Overview
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.
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. Nicholas Link, beneficial owner of ILUS, was appointed as our
Chairman of the Board, Mr. John-Paul Blackwell 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 focused on the Industrial, Oil & Gas and Utility Sectors
and a subsidiary to ILUS.
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.
Quality International Co Ltd FCZ
After ILUS acquired control, on June 30, 2022, it
signed a binding Letter of Intent for our Company to acquire a controlling interest in Quality International Co Ltd FCZ (“QI”),
an international process manufacturing company, manufacturing custom solutions for the Oil and Gas, Power/Energy, Water, Desalination,
Wastewater and Offshore sectors. It 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 QI, 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 Binding Letter of Intent with QI contemplated
a period of due diligence followed by entry into a Stock Purchase Agreement. On January 18, 2023, we entered into a Share Purchase Agreement
with the shareholders of Quality Industrial, which agreement provided for our purchase of 78 of the 150 outstanding shares of QI for
a 52% interest in the company. The Shares will be held by a company in Dubai called “Quality Industries Holding Ltd.,” a
freezone company under the regulations of Abu Dhabi General Markets and laws of United Arab Emirates. This entity will be our wholly
owned subsidiary. All closing documents were executed for the transaction on March 6, 2023.
The purchase price for the Shares 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 Purchase
Agreement filed with this Form 10-K and displayed in the table set below:
Tranche |
Timeframe
and Conditions |
Amount |
Paid
By |
Paid
To |
1 |
Paid
after signing of Letter of Intent (June 28, 2022) |
$1,000,000 |
First
Party |
Gerab
National Enterprise LLC |
2 |
Following
signing of this Agreement and subject to closing as per clause 1.03, payment to be made on or before 18 February 2023. |
$15,000,000
|
First
Party |
Quality
International Co Ltd FZC |
3 |
On
or before 210 calendar days after Closing |
$66,000,000 |
First
Party |
$39,000,000
to Gerab National Enterprise LLC and $6,000,000 to Saseendran Kodapully Ramakrishnan and $21,000,000 to Quality International Co
Ltd FZC |
4 |
Within 30 days
of H1 2023 Auditor Certified Financials |
*$14,000,000 |
First
Party |
$6,000,000
to Gerab National Enterprise LLC and $5,000,000 to Saseendran Kodapully Ramakrishnan and $3,000,000 to Quality International Co Ltd
FZC |
*Based on H1 2023
Forecast being met: |
EBITDA
target: $ 11,164,105 |
5 |
Within 30 days
of Year End 2023 Audited Financials |
*$20,000,000 |
First
Party |
$15,000,000
to Gerab National Enterprise LLC and $2,000,000 to Saseendran Kodapully Ramakrishnan and $3,000,000 to Quality International Co Ltd
FZC |
*Based
on Year End 2023 Forecast being met - EBITDA target: $ 22,328,211 |
6 |
Within 30 days
of Year End 2024 Audited Financials |
*$21,000,000 |
First
Party |
$15,000,000
to Gerab National Enterprise LLC and $3,000,000 to Saseendran Kodapully Ramakrishnan and $3,000,000 to Quality International Co Ltd
FZC |
*Based
on Year End 2024 Forecast being met - EBITDA target: $ 27,144,231 |
The Purchase Agreement also contains certain restrictive
covenants whereby the shareholders selling the Shares are prohibited from (a) competing with the business of the Company, (b) soliciting
employees of the Company and (c) intentionally interfering with the Company’s business relationships, in each case during the two-year
period immediately following the Closing.
Following its acquisition by our Company, QI will
continue its operations as a process manufacturer and the Company plans to continue acquiring businesses in the Industrial and Manufacturing
Sectors.
Shareholders’ Agreement
As a condition of the Purchase Agreement, we have
entered into a Shareholders’ Agreement with the other two Shareholders of QI to, among other things, establish the governance of
QI, restrictions on share transfers, the financing of QI going forward and to govern disputes among Shareholders.
We shall occupy two
non-paid board seats of QI. There is another board seat for existing QI shareholders. A final independent board seat is to be chosen
by us and the existing Shareholders. Within fifteen (15) months from the date of the SPA, we
will assist the newly created board by arranging up to $100,000,000 USD in the form of debt financing to
be secured against the financials of QI, for the benefit of QI’s execution of long-term orders and projects and to meet the cashflow
requirements of QI.
Petro Line FZ LLC
On January 27, 2022, QIND, signed a Share Purchase
Agreement to acquire 51% control of Petro Line FZ-LLC (Petro Line), an established an oil refinery providing oil refining services
registered in the United Arab Emirates. The purchase price for the Shares shall be up to $1,530,000 in cash, paid in three tranches,
subject to the achievement of financial milestones presented in a schedule of payments which are set forth in the Purchase Agreement
filed with this Form 10-K.
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 https://petroline-refinery.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 Annual Report on Form 10-K.
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.
Quality International Co Ltd FCZ
We signed a Purchase Agreement to acquire a 52% interest
in Quality International Co Ltd FCZ on January 18, 2023.
Quality International specializes in the following
industries and field of activities set below in the graphics:
| · | Refineries
& Petrochemicals Industry |
| · | Chemical,
Fertilizer, Metals & Mineral Processing Industry |
| · | Water
& Wastewater Treatment Plants |
| · | Power
& Desalination Industry |
Manufacturing Range:
| 1. | Pressure
Vessels, Reactors & Columns. All metallurgies with shell thickness up to 135 mm: |
| § | Clad
Steels (SS, Inconel, Incoloy, Ti) |
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)
3.
Pipe Spools Fabrication and Piping Systems:
Materials of Construction:
- Carbon Steel / LTCS
- Stainless Steel
- Duplex & Super Duplex SS
- Non-Ferrous Alloys
- Clad Steel
- CS Rubber Lined
- Fiber Reinforced Plastic
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
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
Intellectual Property
QI does not own its 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.
QI 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
A list
of some QI’s competitors is provided below:
| · | IFS
Solutions |
| · | Harris
Pye |
| · | Aarya
Engineering |
Employees
We have 5 employees in QIND consisting of the
Officers and our Director and QI 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.
Petro Line FZ LLC
On January 27, 2022, QIND, signed a Share Purchase
Agreement to acquire 51% control of Petro Line FZ-LLC (Petro Line), an established oil refinery providing oil refining services
registered in the United Arab Emirates. The purchase price for the Shares shall be up to $1,530,000 in cash, paid in three tranches,
subject to the achievement of financial milestones presented in a schedule of payments which are set forth in the Purchase Agreement
filed with this Form 10 and scheduled below. The acquisition closed on January 27, 2023.
Tranche |
|
Timeframe and Conditions |
|
Amount |
|
Paid By |
|
Paid To |
1 |
|
|
To be paid within 14 days of signing
this Share Purchase Agreement (closing). Payment to be utilized towards the restoration of the RAK facility with factory restoration
to be completed and full operational capacity obtained within 2 months from the date of payment. |
|
$ |
500,000 |
|
|
QIND |
|
Petro
Line |
2 |
|
|
To be paid on or within 6 Months after closing,
provided mutually agreed performance and KPIs are met. |
|
$ |
500,000 |
|
|
QIND |
|
Petro
Line |
3 |
|
|
To be paid on or within 12 Months after closing,
provided mutually agreed performance and KPIs are met. |
|
$ |
500,000 |
|
|
QIND |
|
Petro
Line |
The minimum agreed performance and KPIs for tranches
2 & 3 are set forth below:
Year |
EBIDTA
USD |
2023 |
1,609,671.17 |
2024 |
1,690,154.73 |
Manufacturing Range:
Petro Line is an oil refinery
which refines crude oil of all kinds and re-refines or re-separates various spent oil extracts, petroleum and chemical materials resulting
from incomplete distillation operations or from production lines, washing tanks of ships or other chemical processes in factories. Below
is the current facilities owned by Petro Line for the purposes of providing the refining services:
The final product tanks store a various
types of final product dependent on customer requirement. It is mainly possible to specify the following materials:
| • | White
light products (Naphtha – Kerosene – Solvents) |
| • | Heavy
Products (Fuel Oil – Cutter Stock – Assorted Heavy Distillers) |
We
have two sets of heat exchangers on site. The first is used for condensing and cooling the light picks, the second set is for cooling
the heavy cuts.
Our Weigh-bridges are
mainly used for weighing large vehicles such as trucks or containers. Accurate weighing maintains efficiency by providing exact figures
to maintain inward and outward goods.
Our state-of-the-art firefighting systems are critical to our
protection of employees, customers and property. At our factory, we operate 3 firefighting pump systems accompanied by several large
water and foam storage stations.
Our Scada PLC Automation Panels ensure efficient operations
and allow for scalable expansion of the facility.
Our operation tanks contain raw materials during the refining
stage, and its capacity is 150 tons of raw materials. We are expanding this capacity in the near future with additional tanks. The current
tank is completely isolated to preserve heat and reduce the time required for refining, thus raising the overall production capacity
of the unit.
Our cylindrical distillation column provides high flexibility
and premium quality of distilled materials. We offer flexibility to distill a wide range of raw materials with specifications that suit
market needs. Distillation takes place inside our fully insulated vertical cylindrical tower where raw materials are separated into their
required cuts.
Competition
A list of Petro Line FZ-LLC competitors is provided
below:
|
• |
Takreer Refinery |
|
• |
Eagle Oil Refining Co LLC |
Employees
As of December 31, 2022, we had approximately 18 employees
in Petro Line FZ-LLC. 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 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, and our
current CEO and sole director were appointed thereafter as described in detail below.
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.
On August 4, 2022, 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.”
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.
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 |
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.
An investment in our securities involves a high degree
of risk. In addition to the other information contained in this Registration Statement on Form 10, 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. In assessing the risks below, you should also refer to the other information contained in this Form 10, including the
financial statements and the related notes, before deciding to purchase any of our securities.
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.
Risks Relating to Macro Conditions and
Our Financial Condition
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.
Although this is presently not the case, nor do we
currently foresee it, 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. 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.
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. 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. 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. 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 U.S. 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.
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.
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 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.
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.
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 however pegged to the US 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 of the Company’s 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 subsidiaries 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.
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 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 detail related to this risk, see Item 8, “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 and Petro Line both have General
Liability Cover.
Failure by us to Maintain the Proprietary Nature of our Technology,
Intellectual Property and Manufacturing Processes Could Have a Material Adverse Effect on our Business, Operating Results, Financial
Condition, Stock Price, and on our Ability to Compete Effectively.
We principally rely upon patent, trademark, copyright,
trade secret and contract law to establish and protect our proprietary rights. There is a risk that claims allowed on any patent licenses
or trademarks we hold may not be broad enough to protect our technology. In addition, our patent licenses or trademarks may be challenged,
invalidated or circumvented and we cannot be certain that the rights granted thereunder will provide competitive advantages to us. Moreover,
any current or future issued or licensed patents, or trademarks, or currently existing or future developed trade secrets or know-how
may not afford sufficient protection against competitors with similar technologies or processes, and the possibility exists that certain
of our already issued patents or trademarks may infringe upon third party patents or trademarks or be designed around by others. In addition,
there is a risk that others may independently develop proprietary technologies and processes, which are the same as, substantially equivalent,
or superior to ours, or become available in the market at a lower price.
In addition, foreign laws treat the protection of
proprietary rights differently from laws in the United States and may not protect our proprietary rights to the same extent as U.S. laws.
The failure of foreign laws or judicial systems to adequately protect our proprietary rights or intellectual property, including intellectual
property developed on our behalf by foreign contractors or subcontractors may have a material adverse effect on our business, operations,
financial results, and stock price.
There is a risk that we have infringed or in the future
will infringe patents or trademarks owned by others, that we will need to acquire licenses under patents or trademarks belonging to others
for technology potentially useful or necessary to us, and that licenses will not be available to us on acceptable terms, if at all.
We may have to litigate to enforce our patents or
trademarks or to determine the scope and validity of other parties’ proprietary rights. Litigation could be very costly and divert
management’s attention. An adverse outcome in any litigation may have a severe negative effect on our financial results and stock
price. To determine the priority of inventions, we may have to participate in interference proceedings declared by the United States
Patent and Trademark Office or oppositions in foreign patent and trademark offices, which could result in substantial cost and limitations
on the scope or validity of our patents or trademarks.
We also rely on trade secrets and proprietary know-how,
which we seek to protect by confidentiality agreements with our employees, consultants, service providers and third parties. There is
a risk that these agreements may be breached, and that the remedies available to us may not be adequate. In addition, our trade secrets
and proprietary know-how may otherwise become known to or be independently discovered by others.
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.
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 and a report by our independent auditors
addressing these assessments. 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 subsidiaries operate in certain
countries that are 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.
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.
From time to time, certain subsidiaries have limited business dealings in countries subject to comprehensive sanctions.
Certain of our subsidiaries 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 Subsidiaries
We account for substantially all long-term
contracts 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.
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.
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 Chairman of the Board of Directors)
holds substantial control of our company with his approximately 75.5% 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.
We are dependent on the continued services of our Director and Chairman
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
Chairman, Nicolas Link and CEO, John-Paul Backwell, 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 is currently investigating and plans to obtain one. 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.
Our Officers and Key Personnel 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 key personnel and fail to replace them if they depart, we could experience a negative effect on our financial results and
stock price. The loss and our failure to attract, integrate, motivate, and retain additional key employees could have a material adverse
effect on our business, operating and financial results and stock price.
Certain of our 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. 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 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. 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 with industry experience 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 director 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 director are required
to present business opportunities to ILUS, which may include QIND, if:
| § | ILUS
could financially undertake the opportunity, through QIND; |
| § | the
opportunity is within the line of business of QIND |
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 their other
business interest over the needs of our company. These competing business interests could interfere with what our ability to successfully
implement our business plan..
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 December 31, 2022, a total of 102,883,709
shares of our common stock were outstanding. Of those shares, 21,612,990 are currently 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.
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, have 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.
Risks Relating to Our Company and Industry
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 not 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:
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Lower than projected revenues; |
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Price reductions and lower profit margins. |
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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.
We may fail to successfully integrate acquisitions or otherwise
be unable to benefit from pursuing acquisitions.
We believe there are meaningful opportunities to grow
through acquisitions and joint ventures across all service categories and we expect to continue a strategy of selectively identifying
and acquiring businesses with complementary services. We may be unable to identify, negotiate, and complete suitable acquisition opportunities
on reasonable terms. There can be no assurance that any business acquired by us will be successfully integrated with our operations or
prove to be profitable to us. We may incur future liabilities related to acquisitions. Should any of the following problems, or others,
occur as a result of our acquisition strategy, the impact could be material:
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difficulties integrating personnel from acquired entities and other corporate
cultures into our business; difficulties integrating information systems; |
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the potential loss of key employees of acquired companies; |
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the assumption of liabilities and exposure to undisclosed or unknown liabilities
of acquired companies; or the diversion of management attention from existing operations. |
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.