Item 1. Financial Statements
Our financial statements included in this Form 10-Q are as follows:
|
F-1 |
Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021 (audited); |
|
F-2 |
Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (unaudited); |
|
F-3 |
Statement of Stockholders’ Equity (Deficit) for the periods ended September 30, 2022 and 2021 (unaudited); |
|
F-4 |
Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (unaudited); and |
|
F-5 |
Notes to Financial Statements. |
These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q.
In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the
interim period ended September 30, 2022 are not necessarily indicative of the results that can be expected for the full year.
QUALITY INDUSTRIAL CORP.
CONSOLIDATED BALANCE SHEETS
| |
| |
|
| |
September
30, 2022 | |
December
31, 2021 |
ASSETS | |
| | | |
| | |
Current
assets | |
| | | |
| | |
Cash
and cash equivalents | |
| 4,064 | | |
| 15,659 | |
Other
current assets | |
| 37,444,265 | | |
| 178 | |
Total
current assets | |
| 37,448,329 | | |
| 15,837 | |
| |
| | | |
| | |
Other
assets | |
| | | |
| | |
Investment
in Subsidiary (Quality International) | |
| 1,000,000 | | |
| — | |
Prepaid
expenses - long term | |
| — | | |
| 210,293 | |
Total
other assets | |
| 1,000,000 | | |
| 210,293 | |
| |
| | | |
| | |
Total
Assets | |
$ | 38,448,329 | | |
$ | 226,130 | |
| |
| | | |
| | |
LIABILITIES
AND STOCKHOLDERS' DEFICIT | |
| | | |
| | |
Current
liabilities | |
| | | |
| | |
Accounts
payable and accrued liabilities | |
| 33,136,266 | | |
| 207,421 | |
Other
Current Liabilities | |
| 94,571 | | |
| 387,716 | |
Total
current liabilities | |
| 33,230,837 | | |
| 595,137 | |
| |
| | | |
| | |
Long
Term liabilities | |
| | | |
| | |
Convertible
Notes | |
| 1,100,000 | | |
| — | |
Total
Long-Term Liabilities | |
| 1,100,000 | | |
| — | |
| |
| | | |
| | |
Stockholders'
Equity | |
| | | |
| | |
Preferred
stock; $0.001
par value; 1,000,000
shares authorized; 0
and 0 shares issued and outstanding as of as of September 30, 2022, and December 31, 2021, respectively | |
| — | | |
| — | |
Common
stock; $0.001 par value; 200,000,000 shares authorized; 102,883,709 and 94,738,209 shares issued and outstanding as of September
30, 2022, and December 31, 2021, respectively | |
| 102,886 | | |
| 94,740 | |
Additional
paid-in capital | |
| 12,174,975 | | |
| 11,904,190 | |
Stock
Payable | |
| 395,101 | | |
| 395,101 | |
Retained
Earnings/ accumulated Deficit | |
| (10,986,585 | ) | |
| (12,763,038 | ) |
Net
Income | |
| 2,431,115 | | |
| — | |
Total
stockholders' Equity | |
| 4,117,492 | | |
| (369,007 | ) |
| |
| | | |
| | |
Total
liabilities and stockholders' Equity | |
$ | 38,448,329 | | |
$ | 226,130 | |
The accompanying notes are an integral part of these
consolidated financial statements.
QUALITY INDUSTRIAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
For
the Three Months Ended | |
For
the Nine Months Ended |
| |
September
30, 2022 | |
September
30, 2021 | |
September
30, 2022 | |
September
30, 2021 |
| |
| |
| |
| |
|
Revenue | |
| 19,126,800 | | |
| — | | |
| 37,342,800 | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
Cost
of revenues | |
| 12,481,550 | | |
| — | | |
| 25,310,550 | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
Gross
profit | |
| 6,645,250 | | |
| — | | |
| 12,032,250 | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
Operating
expenses | |
| | | |
| | | |
| | | |
| | |
Professional
fees | |
| 37,272 | | |
| 84,297 | | |
| 255,111 | | |
| 253,651 | |
General
and administrative | |
| 3,756,616 | | |
| 4,534,832 | | |
| 7,092,061 | | |
| 4,775,223 | |
Total
operating expenses | |
| 3,793,888 | | |
| 4,619,129 | | |
| 7,347,172 | | |
| 5,028,874 | |
| |
| | | |
| | | |
| | | |
| | |
Profit
from Operations | |
| 2,851,362 | | |
| (4,619,129 | ) | |
| 4,685,078 | | |
| (5,028,874 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other
Non-Operating expense | |
| | | |
| | | |
| | | |
| | |
Interest
on Convertible Notes | |
| 12,447 | | |
| — | | |
| 12,447 | | |
| — | |
Interest
expense | |
| 407,800 | | |
| 1,123 | | |
| 817,584 | | |
| 3,335 | |
Loss
on License Agreement | |
| — | | |
| — | | |
| 104,550 | | |
| — | |
Total
other expense | |
| 420,247 | | |
| 1,123 | | |
| 934,581 | | |
| 3,335 | |
Other
Non-Operating Income | |
| | | |
| | | |
| | | |
| | |
Gain
on forgiveness of debt | |
| — | | |
| — | | |
| 457,071 | | |
| — | |
Net
loss/ profit | |
| 2,431,115 | | |
| (4,620,252 | ) | |
| 4,207,568 | | |
| (5,032,209 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net
profit per common share - basic and diluted | |
| 0.024 | | |
| (0.051 | ) | |
| 0.042 | | |
| (0.055 | ) |
Weighted
average common shares outstanding | |
| 99,928,693 | | |
| 91,379,241 | | |
| 99,928,693 | | |
| 91,379,241 | |
The accompanying notes are an integral part of
these consolidated financial statements.
QUALITY INDUSTRIAL CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
For the
Nine Months Ended September 30, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Preferred
Stock | |
Common Stock | |
| |
| |
| |
| |
|
| |
Shares | |
Amount | |
Shares | |
Amount | |
Additional
Paid-in Capital | |
Stock
Payable | |
Stock
Receivable | |
Accumulated
Deficit | |
Total Stockholders' Equity |
Balance,
December 31, 2021 | |
| — | | |
| — | | |
| 94,738,209 | | |
| 94,740 | | |
| 11,904,190 | | |
| 395,101 | | |
| — | | |
| (12,763,038) | | |
| (369,007) |
Common
stock issued for cash | |
| — | | |
| — | | |
| 3,000,000 | | |
| 3,000 | | |
| 66,549 | | |
| — | | |
| (11,725 | ) | |
| — | | |
| 57,824 |
Common
stock issued for license agreement | |
| — | | |
| — | | |
| 2,550,000 | | |
| 2550 | | |
| 102000 | | |
| — | | |
| — | | |
| — | | |
| 104,550 |
Imputed
interest | |
| — | | |
| — | | |
| — | | |
| — | | |
| 745 | | |
| — | | |
| — | | |
| — | | |
| 745 |
Net
Income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (169,990 | ) | |
| (169,990) |
Balance,
March 31, 2022 | |
| — | | |
| — | | |
| 100,288,209 | | |
| 100,290 | | |
| 12,073,484 | | |
| 395,101 | | |
| (11,725 | ) | |
| (12,933,028 | ) | |
| (375,878) |
Common
stock issued for cash | |
| — | | |
| — | | |
| 595,500 | | |
| 596 | | |
| 26,421 | | |
| — | | |
| 11,725 | | |
| — | | |
| 38,742 |
Imputed
interest | |
| — | | |
| — | | |
| — | | |
| — | | |
| 753 | | |
| — | | |
| — | | |
| — | | |
| 753 |
Reclassification
of imputed interest | |
| — | | |
| — | | |
| — | | |
| — | | |
| (6,283 | ) | |
| — | | |
| — | | |
| — | | |
| (6,283) |
Net
Income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,946,443 | | |
| 245,443 |
Balance,
June 30, 2022 | |
| — | | |
| — | | |
| 100,883,709 | | |
| 100,886 | | |
| 12,094,375 | | |
| 395,101 | | |
| — | | |
| (10,986,585 | ) | |
| (1,603,777) |
Common
stock issued | |
| — | | |
| — | | |
| 2,000,000 | | |
| 2,000 | | |
| 80,600 | | |
| — | | |
| — | | |
| — | | |
| 82,600 |
Net
Income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 2,431,115 | | |
| 2,431,115 |
Balance,
September 30,2022 | |
| — | | |
| — | | |
| 102,883,709 | | |
| 102,886 | | |
| 12,174,975 | | |
| 395,101 | | |
| — | | |
| (8,555,470 | ) | |
| 4,117,492 |
For the Nine Months
Ended September 30, 2021
|
|
| |
| Preferred
Stock | | |
| Common
Stock | | |
| | | |
| | | |
| | | |
| | | |
| |
| |
| Shares | | |
| Amount | | |
| Shares | | |
| Amount | | |
| Additional
Paid-in
Capital | | |
| Stock
Payable | | |
| Stock
Receivable | | |
| Accumulated
Deficit | | |
| Total
Stockholders' Equity |
Balance,
December 31, 2020 | |
| — | | |
$ | — | | |
| 104,964,265 | | |
$ | 104,966 | | |
$ | 7,232,305 | | |
$ | 223,226 | | |
$ | — | | |
$ | (7,583,538 | ) | |
$ | (23,041) |
Common stock issued for services | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 68,750 | | |
| — | | |
| — | | |
| 68,750) |
Redemption of common stock
for cash | |
| — | | |
| — | | |
| (14,000,000 | ) | |
| (14,000 | ) | |
| 13,999 | | |
| — | | |
| — | | |
| — | | |
| (1) |
Imputed interest | |
| — | | |
| — | | |
| — | | |
| — | | |
| 745 | | |
| | | |
| — | | |
| — | | |
| 745 |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (189,797 | ) | |
| (189,797) |
Balance,
March 31, 2021 | |
| — | | |
$ | — | | |
| 90,964,265 | | |
$ | 90,966 | | |
$ | 7,247,049 | | |
$ | 291,976 | | |
$ | — | | |
$ | (7,773,335 | ) | |
$ | (143,344) |
Common stock issued for services | |
| — | | |
| — | | |
| 25,000 | | |
| 25 | | |
| 49,475 | | |
| 34,375 | | |
| — | | |
| — | | |
| 83,875 |
Imputed interest | |
| — | | |
| — | | |
| — | | |
| — | | |
| 754 | | |
| — | | |
| — | | |
| — | | |
| 754 |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (222,160 | ) | |
| (222,160) |
Balance,
June 30, 2021 | |
| — | | |
$ | — | | |
| 90,989,265 | | |
$ | 90,991 | | |
$ | 7,297,278 | | |
$ | 326,351 | | |
$ | — | | |
$ | (7,995,495 | ) | |
$ | (280,875) |
Common stock issued for services | |
| — | | |
| — | | |
| 1,686,111 | | |
| 1,686 | | |
| 4,457,703 | | |
| 34,375 | | |
| — | | |
| — | | |
| 4,493,764 |
Imputed interest | |
| — | | |
| — | | |
| — | | |
| — | | |
| 761 | | |
| — | | |
| — | | |
| — | | |
| 761 |
Common stock issued for cash | |
| — | | |
| — | | |
| 162,000 | | |
| 162 | | |
| 28,100 | | |
| — | | |
| (8,262 | ) | |
| — | | |
| 20,000 |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (4,620,252 | ) | |
| (4,620,252) |
Balance,
September 30, 2021 | |
| — | | |
$ | — | | |
| 92,837,376 | | |
$ | 92,839 | | |
$ | 11,783,842 | | |
$ | 360,726 | | |
$ | (8,262 | ) | |
$ | (12,615,747 | ) | |
$ | (386,602) |
The accompanying notes are an integral part of
these consolidated financial statements.
QUALITY INDUSTRIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
| |
For
the Nine Months Ended |
| |
September
30,2022 | |
September
30,2021 |
Cash
Flows from Operating Activities | |
| | | |
| | |
Net
profit | |
$ | 4,207,568 | | |
$ | (5,032,209 | ) |
Adjustments
to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Finance
Cost | |
| 830,031 | | |
| — | |
Loss
on license agreement | |
| 104,550 | | |
| — | |
Stock
Based Compensation | |
| — | | |
| 4,646,389 | |
Gain
on settlement of loss | |
| 457,071 | | |
| — | |
Increase
in Current assets | |
| (37,444,087 | ) | |
| 1,549 | |
Increase
in Accounts payable | |
| 32,635,700 | | |
| 55,034 | |
Net
cash used in operating activities | |
| (123,309 | ) | |
| (329,237 | ) |
| |
| | | |
| | |
Cash
Flows from Investing Activities | |
| | | |
| | |
Net
cash used in investing activities | |
| (789,707 | ) | |
| — | |
| |
| (789,707 | ) | |
| — | |
Cash
Flows from Financing Activities | |
| | | |
| | |
Issuance
of Convertible Note | |
| 1,100,000 | | |
| — | |
Finance
Cost | |
| (830,031 | ) | |
| — | |
Loss
on license agreement | |
| (104,550 | ) | |
| — | |
Gain
on settlement of loss | |
| 457,071 | | |
| — | |
Stock
redemption for cash | |
| — | | |
| (1 | ) |
Related
party line of credit | |
| — | | |
| 295,000 | |
Proceeds
from issuance of common stock | |
| 278,931 | | |
| 20000 | |
Net
cash from financing activities | |
| 901,421 | | |
| 314,999 | |
| |
| | | |
| | |
Net
increase (decrease) in Cash | |
| (11,595 | ) | |
| (14,238 | ) |
| |
| | | |
| | |
Beginning
cash balance | |
| 15,659 | | |
| 19,564 | |
Ending
cash balance | |
$ | 4,064 | | |
$ | 5,326 | |
The accompanying notes are an integral part of
these consolidated financial statements.
QUALITY INDUSTRIAL CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
AND NATURE OF BUSINESS
Organization
Quality Industrial Corp. (“we”, “our”,
the "Company") was incorporated in the state of Nevada in May 1998 as Sensor Technologies Inc. On June 27, 2022, the Company
amended its articles of incorporation and changed its name from Wikisoft Corp. to Quality Industrial Corp.
Nature of operations
The Company is a public M&A Company focused on the Industrial,
Oil & Gas and Utility Sectors. We aim to be a global leader in process manufacturing and engineering for the Industrial, Oil &
Gas, and Utility sectors.
Change of control
On May 28, 2022, Modern Art Foundation Inc. (“Modern Art”)
Rene Lauritsen and Fastbase Holding Inc. agreed to transfer 77,669,078 shares of common stock in the Company to Ilustrato Pictures International
Inc. (“Ilustrato”).
Pursuant to a Stock Transfer Agreement, Ilustrato purchased
the shares for an aggregate amount of $500,000. Mr. Nicolas Link is CEO of Ilustrato who is the beneficial owner.
As a result of this transaction, there has been a change in
control of the Company. The 77,669,078 shares transferred amounts to 77% of the outstanding shares in our Company. Consequently, Ilustrato is
now able to unilaterally control the election of our board of directors, all matters upon which shareholder approval is required and,
ultimately, the direction of our Company.
As a result of the Change of Control, Mr. Quintal resigned
as Chairman of the Board, and Mr. Link was appointed as the Company's Chairman of the Board. There was no known disagreement with Mr.
Quintal on any matter relating to our operations, policies, or practices. There are no further arrangements known to the Company, the
operation of which may, at a subsequent date, result in a change in control of the Company. There are no arrangements or understandings
among Modern Art Foundation Inc. (“Modern Art”) Rene Lauritsen and Fastbase Holding Inc., Ilustrato and their associates
with respect to election of directors or other matters.
2. SUMMARY OF SIGNIFICANT POLICIES
Basis of Presentation and Principles of consolidation
The accompanying condensed consolidated financial statements
represent the results of operations, financial position and cash flows of the Company prepared on the accrual basis of accounting and
conform to accounting principles generally accepted in the United States of America.
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. – On March 31, 2019, the Company, a Nevada corporation, entered into an Agreement
and Plan of Merger with WikiSoft DE, a Delaware corporation, and WikiSoft Acquisition, Inc., a Delaware corporation. WikiSoft Acquisition,
Inc. merged with and into WikiSoft DE (the “Merger”) on April 30, 2019, with the filing of Articles of Merger with the Delaware
Secretary of State. All significant inter-company transactions and balances have been eliminated.
Use of estimates
The preparation of condensed consolidated financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of
the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates. Significant estimates include estimates used to review the Company’s, impairments and estimations
of long-lived assets, revenue recognition of Contract based revenue, allowances for uncollectible accounts, and the valuations of non-cash
capital stock issuances. The Company bases its estimates on historical experience and on various other assumptions that are believed
to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different
assumptions or conditions.
Fair value of financial instruments
|
• |
Level 1 - |
Quoted prices in active markets for identical assets or
liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets. |
|
|
|
|
|
• |
Level 2 - |
Quoted prices for similar assets and liabilities in active
markets; quoted prices included for identical or similar assets and liabilities that are not active; and model-derived valuations in
which all significant inputs and significant value drivers are observable in active markets. These are typically obtained from readily
available pricing sources for comparable instruments. |
|
|
|
|
|
• |
Level 3 - |
Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own beliefs about the assumptions that market participants would use in pricing the asset or liability, based on the best information available in the circumstances. |
The carrying value of cash, accounts payable and accrued expenses,
and debt approximate their fair values because of the short-term nature of these instruments. Management believes the Company is not exposed
to significant interest or credit risks arising from these financial instruments Fair value is defined as the exchange price that would
be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value
maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a fair value hierarchy based on
three levels of inputs, of which the first two are considered observable and the last unobservable.
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic
606. The accounting policy on revenue recognition is provided below.
Service Contracts
The company recognizes service contract revenue over time, as
performance obligations are satisfied, due to the continuous transfer of control to the customer. Service contracts are generally accounted
for as a single unit of account (a single performance obligation) and are not segmented between types of services. The company recognizes
revenue based primarily on contract cost incurred to date compared to total estimated contract cost (an input method). The input method
is the most faithful depiction of the company’s performance because it directly measures the value of the services transferred to
the customer. Changes to total estimated contract cost or losses, if any, are recognized in the period in which they are determined as
assessed at the contract level. Pre-contract costs are expensed as incurred unless they are expected to be recovered from the client.
Project mobilization costs are generally charged to project costs as incurred when they are an integrated part of the performance obligation
being transferred to the client. Customer payments on service contracts are typically due in advance, depending on the contract.
For service contracts in which the company has the right to
consideration from the customer in an amount that corresponds directly with the value to the customer of the company’s performance
completed to date, revenue is recognized when services are performed and contractually billable. Service contracts that include multiple
performance obligations are segmented between types of services. For contracts with multiple performance obligations, the company allocates
the transaction price to each performance obligation using an estimate of the stand-alone selling price of each distinct service in the
contract. Revenue recognized on service contracts that have not been billed to clients is classified as a current asset under contract
assets on the Consolidated Balance Sheet. Amounts billed to clients more than revenue recognized on service contracts to date are classified
as a current liability under contract liabilities. Customer payments on service contracts are typically due within 30 days of billing,
depending on the contract.
Cash and cash equivalents
For purposes of the statements of cash flows, the Company considers
all highly liquid investments and short-term debt instruments with original maturities of six months or less to be cash equivalents.
Stock-based compensation
The Company follows the guidelines in FASB Codification Topic
ASC 718-10 “Compensation-Stock Compensation,” which requires companies to measure the cost of employee services received in
exchange for an award of an equity instrument based on the grant-date fair value of the award. Stock-based compensation expense is recognized
on a straight-line basis over the requisite service period. The Company accounts for non-employee share-based awards in accordance with
FASB ASC 505-50 under which the awards are valued at the earlier of a commitment date or upon completion of the services, based on the
fair value of the equity instruments, and are recognized as expense over the service period.
Earnings (loss) per share
The Company reports earnings (loss) per share in accordance
with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 260-10 “Earnings
Per Share,” which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per
share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average common
shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings
of an entity. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares
are excluded if their effect is anti-dilutive.
Long-lived Assets
In accordance with the Financial Accounting Standards Board
("FASB") Accounts Standard Codification (ASC) ASC 360-10, "Property, Plant and Equipment," the carrying value of intangible
assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment.
The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the
asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.
Income taxes
The Company accounts for its income taxes in accordance with
FASB Codification Topic ASC 740-10, “Income Taxes”, which requires recognition of deferred tax assets and liabilities for
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Recently issued accounting pronouncements
The Company has evaluated all other recent accounting pronouncements
and believes that none of them are expected to have a material effect on the Company's financial position, results of operations or cash
flows.
3. GOING CONCERN
The accompanying condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.
4. PURCHASE OF MEMBERSHIP INTEREST IN ETHERALABS LLC
On February 28, 2022, the Company entered
into a definitive agreement to acquire 51% of
Etheralabs LLC for 2,550,000 of
the Company’s common stock valued at $104,550.
Etheralabs LLC is a New York City based venture lab and ecosystem that invests in, builds, and deploys disruptive
technologies across the Blockchain space, and the transaction includes a global access to Etheralabs´ full stack of technologies across the
Blockchain and global funding landscape. Etheralabs ecosystem allows development and finance partnerships throughout the blockchain
world and beyond, and connects the blockchain community, investors and venture capital to relevant data intelligence and direct
investment opportunities. Wikisoft intends to ensure that Etheralabs future product and technology roadmap supports wikiprofile.com
and the upcoming Wikifunding platform aiming to accelerate matching investors to startups.
On May 25, 2022 the Company entered into
an agreement to transfer its 51% ownership interest in Etheralabs LLC to settle $300,000 of Line of credit – related party
debt, as well as $41 of interest.
5. RELATED PARTY TRANSACTIONS
As of September 30, 2022 and December 31, 2021, the Company
had amounts owed by Ilustrato Pictures International Inc, a majority shareholder of the Company, of $22,875 and $0, respectively.
6. ADVANCES PAYABLE
As of September 30, 2022, the Company has no advance payable.
7. LINE OF CREDIT
On December 30, 2020 the company entered into a $1,000,000 revolving
note agreement. The note carries a 0.01% interest rate and is due on the later of the date the Company has the funds to repay the note
or 24 months. On May 25, 2022 the balance of the line of credit was settled in full with the transfer of the Companys 51% ownership interest
in Etheralabs LLC to the shareholder. As of September 30, 2022 and December 31, 2021, the note had a balance of $0 and $295,000, respectively
8. LOANS PAYABLE
| • | On
June 1, 2020, the Company entered into a loan agreement with Fastbase Inc., in the amount
of $30,215. The amount bears no interest and is due upon request. |
| | |
| • | On
September 1, 2020, the Company entered into a loan agreement with Fastbase Inc., in the amount
of $15,000. The note bears an interest rate of 4.25% and is due on September 1, 2022. |
| | |
| • | On
October 24, 2020, the Company entered into a loan agreement with Fastbase Inc., in the amount
of $7,875. The note bears an interest rate of 4.25% and is due on January 1, 2023. On April
29, 2022 the Company paid the loan in full as well as accrued interest of $506. As of September
30, 2022 the balance of principal owed was $0. |
| | |
| • | On
December 3, 2020, the Company entered into a loan agreement with Fastbase Inc., in the amount
of $10,000. The note bears an interest rate of 4.25% and is due on January 1, 2023. On January
20, 2022 the Company paid the loan in full as well as accrued interest of $477. As of September
30, 2022 the balance of principal owed was $0. |
| | |
| • | On
May 15, 2022, the Company entered into a loan agreement with Fastbase Inc., in the amount of
$37,000. The note bears an interest rate of 3% and is due on January 1, 2024. On May 25,
2022 the loan was forgiven in full as well as accrued interest of $30, and a gain on forgiveness
of debt of $37,030 was recorded. As of September 30, 2022 the balance of principal owed was
$0. |
| | |
| • | As
of September 30, 2022, and December 31, 2021, the Company had loans payable of $0 and $63,090
respectively. The Company entered into a Debt Conversion agreement on 28th July
2022 and converted the full amount of Debt into 2,000,000 of Common Stock. |
9. NOTES PAYABLE
On August 3, 2022, the Company issued to an
accredited investor a two-year convertible promissory note in the principal amount of $1,100,000. The Note bears interest at 7% per annum.
The Company has the right to prepay the Note at any time. All principal on the Note is convertible into shares of our common stock after
six months from issuance at the election of the holder at a conversion price equal $1.00 per share.
10. STOCKHOLDERS’ EQUITY
The Company’s authorized capital
stock consists of 200,000,000 shares of common stock and 1,000,000 shares of preferred stock, par value $0.001 per share. As of September
30, 2022 and December 31, 2021, there were 102,883,709 and 94,738,209 shares of common stock issued and outstanding, respectively.
As of September 30, 2022 and December 31,
2021, there were 0 and 0 shares of preferred stock of the Company issued and outstanding, respectively.
Common Stock issuances during the Nine months
ending September 30, 2022
|
• |
On January 3, 2022, the Company issued 500,000 shares of common stock for $20,523 cash. |
|
|
|
|
• |
On January 10, 2022, the Company issued 500,000 shares of common stock for $15,975 cash. |
|
|
|
|
• |
On March 10, 2022, the Company issued 500,000 shares of common stock for $7,688 cash. |
|
|
|
|
• |
On March 21, 2022, the Company issued 750,000 shares of common stock for $13,638 cash. |
|
|
|
|
• |
On March 29, 2022, the Company issued 750,000 shares of common stock for $11,725 cash. |
|
|
|
|
• |
On February 28 2022 the company entered into a definitive agreement to acquire 51% of Etheralabs
LLC for 2,550,000 of the Company’s common stock valued at $104,550. See note 4 for additional information. |
|
|
|
|
• |
On May 10, 2022 the Company issued 595,500
shares of common stock for $27,017
cash. |
|
|
|
|
• |
On July 28, 2022 the company entered into a Debt conversion agreement and issued 2,000,000 shares of common stock. |
11. SUBSEQUENT EVENTS
On October 21, 2022, Carsten Falk resigned as our Chief Executive Officer
and John-Paul Backwell resigned as our Chief Commercial Officer. Our board of directors appointed Mr. Backwell as our Chief Executive
Officer and Mr. Falk as our Chief Commercial Officer.
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Forward-Looking Statements
Certain statements, other than purely historical information, including
estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon
which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking
statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,”
“estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,”
“will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking
statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995 and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are
based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially
from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.
Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include but are not
limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and
generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements
and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including
additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
Business Overview
Change in Control
On May 28, 2022, Modern Art Foundation Inc. (“Modern
Art”), Rene Lauritsen and Fastbase Holding Inc. agreed to transfer 77,669,078 shares of their common stock in our Company, Quality
Industrial Corp., to Ilustrato Pictures International Inc. (“ILUS”).
Pursuant to a Stock Purchase Agreement, ILUS purchased the shares for
an aggregate amount of $500,000. Mr. Nicolas Link is CEO and Chairman of ILUS which
is the beneficial owner.
As a result of this transaction, there has been
a change in control of our Company. The 77,669,078 shares transferred amounts to 75.5 % of the outstanding shares in our Company. Consequently,
ILUS is now able to unilaterally control the election of our board of directors, all matters upon which shareholder approval is required
and, ultimately, the direction of our Company.
As a result of the change
of control, Mr. Quintal resigned as Chairman of the Board, and Mr. Link was appointed as the Company's Chairman of the Board. There was
no known disagreement with Mr. Quintal on any matter relating to our operations, policies, or practices.
On May 25, 2022, we entered into a Debt Conversion Agreement (the “Agreement”)
with our prior officer and director, Rasmus Refer. Pursuant to the Agreement, we transferred our 51% interest in Etheralabs LLC to Mr.
Refer. In exchange, Mr. Refer agreed to cancel $300,041 in loans including interest owed by our company to Mr. Refer.
In line with the change in control and business direction, our Company
changed its name to Quality Industrial Corp. with the ticker QIND, with a market effective
date of August 4, 2022.
As a result of these transactions, Quality Industrial Corp. is now a public
company focused on the Industrial, Oil & Gas and Utility Sectors and a subsidiary to ILUS.
Change in Business Direction
Quality Industrial Corp. is the Industrial and Manufacturing subsidiary
of ILUS. QIND has planned future acquisitions that are contemplated in this division. We
intend to disclose these acquisitions, as they happen, in our ongoing reports with the Securities and Exchange Commission.
On June 30, 2022, ILUS signed a binding Letter of
Intent for the Company to acquire a 51% interest in Quality International Co Ltd FCZ (QI), an international process engineering company
and manufacturer of custom solutions for the Oil and Gas, Power/Energy, Water, Desalination, Wastewater, Offshore and Public Safety. It
has Oil and Gas industry certifications in place and is on several global preferred vendor lists including but not limited to BP, Shell,
Total, Chevron, Sonatrach, Sasol & Gasco.
The agreed Purchase Price for the 51% of outstanding
shares of QI which is linked to financial performance of the company, is up to $135,000,000, with payments scheduled in tranches, of which
the first tranche payment of $1,000,000 million was made to QI on August 4, 2022, pursuant to the
binding Letter of Intent.
On August 3, 2022, we issued to an accredited investor
a two-year convertible promissory note in the principal amount of $1,100,000 (the “Note”). The Note bears interest at 7% per
annum. We have the right to prepay the Note at any time. All principal on the Note is convertible into shares of our common stock after
six months from issuance at the election of the holder at a conversion price equal $1.00 per share.
The Company expects to continue to acquire and drive broad-based market
awareness among both sections of our company focusing on the end user of our products. Our marketing channels continue to expand as our
number of satisfied customers increase, creating additional referrals to augment our traditional print, online and social media efforts.
We also rely heavily on our relationships with trade partners in the construction industry for involvement with their projects.
Our offices are located at 315 Montgomery Street, San Francisco, CA 94104,
and our telephone number is 800-706-0806. Our website address is www.qualityindustrialcorp.com and our email address is info@qualityindustrialcorp.com.
Information contained on, or accessible through, the foregoing website is not a part of, and is not incorporated by reference into, this
Quarterly Report on Form 10-Q.
Results of Operation for the Nine Months Ended September 30, 2022 and
2021
Revenues
We earned USD 37,342,800 revenues for the nine months
ended September 30, 2022, or 2021. The increase in revenue is a result of revenue from work in progress. We recently entered into a binding
letter of intent to acquire an international process engineering company and therefore, the company will generate revenues for the remainder
2022 as a result of the consolidation of the acquisition into our financial results.
Operating Expenses
Operating expenses increased from $5,028,874 for the
nine months ended September 30, 2021, to $7,347,172 for the nine months ended September 30, 2022. The operating expenses for the nine
months correspond to actual operating expenses incurred to achieve the revenue. However, 2021 expenses include major portion of Stock
based compensation. This year so far company have not issued any stock for services.
We anticipate our operating expenses will increase as we undertake our
plan of operations associated with the international process engineering company. The increase will be attributable to administrative
and operating costs associated with our business activities and the professional fees associated with our reporting obligations.
Other Income
$352,521 was earned for the nine months ended September
30, 2022, as compared with no other income for the same period ended 2021. Our other income in 2022 was the result of a gain on settlement
and forgiveness of debt, offset mainly by a loss on a license agreement.
Net Income/Net Loss
We incurred
Net Income of $4,207,568 for the nine months ended September 30, 2022, compared to a
net loss of $5,032,209 for the same period ended September 30, 2021. Quarter on Quarter (QoQ) we saw a 20.5% increase in Net Income of
$412.971 from $2,018,144 in Q2 to $2,431,115 in Q3. The main driver was a decrease in cost of revenue QoQ resulting in a Net Income
margin improvement from 11% to 12.7% QoQ. The increase in Net Profit for the quarter resulted in a Net Profit per common share (Earnings
Per Share - EPS) for the three months ended September 30, 2022 of $0.024 with an annualized EPS value of $0.1 per common share.
Liquidity and Capital Resources
As of September 30, 2022, we had total current assets
of $ 37,448,329 and total current liabilities of $33,230,837. We had a working capital Surplus of $4,217,492 as of September 30, 2022.
This compares with a working capital deficit of $579,300 as of December 31, 2021.
Net cash used in operating activities was $123,309 for the nine months ended September 30, 2022, as compared with $329,237 in cash for
the same period ended 2021.
Financing activities provided $901,421 in cash for the nine months ended
September 30, 2022, as compared with $314,999 in cash provided for the same period ended 2021.
Going Concern
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, liquidation of liabilities,
the continued ability to raise capital as and when required, in the normal course of business.
Impact of Acquisitions
Historically a significant component of our growth has been through the
acquisition of businesses in our targeted sectors. We typically incur upfront costs as we incorporate and integrate acquired businesses
into our operating philosophy and operational excellence. This includes consolidation of supplies and raw materials, optimized logistics
and production processes, and other restructuring and improvements initiatives. The benefits of these integration efforts and upcoming
planned acquisitions may not positively impact our financial results instantly but has historically been the case in future periods.
Critical Accounting Policies.
In December 2001, the SEC requested that all registrants
list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical
accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires
management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect
of matters that are inherently uncertain. Our critical accounting policies are disclosed Note 2 of our unaudited financial statements
included in this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Recently Issued Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are
in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company
does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its
financial position or results of operations.