| SUMMARY OF SIGNIFICANT POLICIES | NOTE 2. SUMMARY OF SIGNIFICANT POLICIES Basis of Presentation and Principles of consolidation The accompanying consolidated financial statements
represent the results of operations, financial position, and cash flows of QIND, and all of its majority-owned and controlled subsidiary
are prepared in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP). The accounts
of ASG have been included since acquired on March 27, 2024. All significant inter-company accounts and transactions have been eliminated. The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for interim
financial information. It is management’s opinion that the accompanying unaudited condensed consolidated financial statements are
prepared in accordance with instructions for Form 10-Q and include all adjustments (consisting only of normal recurring accruals) which
are necessary for a fair presentation of the results for the periods presented. Certain information and footnote disclosures normally
included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States
of America (“U.S. GAAP”) have been condensed or omitted. It is suggested that these condensed consolidated financial statements
be read in conjunction with the Annual Report on Form 10-K of Quality Industrial Corp. as of and for the year ended December 31, 2023,
filed with the SEC on April 8, 2024. The results of operations for the six months ended June 30, 2024, are not necessarily indicative
of the results to be expected for the full year or for future periods. Use of estimates A critical accounting estimate is an estimate that:
(i) is made in accordance with generally accepted accounting principles, (ii) involves a significant level of estimation uncertainty
and (iii) has had or is reasonably likely to have a material impact on the Company’s financial condition or results of operations. The Company’s consolidated financial statements
have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP).
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and judgments that affect
reported amounts and related disclosures. On an ongoing basis, management evaluates and updates its estimates. Management employs judgment
in making its estimates but they are based on historical experience and currently available information and various other assumptions
that the Company believes to be reasonable under the circumstances. The results of these estimates form the basis for making judgments
about the carrying values of assets and liabilities that are not readily available from other sources. Actual results could differ from
those estimates. Management believes that its judgment is applied consistently and produces financial information that fairly depicts
the results of operations for all periods presented. Significant estimates include estimates used to
review the Company’s, impairments and estimations of long-lived assets, revenue recognition of contract-based revenue, allowances
for uncollectible accounts, and the valuations of non-cash capital stock issuances. The Company bases its estimates on historical experience
and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions. Accounts receivable Accounts receivables are recorded at the invoice
amount less an allowance for credit losses. The allowance is an estimate based on historical collection experience, current and future
economic and market conditions, and a review of the current status of each customer’s trade accounts receivable. Management evaluates
the aging of the accounts receivable balances and the financial condition of its customers and all other forward-looking information that
is reasonably available to estimate the amount of accounts receivable that may not be collected in the future and before recording the
appropriate provision. The duration of such receivables extends from 30
days to beyond 90 days. Payments are received only when a project is completed, and approvals are obtained. Provisions are created based
on the estimated irrecoverable amounts determined by referring to past default experience and future economic and market conditions. Inventories In accordance with ASC 330, the Company states
inventories at the lower of cost or net realizable value. Cost, which includes material, labor and overhead, is determined on a first-in,
first-out basis. The Company makes adjustments to reduce the cost of inventory to its net realizable value, if required, for estimated
excess, obsolete, zero usage or impaired balances. Factors influencing these adjustments include changes in market demand, product life
cycle and engineering changes. Property, Plant & Equipment Property, Plant and Equipment are recorded at cost,
except when acquired in a business combination where property, plant and equipment are recorded at fair value. Depreciation of property,
plant and equipment is recognized over the estimated useful lives of the respective assets using the straight-line method. The estimated
useful lives are as follows:
Property, Plant and Equipment Years
Machinery 5 – 15
Vehicles 5 – 10
Furniture, Fixtures & Office Equipment 3 – 5 Expenditures that extend the useful life of existing
property, plant and equipment are capitalized and depreciated over the remaining useful life of the related asset. Expenditures for repairs
and maintenance are expensed as incurred. When property, plant and equipment are retired or sold, the cost and related accumulated depreciation
is removed from the Company’s balance sheet, with any gain or loss reflected in operations. Depreciation expense for the three months ended June 30, 2024, and
2023 was $37,555 and $0, respectively. Depreciation expense for the six months ended June 30, 2024, and 2023 was $37,555 and
$0, respectively. Deposits Advances have been paid to the suppliers and subcontractors
in the ordinary course of business for the procurement of specialized material and equipment required in the process of designing, engineering
and installing Central Gas distribution and monitoring systems. The Company is engaged in the design, engineering, supply and monitoring
of Central Gas systems supplying and installing equipment such as pressure regulators, pipelines, safety equipment, tapping points, metering
units, valves and storage tanks. To undertake these projects, the Company is required to make upfront investments in materials and machinery.
These projects involve many processes and take substantial time to complete. We estimate that the deposit will be utilized in the next
12 months, however, some will only be returned upon cancellation such as office lease deposit, internet and utilities. End-of-service benefits Employee
end-of-service benefits in our subsidiary Al Shola Gas amounting to $ as of June 30,
2024, are provided to employees, in the UAE when they leave a job. Eligibility begins
after one year of continuous service and varies based on contract type and length of service.
Employee end of service benefits Al Shola Gas June 30,
Balance at Beginning 154,261
Add: charge for the period 82,764
Less: Settlement for the period (107,613 )
Balance at the end of the period 129,412 Goodwill Goodwill represents the cost of acquired companies
in excess of the fair value of the net assets at the acquisition date and is subject to annual impairment. Goodwill is the excess of the
purchase price paid for an acquired entity and the amount of the price not assigned to acquired assets and liabilities. It arises when
an acquirer pays a high price to acquire a business. This asset only arises from an acquisition, and it cannot be generated internally.
Goodwill is an intangible asset, and so is listed within the long-term assets section of the acquirers’ balance sheet. The Company accounts for business combinations
by estimating the fair value of consideration paid for acquired businesses and assigning that amount to the fair values of assets acquired
and liabilities assumed, with the remainder assigned to goodwill. If the fair value of assets acquired and liabilities assumed exceeds
the fair value of consideration paid, a gain on bargain purchase is recognized. The estimates of fair values are determined utilizing
customary valuation procedures and techniques, which require us, among other things, to estimate future cash flows and discount rates.
Such analyses involve significant judgments and estimations. The Company follows the guidance prescribed in
Accounting Standards Codification (“ASC”) 350, Goodwill and Other Intangible Assets On March 27, 2024, the Company acquired 51% of
Al Shola Gas LLC for $10,000,000 and now owns 51% of the Net Assets of Al Shola Gas. The net assets of Al Shola Gas were $2,981,918 on
March 31, 2024, of which $1,520,778 (51%) is owned by QIND. The remaining $1,461,140 (49%) of net assets are held by a minority interest
or noncontrolling interest. The purchase price of $10,000,000 minus the net assets held by the Company in Al Shola Gas equating to $8,479,222
is part of the Company’s Goodwill. The noncontrolling interest has been presented separately on the accompanying consolidated balance
sheet and statement of operations. Fair value of financial instruments The carrying value of cash, accounts payable, warrants,
accrued expenses, and debt, short term as well as long term, is recorded at fair value. Management believes the Company is not exposed
to significant interest or credit risks arising from these financial instruments. Fair value is defined as the exchange price that
would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair
value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a fair value hierarchy based
on three levels of inputs, of which the first two are considered observable and the last unobservable.
● Level 1. Quoted prices in active markets for identical assets
or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.
● Level 2. Quoted prices for similar assets and liabilities
in active markets; quoted prices included for identical or similar assets and liabilities that are not active; and model-derived valuations
in which all significant inputs and significant value drivers are observable in active markets. These are typically obtained from readily
available pricing sources for comparable instruments.
● Level 3. Unobservable inputs, where there is little or no
market activity for the asset or liability. These inputs reflect the reporting entity’s own beliefs about the assumptions that
market participants would use in pricing the asset or liability, based on the best information available in the circumstances. Revenue Recognition The Company recognizes revenue in accordance with
Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC 606). The principal activity of the Company is to engage
in general trading, manufacturing and fabrication or steel and steel products and mainly manufacturing of pressure vessels, tanks, heat
exchangers and construction of storage tanks and piping. Revenue from contracts with customers is recognized when control of the goods
or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in
exchange for those goods or services. The Company has generally concluded that it is the principal in its revenue arrangements because
it typically controls the goods or services before transferring them to the customer. Stock-based compensation The Company recognizes all stock-based compensation
using the fair value provisions prescribed by ASC Topic 718, Compensation - Stock Compensation. Accordingly, compensation
costs for awards of stock-based compensation settled in shares are determined based on the fair value of the share-based instrument at
the time of grant and are recognized as expense over the vesting period of the share-based instrument, net of estimated forfeitures. In accordance with ASC 718, the Company will
generally apply the same guidance to both employee and non-employee share-based awards. However, the Company will also follow specific
guidance for share-based awards to non-employees related to the attribution of compensation cost and the inputs to the option-pricing
model for expected term. Non-employee share-based payment equity awards are measured at the grant-date fair value of the equity instruments,
similar to employee share-based payment equity awards. The Company calculates the fair value of option
grants and warrant issuances utilizing the Binomial pricing model. The amount of stock-based compensation recognized during a period is
based on the value of the portion of the awards that are ultimately expected to vest. ASC 718 requires forfeitures to be estimated
at the time stock options are granted and warrants are issued to employees and non-employees, and revised, if necessary, in subsequent
periods if actual forfeitures differ from those estimates. The term “forfeiture” is distinct from “cancellations”
or “expirations” and represents only the unvested portion of the surrendered stock option or warrant. The Company estimates
forfeiture rates for all unvested awards when calculating the expenses for the period. In estimating the forfeiture rate, the Company
monitors both stock option and warrant exercises as well as employee termination patterns. The resulting stock-based compensation expense
for both employee and non-employee awards is generally recognized on a straight-line basis over the period in which the Company expects
to receive the benefit, which is generally the vesting period. Earnings (loss) per share The Company reports earnings (loss) per share in
accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 260-10
“ Earnings Per Share,
Particulars Three Months Ended Three Months Ended Six Months Ended Six Months Ended
Basic and diluted EPS*
Numerator
Net income/(loss) 348,443 (1,666,495 ) 555,133 (1,582,221 )
Net Income attributable to common stockholders 107,895 (1,666,495 ) 314,585 (1,582,221 )
Denominator
Weighted average shares outstanding 128,547,368 106,573,410 128,547,368 110,222,564
Number of shares used for basic EPS computation 128,547,368 106,573,410 128,547,368 110,222,564
Basic EPS 0.00 (0.01 ) 0.00 (0.01 )
Number of shares used for diluted EPS computation* 133,256,691 106,823,410 133,256,691 110,472,564
Diluted EPS 0.00 (0.01 ) 0.00 (0.01 )
* Includes 250,000 issued warrants. Income taxes The Company accounts for income tax positions
in accordance with Accounting Standards Codification Topic 740-10-50, “Income Taxes” (“ASC
Topic 740”). This standard prescribes a recognition and measurement of tax positions taken or expected to be taken in a
tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by
taxing authorities. There was no material impact on the Company’s financial position or results of operations as a result of
the application of this standard. Deferred tax assets have not been created the majority of the company’s income belongs to
the subsidiary, which is registered in an income tax-free jurisdiction since any losses incurred cannot be utilized in the future,
rendering deferred tax assets irrelevant, The profits of a foreign subsidiary corporation are ordinarily not subject to tax in the
United States as in accordance with the general Internal Revenue Service rule, foreign subsidiaries are not considered
U.S. corporations even if they are wholly owned. Recently issued accounting pronouncements The Company has evaluated all other recent accounting
pronouncements and believes that none of them are expected to have a material effect on the Company’s financial position, results
of operations, or cash flows. Off-Balance Sheet Arrangements We have no significant off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to stockholders. Lease liabilities The Company accounts for leases under ASC Topic
842, Leases The variable lease payments that do not depend
on an index or a rate are recognized as expenses in the period on which the event or condition that triggers the payment occurs. In calculating the present value of lease payments,
the Company uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced
for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change
in the lease term, a change in the in-substance fixed lease payments, or a change in the assessment to purchase the underlying asset. The Company’s subsidiary, Al Shola Gas, has
entered into commercial vehicles. These leases generally have a lease term of 4 years. The Company’s obligations under its leases
are secured by the lessor’s title to the leased assets. There are no restrictions placed upon the Company by entering into these
leases. The Company also has leases with terms of 12 months or less which the Company has elected to not apply Topic 842 to short-term
leases. The Company has a Lease arrangement for which the
liability has been recorded separately. The Company determines whether an arrangement contains a lease at inception. A lease liability
and corresponding right of use (ROU) asset are recognized for qualifying leased assets based on the present value of fixed and certain
index-based lease payments at lease commencement. The Company’s obligations under its leases
are secured by the lessor’s title to the leased assets. There are no restrictions placed upon the Company by entering into these
leases. The Company determines if an arrangement is or contains a lease at contract inception and recognizes an ROU asset and a lease
liability based on the present value of fixed, and certain index-based lease payments at the lease commencement date. Variable payments
are excluded from the present value of lease payments and are recognized in the period in which the payment is made. The Company generally uses its incremental borrowing
rate as the discount rate for measuring its lease liabilities, as the Company cannot determine the interest rate implicit in the lease
because it does not have access to certain lessor-specific information. Lease expense is recognized on a straight-line basis over the
lease term. The Company does not have significant finance leases. The Company has elected not to separate payments for lease components
from payments for non-lease components for all classes of leases. When accounting for finance leases in accordance
with ASC 842, entity recognizes interest on the lease liability and amortization of the ROU asset in the income statement and classify
payments of the principal portion of the lease liability as financing activities and payments of interest on the lease liability as operating
activities. Reclassifications Certain reclassifications have been made
to the December 31, 2023, balance sheet to conform to the June 30, 2024, presentation. These reclassifications had no impact on the net
loss or loss per share as previously reported. |
