10-Q: Quality Industrial Corp. Reports Q3 2025 Loss Amid Revenue Growth

Quality Industrial Corp. reported increased revenue for Q3 and nine months ended September 30, 2025, driven by the Al Shola Gas acquisition, but posted a net loss due to significant one-time expenses and negative working capital.

Summary

• Revenue for the three months ended September 30, 2025, increased to $3,515,873 from $2,662,050 in the prior year, a 32.1% increase for Al Shola Gas.
• Revenue for the nine months ended September 30, 2025, grew to $11,146,807 from $5,979,256 in the prior year.
• The company incurred a net loss of $78,227 for the three months ended September 30, 2025, compared to a net loss of $339,852 for the same period in 2024.
• A net loss of $1,238,642 was reported for the nine months ended September 30, 2025, contrasting with a net income of $195,028 for the same period in 2024.
• Operating expenses significantly increased to $1,498,249 for the three months and $4,280,404 for the nine months ended September 30, 2025, primarily due to one-time settlements and management payouts totaling $1,540,000.
• Cash and cash equivalents increased to $971,555 as of September 30, 2025, from $225,582 as of December 31, 2024.
• Negative working capital worsened to $7,174,367 as of September 30, 2025, from $3,896,995 as of December 31, 2024.
• Al Shola Gas secured over $2.7 million in new project awards since March 2025 and added over 1,800 apartments to its utility portfolio since January 2025, with projected annual recurring utility revenue of $905,000 from new LPG bulk supply contracts.
• New LPG engineering and supply contracts for 1,244 residential units are expected to generate $185,000 in one-time project revenue and $177,000 in annual recurring revenue.
• Renewed contracts are expected to generate approximately $217,000 in continued annual recurring revenue.
• Goodwill remains at $8,411,100 as of September 30, 2025, related to the Al Shola Gas acquisition.

Sentiment

Score: 4

Explanation: While revenue growth is positive, the significant net loss, worsening negative working capital, and substantial cash burn from operations, largely due to one-time payouts, indicate underlying financial strain. The reliance on future capital raises for going concern and the increase in related party payables to the parent company suggest a challenging financial position despite strategic acquisitions and project wins.

Positives

• Revenue for the three months ended September 30, 2025, increased by 32.1% for Al Shola Gas compared to the same period last year.
• Total revenue for the nine months ended September 30, 2025, significantly increased to $11,146,807 from $5,979,256 in the prior year, driven by the Al Shola Gas acquisition.
• Gross profit increased to $1,212,444 for the three months and $3,487,936 for the nine months ended September 30, 2025.
• Cash and cash equivalents increased substantially to $971,555 as of September 30, 2025, from $225,582 as of December 31, 2024.
• Al Shola Gas secured over $2.7 million in new project awards since March 2025 and added more than 1,800 apartments to its utility portfolio since January 2025.
• New LPG bulk supply contracts are projected to yield an estimated annual recurring utility revenue of $905,000.
• Two significant LPG utility engineering and supply contracts for 1,244 residential units are expected to generate $185,000 in initial one-time project revenue and $177,000 in recurring annual revenue.
• Renewed engineering and LPG supply contracts are expected to generate approximately $217,000 in continued annual recurring revenue.
• A settlement agreement with Lucosky Brookman LLP resulted in $318,706 of non-operating income for the three and nine months ended September 30, 2025.

Negatives

• The company reported a net loss of $78,227 for the three months ended September 30, 2025, and a net loss of $1,238,642 for the nine months ended September 30, 2025, compared to a net income in the prior nine-month period.
• Operating expenses increased significantly due to one-time settlements with former executives ($520,000) and a one-time payout to management ($1,020,000).
• Negative working capital worsened to $7,174,367 as of September 30, 2025, from $3,896,995 as of December 31, 2024.
• Operating activities used $1,855,333 in cash for the nine months ended September 30, 2025, compared to providing $1,043,809 in the prior year.
• Non-operating expenses were higher due to stock issued discount and interest on convertible notes.
• Related party payables increased significantly to $4,061,803 as of September 30, 2025, from $0 as of December 31, 2024, primarily due to loans from Fusion Fuel Green PLC.

Risks

• General macroeconomic conditions, including global instability and the Russian invasion of Ukraine, can impact financial performance.
• Changes in the U.S. economic climate can affect demand for products in the industrial and manufacturing sectors.
• Tenders can be withdrawn, and lead times for manufacturing can be affected, potentially leading to order cancellations.
• The company's ability to continue as a going concern is dependent on generating sufficient revenues and raising capital within one year.
• No assurance can be given that debt or equity financing, if and when required, will be available.
• Upfront costs are incurred when incorporating and integrating acquired businesses, and benefits may not positively impact financial results in the short term.
• Factors such as non-renewal of a major contract or substantial changes in business conditions could materially adversely affect the valuation of goodwill.

Future Outlook

Management anticipates that revenue and operating expenses will increase as the company implements its expansion plan related to its subsidiary, Al Shola Gas, including investments in new LPG bobtail trucks expected in Q4 2025. The company plans to use borrowings and security sales to mitigate cash flow deficits over the next twelve months and intends to pay off some or all of its convertible notes during the remainder of FY 2025. Future acquisitions are planned and will be disclosed in ongoing SEC reports.

Management Comments

• Management believes the accompanying audited condensed consolidated financial statements are prepared in accordance with instructions for Form 10-Q and include all necessary adjustments for a fair presentation.
• Management plans to use borrowings and security sales to mitigate the effects of cash flow deficits over the next twelve months.
• Management anticipates that operating expenses will increase as we undertake our control plan associated with our operating business, Al Shola Gas, attributable to administrative and operating costs and professional fees.
• The management plan is to pay off some or all of the convertible notes during the remainder of FY 2025.

Industry Context

Quality Industrial Corp. operates as the Industrial Energy subsidiary of Fusion Fuel Green PLC, focusing on the industrial, oil & gas, and utility sectors. The acquisition of Al Shola Gas, an established UAE-based LPG industry engineering and distribution company, positions the company to capitalize on the growing demand for LPG systems and supply in commercial and residential developments in the Middle East. The company's strategic focus on expanding its LPG supply capabilities through new vehicle investments and securing new project awards aligns with trends in energy infrastructure development and utility services in the region.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Legal Proceedings

• No material, existing or pending legal proceedings against the company were known.
• The company is not involved as a plaintiff in any material proceeding or pending litigation.
• No proceedings exist where any directors, officers, affiliates, or shareholders are adverse parties or have a material interest adverse to the company's interests.

Related Party Transactions

• As of September 30, 2025, and December 31, 2024, the company had amounts due from Ilustrato Pictures International, Inc. (ILUS), a former majority shareholder, of $1,993,525 and $1,979,772, respectively.
• An intercompany loan agreement with ILUS (executed June 15, 2022) for working capital, with a maximum principal of $1,000,000 and 1% simple interest per annum, accounts for $493,525 of the receivable.
• The remaining $1,500,000 of the ILUS receivable relates to an asset purchase agreement (June 21, 2024) where ILUS agreed to reimburse the company for an investment in Quality International that was cancelled and not returned.
• Al Shola Gas, a majority-owned subsidiary, has an outstanding receivable of $302,412 with its sister company, Al Shola Al Modea Safety and Security LLC, due to customers remitting payments for both entities to only one.
• Quality Industrial Corp. advanced $242,500 to Al Shola Gas for the purchase of two LPG Bobtail trucks, classified under Deposits, Prepayments and Advances.
• As of September 30, 2025, the company owed Fusion Fuel Green PLC $4,061,803, resulting from loans made by Fusion Fuel to split net proceeds from a Purchaser Financing, with these loans to be forgiven upon Preferred Stock Conversion or repaid if transactions unwind.
• One-time settlement payments of $60,000 to Mrs. Bennett (former COO) and $265,000 to Mr. Link (former Chairman) were made as part of pre-agreed arrangements related to their resignations.

Stakeholder Impact

• Shareholders: Experienced a net loss for the nine months ended September 30, 2025, and dilution from significant common stock issuances for convertible note conversions and capital raises. The company's going concern status and reliance on future capital raises pose a risk.
• Employees: Management changes occurred, with new appointments and resignations. One-time payouts to former executives and management were noted.
• Customers (Al Shola Gas): Benefit from new project awards and expanded LPG utility services, indicating continued operational growth and service delivery.
• Creditors (Convertible Note Holders): Many convertible notes were converted into common stock, reducing debt but potentially increasing dilution for existing shareholders. Some notes remain outstanding, and management plans to pay them off.
• Fusion Fuel Green PLC (Majority Shareholder): Provided significant financing and is actively involved in management changes and strategic direction, indicating strong influence and support.

Next Steps

• Allocate resources to Al Shola Gas to enhance efficiency, boost sales, and positively impact financial performance.
• Continue investing in new LPG bobtail trucks for Al Shola Gas, with deliveries expected in Q4 2025.
• Disclose future acquisitions in ongoing reports with the Securities and Exchange Commission.
• Management plans to use borrowings and security sales to mitigate cash flow deficits over the next twelve months.
• Management plans to pay off some or all of the convertible notes during the remainder of FY 2025.
• Final contract approval for an additional engineering project, subject to a Letter of Intent, is anticipated in the near future.

Key Dates

Recommendation

The company exhibits mixed signals. While revenue growth, particularly from the Al Shola Gas acquisition and new project awards, is a positive indicator of operational expansion and market penetration in the UAE's LPG sector, the significant net loss for the nine-month period and the worsening negative working capital are concerning. The substantial one-time expenses for executive settlements and management payouts, while non-recurring, highlight past financial commitments. The company's reliance on future capital raises to address its going concern status and liquidity challenges, coupled with increased related party payables to its majority shareholder, Fusion Fuel Green PLC, suggests a need for careful monitoring. The strategic realignment of management and continued investment in assets like LPG trucks are positive steps, but the financial health remains precarious. A 'hold' recommendation is appropriate as investors should await further clarity on sustained profitability, improved working capital, and successful capital raises before making a more definitive investment decision.

Keywords

Industrial Energy, LPG systems, Gas distribution, UAE, Oil & Gas, Utility sector, SEC filing, 10-Q, Financial results, Acquisition, Al Shola Gas, Fusion Fuel Green PLC, Convertible notes, Working capital