QIND.OIDQuality Industrial CORP

10-Q: Quality Industrial Corp. Reports Positive Net Income in Q2 2024 Following Al Shola Gas Acquisition

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Quality Industrial Corp. reports a net income of $392,332 for the three months ended June 30, 2024, a significant turnaround from a net loss of $1,582,221 in the same period last year, primarily due to the acquisition of Al Shola Gas.

Delay expectedThe company extended the non-solicitation and no-shop periods with Actelis Networks, Inc. multiple times, indicating potential delays in the transaction.
Capital raiseThe company plans to use borrowings and security sales to mitigate the effects of cash flow deficits.The company issued multiple convertible promissory notes, indicating a reliance on debt financing.The company issued commitment shares in connection with a convertible note.
Better than expectedThe company's net income for the quarter was significantly better than the net loss in the same period last year.The company's revenue increased substantially compared to the same period last year.The company's working capital deficit improved compared to the end of the previous year.

Summary

  • Quality Industrial Corp. (QIND) reported a net income of $392,332 for the three months ended June 30, 2024, compared to a net loss of $1,582,221 for the same period in 2023.
  • The company's revenue for the three and six months ended June 30, 2024, was $3,317,206, a substantial increase from $0 in the same periods of 2023.
  • This revenue increase is attributed to the acquisition of Al Shola Gas in the second quarter of 2024.
  • Operating expenses for the three months ended June 30, 2024, were $825,430, slightly down from $835,314 in 2023.
  • Non-operating expenses decreased significantly from $746,907 in Q2 2023 to $78,736 in Q2 2024.
  • The company's net income for the six months ended June 30, 2024, was $599,022, compared to a net loss of $1,666,495 for the same period in 2023.
  • The company had a working capital deficit of $2,768,503 as of June 30, 2024, compared to a deficit of $6,089,634 as of December 31, 2023.
  • The company plans to use borrowings and security sales to mitigate cash flow deficits over the next twelve months.
  • The company acquired 51% of Al Shola Gas on March 27, 2024, for $10,000,000, consisting of $9,000,000 in a note payable and $1,000,000 in cash.
  • The company terminated its purchase agreement with Quality International on April 1, 2024, and is unwinding the remaining parts of the transaction.

Sentiment

Score: 7

Explanation: The document shows a positive turnaround in financial performance with the acquisition of Al Shola Gas, but there are still concerns about the working capital deficit and reliance on debt financing. The sentiment is cautiously optimistic.

Positives

  • The company achieved a significant turnaround in profitability, moving from a net loss to a net income.
  • The acquisition of Al Shola Gas has proven to be a positive catalyst for revenue growth.
  • Operating expenses were well managed, with a slight decrease compared to the previous year.
  • Non-operating expenses decreased substantially, contributing to the improved net income.
  • The working capital deficit has been reduced, indicating improved financial management.
  • The company has a plan to mitigate cash flow deficits through borrowings and security sales.

Negatives

  • The company still has a working capital deficit, indicating ongoing financial challenges.
  • The company is relying on borrowings and security sales to mitigate cash flow deficits, which may increase financial risk.
  • The termination of the Quality International purchase agreement resulted in the company unwinding the transaction and potentially writing off the investment.
  • The company has a significant amount of debt, including convertible notes and notes payable.

Risks

  • The company's ability to continue as a going concern is dependent on its ability to generate sufficient revenues and raise capital.
  • The company's reliance on borrowings and security sales to mitigate cash flow deficits may increase financial risk.
  • The company's planned acquisitions may not positively impact financial results in the short term.
  • The company is exposed to risks related to general macro economic conditions, including global instability and changes in the U.S. economic climate.
  • The company's goodwill is subject to impairment if business conditions change substantially.
  • The company's convertible notes could lead to dilution of existing shareholders.

Future Outlook

The company plans to allocate resources to its subsidiary to increase efficiency and drive sales, invest in new vehicles for Al Shola Gas, and anticipates increased operating expenses due to expansion plans.

Management Comments

  • Management plans to use borrowings and security sales to mitigate the effects of cash flow deficits.
  • Management aims to recover the investment or parts of it from the Quality International transaction, but if recovery proves unattainable, the investment may need to be written off.

Industry Context

The company's focus on the industrial, oil & gas, and utility sectors aligns with current market trends, and the acquisition of Al Shola Gas expands its presence in the LPG industry. The company's performance is influenced by global economic conditions and the industrial and manufacturing sectors.

Comparison to Industry Standards

  • The company's revenue growth is significant compared to the previous year, indicating a positive impact from the Al Shola Gas acquisition.
  • The company's turnaround from a net loss to a net income is a positive sign, but it is important to compare this to industry benchmarks for similar companies.
  • The company's working capital deficit is a concern, and it should be compared to industry averages to assess its financial health.
  • The company's reliance on debt financing is a common practice in the industry, but it is important to monitor the debt levels and interest expenses.
  • The company's goodwill of $8,479,222 is a significant asset, and it should be monitored for potential impairment.

Related Party Transactions

  • As of June 30, 2024, the Company had amounts due from Ilustrato Pictures International, Inc. (ILUS), a majority shareholder of the Company, of $1,866,396.
  • On May 14, 2024, the Company issued 500,000 fully vested shares of our common stock to John-Paul Backwell pursuant to his employment contract.

Stakeholder Impact

  • Shareholders may view the improved financial results positively, but the reliance on debt financing and potential dilution from convertible notes may be a concern.
  • Employees of Al Shola Gas may benefit from the company's investment in new vehicles and increased efficiency.
  • Customers of Al Shola Gas may benefit from improved services and increased supply of LPG.
  • Creditors may be concerned about the company's working capital deficit and reliance on debt financing.

Next Steps

  • The company will allocate resources to its subsidiary to increase efficiency and drive sales.
  • The company plans to invest in new vehicles for Al Shola Gas to increase their Bulk LPG supply.
  • The company will continue to unwind the remaining parts of the transaction with Quality International.
  • The company will continue to work towards a potential acquisition by Actelis Networks, Inc.

Key Dates

DateDescription
May 4, 1998The Company was incorporated in the state of Nevada under the name Sensor Technologies, Inc.
March 2006The Company changed its name to Bixby Energy Systems Inc.
September 2006The Company changed its name to Power Play Development Corporation.
April 2007The Company changed its name to National League of Poker, Inc.
October 2007The Company changed its name back to Power Play Development Corporation.
October 2011The Company changed its name to Bluestar Technologies, Inc.
March 2018The Company changed its name to Wikisoft Corp.
May 2016The Companys Board of Directors terminated the services of all prior officers and directors and the board appointed Robert Stevens as the Board Appointed Receiver for the Company.
April 16, 2019Robert Stevens resigned from all of his positions with the Company and the board-appointed receivership was concluded.
April 11, 2019The Company entered into an Agreement and Plan of Merger with WikiSoft Acquisition Corp.
April 24, 2019Merger Sub merged with and into WikiSoft DE.
March 19, 2020The Company entered into an Agreement and Plan of Merger with WikiSoft DE.
March 25, 2020WikiSoft DE merged with and into the Company.
August 31, 2020Carsten Kjems Falk was appointed as CEO.
December 1, 2021Paul C Quintal was appointed as the sole director of the Company.
May 28, 2022ILUS acquired 77.4% of the outstanding shares in the Company.
August 4, 2022The Company changed its name to Quality Industrial Corp. with the ticker QIND.
June 28, 2022ILUS signed a binding letter of intent for the Company to acquire control of Quality International.
August 3, 2022The Company issued a two-year convertible promissory note in the principal amount of $1,100,000 to RB Capital Partners Inc.
March 9, 2023The Company changed the SIC code to SIC 3590 Misc. Industrial & Commercial Machinery and Equipment.
March 17, 2023The Company issued a two-year convertible promissory note in the principal amount of $200,000 to RB Capital Partners Inc.
May 23, 2023The Company issued to Jefferson Street Capital LLC a one-year convertible promissory note in the principal amount of $220,000.
July 27, 2023The Company borrowed from Mahavir Investments Limited, the principal amount of $3,000,000 (the Mahavir Loan).
July 31, 2023The Company issued to 1800 Diagonal Lending Ltd. a promissory note in the principal amount of $174,867.
August 15, 2023The Company issued to 1800 Diagonal Lending Ltd. a promissory note in the principal amount of $118,367.
August 25, 2023The Company issued to Artelliq Software Trading 6,410,971 shares of our common stock for $2,000,000.
June 16, 2023The Company issued to Sky Holdings Ltd. a six-month convertible promissory note in the principal amount of $550,000.
December 20, 2023The Company issued a two-year convertible promissory note in the principal amount of $100,000 to RB Capital Partners Inc.
December 20, 2023The Company issued a one-year convertible promissory note in the principal amount of $100,000 to Sean Levi.
January 18, 2024The Company issued a convertible promissory note 1800 Diagonal Lending LLC in the principal amount of $174,867.
February 6, 2024The Company issued a six-month convertible promissory note to Exchange Listing LLC in the principal amount of $35,000.
March 12, 2024The Company issued a convertible promissory note to 1800 Diagonal Lending LLC in the principal amount of $118,367.
March 27, 2024The Company signed a definitive Share Purchase Agreement with Al Shola Gas LLC.
April 1, 2024The Company terminated the QI Purchase Agreement with Quality International.
April 26, 2024The Company entered into an asset purchase agreement with Mr. Refer.
May 14, 2024The Company issued 500,000 fully vested shares of our common stock to John-Paul Backwell.
May 16, 2024The promissory note with Sky Holdings was amended.
May 21, 2024The Company issued a one-year convertible promissory note Jefferson Street Capital LLC in the principal amount of $71,500.
May 23, 2024Quality Industrial Corp. entered into a binding term sheet with Actelis Networks, Inc.
June 21, 2024The Company signed an asset purchase agreement with Ilustrato Pictures International Inc.
July 3, 2024The Company issued a convertible promissory note 1800 Diagonal Lending LLC in the principal amount of $179,400.
July 19, 2024The Company agreed to extend the non-solicitation and no-shop periods with Actelis Networks, Inc.
August 2, 2024The Company agreed to further extend the non-solicitation and no-shop periods with Actelis Networks, Inc.
August 9, 2024Audit review report Al Shola Gas, by NBN Auditing of Accounts.
August 16, 2024The Company agreed to further extend the non-solicitation and no-shop periods with Actelis Networks, Inc.
August 19, 2024The company engaged a new independent registered public accounting firm.

Keywords

Quality Industrial Corp, Al Shola Gas, acquisition, net income, revenue, convertible notes, working capital, financial results, industrial, manufacturing

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