SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 18, 2023
Quality Industrial Corp.
(Exact name of registrant as specified in its charter)
| Nevada | 000-56239 | 35-2675388 |
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
|
315 Montgomery Street San Francisco, CA |
94104 |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (800)-706-0806
|
______________________ (Former name or former address, if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17CFR 230.425) |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company [X]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Section 2 – Financial Information
Item 2.01. Completion of Acquisition or Disposition of Assets.
As previously disclosed, on January 18, 2023, we entered into a definitive Stock Purchase Agreement (the “Purchase Agreement”) with the shareholders of Quality International, which agreement provided for purchase of 52% of the shares of Quality International Co Ltd FZC (the “Shares”).
On Closing Date March 6, 2023, QIND completed acquision of Quality International .The purchase price for the Shares shall be up to $137,000,000 in cash, paid in six tranches, subject to the achievement of financial milestones presented in a schedule of payments which are set forth in the Purchase Agreement.
The following audited pro forma condensed combined financial statements give effect to the transaction (the "Transaction").
The foregoing description of the Purchase Agreement is not complete and is qualified in its entirety by reference to the text of such document, which is filed as Exhibit 2.1 hereto and which is incorporated herein by reference.
SECTION 9 – Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits
| (a) | Financial Statements of business Acquired |
The Company file the financial statements required by Item 9.01 (a) of Form 8-K in its annual report on Form 10-K for the year ended December 31, 2022, on March 31, 2022.
| (b) | Pro Forma Financial Information |
The Company filed the pro forma financial statements required by Item 9.01 (a) with this Form 8-K.
| (d) | Exhibits |
| 2.1 | Stock Purchase Agreement, dated January 18, 2023(1) | |
| 99.1 | Notes to the audited Pro Forma Condensed Combined Financial Statements |
(1) previously filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Quality Industrial Corp.
/s/ John-Paul Backwell
John-Paul Backwell, CEO
Date: May 12, 2023
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Exhibit 99.1
Quality Industrial Corp.
Notes to the audited Pro Forma Condensed Combined Financial Statements
On June 28, 2022, company entered into a binding letter of intent (the “Agreement”) for our company to purchase 51% of the outstanding shares of Quality International Co Ltd FZC, a United Arab Emirates headquartered company (“Quality International”), from the shareholders of Quality International. Quality International is a revenue generating company that manufactures custom solutions for the Oil and Gas, Energy, Water Desalination, Wastewater, Offshore and Public Safety sectors.
The Agreement contemplated a period of due diligence and revaluation followed by entry into a definitive Stock Purchase Agreement. On January 18, 2023, we entered into a definitive Stock Purchase Agreement (the “Purchase Agreement”) with the shareholders of Quality International, which agreement provided for our purchase of 52% (increased by 1% over the Agreement) of the shares of Quality International Co Ltd FZC (the “Shares”).
The purchase price for the Shares shall be up to $137,000,000 in cash, paid in six tranches, subject to the achievement of financial milestones presented in a schedule of payments which are set forth in the Purchase Agreement.
On March 6, 2023, having completed all conditions under the Agreement, the Company closed the transaction.
NOTE 1. BASIS OF PRO FORMA PRESENTATION
The audited pro forma condensed combined financial statements are based on the Company’s and Quality International historical consolidated financial statements as adjusted to give effect to the acquisition of Quality International and the shares issued as part of the acquisition. The audited pro forma combined statements of operations and balance sheet for the year ended December 31, 2022, give effect to the Quality International acquisition as if it had occurred on June 28, 2022, with the signed binding letter of intent.
Historical financial information has been adjusted in the pro forma balance sheet to pro forma events that are: (1) directly attributable to the Acquisition; and (2) factually supportable.
The pro forma adjustments presented in the pro forma combined balance sheet and statement of operations are described in Note 4 — Pro Forma Adjustments.
NOTE 2. ACCOUNTING PERIODS PRESENTED
Certain pro forma adjustments were made to conform accounting policies to the Company’s accounting policies as noted below.
The audited pro forma condensed combined balance sheet as of December 31, 2022, is presented as if the acquisition had occurred on June 28, 2022 and combines the balance sheet of the Company at December 31, 2022 and the balance sheet of the Quality International at December 31, 2022.
The audited pro forma condensed combined statement of operations for the year ended December 31, 2022, has been prepared by combining the Company’s consolidated statement of operations for the year ended December 31, 2022, with the statement of operations of Quality International for the year ended December 31, 2022.
NOTE 3. PRELIMINARY PURCHASE PRICE ALLOCATION
On January 18, 2023, the Company signed the definitive stock purchase agreement and acquired 52% of Quality International co ltd FZC for the consideration of $82,000,000. The audited pro forma condensed combined financial statements include various assumptions, including those related to the preliminary purchase price allocation of the assets acquired based on management’s best estimates of fair value. The final purchase price allocation may vary based on final appraisals, valuations and analysis of fair value of the acquired assets and assumed liabilities.
The total payment for this agreement is $137,000,000, however the committed payment for above mentioned agreement is $82,000,000, and the remaining $55,000,000 will only become payable if certain future conditions are met. However, if the future payment increases, it will also increase the goodwill valuation for the company in the future, equal to the additional amount paid on top of the committed purchase consideration.
NOTE 4. PRO FORMA ADJUSTMENTS
The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the audited pro forma condensed combined financial information:
| a) | To give effect of consolidation as per general accepted principles of consolidation, purchase consideration, goodwill and minority Interest has been recorded. |
| QUALITY INDUSTRIAL CORP | ||||||||||||||||
| AUDITED PRO FORMA COMBINED BALANCE SHEET | ||||||||||||||||
| Quality Industrial Corp. | Quality International FZC | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||
| ASSETS | December 31, 2022 | December 31, 2022 | December 31, 2022 | |||||||||||||
| Current assets | ||||||||||||||||
| Cash and cash equivalents | 3,136 | 1,309,429 | 1,312,565 | |||||||||||||
| Other current assets | 10,958 | 110,278,398 | 110,289,356 | |||||||||||||
| Total current assets | 14,094 | 111,587,827 | 111,601,921 | |||||||||||||
| Non- Current assets | ||||||||||||||||
| Investment | 82,000,000 | (82,000,000 | ) | |||||||||||||
| Property Plant & Equipment | 1,365,585 | 1,365,585 | ||||||||||||||
| Capital WIP | 1,884,569 | 1,884,569 | ||||||||||||||
| Furniture, Fixtures & Office Equipment | 156,370 | 156,370 | ||||||||||||||
| Lease Hold Improvements & Building | 17,390,067 | 17,390,067 | ||||||||||||||
| Right of Use assets | 11,906,654 | 11,906,654 | ||||||||||||||
| Goodwill | 56,387,027 | 56,387,027 | ||||||||||||||
| Total other assets | 82,000,000 | 32,703,245 | (25,612,973 | ) | 89,090,272 | |||||||||||
| Total Assets | 82,014,094 | 144,291,072 | (25,612,973 | ) | 200,692,193 | |||||||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||||||||
| Current liabilities | ||||||||||||||||
| Accounts payable and accrued liabilities | 1,260,220 | 43,289,973 | 44,550,194 | |||||||||||||
| Other Current Liabilities | 81,079,230 | 19,056,696 | 100,135,926 | |||||||||||||
| Total current liabilities | 82,339,450 | 62,346,669 | 144,686,119 | |||||||||||||
| Long Term liabilities | ||||||||||||||||
| Convertible Notes | 1,100,000 | 1,100,000 | ||||||||||||||
| Other long term liabilities | 28,028,680 | 28,028,680 | ||||||||||||||
| Total Long-Term Liabilities | 1,100,000 | 28,028,680 | 29,128,680 | |||||||||||||
| Stockholders' Equity | ||||||||||||||||
| Preferred stock; par value; shares authorized; and shares issued and outstanding as of as of December 31, 2022, and December 31, 2021, respectively | ||||||||||||||||
| Common stock; par value; shares authorized; and shares issued and outstanding as of December 31, 2022, and December 31, 2021, respectively | 102,886 | 102,886 | ||||||||||||||
| Additional paid-in capital | 12,174,975 | 49,255,718 | (49,255,718 | ) | 12,174,975 | |||||||||||
| Retained Earnings/ accumulated Deficit | (13,703,217 | ) | 4,660,005 | (9,043,212 | ) | |||||||||||
| Minority Interest | 23,642,745 | 23,642,745 | ||||||||||||||
| Total stockholders' Equity | (1,425,356 | ) | 53,915,723 | (25,612,973 | ) | 26,877,394 | ||||||||||
| Total liabilities and stockholders' Equity | 82,014,094 | 144,291,072 | (25,612,973 | ) | 200,692,193 | |||||||||||
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| QUALITY INDUSTRIAL CORP. | ||||||||||||||||
| AUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS | ||||||||||||||||
| Quality Industrial Corp. | Quality International Co Ltd FZC | Proforma Adjustments | Pro Forma Combined | |||||||||||||
| December 31, 2022 | December 31, 2022 | December 31, 2022 | ||||||||||||||
| Revenue | 65,603,673 | 65,603,673 | ||||||||||||||
| Cost of revenues | 43,931,541 | 43,931,541 | ||||||||||||||
| Gross profit | 21,672,132 | 21,672,132 | ||||||||||||||
| Operating expenses | — | — | — | — | ||||||||||||
| Professional fees | 255,111 | 255,111 | ||||||||||||||
| Product Development | ||||||||||||||||
| General and administrative | 115,000 | 11,101,017 | 11,216,017 | |||||||||||||
| Total operating expenses | 370,111 | 11,101,017 | 11,471,128 | |||||||||||||
| Profit/ Loss from Operations |
(370,111 | ) | 10,571,115 | 10,201,004 | ||||||||||||
| Non-Operating expenses | ||||||||||||||||
| Interest on Convertible Notes | 31,855 | 31,855 | ||||||||||||||
| Interest expense | 1,984 | 3,838,336 | 3,840,320 | |||||||||||||
| Loss on License Agreement | 104,550 | 104,550 | ||||||||||||||
| Depreciation | 171,014 | 171,014 | ||||||||||||||
| Total other expenses | 138,389 | 4,009,350 | 4,147,739 | |||||||||||||
| Non-Operating Income | ||||||||||||||||
| Other Non-Operating Income | 262,932 | 262,932 | ||||||||||||||
| Gain on settlement & forgiveness of debt | 457,071 | 457,071 | ||||||||||||||
| Total Non-Operating Income | 457,071 | 262,932 | 720,003 | |||||||||||||
| Net loss/ profit | (51,429 | ) | 6,824,697 | 6,773,268 | ||||||||||||
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