the amount of $21,955.45. The promissory note matures on February 28, 2024, with a total payback to the Holder of $197,599. All principal on the Diagonal Lending Note is convertible into shares of our common stock in the event of default with a conversion price of 65% multiplied by the lowest Trading Price for the Common Stock during the ten (10) Trading Days prior to the Conversion Date. |
| • | On August 15, 2023, the Company issued to 1800 Diagonal Lending Ltd. a promissory note in the principal amount of $118,367 (the “Diagonal Lending Note”). The Diagonal Lending Note had a one time interest amount of $15,387.71. The Company will prepay the Diagonal Lending Note in nine monthly payments each in the amount of $14,861.64. The promissory note matures on May 30, 2024, with a total payback to the Holder of $133,754.71 All principal on the Diagonal Lending Note is convertible into shares of our common stock in the event of default with a conversion price of 65% multiplied by the lowest Trading Price for the Common Stock during the ten (10) Trading Days prior to the Conversion Date. |
The sales and issuances of the securities described below were made pursuant to the exemptions from registration contained in Section 4(a)(2) of the Securities Act and Regulation D under the Securities Act. Each purchaser represented that such purchaser’s intention to acquire the shares for investment only and not with a view toward distribution. We requested our stock transfer agent to affix appropriate legends to the stock certificate issued to each purchaser and the transfer agent affixed the appropriate legends. Each purchaser was given adequate access to sufficient information about us to make an informed investment decision.
| ITEM 6. | RESERVED |
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| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
General
The following is a discussion by management of its view of the Company’s business, financial condition, and corporate performance for the past year. The purpose of this information is to give management’s recap of the past year, and to give an understanding of management’s current outlook for the near future. This section is meant to be read in conjunction with the Financial Statements of this Transition Report on Form 10-KT.
Overview
We aim to be a global leader in the manufacture and assembly of industrial equipment and precision engineered technology for the industrial, manufacturing, oil & gas, and utility sectors. We strive to be the leading global manufacturer of the next-generation equipment needed to support the world’s growing need for high-quality, sustainable energy solutions.
We changed ownership on the 28th of May 2022, when Ilustrato Pictures International, Inc. (“ILUS”) acquired 77.4 % of the outstanding shares in our Company. Consequently, ILUS is now able to unilaterally control the election of our board of directors, all matters upon which shareholder approval is required and, ultimately, the direction of our Company. Also, during the year, Mr. Nicolas Link, beneficial owner of ILUS, was appointed as our Chairman of the board of directors, Mr. John-Paul Backwell was appointed as our Chief Executive Officer and Mr. Carsten Kjems Falk was appointed as our Chief Commercial Officer.
In line with the change in control and business direction, our Company changed its name to Quality Industrial Corp. with the ticker QIND and plans to continue to make strategic acquisitions in the industrial, manufacturing, oil & gas and utility sectors. Our first acquisition occurred on June 28, 2022, where we signed a binding letter of intent with Quality International Co Ltd FZC. Quality International Co Ltd FZC, is a United Arab Emirates headquartered company which manufactures custom solutions for the oil and gas, energy, water desalination, wastewater, offshore and public safety sectors. The Company has over 10 million square feet of manufacturing and assembly facilities and 1,350 employees. It has all the required 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.
Factors Affecting Our Performance
The primary factors affecting our results of operations include:
General Macro Economic Conditions
Our business is impacted by the global economic environment, employment levels, consumer confidence, government, and municipal spending. Global instability in securities markets and the war in Ukraine are among other factors that can impact our financial performance. In particular, changes in the U.S. economic climate, can impact the demand of our products range. The Industrial and Manufacturing sectors are impacted by the overall economic environment. Tenders can be withdrawn and lead times for the manufacturing can be affected which can result in cancellation of orders if not delivered on time.
Impact of Acquisitions
A significant component of our growth is through the acquisition and consolidation of operating companies in our targeted sectors. We typically incur upfront costs as we incorporate and integrate acquired businesses into our operating philosophy and operational excellence. This includes consolidation of supplies and raw materials, optimized logistics and production processes, and sales synergies within the operating businesses with the aim to expand globally. The benefits of these integration efforts may not positively impact our financial results instantly but are expected to do so in the medium to long-term future.
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Recent Developments
On January 18, 2023, QIND signed a definitive share purchase agreement acquiring 52% of Quality International Co Ltd FZC . All closing documents were executed for the transaction on March 6, 2023. The QI Share Purchase Agreement was later amended on July 31, 2023, and is filed as an exhibit to this transition report. Quality International Co Ltd FZC currently has signed purchase orders exceeding $150M in various stages of the manufacturing process. The Company will allocate resources to our subsidiary with the aim to increase efficiency, drive increased sales and positively impact their financial results.
On March 9, 2023, we changed our SIC code of the Company to SIC 3590 – Misc. Industrial & Commercial Machinery and Equipment to reflect the new business direction.
On April 19, 2023, QIND engaged with Exchange Listing LLC as strategic advisors to pursue the company’s goal of completing a successful uplisting to a major stock exchange in conjunction with a simultaneous debt financing and/or registration statement with common stock financing.
On August 4, 2023, the Board of Directors of Quality Industrial Corp, approved a change in fiscal year end of the Company from December 31 to June 30. The Board’s decision to change the fiscal year end was related to the Company’s intent to uplist to NYSE American and to allow investors to accurately measure revenue and earnings year-over-year.
Results of Operation for the Six Months Ended June 30, 2023, and 2022
Revenues
We earned $39,759,756 in revenue for the six months ended June 30, 2023, compared with $18,216,000 in revenue for the six months ended June 30, 2022.
Operating Expenses
Operating expenses decreased from $4769,690 for the six months ended June 30, 2022, to $3,553,284 for the six months ended June 30, 2023.
Our operating expenses in 2023 were mainly as a result of administrative and operating costs associated with the business activities of our subsidiary, Quality International, and stock-based compensation to our management. Our operating expenses in 2022 were mainly the result of Professional fees and operating expenses.
We anticipate that our operating expenses will increase as we undertake the expansion plan associated with our acquisition. The increase will be attributable to administrative and operating costs associated with our business activities and the professional fees associated with our reporting obligations.
Other Expenses
We had other expenses of $2,748,301 for the six months ended June 30, 2023, as compared to $514,334 in other expenses for the six months ended June 30, 2022. Our other expenses in 2023 were mainly the result of stock issued for services and interest on long term borrowings and convertible notes. Our other expenses in 2022 were mainly the result of a loss on a license agreement and interest expenses.
Net Income/Net Loss
We incurred net income of $4,883,343 for the six months ended June 30, 2023, compared to a net income of $1,776,453 for the six months ended June 30, 2022.
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Liquidity and Capital Resources
As of June 30, 2023, we had total current assets of $116,686,881 and total current liabilities of $143,647,498 which include the payable amount of $80,500,000 as part of the purchase consideration for the acquisition of our operating company, Quality International. We had a working capital deficit of $26,960,617 as of June 30, 2023. This compares with a working capital deficit of $33,084,200 as of December 31, 2022.
Operating activities provided $2,911,056 in cash for the six months ended June 30, 2023, as compared with $(140,281) provided in cash for the six months ended June 30, 2022. Our positive operating cash flow in 2023 was mainly the result of growth in core business activities being higher operating profit.
Investing activities used $712,582 in cash for the six months ended June 30, 2023, as compared with $0 used in cash for the six months ended June 30, 2022. Our positive investing cash flow for the six months ended June 30, 2023, was mainly the result of movement of capital towards the Company’s growth projects.
Financing activities provided $1,803,238 in cash for the six months ended June 30, 2023, as compared with $139,068 in cash provided for the six months ended June 30, 2022. Our financing cash flow for the six months ended June 30, was mainly the result of Finance costs and issuance of a convertible note.
Our primary requirements for liquidity and capital are working capital including liquidity to uplist to NYSE American, expansion of existing manufacturing facilities in UAE, product development and certifications, new acquisitions and existing acquisition tranche payments, and general corporate operational needs. Historically, these cash requirements have been met through cash provided by financing activities. The Company plans to file an S-1 registration statement upon uplisting to the NYSE American to provide funding and satisfy our historical debt obligations from the acquisition of Quality International, settlement convertible notes and provide liquidity to satisfy our cash requirements for the next 12 months.
The Company’s current Debt Obligations (convertible and promissory notes) are as below:
| Note owner | Issue date | Maturity Date | *Amount $ |
| RB Capital Partners Inc. | 08/03/2022 | 08/03/2024 | 1,100,000 |
| RB Capital Partners Inc. | 03/17/2023 | 03/17/2025 | 200,000 |
| Jefferson Street Capital LLC | 03/23/2023 | 03/23/2024 | 220,000 |
| Sky Holdings LLC | 06/23/2023 | 12/23/2023 | 550,000 |
| 1800 Diagonal Lending LTD | 07/31/2023 | 02/28/2024 | 174,867 |
| 1800 Diagonal Lending LTD | 08/15/2023 | 05/30/2024 | 133,755 |
| TOTAL | 2,378,622 | ||
* The convertible and promissory notes are described in financial footnotes and included in the exhibits. Amounts are principal amounts and exclude interrest
Results of Operations for the Years Ended December 31, 2022, and 2021
Revenues
We earned $65,603,673 in revenue for the year ended December 31, 2022, as compared with revenue of $0 for the year ended December 31, 2021. The increase in revenue is a result of revenue from our acquisition of Quality International and consolidation in 2022.
Operating Expenses
Operating expenses increased from $5,175,042 for the year ended December 31, 2021, to $11,471,128 for the year ended December 31, 2022. Our operating expenses in 2022 were mainly as a result of the acquisition of Quality International. Our operating expenses in 2021 were mainly the result of shares issued to our CEO and Executive Chairman at that time in the amount of $4,720,214, resulting in the majority of increased operating expenses.
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We anticipate that our operating expenses will increase as we undertake our expansion plan associated with our acquisitions. The increase will be attributable to administrative and operating costs associated with our business activities and the professional fees associated with our reporting obligations.
Other Income/Expenses
We had other expenses of $4,147,739 for the year ended December 31, 2022, as compared with $4,449 other expenses consisting of interest expenses for the same period ended 2021. Our other expenses in 2022 were mainly the result of interest expenses on the bank loans and depreciation for Quality International.
Net Income/Net Loss
We incurred net income of $6,773,268 for the year ended December 31, 2022, compared to a net loss of $5,179,500 for the same period ended December 31, 2021. Quarter on Quarter (QoQ) we saw a 5.5% increase in Net Income of $134,585 from $2,431,115 in Q3 to $2,565,700 in Q4.
Liquidity and Capital Resources
As of December 31, 2022, we had total current assets of $111,601,921 and total current liabilities of $144,686,121. We had working capital deficit of $33,084,200 as of December 31, 2022. This compares with a working capital deficit of $579,300 as of December 31, 2021.
Operating activities provided $9,652,444 in cash for the year ended December 31, 2022, as compared with $409,204 in cash used for the same period ended 2021.
Investing activities used $1,827,636 in cash for the year ended December 31, 2022, as compared with $0 for the same period ended 2021.
Financing activities provided $10,183,174 in cash for the year ended December 31, 2022, as compared with $405,299 in cash provided for the same period ended 2021.
Going Concern
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.
Management evaluated all relevant conditions and events that are reasonably known or reasonably knowable, in the aggregate, as of the date the consolidated financial statements are issued and determined. The Company’s ability to continue as a going concern is dependent on the Company’s ability to continue to generate sufficient revenues and raise capital within one year from the date of filing.
Over the next twelve months, management plans to use borrowings and security sales to mitigate the effects of cash flow deficits; however, no assurance can be given that debt or equity financing, if and when required, will be available.
Impact of Acquisitions
Historically a significant component of our growth has been through the acquisition of businesses in our targeted sectors. We typically incur upfront costs as we incorporate and integrate acquired businesses into our operating philosophy and operational excellence. This includes consolidation of supplies and raw materials, optimized logistics and production processes, and other restructuring and improvements initiatives. The benefits of these integration efforts and upcoming planned acquisitions may not positively impact our financial results in the short term but has historically been the case in the medium to long term.
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Critical Accounting Estimates
A critical accounting estimate is an estimate that: (i) is made in accordance with generally accepted accounting principles, (ii) involves a significant level of estimation uncertainty and (iii) has had or is reasonably likely to have a material impact on the Company’s financial condition or results of operations.
The Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based on the Company’s Consolidated Financial Statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and judgments that affect reported amounts and related disclosures. On an ongoing basis, management evaluates and updates its estimates. Management employs judgment in making its estimates but they are based on historical experience and currently available information and various other assumptions that the Company believes to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results could differ from those estimates. Management believes that its judgment is applied consistently and produces financial information that fairly depicts the results of operations for all periods presented.
Significant estimates include estimates used to review the Company’s, impairments and estimations of long-lived assets, revenue recognition of Contract based revenue, allowances for uncollectible accounts, and the valuations of non-cash capital stock issuances. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Further, refer to the Company’s significant accounting policies as described in Note 2 of the Notes to Consolidated Financial Statements.
We consider the following accounting estimate to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements:
Goodwill and Indefinite-Lived Intangible Assets
The Company accounts for business combinations by estimating the fair value of consideration paid for acquired businesses, including contingent consideration, and assigning that amount to the fair values of assets acquired and liabilities assumed, with the remainder assigned to goodwill. If the fair value of assets acquired and liabilities assumed exceeds the fair value of consideration paid, a gain on bargain purchase is recognized. The estimates of fair values are determined utilizing customary valuation procedures and techniques, which require us, among other things, to estimate future cash flows and discount rates. Such analyses involve significant judgments and estimations.
The Company reviews goodwill and indefinite-lived intangible assets for impairment at least annually or more often if an event occurs or circumstances change which indicates that it carrying amount may not exceed its fair value. The annual impairment review is performed as of the first day of the fourth quarter of each fiscal year based upon information and estimates available at that time. To perform the impairment testing, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair values of the Company’s reporting units or indefinite-lived intangible assets are less than their carrying amounts as a basis for determining whether or not to perform the quantitative impairment test. Qualitative testing includes the evaluation of economic conditions, financial performance and other factors such as key events when they occur. The Company then estimates the fair value of each reporting unit and each indefinite-lived intangible asset not meeting the qualitative criteria and compares their fair values to their carrying values.
During the fiscal year 2022, the Company performed its annual goodwill test and did not identify any goodwill impairments.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
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Recently Issued Accounting Pronouncements
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the accounting for goodwill impairments by eliminating step two from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. ASU 2017-04 also clarifies that an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The new standard is effective for fiscal years beginning after December 15, 2019, for both interim and annual reporting periods. The Company is currently assessing the potential impact of the adoption of ASU 2017-04 on its consolidated financial statements.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
We are not required to provide the information required by this Item because we are a smaller reporting company.
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
The financial statements required by this Item 8 are included in this Transition Report following Item 15 hereof. As a smaller reporting company, we are not required to provide supplementary financial information.
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
| ITEM 9A. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure 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 Transition Report on Form 10-KT.
Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during the the six months ended June 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| ITEM 9B. | OTHER INFORMATION |
None.
| ITEM 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
None.
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PART III
| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. |
Our current director and executive officers and their age are listed below.
| Name | Current Age | Position | ||
| Nicolas Link | 42 | Executive Chairman | ||
| John-Paul Backwell | 42 | Chief Executive Officer | ||
| Louise Bennett | 52 | Chief Operating Officer | ||
| Krishnan Krishnamoorthy | 58 | Chief Financial Officer | ||
| Carsten Kjems Falk | 49 | Chief Commercial Officer |
Nicolas Link
From 2021 to the present, Mr. Link was Chief Executive Officer of Ilustrato Pictures International, Inc. The parent company ILUS entered into an amended employment agreement with Mr. Link on June 30, 2022, which also governs his contract in QIND.
Mr. Link holds the position as Chairman of the Board of Directors at Dear Cashmere Holding Co. On December 7, 2022, Mr. Link was appointed as CEO and Chairman of the Board of Directors for CGrowth Capital, Inc. Mr. Link resigned the position as CEO of CGRA on May 15, 2023.
Aside from that provided above, Mr. Link does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940.
John-Paul Backwell
From 2021 to the present, Mr. Backwell was Managing Director of Ilustrato Pictures International, Inc
The parent company ILUS entered into an amended employment agreement with Mr. Backwell on June 30, 2022, which also governs his contract in QIND. 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.
Aside from that provided above, Mr. Backwell does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940.
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Louise Bennett
From 2021 to the present, Ms. Bennett was the Chief Operational Officer of Ilustrato Pictures International, Inc. The parent company ILUS entered into an amended employment agreement with Ms. Bennett on June 30, 2022, which also governs her contract in QIND.
Aside from that provided above, Ms. Bennett does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940.
Krishnan Krishnamoorthy
From 2022 to the present, Mr. Krishnamoorthy was Chief Financial Officer of Ilustrato Pictures International, Inc. The parent company ILUS entered into an amended employment agreement with Mr. Krishnamoorthy on June 30, 2022, which also governs his contract in QIND.
Aside from that provided above, Mr. Krishnamoorthy does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940.
Carsten Kjems Falk
Mr. Falk joined the Company on June 1, 2020, as our Deputy Chief Executive Officer and signed a new contract as Chief Executive Officer on September 1, 2020. 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.
Aside from that provided above, Mr. Falk does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940.
Family Relationships
There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.
Involvement in Certain Legal Proceedings
During the past 10 years, none of our current directors, nominees for directors or current executive officers has been involved in any legal proceeding identified in Item 401(f) of Regulation S-K.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company’s directors and officers, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of beneficial ownership and changes in beneficial ownership of the Company’s securities with the SEC on Forms 3, 4 and 5. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. All filings were timely.
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We currently do not have a separately designated standing audit committee or any other committees. The entire board of directors performs the functions of an audit committee, but no written charter governs the actions of the board of directors when performing the functions of that would generally be performed by an audit committee. The board of directors approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the board of directors reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor.
Committees
For the fiscal year ending December 31, 2022, and 2021, , and the six months ended June 30, 2023, the board of directors:
Reviewed and discussed the audited financial statements with management and reviewed and discussed the written disclosures and the letter from our independent auditors on the matters relating to the auditor's independence.
Based upon the board of directors’ review and discussion of the matters above, the board of directors authorized inclusion of the audited financial statements for the year ended December 31, 2022, and 2021 and the audited financial statements for the period ended June 30, 2023, to be included in this transition report Statement.
Under the rules of NYSE, a company listing in connection with its initial public offering has one year to become fully compliant with the independence standards. Each committee must have one independent director at the initial listing, have a majority of independent directors within 90 days of the initial listing, and be fully independent within one year of the initial listing. Additionally, a company listing in connection with its initial public offering shall have 12 months from the date of listing to comply with the majority independent board requirement.
Upon completion of an anticipated public offering and before the uplist to NYSE American, our Board will have established the following three standing committees: audit committee (the “Audit Committee”); compensation committee (the “Compensation Committee”); and nominating and governance committee (the “Nominating Committee”). We also intend to appoint independent directors that will serve on each committee. Furthermore, we plan to obtain D&O insurance prior to uplisting to a National Exchange to attract independent directors to our board and to cover for indemnification obligations to directors and officers, as well as the organization’s conduct. Our Board will adopt written charters for each of the three committees. Upon completion of an anticipated public offering, copies of the charters will be available on our website at www.qualityindustrialcorp.com. Our Board may establish other committees as it deems necessary or appropriate from time to time.
Audit Committee
The Audit Committee, among other things, will be responsible for:
| • | appointing; approving the compensation of; overseeing the work of; and assessing the independence, qualifications, and performance of the independent auditor; | |
| • | reviewing the internal audit function, including its independence, plans, and budget; | |
| • | approving, in advance, audit and any permissible non-audit services performed by our independent auditor; | |
| • | reviewing our internal controls with the independent auditor, the internal auditor, and management; | |
| • | reviewing the adequacy of our accounting and financial controls as reported by the independent auditor, the internal auditor, and management; | |
| • | overseeing our financial compliance system; and | |
| • | overseeing our major risk exposures regarding the Company’s accounting and financial reporting policies, the activities of our internal audit function, and information technology. |
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The Board intends that each prospective member of the Audit Committee meets the additional independence criteria applicable to audit committee members under SEC rules and NYSE listing rules. Effective upon the completion an anticipated public offering the Board will adopt a written charter setting forth the authority and responsibilities of the Audit Committee. The Board intends that each prospective member of the Audit Committee is financially literate, and that a member will be appointed that meets the qualifications of an Audit Committee financial expert under the rules promulgated by the SEC.
We believe that, after consummation an anticipated public offering, the functioning of the Audit Committee will comply with the applicable requirements of the rules and regulations of the NYSE listing rules and the SEC.
Compensation Committee
The Compensation Committee will be responsible for:
| • | reviewing and making recommendations to the Board with respect to the compensation of our officers and directors, including the CEO; | |
| • | overseeing and administering the Company’s executive compensation plans, including equity-based awards; | |
| • | negotiating and overseeing employment agreements with officers and directors; and | |
| • | overseeing how the Company’s compensation policies and practices may affect the Company’s risk management practices and/or risk-taking incentives. |
Effective upon the completion of an anticipated public offering, the Board will adopt a written charter setting forth the authority and responsibilities of the Compensation Committee.
The Compensation Committee will consist of independent board members. The Board intends that each member of the Compensation Committee meets the independence criteria applicable to compensation committee members under SEC rules and NYSE listing rules. The Company believes that, after the consummation of the offering, the composition of the Compensation Committee will meet the requirements for independence under, and the functioning of such Compensation Committee will comply with, any applicable requirements of the rules and regulations of NYSE listing rules and the SEC.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee, among other things, will be responsible for:
| • | reviewing and assessing the development of the executive officers and considering and making recommendations to the Board regarding promotion and succession issues; | |
| • | evaluating and reporting to the Board on the performance and effectiveness of the directors, committees and the Board as a whole; | |
| • | working with the Board to determine the appropriate and desirable mix of characteristics, skills, expertise and experience, including diversity considerations, for the full Board and each committee; | |
| • | annually presenting to the Board a list of individuals recommended to be nominated for election to the Board; | |
| • | reviewing, evaluating, and recommending changes to the Company’s corporate governance principles and committee charters; | |
| • | recommending to the Board individuals to be elected to fill vacancies and newly created directorships; |
| • | overseeing the Company’s compliance program, including the code of business conduct and ethics; and | |
| • | overseeing and evaluating how the Company’s corporate governance and legal and regulatory compliance policies and practices, including leadership, structure, and succession planning, may affect the Company’s major risk exposures. |
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Effective upon completion an anticipated public offering, the Board will adopt a written charter setting forth the authority and responsibilities of the Nominating and Corporate Governance Committee.
Board intends that each member of the Nominating and Corporate Governance Committee will be independent within the meaning of the independent director guidelines of NYSE listing rules.
Compensation Committee Interlocks and Insider Participation
None of the Company’s executive officers serves, or in the past has served, as a member of the Board or the Compensation Committee, or other committee serving an equivalent function, of any entity that has one or more executive officers who serve as members of the Board or its Compensation Committee. None of the members of the Compensation Committee is, or has ever been, an officer or employee of the company.
Code of Ethics & Insider Trading Policy
We have adopted a Code of Ethics & Insider Trading Policy which applies to our executive officers, directors and employees, a copy of our code of ethics is filed as Exhibits to our Annual Report on Form 10-K for the year ended December 31, 2022.
Conflicts of Interest
Our key management and board are also represented on the management and board of ILUS, our parent company. As a result, at certain points in time, these jointly represented companies may have members of key management and board concentrate their efforts on transactions that focus on one company over the other, which collectively would not amount to work for our company on a full-time basis. This and other conflicts of interest may arise between us and our officers and directors in that they have other business interests currently, with respect to ILUS, and in the future to which they devote their attention, such as in the case of acquisitions, and they may be expected to continue to do so although management time must also be devoted to our business. These competing interests could disrupt focus of our key management and board and may result in competing loyalties. In addition, our officers and directors have other business interests in companies other than our company and ILUS. As a result, conflicts of interest may arise that can be resolved only through exercise of such judgment as is consistent with each officer or director’s understanding of his or her fiduciary duties to our company.
Currently we have only four officers and one director. We will seek to add additional officers and/or directors as and when the proper personnel are located and terms of employment are mutually negotiated and agreed, and we have sufficient capital resources and cash flow to make such offers.
In an effort to resolve such potential conflicts of interest, our officers and directors have agreed that any opportunities that they are aware of independently or directly through their association with us would be presented by them solely to ILUS, and it would determine whether to include such opportunity in QIND or another subsidiary. In general, our officers and directors are required to present business opportunities to ILUS, which may include QIND, if:
| § | ILUS could financially undertake the opportunity, through one or more of its subsidiaries, including QIND; |
| § | the opportunity is within the line of business of ILUS through one or more of its subsidiaries, including QIND; |
| § | it would be unfair to ILUS or QIND and their respective stockholders not to bring the opportunity to the attention of ILUS. |
We cannot provide assurances that our efforts to eliminate the potential impact of conflicts of interest will be effective. We are at risk that our officers and directors will favor ILUS business interest over the needs of our company. These competing business interests could interfere with our ability to achieve optimal success.
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| ITEM 11. | EXECUTIVE COMPENSATION. |
EXECUTIVE COMPENSATION
| Summary Compensation Table* | ||||||||||||||||||||||||||||||||||
| Name and Principal Position | Year | Salary ($) |
Bonus ($) |
Stock Awards ($) |
Option Awards ($) |
Non-Equity Incentive Plan Compensation ($) |
Non-Qualified Deferred Compensation Earnings ($) |
All Other Compensation ($) |
Total ($) |
|||||||||||||||||||||||||
| Nicolas Link | 2023 | 198,275 | $198,275 | |||||||||||||||||||||||||||||||
| 2022 | 0 | |||||||||||||||||||||||||||||||||
| Executive Chairman | 2021 | 0 | ||||||||||||||||||||||||||||||||
| John-Paul Backwell | 2023 | 162,500 | $162,500 | |||||||||||||||||||||||||||||||
| CEO | 2022 | 0 | ||||||||||||||||||||||||||||||||
| 2021 | 0 | |||||||||||||||||||||||||||||||||
| Krishnan Krishnamoorthy | 2023 | 162,500 | $162,500 | |||||||||||||||||||||||||||||||
| CFO | 2022 | 0 | ||||||||||||||||||||||||||||||||
| 2021 | 0 | |||||||||||||||||||||||||||||||||
| Louise Bennett | 2023 | 36,050 | $36,050 | |||||||||||||||||||||||||||||||
| COO | 2022 | 0 | ||||||||||||||||||||||||||||||||
| 2021 | 0 | |||||||||||||||||||||||||||||||||
| Carsten Falk | 2023 | 162,500 | $162,500 | |||||||||||||||||||||||||||||||
| CCO | 2022 | $30,000 | $30,000 | |||||||||||||||||||||||||||||||
| 2021 | $60,000 | **$4,125,000 | $4,185,00 | |||||||||||||||||||||||||||||||
| Paul C. Quintal | 2022 | $10,000 | $10,000 | |||||||||||||||||||||||||||||||
| Previous Executive Chairman*** | 2021 | $24,000 | ***$188,889 | $212,889 | ||||||||||||||||||||||||||||||
|
* Includes 10,000,000 common shares to our officers and director pursuant to their employee contracts with a grant-date and fair value of the award as of June 1, 2022, at $0.0721 issued May 4, 2023. See narrative disclosure for equity break-down. ** Mr. Falk joined the Company on June 1st, 2020, as our Deputy Chief Executive Officer and became our Chief Executive Officer on September 1, 2020. This amount represents the fair market value of 1,500,000 shares of common stock issued to Carsten Falk pursuant to his Prior Employment Agreement, as such term is defined in the exhibits, in his capacity as the Company’s Chief Executive Officer for employment services. This amount represents the fair market value of $2.75 per share on the effective date of his Prior Employment Agreement. Mr. Falk received a new contract with the parent company ILUS on June 1, 2022. *** Mr. Quintal joined the Company on August 1, 2020, as Chief Commercial Officer and resigned from this role on December 1, 2020, and took the role as Executive Chairman on the same date. Mr. Quintal was paid $2,000 pursuant to both his employment agreements. On September 10, 2021, the Company issued 111,111 shares of the Company's $0.001 par value common stock to Executive Chairman Paul Quintal pursuant to his employment agreement as Executive Chairman. The shares were valued on the grant date at $1.70 per share, amounting to $188,889. Paul Quintal resigned on May 30, 2022, where Nicolas Link replaced him. |
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Narrative Disclosure to Summary Compensation Table
Employment Agreements
Officers and Directors of the Company have an employee agreement with the parent Company ILUS. The agreements also govern their employee agreements in Quality Industrial Corp. All salaries are paid by ILUS, and stock-based compensation is as a combination from both companies. The executive’s short term incentive program reflects this time allocation in the Company and its subsidiary. If the company should up list to a National Exchange through an initial public offering (IPO) the Director and Officers are entitled to a new employment agreement with an appropriate market-based salary in accordance with the size and performance of the business determined by the compensation committee.
Nicolas Link (Executive Chairman)
The parent company ILUS entered into an amended employment agreement with Mr. Link on June 30, 2022, Mr. Link will be issued 2,750,000 QIND common shares. Lock-up of the shares will be under rule 144. If Mr. Link should resign, he will be considered a corporate insider according to rule 144 for a full year and can during any given week not sell or transfer more than 2.5% of the average weekly trading volume over the previous 30 days average trading volume. During the following year, Mr. Link can sell 25% of any remaining shares per quarter. The company has the right of first refusal to acquire the shares or match any written offer by a third party for the shares.
Mr. Link is eligible for the Company Officer’s Short Term Incentive Program (STIP), a Performance Based Target opportunity. Mr. Links target opportunity equals 1,000,000 common shares in Quality Industrial Corp. intended to qualify as performance-based compensation under Internal Revenue Code section 162(m). The STIP can range from 0% to a maximum target based on performance against agreed plan. The Board of Directors reserves the right to amend the Bonus Structure based on market conditions and overall performance of the Company. The targets will be negotiated with the Board of Directors and compensation paid out once a year after the filing of the annual results effective from the month after the filing, for the first time with the 2022 annual results. The board of directors will, after the annual result, discretionarily decide if the STIP is stock-based equity, cash pay-out or a combination in the company or its subsidiary. The targets for the Officer for each term are as per the Officer’s Key Performance Indices (KPI) Agreement.
If the company should up list to a National Exchange through an initial public offering (IPO) the Executive Chairman is entitled to an appropriate market-based salary in accordance with the size and performance of the business, payable in 12 equal monthly payments, on the last day of every month, plus annual bonus in line with a revised appropriate Short Term Incentive Program (STIP), shares in an up list or IPO of the company or its subsidiaries, all subject to approval by the Board of Directors.
The Executive Chairman is also eligible for up to 30 days of vacation per year excluding public holidays and may not carry over any unused vacation from prior years and is eligible to participate in all health and welfare benefits provided to other employees of the Company (other than any severance plans) or similar own insurance paid by the company.
The Executive Chairman is also eligible for vacation, paid sick days, mobile and internet and expenses incurred for travel, nights away from home, dining, entertainment etc.
If the Executive Chairman’s employment is terminated by the Company for Cause, or if his employment with the Company ends due to death, "permanent and total disability", or due to a voluntary termination of employment by The Chief Executive Officer without Good Reason, then The Executive Chairman shall only be entitled to any earned but unpaid compensation as well as any other amounts or benefits owing to The Executive Chairman under the terms of any employee benefit plan of the Company.
If the Executive Chairman ’s employment with the Company is terminated by the Company in connection with a non-renewal of the Agreement without Cause or for reasons other than Cause, death, "permanent and total disability” or is voluntarily terminated by The Officer for Good Reason, then The Director shall be entitled to the Severance Benefits as well as his Accrued Benefits. In the event the Director becomes entitled to receive severance benefits the Company shall pay and provide for a period of 6 months after the Date of Termination, the Director’s then current base salary per month, and a pro rata portion of any annual bonus that the Director would have been entitled to receive.
The foregoing description of the employment agreement does not purport to be complete and is qualified in its entirety by the full text of the employment contract in the exhibits.
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John-Paul Backwell (Chief Executive Officer)
The company entered into an amended employment agreement with Mr. Backwell on June 30, 2022. In accordance with his amended employee agreement, Mr. Backwell will be issued 2,250,000 QIND common shares. Lock-up of the shares will be under rule 144. If Mr. Backwell should resign, he will be considered a corporate insider according to rule 144 for a full year and can during any given week not sell or transfer more than 2.5% of the average weekly trading volume over the previous 30 days average trading volume. During the following year, Mr. Backwell can sell 25% of any remaining shares per quarter. The company has the right of first refusal to acquire the shares or match any written offer by a third party for the shares. 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.
Mr. Backwell is eligible for the Company Officer’s Short Term Incentive Program (STIP), a Performance Based Target opportunity. Mr. Backwell’s target opportunity equals 1,000,000 common shares in Quality Industrial Corp. intended to qualify as performance-based compensation under Internal Revenue Code section 162(m). The STIP can range from 0% to a maximum target based on performance against agreed plan. The Board of Directors reserves the right to amend the Bonus Structure based on market conditions and overall performance of the Company. The targets will be negotiated with the Board of Directors and compensation paid out once a year after the filing of the annual results effective from the month after the filing, for the first time with the 2022 annual results. The board of directors, will after the annual result, discretionarily decide if the STIP is stock-based equity, cash pay-out or a combination in the company or its subsidiaries. The targets for the Officer for each term are as per the Officer’s Key Performance Indices (KPI) Agreement.
If the company should up list to a National Exchange through an initial public offering (IPO) the Chief Executive Officer is entitled to an appropriate market based salary in accordance with the size and performance of the business, payable in 12 equal monthly payments, on the last day of every month, plus annual bonus in line with a revised appropriate Short Term Incentive Program (STIP), shares in an up list or IPO of the company or its subsidiaries, all subject to approval by the Board of Directors.
The Chief Executive Officer is also eligible of up to 30 days per year excluding public holidays and may not carry over any unused vacation from prior years and is eligible to participate in all health and welfare benefits provided to other employees of the Company (other than any severance plans) or similar own insurance paid by the company.
The Chief Executive Officer is also eligible for vacation, paid sick days, mobile and internet and expenses incurred for travel, nights away from home, dining, entertainment etc.
If the Chief Executive Officer’s employment is terminated by the Company for Cause, or if his employment with the Company ends due to death, “permanent and total disability”, or due to a voluntary termination of employment by The Managing Director without Good Reason, then The Chief Executive Officer shall only be entitled to any earned but unpaid compensation as well as any other amounts or benefits owing to Chief Executive Officer under the terms of any employee benefit plan of the Company.
If the Chief Executive Officer's employment with the Company is terminated by the Company in connection with a non-renewal of the Agreement without Cause or for reasons other than Cause, death, “permanent and total disability” or is voluntarily terminated by The Officer for Good Reason, then The Officer shall be entitled to the Severance Benefits as well as his Accrued Benefits. In the event the Director becomes entitled to receive severance benefits the Company shall pay and provide for a period of 3 months after the Date of Termination, the Officer’s then current base salary per month, a pro rata portion of any annual bonus that the Director would have been entitled to receive.
The foregoing description of the employment agreement does not purport to be complete and is qualified in its entirety by the full text of the employment contract in exhibit 10.2.
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Louise Bennett (Chief Operations Officer)
The company entered into an amended employee agreement on 30th June. In accordance with her amended employee agreement, Mrs. Bennett will be issued 500,000 QIND common shares. Lock-up of the shares will be under rule 144. If Mrs. Bennett should resign, she will be considered a corporate insider according to rule 144 for a full year and can during any given week not sell or transfer more than 2.5% of the average weekly trading volume over the previous 30 days average trading volume. During the following year, Mrs. Bennett can sell 25% of any remaining shares per quarter. The company has the right of first refusal to acquire the shares or match any written offer by a third party for the shares.
Mrs. Bennett is eligible for the Company Officer’s Short Term Incentive Program (STIP), a Performance Based Target opportunity. Mrs. Bennett’s target opportunity equals 250,000 common shares in the subsidiary Quality Industrial Corp. intended to qualify as performance-based compensation under Internal Revenue Code section 162(m). The STIP can range from 0% to a maximum target based on performance against agreed plan. The Board of Directors reserves the right to amend the Bonus Structure based on market conditions and overall performance of the Company. The targets will be negotiated with the Board of Directors and compensation paid out once a year after the filing of the annual results effective from the month after the filing, for the first time with the 2022 annual results. The board of directors, will after the annual result, discretionarily decide if the STIP is stock-based equity, cash pay-out or a combination in the company or its subsidiaries. The targets for the Officer for each term are as per the Officer’s Key Performance Indices (KPI) Agreement.
If the company should up list to a National Exchange through an initial public offering (IPO) the Chief Operations Officer is entitled to an appropriate market based salary in accordance with the size and performance of the business, payable in 12 equal monthly payments, on the last day of every month, plus annual bonus in line with a revised appropriate Short Term Incentive Program (STIP), shares in an up list or IPO of the company or its subsidiaries, all subject to approval by the Board of Directors.
The Chief Operations Officer is also eligible of up to 30 days per year excluding public holidays and may not carry over any unused vacation from prior years and is eligible to participate in all health and welfare benefits provided to other employees of the Company (other than any severance plans) or similar own insurance paid by the company.
The Chief Operations Officer is also eligible for vacation, paid sick days, mobile and internet and expenses incurred for travel, nights away from home, dining, entertainment etc.
If the Chief Operations Officer’s employment is terminated by the Company for Cause, or if her employment with the Company ends due to death, “permanent and total disability”, or due to a voluntary termination of employment by The Chief Operations Officer without Good Reason, then The Chief Operations Officer shall only be entitled to any earned but unpaid compensation as well as any other amounts or benefits owing to The Chief Operations Officer under the terms of any employee benefit plan of the Company.
If the Chief Operations Officer’s employment with the Company is terminated by the Company in connection with a non-renewal of the Agreement without Cause or for reasons other than Cause, death, “permanent and total disability” or is voluntarily terminated by The Officer for Good Reason, then The Officer shall be entitled to the Severance Benefits as well as her Accrued Benefits. In the event the Officer becomes entitled to receive severance benefits the Company shall pay and provide for a period of 3 months after the Date of Termination, the Officer’s then current base salary per month, a pro rata portion of any annual bonus that the Officer would have been entitled to receive.
The foregoing description of the employment agreement does not purport to be complete and is qualified in its entirety by the full text of the employment contract in the exhibits.
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Krishnan Krishnamoorthy (Chief Financial Officer)
The company entered into an amended employee agreement signed on June 30, 2022. In accordance with his amended employee agreement, Mr. Krishnamoorthy will also be issued 2,250,000 QIND common shares. Lock-up of the shares will be under rule 144. If Mr. Krishnamoorthy should resign, he will be considered a corporate insider according to rule 144 for a full year and can during any given week not sell or transfer more than 2.5% of the average weekly trading volume over the previous 30 days average trading volume. During the following year, Mr. Krishnamoorthy can sell 25% of any remaining shares per quarter. The company has the right of first refusal to acquire the shares or match any written offer by a third party for the shares.
Mr. Krishnamoorthy is eligible for the Company Officer’s Short Term Incentive Program (STIP), a Performance Based Target opportunity. Mr. Krishnamoorthy’s target opportunity equals 250,000 common shares in the subsidiary Quality Industrial Corp. intended to qualify as performance-based compensation under Internal Revenue Code section 162(m). The STIP can range from 0% to a maximum target based on performance against agreed plan. The Board of Directors reserves the right to amend the Bonus Structure based on market conditions and overall performance of the Company. The targets will be negotiated with the Board of Directors and compensation paid out once a year after the filing of the annual results effective from the month after the filing, for the first time with the 2022 annual results. The board of directors, will after the annual result, discretionarily decide if the STIP is stock-based equity, cash pay-out or a combination in the company or its subsidiaries. The targets for the Officer for each term are as per the Officer’s Key Performance Indices (KPI) Agreement.
If the company should up list to a National Exchange through an initial public offering (IPO), the Chief Financial Officer is entitled to an appropriate market based salary in accordance with the size and performance of the business, payable in 12 equal monthly payments, on the last day of every month, plus annual bonus in line with a revised appropriate Short Term Incentive Program (STIP), all subject to approval by the Board of Directors.
The Chief Financial Officer is also eligible of up to 30 days per year excluding public holidays and may not carry over any unused vacation from prior years and is eligible to participate in all health and welfare benefits provided to other employees of the Company (other than any severance plans) or similar own insurance paid by the company.
The Chief Financial Officer is also eligible for vacation, paid sick days, mobile and internet and expenses incurred for travel, nights away from home, dining, entertainment etc.
If the Chief Financial Officer’s employment is terminated by the Company for Cause, or if his employment with the Company ends due to death, “permanent and total disability”, or due to a voluntary termination of employment by The Chief Financial Officer without Good Reason, then The Chief Financial Officer shall only be entitled to any earned but unpaid compensation as well as any other amounts or benefits owing to The Chief Financial Officer under the terms of any employee benefit plan of the Company.
If the Chief Financial Officer’s employment with the Company is terminated by the Company in connection with a non-renewal of the Agreement without Cause or for reasons other than Cause, death, “permanent and total disability” or is voluntarily terminated by The Officer for Good Reason, then The Officer shall be entitled to the Severance Benefits as well as his Accrued Benefits. In the event the Officer becomes entitled to receive severance benefits the Company shall pay and provide for a period of 3 months after the Date of Termination, the Officer’s then current base salary per month, a pro rata portion of any annual bonus that the Officer would have been entitled to receive.
The foregoing description of the employment agreement does not purport to be complete and is qualified in its entirety by the full text of the employment contract in the exhibits.
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Carsten Kjems Falk (Chief Commercial Officer)
The parent company ILUS entered into an employment agreement with Mr. Falk on June 1, 2022, in his capacity as Chief Commercial Officer. Pursuant to the agreement, the company agreed to issue 2,250,000 common shares in QIND, for entering into the employment agreement and waiving all liabilities as CEO in Quality Industrial Corp. Lock-up of the shares will be under rule 144. If Mr. Falk should resign, he will be considered a corporate insider according to rule 144 for a full year and can during any given week not sell or transfer more than 2.5% of the average weekly trading volume over the previous 30 days average trading volume. During the following year, Mr. Falk can sell 25% of any remaining shares per quarter. 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.
Mr. Falk is eligible for the Company Officer’s Short Term Incentive Program (STIP), a Performance Based Target opportunity. Mr. Falk’s target opportunity equals 250,000 common shares in Quality Industrial Corp. intended to qualify as performance-based compensation under Internal Revenue Code section 162(m). Any bonus compensation will be pro-rated according to the start date of the Officer. The STIP can range from 0% to a maximum target based on performance against agreed plan. The Board of Directors reserves the right to amend the Bonus Structure based on market conditions and overall performance of the Company. The targets will be negotiated with the Executive Chairman of the board and compensation paid out once a year after the filing of the annual results effective from the month after the filing, for the first time with the 2022 annual results. The board of directors, will after the annual result, discretionarily decide if the STIP is stock-based equity, cash pay-out or a combination in the company or its subsidiaries. The targets for the Officer for each term are as per the Officer’s Key Performance Indices (KPI) Agreement.
If the company should up list to a National Exchange through an initial public offering (IPO) the Chief Commercial Officer is entitled to an appropriate market based salary in accordance with the size and performance of the business, payable in 12 equal monthly payments, on the last day of every month, plus annual bonus in line with a revised appropriate Short Term Incentive Program (STIP), all subject to approval by the Board of Directors.
The Chief Commercial Officer is also eligible of up to 30 days per year excluding public holidays and may not carry over any unused vacation from prior years and is eligible to participate in all health and welfare benefits provided to other employees of the Company (other than any severance plans) or similar own insurance paid by the company.
The Chief Commercial Officer is also eligible for vacation, paid sick days, mobile and internet and expenses incurred for travel, nights away from home, dining, entertainment etc.
If the Chief Commercial Officer’s employment is terminated by the Company for Cause, or if his employment with the Company ends due to death, "permanent and total disability", or due to a voluntary non-renewal of this Agreement by the Company or due to a voluntary termination of employment by The Chief Commercial Officer without Good Reason, then The Chief Commercial Officer shall only be entitled to any earned but unpaid compensation as well as any other amounts or benefits owing to The Chief Commercial Officer under the terms of any employee benefit plan of the Company.
If the Chief Commercial Officer’s employment with the Company is terminated by the Company in connection with a non-renewal of the Agreement without Cause or for reasons other than Cause, death, "permanent and total disability” or is voluntarily terminated by The Officer for Good Reason, then The Officer shall be entitled to the Severance Benefits as well as his Accrued Benefits. In the event the Officer becomes entitled to receive severance benefits the Company shall pay and provide for a period of 3 months after the Date of Termination, the Officer’s then current base salary per month, a pro rata portion of any annual bonus that the Officer would have been entitled to receive.
The foregoing description of the employment agreement does not purport to be complete and is qualified in its entirety by the full text of the employment contract in the exhibits.
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Outstanding Equity Awards at Fiscal Year-End
Other than as discussed above, no executive officer received any equity awards, or holds exercisable or un-exercisable options, as of the years ended December 31, 2022, and 2021 and the six months ended June 30, 2023.
Long-Term Incentive Plans
There are no arrangements or plans in which the Company would provide pension, retirement or similar benefits for our Director or Executive Officers.
Compensation of Directors
Directors are permitted to receive fixed fees and other compensation for their services as Directors. The Board of Directors has the authority to fix the compensation of Directors.
Security Holders Recommendations to Board of Directors
The Company welcomes comments and questions from the shareholders. However, while the Company appreciates all comments from shareholders, it may not be able to individually respond to all communications.
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. |
The following table sets forth certain information known to us regarding beneficial ownership of our capital stock for (i) all executive officers and directors as a group and (ii) each person, or group of affiliated persons, known by us to be the beneficial owner of more than five percent (5%) of our capital stock. The percentage of beneficial ownership in the table below is based on 114,876,965 shares of common stock deemed to be outstanding as of August 18, 2023. Unless otherwise indicated, the address of each beneficial owner listed in the table below is 315 Montgomery Street, San Francisco, CA 94104.
| Name of Beneficial Owner | Amount and Nature of Beneficial Ownership(1) | Percentage of Beneficial Ownership(2) | ||||||
| Directors and Officers: | ||||||||
| Nicolas Link (3) | 80,419,078 | 74.4 | % | |||||
| John-Paul Backwell | 2,250,000 | 2.0 | % | |||||
| Krishnan Krishnamoorthy | 2,250,000 | 2.0 | % | |||||
| Louise Bennett | 500,000 | 0.4 | % | |||||
| Carsten Falk | 4,250,000 | 3.7 | % | |||||
| All executive officers and directors as a group (5 persons) |
89,669,078 | (4) | 78.3 | % | ||||
| 5% Holders | ||||||||
| NONE | ||||||||
| (1) | Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the number of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding. | |
| (2) | Based upon 114,876,965 common shares issued and outstanding as per August 18, 2023. | |
| (3) | Includes 77,669,078 shares held in Ilustrato Pictures International, Inc. in which Mr. Link has voting and dispositive control. | |
| (4) | Includes 10,000,000 common shares to our officers and director pursuant to their employee contracts with a grant-date and fair value of the award as of June 1, 2022, at $0.0721 issued on May 4, 2023. |
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| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. |
Other than described below or under the transactions described under the heading “Executive Compensation,” there have not been, and there is not currently proposed, any transaction or series of similar transactions to which we were or will be a participant in which the amount involved exceeded or will exceed the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any director, executive officer, holder of 5% or more of any class of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest.
As of June 30, 2023, and June 30, 2022, the Company had amounts due from Ilustrato Pictures International, Inc., a majority shareholder of the Company, of $277,859 and $0, respectively.
As of June 30, 2023, and June 30, 2022, the Company had amounts due from Gerab National Enterprises LLC a shareholder of Quality International, a subsidiary of the Company, of $1,794,218 and $0, respectively.
Director Independence
The Board of Directors is currently composed of one member. Mr. Nicolas Link does not qualify as independent in accordance with the published listing requirements of the NYSE American. The NYSE American independence definition includes a series of objective tests, such as that the Director is not, and has not been for at least three years, one of the Company’s employees and that neither the Director, nor any of his family members has engaged in various types of business dealings with us.
Indemnification
Under our bylaws, every person who was or is a party to, or is threatened to be made a party to, or is involved in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that he is or was our director or officer, or is or was serving at our request as a director or officer of another corporation, or as its representative in a partnership, joint venture, trust, or other enterprise, shall be indemnified and held harmless to the fullest extent legally permissible under the laws of the State of Nevada from time to time against all expenses, liability, and loss (including attorneys’ fees judgments, fines, and amounts paid or to be paid in settlement) reasonably incurred or suffered by him or her in connection therewith. Such right of indemnification shall be a contract right, which may be enforced in any manner desired by such person. The expenses of officers and directors incurred in defending a civil or criminal action, suit, or proceeding must be paid by us as they are incurred and in advance of the final disposition of the action, suit, or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by us. Such right of indemnification shall not be exclusive of any other right which such directors, officers, or representatives may have or hereafter acquire, and, without limiting the generality of such statement, they shall be entitled to their respective rights of indemnification under any bylaw, agreement, vote of shareholders, provision of law, or otherwise.
Without limiting the application of the foregoing, our board of directors may adopt bylaws from time to time with respect to indemnification, to provide at all times the fullest indemnification permitted by the laws of the State of Nevada, and may cause us to purchase and maintain insurance on behalf of any person who is or was our director or officer, or is or was serving at our request as a director or officer of another corporation, or as its representative in a partnership, joint venture, trust, or other enterprise against any liability asserted against such person and incurred in any such capacity or arising out of such status, whether or not we would have the power to indemnify such person. The indemnification provided shall continue as to a person who has ceased to be a director, officer, employee, or agent, and shall inure to the benefit of the heirs, executors and administrators of such person.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
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| ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES. |
The following table sets forth the fees billed to our company for the years ended December 31, 2022, and 2021, and the six months ended June 30, 2023, for professional services rendered by our independent registered public accounting firm Pipara & Co LLP who did a reaudit of 2021 and Boyle CPA, LLC in 2021, respectively and does not include audit fee to the subsidiary auditor:
| Fees | June 30, 2023 | 2022 | 2021 | |||||||||
| Audit Fees | $ | 13,500 | $ | 25,500 | $ | 33,000 | ||||||
| Audit-Related Fees | — | — | — | |||||||||
| Tax Fees | — | — | — | |||||||||
| All Other Fees | — | — | — | |||||||||
| Total | $ | 13,500 | $ | 25,500 | $ | 33,000 | ||||||
Audit Fees
Audit fees were for professional services rendered for the audits of our annual financial statements and for review of our quarterly financial statements during the previous 2022 and 2021 fiscal years and the six months ended June 30, 2023.
Audit-related Fees
This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees”.
Tax Fees
As our independent registered public accountants did not provide any services to us for tax compliance, tax advice and tax planning during the previous fiscal years ended December 31, 2022, and 2021, and the six months ended June 30, 2023,no tax fees were billed or paid during those fiscal years.
All Other Fees
Our independent registered public accountants did not provide any products and services not disclosed in the table above during the previous 2022 and 2021 fiscal years, and the six months ended June 30, 2023. As a result, there were no other fees billed or paid during those fiscal years.
Pre-Approval Policies and Procedures
Our board of directors, which acts as our audit committee, pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by our board of directors before the respective services were rendered.
Our board of directors has considered the nature and amount of fees billed by our independent registered public accounting firm and believe that the provision of services for activities unrelated to the audit is compatible with maintaining their respective independence.
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PART IV
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.
We have filed the exhibits listed on the accompanying Exhibit Index of this transition report and below in this Item 15:
| (a) | Financial Statements |
| (b) | Exhibits |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Report of Independent Registered Public Accounting Firm; | F-1 |
| Consolidated Balance Sheets as of June 30, 2022, December 31, 2022, and 2021; | F-2 |
| Consolidated Statements of Operations as of June 30, 2023, and for the years ended December 31, 2022, and 2021; | F-3 |
| Consolidated Statements of Stockholders’ Equity as of June 30, 2023, and for the years ended December 31, 2022, and 2021; | F-4 |
| Consolidated Statements of Cash Flows as of June 30, 2023 for the years ended December 31, 2022, and 2021; and | F-5 |
| Notes to Consolidated Financial Statements. | F-6 |
| 57 |
 |
 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Quality Industrial Corp. (QIND)
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Quality Industrial Corp. (QIND) (the Company) for the six months ended as of June 30, 2023, and 2022, and for each of the two years and the period ended December 31, 2022, and 2021, the related statements of income, changes in stockholders’ equity, and cash flows for each of the two CY and the periods ended June 30, 2023, and 2022, and the related notes (collectively referred to as the “Consolidated financial statements”).
In our opinion, based on our audit and the report of the other auditors, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of the six months ended June 30, 2023, and 2022, and for the CY 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the six month period ended June 30, 2023, and 2022 and for the CY 2022 and 2021, in conformity with accounting principles generally accepted in the United States of America.
We did not audit the financial statements of Quality International Co Ltd FZC, a majority-owned subsidiary, which statements reflect total assets and revenues constituting 70 percent and 100 percent, respectively, of the related consolidated totals. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Quality Industrial Corp. (QIND), is based solely on the report of the other auditors.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit and the report of the other auditors provide a reasonable basis for our opinion.
Company’s Ability to Continue as a Going Concern
The Company suffered losses from operations in CY 2021 and has a net capital deficiency in the six months ended June 30, 2023, CY 2022, and 2021 that raise substantial doubt about its ability to continue as a going concern. As discussed in Note 3 to the financial statements, the accompanying consolidated financial statements have been prepared on a going concern basis. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
In CY 2022 a convertible note was issued by the company and was determined as a critical audit matter. Owing to the terms of conversion to common stock and material significance of this matter, the audit procedures involved verification of the conversion terms from the executed document, their presentation in the financial statements in note 10, and the reporting of Diluted Earnings Per Share (EPS) as represented in Note 2 on the P&L statement.
For,
We have served as the Company’s auditor since 2022
Place:
Date: August 21, 2023
|
New York Office: 1270, Ave of Americas, Rockfeller Center, FL7, New York – 10020, USA
|
Corporate Office: “Pipara Corporate House” Near Bandhan Bank Ltd., Netaji Marg, Law Garden, Ahmedabad - 380006, INDIA |
Mumbai Office: #3, 13th floor, Tradelink, ‘E’ Wing, A - Block, Kamala Mills, Senapati Bapat Marg, Lower Parej, Mumbai - 400013 |
Delhi Office: 1602, Ambadeep Building, KG Marg, Connaught Place New Delhi- 110001 |
Contact: T: +1 (646) 387 - 2034 F: 91 79 40 370376 E:usa@pipara.com naman@piara.com |
| F-1 |
QUALITY INDUSTRIAL CORP.
CONSOLIDATED BALANCE SHEETS
(AUDITED)
| June 30, 2023 | December 31, 2022 | December 31, 2021 | ||||||||||||||
| ASSETS | ||||||||||||||||
| Current assets | ||||||||||||||||
| Cash and cash equivalents | 4 | |||||||||||||||
| Inventories | 5 | |||||||||||||||
| Work in Progress | 5 | |||||||||||||||
| Accounts Receivables | 5 | |||||||||||||||
| Advances to Sub - Contractors | 5 | |||||||||||||||
| Deposits | 5 | |||||||||||||||
| Other current assets | 5 | |||||||||||||||
| Total current assets | ||||||||||||||||
| Non- Current assets | ||||||||||||||||
| Prepaid expenses - long term | ||||||||||||||||
| Property Plant & Equipment | 6 | |||||||||||||||
| Capital WIP | ||||||||||||||||
| Furniture, Fixtures & Office Equipment | 6 | |||||||||||||||
| Lease Hold Improvements & Building | 6 | |||||||||||||||
| Right of Use assets | 7 | |||||||||||||||
| Goodwill | 8 | |||||||||||||||
| Total non-current assets | ||||||||||||||||
| Total Assets | ||||||||||||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||||||
| Current liabilities | 9 | |||||||||||||||
| Accounts payable and accrued liabilities | ||||||||||||||||
Other Current Liabilities | ||||||||||||||||
| Short term bank borrowings | ||||||||||||||||
| Total current liabilities | ||||||||||||||||
| Long Term liabilities | ||||||||||||||||
| Convertible Notes | 10 | |||||||||||||||
| Bank borrowings | 11 | |||||||||||||||
| Lease liabilities | 11 | |||||||||||||||
| Other long-term liabilities | 11 | |||||||||||||||
| Total Long-Term Liabilities | ||||||||||||||||
| Total Liabilities | ||||||||||||||||
| Stockholders’ Equity | 12 | |||||||||||||||
| Preferred stock; par value; shares authorized; and shares issued and outstanding as of as of December 31, 2022, and December 31, 2021, respectively | ||||||||||||||||
| Common stock; par value; shares authorized; and shares issued and outstanding as of December 31, 2022, and December 31, 2021, respectively | ||||||||||||||||
| Additional paid-in capital | ||||||||||||||||
| Retained Earnings/ accumulated Deficit | ( | ) | ( | ) | ( | ) | ||||||||||
| Minority Interest | 13 | |||||||||||||||
| Total stockholders’ Equity | ( | ) | ||||||||||||||
| Total liabilities and stockholders' Equity | ||||||||||||||||
The accompanying notes are an integral part of these audited consolidated financial statements.
| F-2 |
QUALITY INDUSTRIAL CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
(AUDITED)
| For the Six Months Ended | For the Year Ended | |||||||||||||||||||
June 30, 2023 | June 30, 2022 | Dec 31, 2022 | Dec 31, 2021 | |||||||||||||||||
| Revenue | $ | $ | $ | |||||||||||||||||
| Cost of revenues | ||||||||||||||||||||
| Gross profit | $ | $ | ||||||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Professional fees | ||||||||||||||||||||
| Stock based compensation for staff | ||||||||||||||||||||
| Product Development | ||||||||||||||||||||
| General and administrative | 14 | |||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||
| Profit/ Loss from Operations | $ | $ | $ | $ | ( | ) | ||||||||||||||
| Other Non-Operating expense | ||||||||||||||||||||
| Interest on Convertible Notes | ||||||||||||||||||||
| Stock issued for services | ||||||||||||||||||||
| Interest expense | ||||||||||||||||||||
| Loss on License Agreement | ||||||||||||||||||||
| Loss on Currency | ||||||||||||||||||||
| Total other expense | ||||||||||||||||||||
| Non-Operating Income | ||||||||||||||||||||
| Other Non-Operating Income | 15 | |||||||||||||||||||
| Gain on settlement & forgiveness of debt | ||||||||||||||||||||
| Net loss/ profit | $ | $ | $ | $ | ( | ) | ||||||||||||||
| Net profit per common share - basic and diluted | ( | ) | ||||||||||||||||||
| Weighted average common shares outstanding | ||||||||||||||||||||
The accompanying notes are an integral part of these audited consolidated financial statements.
| F-3 |
QUALITY INDUSTRIAL CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(AUDITED)
| For the three and six months ended June 30, 2023, and the years ended December 31, 2021, and 2022 | ||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-in Capital | Stock Receivable | Minority Interest | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||
| Common stock issued for cash | ( | ) | ||||||||||||||||||||||||||||||||||
| Common stock issued for license agreement | ||||||||||||||||||||||||||||||||||||
| Imputed interest | ||||||||||||||||||||||||||||||||||||
| Net Income | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||
| Common stock issued for cash | ||||||||||||||||||||||||||||||||||||
| Imputed interest | ||||||||||||||||||||||||||||||||||||
| Reclassification of imputed interest | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Net Income | ||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||
| Common stock issued | $ | |||||||||||||||||||||||||||||||||||
| Net Income | ||||||||||||||||||||||||||||||||||||
Balance, September 30, 2022 | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Net Income | ||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | ( | ) | ||||||||||||||||||||||||||||||||||
| Common stock issued for cash | ||||||||||||||||||||||||||||||||||||
| Common stock issued for license agreement | ||||||||||||||||||||||||||||||||||||
| Imputed Interest | ||||||||||||||||||||||||||||||||||||
| Net Income | ||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | ( | ) | ||||||||||||||||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||||||||||
| Common stock issued as staff compensation | ||||||||||||||||||||||||||||||||||||
| Imputed Interest | ||||||||||||||||||||||||||||||||||||
| Net Income | ||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | ( | ) | ||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these audited consolidated financial statements.
| F-4 |
QUALITY INDUSTRIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AUDITED)
| For the Six months Ended | For the year Ended | |||||||||||||||
| June 30, 2023 | June 30, 2022 | December 31, 2022 | December 31, 2021 | |||||||||||||
| Cash Flows from Operating Activities | ||||||||||||||||
| Net profit | ( | ) | ||||||||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
| Finance Cost | ||||||||||||||||
| Stock based compensation for staff | ||||||||||||||||
| Loss on license agreement | ||||||||||||||||
| Settlement and forgiveness of Debt | ( | ) | ||||||||||||||
| Stock issued for services | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Increase in Current assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Increase in Accounts payable | ( | ) | ||||||||||||||
| Other Non-Operating Income | ( | ) | ( | ) | ||||||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||||||||||
| Cash Flows from Investing Activities | ||||||||||||||||
| Change in non-current assets | ( | ) | ||||||||||||||
| Net cash used in investing activities | ( | ) | ||||||||||||||
| Cash Flows from Financing Activities | ||||||||||||||||
| Issuance of Convertible Note | ||||||||||||||||
| Long term Borrowings | ( | ) | ( | ) | ||||||||||||
| Finance Cost | ( | ) | ( | ) | ( | ) | ||||||||||
| Settlement of Forgiveness of Debt | ||||||||||||||||
| Loss on License agreement | ( | ) | ||||||||||||||
| Related party line of credit | ||||||||||||||||
| Proceeds from issuance of common stock | ||||||||||||||||
| Net cash from financing activities | ( | ) | ( | ) | ||||||||||||
| Net increase (decrease) in Cash | ( | ) | ( | ) | ||||||||||||
| Beginning cash balance | ||||||||||||||||
| Ending cash balance | $ | $ | $ | |||||||||||||
The accompanying notes are an integral part of these audited consolidated financial statements.
| F-5 |
QUALITY INDUSTRAIL CORP.
NOTES TO AUDITED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, HISTORY AND NATURE OF BUSINESS
Quality Industrial Corp. (“we”, “our”, the “Company”) was incorporated in the state of Nevada in May 1998 as Sensor Technologies Inc. We aim to be a global leader in the manufacture and assembly of industrial equipment and precision engineered technology for the Industrial, Oil & Gas, and Utility sectors.
In March 2006 the Company changed its name to Bixby Energy Systems Inc. The Company changed its name to Power Play Development Corporation in September 2006. In April 2007 the Company changed its name to National League of Poker, Inc. In October 2011 the Company changed its name back to Power Play Development Corporation. In March 2018 the Company changed its name to Bluestar Technologies, Inc. In March 2018, the Company then changed its name to Wikisoft Corp.
In May 2016, the Company’s Board of Directors terminated the services of all prior officers and directors and the board appointed Robert Stevens as the Board Appointed Receiver for the Company. This was a private receivership where the receiver was appointed by the board to act on behalf of the Company and no court filings were ever made in connection with the receivership. On April 16, 2019, in connection with the Merger described below, Robert Stevens resigned from all of his positions with the Company and the board appointed receivership was concluded. At that time Rasmus Refer was appointed as the Company’s CEO and Director, and he resigned from such positions in August and November 2020, respectively. Rasmus Refer was previously the CEO of the Company until August 31, 2020, and Director of the Company until November 30, 2020, where Carsten Kjems Falk was appointed as CEO and Paul C. Quintal sole director were appointed thereafter as described in detail below.
On May 28, 2022, we changed ownership, when Ilustrato Pictures International, Inc. (“ILUS”) acquired 77% of the outstanding shares in our Company. Modern Art Foundation Inc. (“Modern Art”), Rene Lauritsen and Fastbase Holding Inc. agreed to transfer shares of common stock in the Company to Ilustrato Pictures International, Inc. (“Ilustrato”). Pursuant to a Stock Transfer Agreement, Ilustrato purchased the shares for an aggregate amount of $500,000. Mr. Nicolas Link who is the CEO of ILUS, is the beneficial owner.
Consequently, ILUS is now able to unilaterally control the election of our board of directors, all matters upon which shareholder approval is required and, ultimately, the direction of our Company. Quality Industrial Corp. is the Industrial and Manufacturing subsidiary of ILUS. QIND has planned future acquisitions and we intend to disclose these acquisitions, as they happen, in our ongoing reports with the Securities and Exchange Commission. Also, during the year with the Change of Control, Mr. Nicolas Link, beneficial owner of ILUS, was appointed as our Chairman of the Board, Mr. John-Paul Backwell was appointed as our Chief Executive Officer, Mr. Carsten Falk was appointed as our Chief Commercial Officer, Mr. Krishnan Krishnamoorthy was appointed as our Chief Financial Officer and finally, Mrs. Louise Bennett was appointed Chief Operations Officer. The Officers and Director of the Company have an employee agreement with the parent Company ILUS. The agreements also govern their employee agreements in Quality Industrial Corp. All salaries are paid by ILUS, and stock-based compensation is as a combination from both companies.
In line with the change in control and business direction, our Company changed its name to Quality Industrial Corp. with the ticker QIND, with a market effective date of August 4, 2022. As a result of these transactions, Quality Industrial Corp. is now a public company focused on the Industrial, Oil & Gas and Utility Sectors and is a subsidiary to ILUS.
NOTE 2. SUMMARY OF SIGNIFICANT POLICIES
Basis of Presentation and Principles of consolidation
The accompanying consolidated financial statements represent the results of operations, financial position and cash flows of QIND and all of its majority – owned or controlled subsidiary are prepared in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP). All significant inter-company accounts and transactions have been eliminated.
| F-6 |
Use of estimates
A critical accounting estimate is an estimate that: (i) is made in accordance with generally accepted accounting principles, (ii) involves a significant level of estimation uncertainty and (iii) has had or is reasonably likely to have a material impact on the Company’s financial condition or results of operations.
The Company’s Consolidated Financial Statements, have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and judgments that affect reported amounts and related disclosures. On an ongoing basis, management evaluates and updates its estimates. Management employs judgment in making its estimates but they are based on historical experience and currently available information and various other assumptions that the Company believes to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results could differ from those estimates. Management believes that its judgment is applied consistently and produces financial information that fairly depicts the results of operations for all periods presented.
Significant estimates include estimates used to review the Company’s, impairments and estimations of long-lived assets, revenue recognition of Contract based revenue, allowances for uncollectible accounts, and the valuations of non-cash capital stock issuances. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Fair value of financial instruments
The carrying value of cash, accounts payable and accrued expenses, and debt approximate their fair values because of the short-term nature of these instruments. Management believes the Company is not exposed to significant interest or credit risks arising from these financial instruments.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable.
· Level 1. Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.
· Level 2. Quoted prices for similar assets and liabilities in active markets; quoted prices included for identical or similar assets and liabilities that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. These are typically obtained from readily available pricing sources for comparable instruments.
· Level 3. Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own beliefs about the assumptions that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC 606). Accordingly, revenue is recognized when control of the goods or services promised under a contract are transferred to the customer in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for the goods or services.
| F-7 |
Service Contracts
The company recognizes service contract revenue over time, as performance obligations are satisfied, due to the continuous transfer of control to the customer. Service contracts are generally accounted for as a single unit of account (a single performance obligation) and are not segmented between types of services. The company recognizes revenue based primarily on contract cost incurred to date compared to total estimated contract cost (an input method). The input method is the most faithful depiction of the company’s performance because it directly measures the value of the services transferred to the customer. Changes to total estimated contract cost or losses, if any, are recognized in the period in which they are determined as assessed at the contract level. Pre-contract costs are expensed as incurred unless they are expected to be recovered from the client. Project mobilization costs are generally charged to project costs as incurred when they are an integrated part of the performance obligation being transferred to the client. Customer payments on service contracts are typically due in advance, depending on the contract.
For service contracts in which the company has the right to consideration from the customer in an amount that corresponds directly with the value to the customer of the company’s performance completed to date, revenue is recognized when services are performed and contractually billable. Service contracts that include multiple performance obligations are segmented between types of services. For contracts with multiple performance obligations, the company allocates the transaction price to each performance obligation using an estimate of the stand-alone selling price of each distinct service in the contract. Revenue recognized on service contracts that have not been billed to clients is classified as a current asset under contract assets on the Consolidated Balance Sheet. Amounts billed to clients in excess of revenue recognized on service contracts to date are classified as a current liability under contract liabilities. Customer payments on service contracts are typically due within 30 days of billing, depending on the contract.
Cash and cash equivalents
For purposes of the statements of cash flows, in accordance with ASC 230-10-20 the Company considers all highly liquid investments and short-term debt instruments with original maturities of three months or less to be cash equivalents. There was $1,312,565 and $15,659 in cash and cash equivalents as of December 31, 2022, and 2021, respectively.
The Company recognizes all stock-based compensation using the fair value provisions prescribed by ASC Topic 718, Compensation — Stock Compensation. Accordingly, compensation costs for awards of stock-based compensation settled in shares are determined based on the fair value of the share-based instrument at the time of grant and are recognized as expense over the vesting period of the share-based instrument, net of estimated forfeitures.
In accordance with ASC 718, the company will generally apply the same guidance to both employee and nonemployee share-based awards. However, the company will also follow specific guidance for share-based awards to nonemployees related to the attribution of compensation cost and the inputs to the option-pricing model for expected term. Nonemployee share-based payment equity awards are measured at the grant-date fair value of the equity instruments, similar to employee share-based payment equity awards.
The Company calculate the fair value of option grants and warrant issuances utilizing the Binomial pricing model. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. ASC 718 requires forfeitures to be estimated at the time stock options are granted and warrants are issued to employees and non-employees, and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeiture” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered stock option or warrant. The Company estimates forfeiture rates for all unvested awards when calculating the expenses for the period. In estimating the forfeiture rate, the Company monitors both stock option and warrant exercises as well as employee termination patterns. The resulting stock-based compensation expense for both employee and non-employee awards is generally recognized on a straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period.
| F-8 |
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.
| Particulars | December 31, 2022 | December 31, 2021 | ||||||
| Basic and diluted EPS* | ||||||||
| Numerator | ||||||||
| Net income / (loss) | ( | ) | ||||||
| Net Income attributable to common stockholders | ( | ) | ||||||
| Denominator | ||||||||
| Weighted average shares outstanding | ||||||||
| Number of shares used for basic EPS computation | ||||||||
| Basic and diluted EPS* | ( | ) | ||||||
| Particulars | June 30, 2023 | June 30, 2022 | ||||||
| Basic and diluted EPS* | ||||||||
| Numerator | ||||||||
| Net income / (loss) | ||||||||
| Net Income attributable to common stockholders | ||||||||
| Denominator | ||||||||
| Weighted average shares outstanding | ||||||||
| Number of shares used for basic EPS computation | ||||||||
| Basic and diluted EPS* | ||||||||
* The company has only issued common stock
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 income tax positions in accordance with Accounting Standards Codification Topic 740, “Income Taxes” (“ASC Topic 740”). This standard prescribes a recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There was no material impact on the Company’s financial position or results of operations as a result of the application of this standard. Deferred tax assets have not been created for those subsidiaries which are in income tax-free jurisdiction, because the losses incurred cannot be utilized in the future, rendering deferred tax assets irrelevant.
| F-9 |
Inventories
In accordance with ASC 330, the Company states inventories at the lower of cost or net realizable value. Cost, which includes material, labor and overhead, is determined on a first in, first out basis. The Company makes adjustments to reduce the cost of inventory to its net realizable value, if required, for estimated excess, obsolete, zero usage or impaired balances. Factors influencing these adjustments include changes in market demand, product life cycle and engineering changes.
Leases
The Company accounts for leases with escalation clauses in accordance with Accounting Standards Codification (ASC) 840, “Lease”.
In accordance with the principles of ASC 840, the company recognizes both the assets and the liabilities arising from their leases. The lease liability is measured as the present value of lease payments while the lease assets is equal to the lease liability adjusted for certain items like prepaid rent and lease incentives.
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
Lease liabilities
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include, if any, the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating a lease, if the lease term reflects the Company exercising the option to terminate.
The variable lease payments that do not depend on an index or a rate are recognized as expense in the period on which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.
Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Low value asset consideration is those less than USD 5,000. Lease payments on short-term leases and leases of low value assets are recognized as expense on a straight-line basis over the lease term.
The Company’s subsidiary Quality International has entered into commercial leases of land for office, manufacturing yards and storage facilities. These leases generally have lease term of 25 years. The Company’s obligations under its leases are secured by the lessor’s title to the leased assets. There are no restrictions placed upon the Company by entering into these leases. The Company also has certain leases with lease terms of 12 months or less and leases with low value.
| F-10 |
The Company has Lease arrangement for which the liability has been recorded separately. The Company determines whether an arrangement contains a lease at inception. A lease liability and corresponding right of use (ROU) asset are recognized for qualifying leased assets based on the present value of fixed and certain index-based lease payments at lease commencement.
During fiscal year 2022, the Company recognized
interest on lease liabilities amounting to $
As of December 31, 2022, Lease liabilities are presented in the statement of financial position as:
| Current portion of lease liabilities: | $ | |||
| Non-Current portion of lease liabilities: | $ |
As of June 30, 2023, Lease liabilities are presented in the statement of financial position as:
| Current portion of lease liabilities: | $ | |||
| Non-Current portion of lease liabilities: | $ |
Recently issued accounting pronouncements
The Company has evaluated all other recent accounting pronouncements and believes that none of them are expected to have a material effect on the Company’s financial position, results of operations or cash flows.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
NOTE 3. GOING CONCERN
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.
Management evaluated all relevant conditions and events that are reasonably known or reasonably knowable, in the aggregate, as of the date the consolidated financial statements are issued and determined. The Company’s ability to continue as a going concern is dependent on the Company’s ability to continue to generate sufficient revenues and raise capital within one year from the date of filing.
Over the next twelve months management plans to use borrowings and security sales to mitigate the effects of cash flow deficits; however, no assurance can be given that debt or equity financing, if and when required, will be available.
NOTE 4. CASH AND CASH EQUIVALENTS
For purposes of the statements
of cash flows, in accordance with ASC 230-10-20 the Company considers all highly liquid investments and short-term debt instruments with
original maturities of three months or less to be cash equivalents. There was $
| F-11 |
NOTE 5. CURRENT ASSETS
| Other Current Assets |
| Year | June 30, 2023 | December 31, 2022 | December 31, 2021 | |||||||||
| Retention Receivables | ||||||||||||
| Amount Due from a Related Party | ||||||||||||
| Accrued Discount on Convertible notes | ||||||||||||
| Other misc. current assets | ||||||||||||
| Total other current assets | $ | $ | ||||||||||
Related party advances
As of December 31, 2022, and December 31, 2021,
the Company had amounts due to Ilustrato Pictures International Inc, a majority shareholder of the Company, of $
As of December 31, 2022, and December 31, 2021,
the Company had amounts due from Gerab National Enterprises LLC a Shareholder of Quality International, a subsidiary of the Company, of
$
As
of June 30, 2023, and June 30, 2022, the Company had amounts due from Ilustrato Pictures International, Inc., a majority shareholder of
the Company, of $
As of June 30, 2023, and June 30, 2022, the Company
had amounts due from Gerab National Enterprises LLC a shareholder of Quality International, a subsidiary of the Company, of $
On September 10, 2021, the Company
issued shares of the Company's par value common stock to the CEO, Carsten Kjems Falk, pursuant to his employee agreement.
The shares were valued on the grant date at per share, totaling $
On September 10, 2021, the Company
issued shares of the Company's par value common stock to Executive Chairman Paul Quintal pursuant to his employment agreement.
The shares were valued on the grant date at per share, amounting to $
On December 30, 2020, the company entered into a $
Accounts Receivable:
Accounts receivable are recorded at face amount less an allowance for credit losses. The allowance is an estimate based on historical collection experience, current and future economic and market conditions and a review of the current status of each customer’s trade accounts receivable. Management evaluates the aging of the accounts receivable balances and the financial condition of its customers and all other forward-looking information that is reasonably available to estimate the amount of accounts receivable that may not be collected in the future and records the appropriate provision.
Accounts receivable arise from our subsidiary Quality International. The duration of such receivables extend from 30 days beyond 12 Months with an average of 60 days. Payments are received only when a project milestone or entire project is completed, and approvals are obtained. Provisions are created based on the estimated irrecoverable amounts determined by referring to past default experience. The majority of accounts receivable which extend beyond 12 months due to warranties and legacy receivables which are guaranteed by Gerab National Enterprises (LLC).
| F-12 |
Work In Progress:
Work In Progress only reflects the value of products in intermediate production stages and excludes the value of finished products being as inventory in anticipation of future sales and raw materials not yet incorporated into an item for sale.
Advances to Sub - Contractors/suppliers:
Advances have been paid to the suppliers in the ordinary course of business for procurement of specialized material and equipment required in the process of manufacturing of pressure vessels, tanks, heat exchangers and construction of storage tanks and pipes.
Retention Receivables:
Retention receivable relates to a percentage of the contract price being retained by the customers for a period of 12 to 18 months (as per contract agreements), for the purpose of repair of damages (if any), that arise as a result of work done on the projects by the Company. These amounts are received at the expiration of the retention period.
Other misc. Current Assets:
Other Current Assets as mentioned in the above table includes advances paid in connection with operations of the company.
NOTE 6. NON CURRENT ASSETS
Property, Plant and Equipment are recorded at cost, except when acquired in a business combination where property, plant and equipment are recorded at fair value. Depreciation of property, plant and equipment is recognized over the estimated useful lives of the respective assets using the straight-line method. The estimated useful lives are as follows:
| Years | |
| Buildings, related improvements & land improvements | |
| Machinery & Equipment | |
| Computer hardware & software | |
| Furniture & Fixtures |
Expenditures that extend the useful life of existing property, plant and equipment are capitalized and depreciated over the remaining useful life of the related asset. Expenditures for repairs and maintenance are expensed as incurred. When property, plant and equipment are retired or sold, the cost and related accumulated depreciation is removed from the Company’s balance sheet, with any gain or loss reflected in operations.
| F-13 |
Depreciation:
Depreciation of property, plant and equipment is recognized over the estimated useful lives of the respective assets using the straight-line method. Depreciation expense in the year 2022 belongs to Depreciation accounted for on Plant Property and Equipment obtained as part of our subsidiary acquisition. See Note 1 for further details.
| Plant & Machinery | Leasehold Improvements & Building | Furniture, Fixtures & Office Equipment | Capital work in Progress | Total | ||||||||||||||||
| December 31, 2021 | ||||||||||||||||||||
| Additions during the year | ||||||||||||||||||||
| Additions on account of acquisition of Subsidiary | ||||||||||||||||||||
| December 31, 2022 | ||||||||||||||||||||
| Additions during the Quarter | ||||||||||||||||||||
| March 31,2023 | ||||||||||||||||||||
| Additions/ Disposal during the Quarter | ( |
( |
||||||||||||||||||
| June 30, 2023 | ||||||||||||||||||||
| Accumulated depreciation of the assets acquired as a result of acquisition of subsidiary | ||||||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||
| Charge for the year | ||||||||||||||||||||
| Eliminated on disposal during the year | — | — | — | — | — | |||||||||||||||
| December 31, 2021 | ||||||||||||||||||||
| Charge for the year | 1,011,768 | 1,082,441 | 165,035 | — | 2,259,244 | |||||||||||||||
| Accumulated Depreciation December 31, 2022 | 24,061,715 | 9,696,076 | 5,584,809 | — | 39,342,600 | |||||||||||||||
| Carrying value December 31, 2022 | ||||||||||||||||||||
| Charge for the Quarter1 | 633,798 | 0.00 | 0.00 | 0.00 | 633,798 | |||||||||||||||
| Accumulated Depreciation till March 31,2023 | 24,695,513 | 9,696,076 | 5,584,809 | 0.00 | 39,976,398 | |||||||||||||||
| Carrying value March 31, 2023 | ||||||||||||||||||||
| Charge for the Quarter2 | 371,348 | 243,436 | 38,177 | — | 652,961 | |||||||||||||||
| Accumulated Depreciation till June 30, 2023 | 25,066,861 | 9,939,512 | 5,622,986 | — | 40,629,359 | |||||||||||||||
| Carrying value June 30, 2023 | ||||||||||||||||||||
NOTE 7: RIGHT OF USE ASSETS
The Company’s subsidiary has entered into commercial leases of land for offices, manufacturing yards and storage facilities. These leases generally have lease term of 25 years. The Company’s obligations under its leases are secured by the lessor’s title to the leased assets. There are no restrictions placed upon the Company by entering into these leases. The Company also has certain leases with lease terms of 12 months or less and leases with low value.
The Company has Lease arrangement for which the liability has been recorded separately. The Company determines whether an arrangement contains a lease at inception. A lease liability and corresponding right of use (ROU) asset are recognized for qualifying leased assets based on the present value of fixed and certain index-based lease payments at lease commencement.
The Company determines whether an arrangement contains a lease at inception. A lease liability and corresponding right of use (ROU) asset are recognized for qualifying leased assets based on the present value of fixed and certain index-based lease payments at lease commencement. To determine the present value of lease payments, the Company uses the stated interest rate in the lease, when available, or more commonly a secured incremental borrowing rate that reflects risk, term, and economic environment in which the lease is denominated. The Company has elected not to recognize ROU assets or lease liabilities for leases with a term of twelve months or less. Expense is recognized on a straight-line basis over the lease term for operating leases.
| F-14 |
The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received and estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. Unless the Company is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognized right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term as follows:
Land:
Right-of-use assets are subject to impairment review.
| Right of use Assets | Leasehold Land |
| Cost as of December 31, 2022 | |
| Accumulated depreciation as of December 31, 2022 | |
| Carrying Value as of December 31, 2022 | |
| Depreciation for the year 2022 | $ |
NOTE 8 : GOODWILL
Goodwill represents the cost of acquired companies in excess of the fair value of the net assets at the acquisition date and is subject to annual impairment. Goodwill is the excess of the purchase price paid for an acquired entity and the amount of the price not assigned to acquired assets and liabilities. It arises when an acquirer pays a high price to acquire a business. This asset only arises from an acquisition, and it cannot be generated internally. Goodwill is an intangible asset, and so is listed within the long-term assets section of the acquirers’ balance sheet.
The Company accounts for business combinations by estimating the fair value of consideration paid for acquired businesses and assigning that amount to the fair values of assets acquired and liabilities assumed, with the remainder assigned to goodwill. If the fair value of assets acquired and liabilities assumed exceeds the fair value of consideration paid, a gain on bargain purchase is recognized. The estimates of fair values are determined utilizing customary valuation procedures and techniques, which require us, among other things, to estimate future cash flows and discount rates. Such analyses involve significant judgments and estimations.
The Company follows the guidance prescribed in Accounting Standards Codification (“ASC”) 350, Goodwill and Other Intangible Assets, to test goodwill and intangible assets for impairment annually if an event occurs or circumstances change which indicates that its carrying amount may not exceed its fair value.
The Company acquired
NOTE 9. CURRENT LIABILITIES
Other Current Liabilities
Other Current Liabilities as mentioned in the below table includes short term Liabilities – Payable to Quality International, lease liabilities, Short term bank borrowings and other miscellaneous Liabilities.
| Other Current Liabilities | June 30, 2023 | December 31, 2022 | December 31, 2021 | |||||||||
| Lease Liabilities | ||||||||||||
| Accrued Interest on Convertible note | ||||||||||||
| Payable to the shareholders of the Subsidiary Quality International | ||||||||||||
| Misc. Liabilities* | ||||||||||||
| Total | $ | $ | $ | |||||||||
| F-15 |
Loan Payable amounting to $
Short term Borrowings amounting
to $
The Company intend to fund the obligations for acquisitions such as Quality International Co Ltd FZC, through an upcoming registration statement. Following the uplist to NYSE American QIND plan to file an S-1 to fund the remaining cash obligations for its current and future acquisitions.
*Misc. Liabilities as of December 31, 2021:
| Related Party Advances | $ | |
| Loan payable – related party | $ | |
| Line of credit - related party amounting to | $ |
As per the applicable accounting standards, Borrowings from financial institutions have been bifurcated into current and non-Current liabilities.
| Accounts Payable and Accrued Liabilities | June 30, 2023 | December 31, 2022 | December 31, 2021 | |||||||||
| Accounts Payable | ||||||||||||
| Accrued Liabilities | ||||||||||||
| Total | $ | $ | $ | |||||||||
NOTE 10. CONVERTIBLE NOTES
|
· On
August 3, 2022, the Company issued a · On
March 17, 2023, the Company issued a · On
May 23, 2023, the Company issued to Jefferson Street Capital LLC a · On
June 16, 2023, the Company issued to Sky Holdings Ltd. a |
| F-16 |
NOTE 11. OTHER LONG TERM LIABILITIES
The Company has outstanding loan liability on account of consolidation of the subsidiary. Such Loans includes Bank Borrowings and Term loan – working capital loan obtained from the Banks/Financial Institutions to meet the asset financing and working capital requirements of the company.
As of June 30, 2023, and December 31,
2022, the Company had Other Long-Term Liabilities of $
As of June 30, 2023, and December
31, 2022, the Company had total Long-Term Liabilities of $
Long-term Bank Borrowings from
Financial institution amounting to $
These Borrowings are secured by personal and corporate guarantee by Gerab National Enterprises LLC of Quality International along with registered mortgage over plant and machineries belonging to the company Quality International located in Hamriyah Free Zone phase-II, UAE.
Other long term liabilities:
| Particulars | June 30, 2023 | December 31, 2022 | December 31, 2021 | |||||||||
| End of service benefits | ||||||||||||
| Total | $ | $ | ||||||||||
Further, the holding company QIND formerly known as Wikisoft Corp, entered into loan agreement with Fastbase Inc, the details of the loan agreement along with Forgiveness of Debt are as follows:
On June 1, 2020, the Company entered into a loan
agreement with Fastbase Inc, in the amount of $
On September 1, 2020, the Company entered into
a loan agreement with Fastbase Inc, in the amount of $
On October 24, 2020, the Company entered into
a loan agreement with Fastbase Inc in the amount of $
On December 3, 2020, the Company entered into
a loan agreement with Fastbase Inc. in the amount of $
On May 15, 2022, the Company entered into a loan
agreement with Fastbase Inc in the amount of $
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
On July 28, 2022, Company entered into a Debt
Conversion agreement with Enza International and converted the full amount of Debt $
| F-17 |
Options and Warrants
In accordance with ASC 470, detachable warrants issued are allocated to the two elements based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance, the portion of the proceeds assigned to the warrants credited to paid-in capital, and the remainder to the debt instrument.
On April 19, 2023, the Company issued a common share purchase warrant to Exchange Listing LLC (the “Exchange Common Share Purchase Warrant”). The holder is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date of issuance hereof, to purchase from the Company, of the Company’s common shares (whereby such number may be adjusted from time to time pursuant to the terms and conditions of the Exchange Common Share Purchase Warrant) at the exercise price of , per share then in effect.
On May 23, 2023, the Company issued a common share purchase warrant to Jefferson Street Capital LLC (the “Jefferson Common Share Purchase Warrant”). The holder is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date of issuance hereof, to purchase from the Company, of the Company’s common shares (whereby such number may be adjusted from time to time pursuant to the terms and conditions of the Jefferson Common Share Purchase Warrant) at the exercise price of , per share then in effect.
NOTE 12. STOCKHOLDERS’ EQUITY
The Company’s authorized capital stock consists of shares of common stock and shares of preferred stock, par value $0.001 per share.
As of June 30, 2023, December 31, 2022, and December 31, 2021, there were , and shares of common stock issued and outstanding, respectively.
As of June 30, 2023, December 31, 2022, and December 31, 2021, there were , and shares of preferred stock of the Company issued and outstanding, respectively.
From January 1, 2021, to December 31, 2021, we made the following issuances:
| · |
On April 30, 2021, Oscar Gensman resigned and agreed that all claims and obligations towards the company lapsed including the stock payable to Mr. Gensmann of $171,875. |
| · | On June 9, 2021, we issued shares of our common stock for services to Triton Funds LP. The shares were valued on the date of issuance at per share or $ |
| · | On August 6, 2021, we issued shares of our common stock for services to White Lion Capital LLC. The shares were valued on the date of issuance at per share or $ |
| · |
On August 19,
2021, we issued shares of our common stock for services to Triton Funds LP. he shares were valued on the date of issuance at per
share or $
| |
| · | On September 10, 2021, the Company issued shares the Company’s par value common to the CEO Carsten Kjems Falk pursuant to his employee agreement. The shares were valued on the date of grant at per share or $ |
| · | On September 10, 2021, the Company issued shares of the Company’s par value common stock to the Executive Chairman Paul Quintal pursuant to his employee agreement. The shares were valued on the date of grant at per share or $ |
| · | On September 14, 2021, we issued shares common stock for $ |
| · | On September 27, 2021, we issued shares common stock for $ |
| F-18 |
| · | On October 7, 2021, we issued shares common stock for $ |
| · | On October 27, 2021, we issued shares common stock for $ |
| · | On November 10, 2021, we issued shares common stock for $ |
| · | On November 24, 2021, the Company issued shares of common stock for services by North Equities LTD. The shares were valued on the date of issuance at per share or $ |
| · | On December 17, 2021, we issued shares common stock for $ |
| · | On December 28, 2021, we issued shares common stock for $ |
| · | In the year 2021, the company reversed the Stock payable of $ |
From January 1, 2022, to December 31, 2022, we made the following issuances:
| · | On January 3, 2022, the Company issued shares of common stock for $ |
| · | On January 10, 2022, the Company issued shares of common stock for $ |
| · | On February 28 2022, the Company entered into a definitive agreement to acquire |
| · | On March 10, 2022, the Company issued shares of common stock for $ |
| · | On March 21, 2022, the Company issued shares of common stock for $ |
| · | On March 29, 2022, the Company issued shares of common stock for $ |
| · | On April 22, 2022, the Company issued shares of common stock for $ |
| · | On July 28, 2022, the Company issued shares of common stock for $ |
| · | On August 3, 2022, we
issued a |
Common Stock issuances during the six months ending June 30, 2023.
| · | On May 4, 2023, the Company issued to Nicolas Link shares of our common stock with a grant-date and fair market value of the award as of June 1, 2022, at pursuant to his employee contract. |
| · | On May 4, 2023, the Company issued to John-Paul Backwell Link shares of our common stock with a grant-date and fair market value of the award as of June 1, 2022, at pursuant to his employee contract. |
| · | On May 4, 2023, the Company issued to Carsten Kjems Falk shares of our common stock with a grant-date and fair market value of the award as of June 1, 2022, at pursuant to his employee contract. |
| F-19 |
| · | On May 4, 2023, the Company issued to Krishnan Krishnamoorthy shares of our common stock with a grant-date and fair market value of the award as of June 1, 2022, at pursuant to his employee contract. |
| · | On May 4, 2023, the Company issued to Louise Bennett shares of our common stock with a grant-date and fair market value of the award as of June 1, 2022, at pursuant to her employee contract. |
| · | On May 8, 2023, the Company issued to Exchange Listing LLC shares of our common stock for $ |
| · | On June 1, 2023, the Company issued to Jefferson Street Capital LLC shares of our common stock with a grant-date and fair value of the award as of May 23, 2023, at pursuant to a share purchase agreement signed on May 23, 2023. |
NOTE 13. MINORITY INTEREST
The Company acquired
The remaining $
NOTE 14. OPERATING EXPENSES
| General and administrative expenses | December 31, 2022 | December 31, 2021 | ||||||
| Depreciation on Plant, Property and Equipment and right of use assets | ||||||||
| General business expense | ||||||||
| Selling & Distribution Expense | ||||||||
| IT support and Software | ||||||||
| Legal services | ||||||||
| Rent | ||||||||
| Management charge | ||||||||
| Communication | ||||||||
| Travel expense | ||||||||
| Total | $ | $ | ||||||
| General and Administrative Expenses | June 30, 2023 |
June 30, 2022 | ||||||
| Salaries and related benefits | ||||||||
| Travelling and conveyance | ||||||||
| Legal and audit fee | 139,967 | 198,801 | ||||||
| Repairs and maintenance | ||||||||
| Printing and Stationary | ||||||||
| Depreciation on Plant, Property & Equipment | ||||||||
| Insurance | ||||||||
| IT Support & software | ||||||||
| Utilities | ||||||||
| Misc general business expenses | ||||||||
| Total | $ | $ | ||||||
See Note 6 to Financial Statements for Depreciation on Property, Plant and Equipment and Note 7 for Depreciation on Right of Use Asset.
In 2022, we have not issued any stock for services. General & Admin expenses in the year 2022 are attributable to administrative and operating costs associated with our business activities. Such expenses include Employee related costs, rent and other operating expenses.
| F-20 |
NOTE 15. OTHER NON OPERATING INCOME
The Company Earned other income in 2022 as a result of gain on settlement and forgiveness of debt, sale of Scrap and exchange loss/gain.
The table below presents the breakdown of non-Operating income:
| Non-Operating income | December 31, 2022 | December 31, 2021 | ||||||
| Sale of scrap | ||||||||
| Exchange Gain/ loss | ( |
|||||||
| Misc Income | ||||||||
| Gain on settlement and Forgiveness of Debt | ||||||||
| Total | $ | $ | ||||||
| Non-Operating income | June 30, 2023 | June 30, 2022 | ||||||
| Sale of scrap | ||||||||
| Exchange Gain/loss | ||||||||
| Misc Income | ||||||||
| Gain on settlement and Forgiveness of Debt | ||||||||
| Total | $ | $ | ||||||
Note on Gain on settlement & forgiveness of debt:
On May 15, 2022, the Company entered into a loan agreement
with Fastbase Inc in the amount of $
On May 25, 2022, the company entered into a Debt Conversion
Agreement (the “Agreement”) with our prior officer and director, Rasmus Refer. Pursuant to the Agreement, we transferred our
We made a gain
on forgiveness of accrued salary in Q1, 2022, to our currrent oficer Mr. Falk since he waived his right to receive the outstanding amounts
for the fiscal year 2021 of $
NOTE 16. PURCHASE OF MEMBERSHIP INTEREST IN ETHERALABS LLC
On February 28, 2022, the Company entered into a definitive
agreement to acquire
On May 25, 2022, the Company entered into an agreement
to transfer its
| F-21 |
NOTE 17. BUSINESS COMBINATION DISCLOSURE*
*In Accordance with ASC 805-10-50, ASC 805-30-50 and ASC 805-10-25-7
On June 28, 2022, QIND signed a binding Letter of Intent to acquire 51% of the shares of Quality International Co Ltd FZC, a United Arab Emirates headquartered company (“Quality International”), from the shareholders of Quality International. Quality International is a revenue generating company that manufactures custom solutions for the Oil and Gas, Energy, Water Desalination, Wastewater, Offshore and Public Safety sectors.
It was determined that the Company acquired a majority of Quality International, effective as of June 28, 2022, resulting in Quality International becoming a subsidiary, in a transaction accounted for as a business combination. Pursuant to ASC 805-10-25-7, the Company determined that the acquisition date preceded the closing date. The Current Management of Quality International Co Ltd FZC will continue to operate, but QIND as per June 28, 2022, has held the ability to make decisions about the operations and financing of the acquired entity without impediment.
On January 18, 2023, at the time of entering into a
definitive Stock Purchase Agreement (the “Purchase Agreement”) with the shareholders of Quality International,
On July 31, 2023, the parties to the Purchase Agreement entered into an amendment to the Purchase Agreement to revise the payment schedule for the Purchase Price for the Shares. The agreement has been filed with this transition report.
The acquired business
contributed revenues of $
|
Particulars ( Figures in USD) |
Pro forma year ended December 31, 2022 |
Pro forma year ended December 31, 2021 | ||||||
| Revenue | ||||||||
| Earnings | ||||||||
In 2022, QIND incurred $
In accordance with ASC 805-30-50-1 (b) and ASC 80-20-50-1(c), the following table summarizes the consideration transferred to acquire Quality International and the amounts of identified assets acquired, and liabilities assumed at the acquisition date, as well as the fair value of the noncontrolling interest in Quality International at the acquisition date:
Fair value of Consideration:
Cash $
Contingent consideration $
Total $
| Cash and cash equivalents | ||||
| Trade receivables | ||||
| Inventories | ||||
| Receivables | ||||
| Deposits | ||||
| Advances and related party dues | ||||
| Work in Progress | ||||
| Property, plant, and equipment | ||||
| Leasehold Improvements & Buildings | ||||
| Furniture & Fixtures | ||||
| Capital WIP | ||||
| Trade and other payables | ( | ) | ||
| Borrowings | ( | ) | ||
| Total identifiable net assets | $ | |||
| Goodwill | $ |
| F-22 |
NOTE 18. SUBSEQUENT EVENTS
In accordance with ASC 855-10-50 the company list events which are deemed to have a determinable significant effect on the balance sheet at the time of occurrence or on the future operations, and without disclosure of it, the financial statements would be misleading.
On July 17, 2023, the Company issued to Sky Holdings Ltd. 300,000 shares of our common stock with a grant-date and fair value of the award as of June 16, 2023, at $0.42 pursuant to a share purchase agreement signed on June 16, 2023.
On July 31, 2023, the shareholders of Quality International and the company entered into an amendment to the QI purchase agreement to revise the payment schedule for the purchase price for the shares. The agreement has been filed as an exhibit with this transition report.
We considered making an acquisition in Petro Line, however, the acquisition never materialized. On January 27, 2023, we entered into the Petro Line Share Purchase Agreement, to acquire 51% of Petro Line FZ-LLC. The acquisition never materialized after a fire at a Petro Line factory. An investigation into the fire’s impact led us to subsequently terminate the Petro Line Share Purchase Agreement on July 31, 2023, and no payments to Petro Line were made.
On July 31, 2023, the Company issued to 1800 Diagonal Lending LLtd. a promissory note in the principal amount of $174,867 (the “Diagonal Lending Note”). The Diagonal Lending Note had a one-time interest amount of $22,732. The Company will prepay the Diagonal Lending Note in nine monthly payments each in the amount of $21,955.45. The promissory note matures on February 28, 2024, with a total payback to the Holder of $197,599. All principal on the Diagonal Lending Note is convertible into shares of our common stock in the event of default with a conversion price of 65% multiplied by the lowest Trading Price for the Common Stock during the ten (10) Trading Days prior to the Conversion Date.
On August 15, 2023, the Company issued to 1800 Diagonal Lending LLtd. a promissory note in the principal amount of $118,367 (the “Diagonal Lending Note”). The Diagonal Lending Note had a one-time interest amount of $15,387.71. The Company will prepay the Diagonal Lending Note in nine monthly payments each in the amount of $14,861.64. The promissory note matures on May 30, 2024, with a total payback to the Holder of $133,754.71 All principal on the Diagonal Lending Note is convertible into shares of our common stock in the event of default with a conversion price of 65% multiplied by the lowest Trading Price for the Common Stock during the ten (10) Trading Days prior to the Conversion Date.
| F-23 |
2. Financial Statement Schedules
All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission (the “Commission”) are either not required under the related instructions, are not applicable (and therefore have been omitted), or the required disclosures are contained in the financial statements included herein.
3. Exhibits (including those incorporated by reference).
(b) The following exhibits are filed as a part of this Transition Report on Form 10-KT:
*Previously filed
**Filed herewith.
| ITEM 16. | 10-KT SUMMARY |
None
| 58 |
SIGNATURES
Quality Industrial Corp.
| By: | /s/ John-Paul Backwell | |
Name: John-Paul Backwell Title: Chief Executive Officer (principal executive officer)
Date: August 21, 2023 |
| |
| By: | /s/ Krishnan Krishnamoorthy | |
Name: Krishnan Krishnamoorthy Title: Chief Financial Officer (principal financial officer and principal accounting officer)
Date: August 21, 2023 |
| |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ John-Paul Backwell | |
Name: John-Paul Backwell Title: Chief Executive Officer (principal executive officer)
Date: August 21, 2023 |
| |
| By: | /s/ Krishnan Krishnamoorthy | |
Name: Krishnan Krishnamoorthy Title: Chief Financial Officer (principal financial officer and principal accounting officer)
Date: August 21, 2023 |
| |
| By: | /s/ Nicolas Link | |
Name: Nicolas Link Title: Executive Chairman
Date: August 21, 2023 |
|
| 59 |