Executive Summary / Key Takeaways

• Quality Industrial Corp. ($QIND) has pivoted its business focus entirely to the industrial energy sector, primarily driven by its majority-owned subsidiary, Al Shola Al Modea Gas Distribution LLC (ASG), a leading provider of LPG systems and supply in the United Arab Emirates.
• The acquisition of ASG in March 2024 has fundamentally transformed QIND's financial profile, generating significant revenue and gross profit in Q1 2025, with ASG demonstrating 17.3% year-over-year revenue growth in the quarter.
• Despite reporting a net loss of $1.26 million in Q1 2025, this was primarily attributable to a one-off $1.02 million bonus payout associated with the change in control to Fusion Fuel Green PLC (HTOO), which became the majority owner in November 2024.
• QIND faces significant liquidity challenges with a negative working capital of $5.03 million as of March 31, 2025, including a substantial current payable related to the ASG acquisition, necessitating the generation of sufficient revenue and raising capital to continue as a going concern.
• Management is focused on allocating resources and investment from HTOO to enhance ASG's efficiency and sales, anticipating revenue and expense growth from expansion initiatives, and has recently secured over $2.7 million in new project awards and projected $905,000 in annual recurring utility revenue from new contracts.

Setting the Scene: A Transformed Entity in the Industrial Energy Sector

Quality Industrial Corp. has a history marked by numerous strategic shifts and changes in control since its incorporation in 1998. Operating under various names over the years, including Sensor Technologies, Inc., Wikisoft Corp., and others, the company's trajectory fundamentally changed in May 2022 when ILUS (ILUS) acquired a majority stake, initiating a pivot towards the industrial, oil & gas, and utility sectors. This transformation culminated in the company changing its name to Quality Industrial Corp. ($QIND) in August 2022 and subsequently changing its SIC code to reflect this new direction.

The most recent and impactful development occurred in November 2024, when Fusion Fuel Green PLC (HTOO) acquired a majority of QIND's voting stock, establishing QIND as a majority-owned subsidiary. Under HTOO's strategic oversight, QIND is now positioned as the Industrial Energy arm, with its operational focus squarely on its primary asset: Al Shola Al Modea Gas Distribution LLC (ASG).

Acquired in March 2024, ASG is an established Engineering and Distribution Company operating within the Liquefied Petroleum Gas (LPG) industry in the United Arab Emirates since 1980. ASG specializes in providing comprehensive solutions, including the design, engineering, supply, installation, and maintenance of LPG centralized pipeline systems, alongside the transportation and supply of LPG in bulk and cylinder formats. Its client base is diverse, spanning commercial buildings, shopping centers, heavy industries, and various dining establishments. ASG holds a notable position as one of the leading suppliers and contractors in the region, underscored by its approval from the General Directorate of Civil Defense, Government of Dubai. This acquisition represents the cornerstone of QIND's current business model and the primary driver of its financial performance.

The Engine of Growth: Al Shola Gas and its Operational Capabilities

The strategic acquisition of a 51% interest in ASG on March 27, 2024, marked a definitive turning point for QIND. This move anchored the company in a tangible, revenue-generating business within a critical infrastructure sector. ASG's operations in the UAE's LPG market provide QIND with exposure to a stable demand base driven by commercial and domestic energy needs.

ASG's operational capabilities are centered around delivering end-to-end LPG solutions. This includes the technical expertise required for designing and engineering complex centralized gas systems, the logistical capacity for supplying and installing necessary equipment (such as pressure regulators, pipelines, safety equipment, metering units, valves, and storage tanks), and the ongoing service provision through maintenance and direct LPG supply. The company's long-standing presence and approvals in the UAE market suggest a level of operational maturity and established relationships crucial for securing projects in this regulated environment.

While information does not detail proprietary technological breakthroughs in the traditional sense, ASG's strength lies in its integrated service model and established operational processes. The ability to offer a "comprehensive solution" from consulting and design through installation and ongoing supply and maintenance acts as a key operational differentiator. This integrated approach simplifies the process for clients and builds recurring revenue streams, particularly from bulk LPG supply contracts. The planned investment in new vehicles, expected in the third quarter of 2025, is a concrete step aimed at enhancing the efficiency and capacity of ASG's bulk LPG supply capabilities, directly targeting revenue growth in this segment.

The competitive landscape for LPG system providers and suppliers in the UAE, while not detailed with specific competitors in the filing, is characterized by the need for technical expertise, regulatory compliance (such as the Dubai Civil Defense approval held by ASG), reliable supply chains, and strong client relationships. ASG's established history and approved status position it favorably within this market, although the intensity of competition and the specific market shares of key players are not disclosed. The risk factor mentions competition generally, implying it is a relevant consideration for the business's performance and strategy.

Recent Financial Performance: A Snapshot of Transition

The financial results for the three months ended March 31, 2025, provide the first consolidated view of QIND's performance with ASG fully integrated for a comparable period. Revenue for Q1 2025 stood at $3.62 million, a significant increase from $0.00 in Q1 2024, directly reflecting the consolidation of ASG's operations. This top-line growth is further supported by management's commentary that ASG itself grew its revenue by 17.3% in Q1 2025 compared to Q1 2024, indicating organic growth within the core subsidiary.

Gross profit for the quarter was $955,386, also a direct result of the ASG acquisition and its operational performance. The gross profit margin (calculated from the provided Q1 2025 figures) is approximately 26.4%, reflecting the cost structure associated with ASG's engineering, supply, and installation services, as well as LPG procurement and delivery.

Operating expenses saw a substantial increase, rising to $1.90 million in Q1 2025 from $81,249 in Q1 2024. Management explicitly attributes this increase primarily to the administrative and operating costs of the consolidated ASG business and, notably, a one-off bonus payout to management totaling $1.02 million related to the merger with HTOO. Excluding this one-off item, operating expenses would have been approximately $880,000, still a significant increase reflecting the operational scale of ASG compared to QIND's prior activities.

Other income/expenses also impacted the bottom line. Q1 2025 saw net other expenses of $285,418, including interest expenses on convertible notes and depreciation. This contrasts with Q1 2024, which benefited from $379,554 in other income related to the reversal of interest payments from terminated agreements.

The net result for the quarter was a loss of $1.26 million, a notable shift from a net profit of $206,690 in Q1 2024. As highlighted by management, the one-off $1.02 million bonus payment was the primary driver of this loss. Without this expense, the net loss would have been significantly smaller, closer to $240,000 (before considering tax and noncontrolling interest), underscoring the impact of this specific transaction-related cost on the quarterly results.

Liquidity, Capital Structure, and the Going Concern

A critical aspect of QIND's current financial position is its liquidity. As of March 31, 2025, the company reported total current assets of $7.59 million against total current liabilities of $12.62 million, resulting in a negative working capital of $5.03 million. This represents a deterioration from the $3.90 million working capital deficit at December 31, 2024.

A significant component of the current liabilities is a $5.30 million payable to the shareholders of Al Shola Gas as part of the acquisition consideration, which is due within the next 12 months. This large, near-term obligation places considerable pressure on the company's cash flow and working capital position.

Cash flow from operating activities was negative in Q1 2025, using $334,816, exacerbated by the one-off bonus payment. Investing activities used $200,000, reflecting investments in long-term assets, a trend management expects to continue for growth. Financing activities provided $669,647, primarily from proceeds from the parent company, Fusion Fuel, highlighting the importance of HTOO's support.

The company explicitly includes a going concern warning in its financial statements, stating that its ability to continue is dependent on generating sufficient revenues and raising capital within one year. Management's plan to mitigate cash flow deficits involves using borrowings and security sales, but they provide no assurance that necessary debt or equity financing will be available when required. The substantial current portion of the ASG acquisition payable underscores the urgency of these capital-raising efforts or significant operational cash flow generation.

The capital structure includes various convertible notes, with principal amounts totaling $2.58 million outstanding as of March 31, 2025. These notes carry interest and, in some cases, discounts that are amortized as interest expense, adding to the financial burden. Conversions of these notes into common stock also contribute to share dilution, as seen by the increase in weighted average common shares outstanding in Q1 2025 compared to Q1 2024.

Outlook and Strategic Initiatives Under HTOO Ownership

Under the majority ownership of Fusion Fuel Green PLC (HTOO), QIND's strategic direction is focused on enhancing the performance and expanding the reach of its core operating subsidiary, Al Shola Gas. Management's planned developments for 2025 center on allocating resources and leveraging investment from HTOO to boost ASG's efficiency and sales.

A concrete investment planned for 2025 is in new vehicles for ASG, expected to be delivered in the third quarter. This is intended to improve bulk LPG supply capabilities, a direct avenue for increasing revenue, particularly recurring utility revenue. Management anticipates that the implementation of ASG's expansion plan will lead to increases in both revenue and operating expenses, reflecting the costs associated with growth initiatives.

Recent operational achievements at ASG provide positive indicators for the near-term outlook. Since the beginning of March 2025, ASG has secured over $2.7 million in new project awards. Furthermore, since the beginning of January 2025, the company has added more than 1800 apartments to its utility portfolio. These new contracts, particularly those for bulk LPG supply, are projected to yield an estimated annual recurring utility revenue of $905,000. These figures offer specific, quantifiable evidence of ASG's continued business development and potential for future revenue generation.

Beyond the immediate focus on ASG, QIND also mentions planned future acquisitions as part of its growth strategy, although no specific targets or timelines are provided in the filing. The success of these potential acquisitions, alongside the integration and performance enhancement of ASG, will be key factors in QIND's ability to improve its financial position and address its going concern risk.

Risks and Challenges

Investing in QIND involves considering several significant risks and challenges outlined in the filing. Macroeconomic conditions pose a general risk, impacting the global economic environment, consumer confidence, and government/municipal spending, which can affect demand in the industrial and utility sectors where ASG operates. Global instability, including geopolitical events, is also noted as a factor that can impact financial performance. Specifically for the industrial sector, changes in economic conditions can lead to the withdrawal of tenders or affect manufacturing lead times, potentially resulting in order cancellations.

Liquidity risk is paramount, as evidenced by the negative working capital and the going concern warning. The company's ability to generate sufficient revenue and raise capital to meet its obligations, particularly the substantial current portion of the ASG acquisition payable, is critical. There is no guarantee that necessary debt or equity financing will be available when needed.

Goodwill impairment is another potential risk. The $8.41 million in goodwill on the balance sheet, primarily from the ASG acquisition, is subject to annual testing. Factors such as the non-renewal of a major contract or substantial changes in business conditions could lead to a material impairment charge in the future.

Competition, while not detailed, is listed as a factor that can impact the company's financial performance. The ability of ASG to maintain or enhance its market position against rivals in the UAE LPG sector will be crucial.

Operational risks related to supply chain disruptions, the effects of events like the COVID-19 pandemic and wars, and legislative/regulatory changes could also impact the business. Successfully integrating acquired businesses, including optimizing operations and supply chains, is also an ongoing challenge that may not yield positive financial impacts in the short term.

Conclusion

Quality Industrial Corp. has undergone a dramatic transformation, shedding its prior ventures to focus intently on the industrial energy sector through its majority stake in Al Shola Al Modea Gas Distribution LLC. The ASG acquisition has provided QIND with a revenue-generating core business in the stable UAE LPG market, evidenced by the significant top-line figures in Q1 2025 and ASG's reported 17.3% organic growth in the quarter. Under the new majority ownership of Fusion Fuel, the strategic emphasis is clearly on supporting and expanding ASG's operations, with planned investments and recent project wins signaling potential for continued growth, particularly in recurring utility revenue.

However, the company faces immediate and significant liquidity challenges, highlighted by a substantial working capital deficit and a going concern warning. The large payable related to the ASG acquisition due within the next year necessitates successful execution on growth initiatives and the ability to secure additional financing. While the one-off bonus payment distorted the Q1 2025 net income, the underlying operational profitability and cash flow generation capabilities of ASG, net of ongoing administrative and financing costs, will be key to addressing the liquidity crunch. For investors, the story of QIND is now inextricably linked to the performance and expansion of ASG in the UAE, supported by HTOO, but contingent on navigating the near-term financial hurdles and successfully capitalizing on growth opportunities in a competitive market.