UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
For the transition period from __________ to__________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. ☒
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company | ||||
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. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐
Yes
Securities registered pursuant to Section 12(b) of the Act: None
State the number of shares outstanding of each
of the issuer’s classes of common stock, as of the latest practicable date:
TABLE OF CONTENTS
| Page | ||
| PART I – FINANCIAL INFORMATION | ||
| Item 1: | Financial Statements | 1 |
| Item 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 2 |
| Item 3: | Quantitative and Qualitative Disclosures About Market Risk | 8 |
| Item 4: | Controls and Procedures | 8 |
| PART II – OTHER INFORMATION | ||
| Item 1: | Legal Proceedings | 9 |
| Item 1A: | Risk Factors | 9 |
| Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds | 9 |
| Item 3: | Defaults Upon Senior Securities | 9 |
| Item 4: | Mine Safety Disclosures | 9 |
| Item 5: | Other Information | 9 |
| Item 6: | Exhibits | 10 |
i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Our financial statements included in this Form 10-Q are as follows:
These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended March 31, 2024, are not necessarily indicative of the results that can be expected for the full year.
1
ILUSTRATO PICTURES INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, 2024 | Dec 31, 2023 | |||||||||
| ASSETS | ||||||||||
| Current Assets | ||||||||||
| Cash and Cash Equivalents | ||||||||||
| Accounts Receivables | ||||||||||
| Inventory | ||||||||||
| Inventory (work-in-progress) | ||||||||||
| Other Current Assets | ||||||||||
| Total Current Assets | 3 | |||||||||
| Long Term Investments | ||||||||||
| Goodwill | ||||||||||
| Tangible Assets | ||||||||||
| Total Non-Current Assets | 4 | |||||||||
| Total Assets | ||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
| Current Liabilities | ||||||||||
| Account Payable | ||||||||||
| Other Current liabilities | ||||||||||
| Total Current Liabilities | 5 | |||||||||
| Non-current liabilities | ||||||||||
| Notes Payable | ||||||||||
| Non-current lease liability | ||||||||||
| Other non- current liabilities | ||||||||||
| Total Non-Current Liabilities | 6 | |||||||||
| Total Liabilities | ||||||||||
| Stockholders’ Equity | 7 | |||||||||
| Common Stock: | ||||||||||
| Preferred Stock: | ||||||||||
| Class A - | ||||||||||
| Class B - | ||||||||||
| Class C - | ||||||||||
| Class D - | ||||||||||
| Class E - | ||||||||||
| Class F - | ||||||||||
| Additional Paid-in-capital | ||||||||||
| Capital Reserve | ||||||||||
| Minority Interest | ||||||||||
| Retained Earnings | ( | ) | ||||||||
| Total Stockholders’ Equity | ||||||||||
| Total Liabilities and Stockholders’ Equity | ||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-1
ILUSTRATO PICTURES INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
| March 31, 2024 | March 31, 2023 | |||||||||
| NET REVENUE | ||||||||||
| COST OF REVENUE | ||||||||||
| GROSS PROFIT | ||||||||||
| Operating Expenses | ||||||||||
| General, Selling & Administrative Expenses | 8 | |||||||||
| Total Operating Expense | ||||||||||
| PROFIT/ LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||||
| Non- Operating Expenses | ||||||||||
| Non-Operating Income | ||||||||||
| Depreciation & Amortization | ||||||||||
| NET PROFIT/ LOSS | 9 | ( | ) | ( | ) | |||||
| Basic EPS | ( | ) | ( | ) | ||||||
| Diluted EPS | ( | ) | ( | ) | ||||||
| Weighted average shares outstanding | ||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-2
ILUSTRATO PICTURES INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
FOR THE QUARTER ENDED MARCH 31, 2024
| Common Stock | Preferred Stock - Class A | Preferred Stock - Class B | Preferred Stock - Class D | Preferred Stock - Class E | Preferred Stock - Class F | Capital | Minority | Additional Paid in | Accumulated | Total Stock Holders’ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Reserve | Interest | Capital | Deficit | Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance December 31, 2023 | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Convertible notes converted to common stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for Cash | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warrant converted into common stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued as commitment and compensation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock class F issued | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock class F converted into common | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Changes in Minority Interest Earnings | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Changes in Retained Earnings | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Capital Reserve | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Income | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Minority Interest | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance March 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FOR THE QUARTER ENDED MARCH 31, 2023
| Common Stock | Preferred Stock - Class A | Preferred Stock - Class B | Preferred Stock - Class D | Preferred Stock - Class E | Preferred Stock - Class F | Minority | Additional Paid in | Accumulated | Total Stock Holders’ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Interest | Capital | Deficit | Equity | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance December 31, 2022 | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock cancelled | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock issued | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Changes in Retained earnings | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Income | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance March 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-3
ILUSTRATO PICTURES INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AUDITED)
| March 31, 2024 | March 31, 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net Loss/ Profit | ( | ) | ( | ) | ||||
| Minority Interest | ( | ) | ||||||
| Adjustment to reconcile net gain (loss) to net cash Finance cost | ||||||||
| Depreciation & Amortization | ||||||||
| Discount on Convertible Notes | ||||||||
| Changes in Assets and Liabilities, net | ||||||||
| Other Current Assets | ( | ) | ||||||
| Other Current Liabilities | ( | ) | ||||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Addition of Fixed Assets | ( | ) | ||||||
| Changes in Non- Current Assets | ( | ) | ( | ) | ||||
| Changes in Non- Current Liabilities | ( | ) | ||||||
| Net cash (used In) provided by investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Fund raised through notes | ||||||||
| Common Stock issued | ||||||||
| Preferred Stock Issued | ||||||||
| Discount on convertible Notes | ( | ) | ||||||
| Finance cost | ( | ) | ||||||
| Additional Paid-in Capital | ( | ) | ||||||
| Changes In Retained Earnings | ( | ) | ||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Net change in cash, cash equivalents and restricted cash | ( | ) | ||||||
| Cash, cash equivalents and restricted cash, beginning of the year | ||||||||
| Cash, cash equivalents and restricted cash, end of the year | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-4
ILUSTRATO PICTURES INTERNATIONAL INC.
NOTES TO AUDITED FINANCIAL STATEMENTS
NOTE 1: ORGANIZATION, HISTORY AND BUSINESS
(A) We were incorporated as a Superior Venture Corp. on April 27, 2010, in the State of Nevada for the purpose of selling wine varietals. On November 9, 2012, we entered into an Exchange Agreement with the Ilustrato Pictures Ltd., a British Columbia corporation (Ilustrato BC”), whereby we acquired all the issued and outstanding common stock of Ilustrato BC. On November 30, 2012, Ilustrato BC transferred all of its assets and liabilities to Ilustrato Pictures Limited, our wholly owned subsidiary in Hong Kong (“Ilustrato HK”). On February 11, 2013, we changed the name to Ilustrato Pictures International, Inc.
(B) On April 1, 2016, Barton
Hollow, together with the newly elected director of the issuer, caused the Issuer to enter into a letter of Intent to merger with Cache
Cabinetry, LLC, and Arizona limited liability company. Pursuant to the Letter of Intent, the parties thereto would endeavor to arrive
at, and enter into, a definitive merger agreement providing for the Merger. As an inducement to the members of Cache Cabinetry, LLC to
enter into the Letter of Intent and thereafter transact, the Issuer caused to be issued to the members
(C) Subsequently, on April 6, 2016, the Issuer and Cache Cabinetry, LLC entered into a definitive agreement and Plan of Merger (the “Merger Agreement”). Concomitant therewith, the stockholders of the Issuer elected Derrick McWilliams, the President of Cache Cabinetry, LLC Chief Executive Officer of the Issuer, who along with Barton Hollow, ratified and approved the Merger Agreement and Merger.
(D) The Merger closed on June 3, 2016. The merger is designed as a reverse subsidiary merger pursuant to Section 368(a)(2)(E) of the Internal Revenue Code. That is, upon closing, Cache Cabinetry LLC will merger into a newly created subsidiary of the Issuer with the members of Cache Cabinetry, LLC receiving shares of the common stock of the Issuer as consideration therefor. Upon closing of the Merger, Cache Cabinetry, LLC will be the surviving corporation in its merger with the wholly owned subsidiary of the Issuer, therefore has become the wholly owned operating subsidiary of the Issuer.
(E) On November 9th, 2018, the Company entered into a Term Sheet for Plan of Merger and Control with Larson Elmore.
(F) As a part of share purchase arrangement between Lee Larson Elmore and FB Technologies Global Inc., Nick Link, the owner of FB Technologies Global Inc. replaced Lee Larson Elmore as CEO of Ilustrato Pictures International Inc. on January 14, 2021, where we eventually got control over activities and books of accounts of Ilustrato Pictures International Inc. So, we are not aware about facts mentioned above vide note no. 1(A), 1(B), 1(C), 1(D), 1(E), 1(F) and 1(G) ‘organization, history, and business’ as they are related to prior to the date on which control over activities and books of accounts of Ilustrato Pictures International Inc. were handed over to us. Thus, those events have been reiterated as disclosed in previous fillings made by the preceding management of the company with SEC.
F-5
(G) On May 18, 2020, the
Company entered into a definitive agreement and Plan of Merger with FB Technologies Global, Inc, the shareholders of FB Technologies
Global, Inc. were issued
(H) Firebug Mechanical Equipment LLC was incorporated on May 8, 2017.
ILUS acquired
(I) Georgia Fire & Rescue
Supply LLC (Georgia Fire) was incorporated on January 21, 2003. ILUS acquired
(J) Bright Concept Detection
and Protection System LLC (BCD Fire) was incorporated on March 18, 2014. ILUS acquired
(K) Bull Head Products Inc.
was incorporated on June 8, 2007. ILUS acquired
(L) Emergency Response Technologies, Inc. This company was incorporated by ILUS on February 22, 2022, as the company’s Emergency Response Subsidiary. This company is engaged in the business of public safety and emergency response-focused mergers and acquisitions.
(M) E-Raptor. This company was incorporated by ILUS as the company’s Commercial Electric Utility Vehicle manufacturer on February 22, 2022. This company is engaged in the business of manufacturing electric utility vehicles for the emergency response, agricultural, industrial, hospitality and transport sectors.
(N) Replay Solutions was incorporated by ILUS on March 1, 2022. The company is engaged in the business of recovering precious metals from electronic waste, known as urban mining.
F-6
(O) Quality Industrial Corp.
was originally incorporated on May 4, 1998. ILUS acquired
(P) AL Shola Al Modea Safety
and Security LLC is a fire safety company registered in the United Arab Emirates. The company has signed a Share Purchase Agreement to
acquire
(Q) On January 3, 2024, Ilustrato
Pictures International Inc. acquired a convertible note from YAII PN, LTD with outstanding principal and accrued interest of $
(R) On February 23, 2024, Ilustrato Pictures International, Inc., entered into a Stock Purchase Agreement with Samsara Luggage Inc., and sold all its equity interests in seven companies owned by the Company:
| ● | Firebug Mechanical Equipment LLC |
| ● | Georgia Fire & Rescue Supply LLC |
| ● | Bright Concept Detection and Protection System LLC |
| ● | Bull Head Products Inc |
| ● | E-Raptor |
| ● | The Vehicle Converters |
| ● | AL Shola Al Modea Safety and Security LLC, the only entity in which the Company does not own |
The consideration for the sale of the equity interests
in the foregoing companies was paid by SAML by the issuance of
(S) On March 27, 2024, our subsidiary QIND entered into a definitive Stock
Purchase Agreement (the “Stock Purchase Agreement”) with the shareholders of Al Shola Al Modea Gas Distribution LLC (“ASG”
or “Al Shola Gas”) to acquire a
F-7
NOTE 2: SUMMARY OF ACCOUNTING POLICIES
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers.
Accordingly, revenue is recognized when control of the goods or services promised under a contract is transferred to the customer either at a point in time (e.g., upon delivery) or over time (e.g., as the Company performs under the contract) in an amount that reflects the consideration to which the Company expects to be entitled in exchange for the goods or services. The Company accounts for a contract when it has approval and commitment from both parties, the rights and payment terms of the parties are identified, the contract has commercial substance and collectability of consideration is probable. If collectability is not probable, the sale is deferred until collection becomes probable or payment is received.
Contract Assets and Contract Liabilities acquired under Business Combinations
Company follows new guidance under ASC 606 regarding recognition and measurement of contract assets and contract liabilities acquired in a business combination. The company applies the definition of a performance obligation in ASC 606 when recognizing contract liabilities assumed in a business combination. The company eventually recognize contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the acquisition date. Earlier, contract assets and contract liabilities acquired in a business combination were recorded by the acquirer at fair value.
Work-in-progress
Work-in-progress is stated at cost plus attributable profit, less provision for any anticipated losses and progress billings. Cost comprises direct materials, labor, depreciation, and overheads. If any progress billings for any contract exceed the cost-plus attributable profit or less anticipated losses, the excess to be shown as excess progress billings. Claims are only recognized as income when the outcome and recoverability can be determined with reasonable certainty. Contract revenue and costs are recognized as revenue and expenses, respectively, in the statement of comprehensive income when the outcome of a construction contract can be estimated reliably.
In accordance with ASC-606 revenue recognition, amounts are billed in accordance with contractual terms or as work progresses. Unbilled amounts arise when the timing of billing differs from the timing of revenue recognized, such as when contract provisions require specific milestones to be met before a customer can be billed. Unbilled amounts primarily relate to performance obligations satisfied over time when the cost-to-cost method is utilized, and the revenue recognized exceeds the amount billed to the customer as there’s not yet a right to invoice in accordance with contractual terms. Unbilled amounts are recorded as a contract asset when the revenue associated with the contract is recognized prior to billing and derecognized when billed in accordance with the terms of the contract.
Variations
Variations are recognized in contract revenue when the outcome can be determined with reasonable certainty and are capable of being reliably measured.
Variable consideration
If the consideration in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognized will not occur when the associated uncertainty with the variable consideration is subsequently resolved. The construction contracts provide customers with a right to claim damages for delay in delivery of goods. The rights to claim damages for delay in delivery of goods give rise to variable consideration.
F-8
Accounts Receivable
Accounts receivable is reported at the customers’ outstanding balances, less any allowance for doubtful accounts. Interest is not accrued on overdue accounts receivable.
The duration of such receivables extends from 30 days to beyond 12 months. Full payment is received only when a job/project is completed, and approvals are obtained. Provisions are created based on estimated irrecoverable amounts determined by reference to past default experience.
Allowance for Doubtful Accounts
An allowance for doubtful accounts on accounts receivable is charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based on historical write off percentages and information collected from individual customers. Accounts receivables are charged off against the allowances when collectability is determined to be permanently impaired.
Inventories
In accordance with ASC 330, 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.
Tangible Assets/ 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.
| Buildings, related improvements & land improvements | ||||
| Machinery & equipment | ||||
| Computer hardware & software | ||||
| Office, furniture & others |
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.
Stock Based Compensation
When applicable, the Company will account for stock-based payments to employees in accordance with ASC 718, “Stock Compensation” (“ASC 718”). Stock-based payments to employees include grants of stocks, grants of stock options and issuance of warrants that are recognized in the consolidated statement of operations based on their fair values at the date of grant.
In accordance with ASC 718, the company will generally apply the same guidance to both employee and nonemployee share-based awards. However, the company will also follow specific guidance for share-based awards to nonemployees related to the attribution of compensation cost and the inputs to the option-pricing model for expected term. Nonemployee 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.
F-9
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 ASC Topic 260-10, “Earnings per Share.” Basic earnings (loss) per share is computed by dividing income (loss) available to shareholders by the weighted average number of shares available. Diluted earnings (loss) per shares available. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except the denominator is increased to include the number of additional shares that would have been outstanding if the potential shares had been issued and if the additional shares were dilutive.
Organization and Offering Cost
The Company has a policy to expense organization and offering cost as incurred.
Cash and Cash Equivalents
For purpose of the statements of cash flows, the Company considers cash and cash equivalents to include all stable, highly liquid investments with maturities of three months or less.
Fair Value of Financial Instruments
The company’s financial instruments consist of cash and cash equivalents, accounts receivable, and notes payable. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumption that affect the reported amount of assets and liabilities and disclosure of disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Business segment
ASC 280, “Segment Reporting” requires use of the “management approach” model for segments reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance.
Below is the Statement of operations of reportable Segment:
Divisional Income Statement
The Company is organized into two division based on the similarity of products, customers served, common use of facilities, and economic characteristics. The Company’s segments are as follows:
| 1. | Emergency Response |
F-10
| 2. | Industrial & Manufacturing |
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Emergency & Response Division | ||||||||
| Revenue | $ | |||||||
| Cost Of Goods Sold | ||||||||
| Gross Profit | ||||||||
| Total Operating Expenses | ||||||||
| Operating Loss | ( | ) | ( | ) | ||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
Our revenue decreased to $
Operating expenses decreased to $
Due to the revenue decline
and optimized operations, we incurred a loss in net loss of $
For the coming year 2024, the Company will continue to allocate financial, technical and sales resources for recently acquired subsidiaries to positively impact their financial results through increased sales orders and efficiency. Allocated personnel will primarily focus on accelerating sales and marketing efforts, product development, international market expansion, optimizing of supply chain and production processes, and overall increased profitability while continuing with the integration and optimization of currently operating companies. With the group expansion and growth, we also intend to hire executives and personnel with specific industry experience and fields of expertise to streamline financial reporting, compliance, and Investor Relations and to improve our corporate governance.
| For the Three Months Ended | ||||||||
| March 31, 2024 | March 31, 2023 | |||||||
| Industrial & Manufacturing Division | ||||||||
| Revenue | ||||||||
| Cost of revenues | ||||||||
| Gross profit | ||||||||
| Total Operating Expenses | ||||||||
| Profit/ loss from Operations | ( | ) | ||||||
| Non-Operating expenses | ||||||||
| Non-Operating Income | ||||||||
| Net loss/ profit | $ | ( | ) | |||||
F-11
For our Industrial and Manufacturing Division, the
Operating Revenue increased to $
We incurred Net Income of $
Geographical presence
Presently our operations are spread across the United States, United Arab Emirates, United Kingdom, and Republic of Serbia, however, we plan to further expand our regional presence and aim to expand our manufacturing operations in the United States during 2024. At present the revenue reported above is from United States and United Arab Emirates. We’ve classified the revenue based on the entities registered in their respective locations. All the revenue generated as indicated has solely come from external customers, with no sales involving inter-company transactions.
Income Taxes
The Company accounts for income tax positions in accordance with Accounting Standards Codification Topic 740, “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 for those subsidiaries which are in income tax-free jurisdiction, because the losses incurred cannot be utilized in the future, rendering deferred tax assets irrelevant.
Recent Accounting Pronouncements
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the accounting for goodwill impairments by eliminating step two from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. ASU 2017-04 also clarifies that an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The new standard is effective for fiscal years beginning after December 15, 2019, for both interim and annual reporting periods.
Rounding Off
Figures are rounded off to the nearest $, except value of EPS and number of shares.
F-12
NOTE 3: CURRENT ASSETS
| March 31, | December 31, | |||||||
| Particulars | 2024 | 2023 | ||||||
| Loans advanced | ||||||||
| Advance given to suppliers and sub-contractors | ||||||||
| Director’s current accounts | ||||||||
| Statutory dues receivable | ||||||||
| Deposits | ||||||||
| Accrual of discount on notes | ||||||||
| Buy Back Commitment | ||||||||
| Misc. current assets | ||||||||
| Total | $ | $ | ||||||
| ● | Advances to Subcontractors and Suppliers: Advances have been paid to the suppliers/ sub-contractors in the ordinary course of business for procurement of specialized material and equipment. |
| ● | Directors Current Account includes amount incurred for Company’s Annual shareholders meeting, events for investor relationship, advances for our investment projects and other expenses incurred for future potential acquisitions. |
| ● | Loan advanced refers to the amount advanced by a company in the ordinary course of business and includes amount paid for set up of new businesses. |
Accounts Receivable
Accounts receivable are reported at the customers’ outstanding balances, less any allowance for doubtful accounts. Interest is not accrued on overdue accounts receivable.
| March 31, | ||||
| 2024 | ||||
| Accounts Receivables Ageing | (unaudited) | |||
| 1-30 days | ||||
| 31-60 days | ||||
| 61-90 days | ||||
| +90 days | ||||
| Total | ||||
F-13
NOTE 4: NON-CURRENT ASSETS
Goodwill
As a part of share purchase arrangement between Lee Larson Elmore and FB Technologies Global Inc., Nick Link, the owner of FB Technologies Global Inc. replaced Lee Larson Elmore as CEO of Ilustrato Pictures International Inc. on January 14, 2021, and we eventually got control over activities and books of accounts of Ilustrato Pictures International Inc. from the date January 14, 2021.
As of March 31, 2024, the additional Goodwill has been generated through the acquisition by our subsidiaries. Quality Industrial Corp. The operating business Al Shola Gas will be consolidated from January 1, 2024. Goodwill accounted for in the books is primarily a result of acquisitions, representing the excess of the purchase price over the fair value of the tangible net assets acquired.
The Company accounts for business combinations by estimating the fair value of the 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, to test goodwill and intangible assets for impairment annually if an event occurs or circumstances change which indicates that its carrying amount may not exceed its fair value.
The annual impairment review is performed in the fourth quarter of each fiscal year based upon information and estimates available at that time. To perform the impairment testing, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair values of the Company’s reporting units or indefinite-lived intangible assets are less than their carrying amounts as a basis for determining whether or not to perform the quantitative impairment test. Qualitative testing includes the evaluation of economic conditions, financial performance, and other factors such as key events when they occur. The Company then estimates the fair value of each reporting unit and each indefinite-lived intangible asset not meeting the qualitative criteria and compares their fair values to their carrying values.
As all the subsidiaries were acquired in 2022, hence company would start impairment process from the next year 2023 in accordance with the guidance prescribed in ASC 350. The Company would assess at year-end whether there has been an impairment in the value of goodwill and identifiable intangible assets.
If future operating performance at one or more of the Company’s reporting units were to fall significantly below forecasted levels, the Company could be required to reflect, under current applicable accounting rules, a non-cash charge to operating income for an impairment. Any determination requiring the write-off of a significant portion of goodwill, or identifiable intangible assets would adversely impact the Company’s results of operations and net worth.
On April 1, 2024, the Agreement with Quality International was canceled by the Board of Directors of Quality Industrial Corp. QIND restated its financial statements as of December 31, 2022, which were previously reported on the Original Filing and subsequent amendments. Quality International is no longer considered as Goodwill. The following items reflect the restatements:
| Year | March 31, 2024 | December
31, | ||||||
| QIND | ||||||||
| Firebug | ( | ) | ||||||
| Bullhead | ||||||||
| Georgia Fire | ||||||||
| ILUS UK | ||||||||
| BCD | ||||||||
| ASSS | ||||||||
| SAML | ||||||||
| Goodwill Total | ||||||||
F-14
Long term investments
| Particulars | March 31, 2024 | December 31, 2023 | ||||||
| Investment in BCD | ||||||||
| Investment in SAML | ||||||||
| Investment in FB Fire Technologies Ltd | ||||||||
| Investment in Quality International | ||||||||
| Investment in Wikisoft | ||||||||
| Investment in Dear Cashmere Holding Co. | ||||||||
| Long term investment | ||||||||
| Loan to Fb Fire Technologies Ltd | ||||||||
| Total | ||||||||
The company holds long-term investments of $
Investment in Dear cashmere Holding Co. The company
received
Investment in FB Fire technologies
| 1. | Represents |
| Particulars | March 31, 2024 | December 31, 2023 | ||||||
| Tangible Assets | ||||||||
| Land and Buildings | ||||||||
| Plant and Machineries | ||||||||
| Furniture, Fixtures and Fittings | ||||||||
| Vehicles | ||||||||
| Computer and Computer Equipment | ||||||||
| Capital work in Progress | ||||||||
| Total | $ | |||||||
| Plant & Machinery | Furniture, Fixtures & Office Equipment | Vehicles | Computers | Total | ||||||||||||||||
| Carrying value as of January 1, 2024 | ||||||||||||||||||||
| Addition during Q1 2024 | - | |||||||||||||||||||
| Charged Depreciation Q1 2024 | - | |||||||||||||||||||
| Carrying value March 31, 2024 | ||||||||||||||||||||
F-15
NOTE 5: CURRENT LIABILITIES
| March 31, 2024 | December 31, 2023 | |||||||
| Accrued payables | ||||||||
| Credit cards | ||||||||
| other advances | ||||||||
| Loan Payable | ||||||||
| Misc. current liabilities | ||||||||
| Payroll Liabilities | ||||||||
| Payable to Government Authorities | ||||||||
| Provision for Audit Fees | ||||||||
| Payable to subsidiaries | ||||||||
| Total | ||||||||
As per the applicable accounting standards, Borrowings from financial institutions have been bifurcated into current and non-Current liabilities.
NOTE 6: NON-CURRENT LIABILITIES
Notes Payable
The following is the list of Notes payable as of March 31, 2024. Convertible Notes issued during the reported period are accounted in the books as liability, accrued Interest and discount on notes is also accounted accordingly as per general accounting principles.
On January 28, 2022, the company entered into a convertible
note with RB Capital Partners Inc. – Brett Rosen for the amount of $
On February 04, 2022, the company entered into a convertible
note with Discover Growth Fund LLC – John Burke for the amount of $
On April 26, 2022, the company entered into a convertible
note with RB Capital Partners Inc., for the amount of $
On May 20, 2022, the company entered into a convertible
note with RB Capital Partners Inc., for the amount of $
On May 27, 2022, the company entered into a convertible
note with RB Capital Partners Inc., for the amount of $
On June 1, 2022, the company entered into a convertible
note with RB Capital Partners Inc., for the amount of $
On July 12, 2022, the company entered into a convertible
note with RB Capital Partners Inc., for the amount of $
On August 10, 2022, the company entered into a convertible
note with RB Capital Partners Inc., for the amount of $
On August 25, 2022, the company entered into a convertible
note with RB Capital Partners Inc., for the amount of $
On September 21, 2022, the company entered into a convertible
note with RB Capital Partners Inc., for the amount of $
F-16
On November 14, 2022, the company entered into a convertible
note with RB Capital Partners Inc., for the amount of $
On December 2, 2022, the company entered into a convertible
note with AJB Capital Investment LLC for the amount of $
On January 26, 2023, the company entered into a convertible
note with Jefferson Street Capital for the amount of $
On April 12, 2023, the company entered into a convertible
note with RB Capital Partners Inc., for the amount of $
On May 2, 2023, the company entered into a convertible
note with RB Capital Partners Inc., for the amount of $
On May 30, 2023, the company entered into a convertible
note with RB Capital Partners Inc., for the amount of $
On May 30, 2023, the company entered into a convertible
note with RB Capital Partners Inc., for the amount of $
On June 21, 2023, the company entered into a note payable
of $
On July 03, 2023, the company entered into a convertible
note with RB Capital Partners Inc., for the amount of $
On July 26, 2023, the company entered into a convertible
note with RB Capital Partners Inc., for the amount of $
On August 29, 2023, the company entered into a convertible
note with RB Capital Partners Inc., for the amount of $
On September 5, 2023, the company entered into a convertible
note with RB Capital Partners Inc., for the amount of $
On September 7, 2023, the company entered into convertible
Note with Richard Astrom, for the amount of $
F-17
On October 20, 2023, ILUS entered into a note payable
of $
On November 7, 2023, the company entered into a convertible
note with RB Capital Partners Inc., for the amount of $
On November 21, 2023, the company entered into a convertible
note with Twn Brooks Inc., for the amount of $
On November 21, 2023, the company entered into a convertible
note with Carizzo LLC, for the amount of $
On November 29, 2023, the company entered into a convertible
note with Twn Brooks Inc., for the amount of $
On December 1, 2023, ILUS entered into a note payable
of $
On December 2, 2023, the company entered into a convertible
note with AJB Capital Investment LLC for the amount of $
On December 30, 2023, the company entered into a convertible
note with Twn Brooks Inc., for the amount of $
On April 1, 2024, ILUS entered into a consolidated
note payable with a principal amount of $
F-18
| Note owner | Date | Maturity Date | Amount $ | |||||
| Discover Growth Fund LLC | ||||||||
| RB Capital Partners Inc. | ||||||||
| RB Capital Partners Inc. | ||||||||
| Twn Brooks Inc. | ||||||||
| 1800 Diagonal Lending LLC | ||||||||
| AJB Capital Investment LLC | ||||||||
| Twn Brooks Inc. | ||||||||
| Twn Brooks Inc. | ||||||||
| 1800 Diagonal Lending LLC | ||||||||
| Twn Brooks Inc. | ||||||||
| RB Capital Partners Inc. | ||||||||
| RB Capital Partners Inc. | ||||||||
| Twn Brooks Inc. | ||||||||
| TOTAL | ||||||||
Options and Warrants
The Company chose not to record warrants in its financial
books if the exercise price is significantly higher than the current market price and classifies it as a contingent liability. For
example, the common stock purchase warrant to Discover Growth Fund, LLC described below has an exercise price of $
On February 4, 2022, a Common Share Purchase Warrant
was issued to Discover Growth Fund, LLC, of the $
On December 2, 2022, we issued a common stock purchase
warrant to AJB Capital Investment LLC for the $
On January 26, 2023, we issued a common stock purchase
warrant to Jefferson Street Capital for the $
On June 30, 2023, we issued a common stock purchase
warrant to Exchange Listing. The holder is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter
set forth, at any time on or after the date of issuance hereof, to purchase from the Company,
F-19
NOTE 7: STOCKHOLDER´ EQUITY
Common Stock And Preferred Stock
In August 2019 the Company’s Amended its Articles
of Incorporation to authorize it to issue up to two billion (
The Company also created the following
Class A –
Class B –
Class C –
Class D–
Class E -
Class F –
Stockholders’ Equity
As of March 31, 2024,
| 1. |
| 2. |
On March 17, 2023, we issued
On January 3, 2024, Ilustrato Pictures International
Inc. acquired a convertible note from YAII PN, LTD with outstanding principal and accrued interest of $
On January 03, 2024, we issued
On January 15, 2024, the company entered into a convertible
note with Twn Brooks Inc., for the amount of $
F-20
On January 17, 2024, ILUS entered into a note
payable with a principal amount of $
On January 18, 2024, we issued
On January 22, 2024, James Gibbons converted
On January 22, 2024, ILUS entered into a note
payable with a principal amount of $
On January 22, 2024, we issued
On January 23, 2024, ILUS entered into a note
payable with a principal amount of $
On January 25, 2024, we issued
On January 31, 2024, the company entered into a convertible
note with RB Capital Partners Inc., for the amount of $
On February 1, 2024, we issued
On February 2, 2024, we issued
On February 8, 2024, the company entered into a share
purchase agreement with William Black to sell
On February 19, 2024, we issued
On February 23, 2024, Ilustrato Pictures International, Inc., entered into a Stock Purchase Agreement with Samsara Luggage Inc., and sold all its equity interests in seven companies owned by the Company:
| ● | Firebug Mechanical Equipment LLC |
| ● | Georgia Fire & Rescue Supply LLC |
| ● | Bright Concept Detection and Protection System LLC |
| ● | Bull Head Products Inc |
| ● | E-Raptor |
| ● | The Vehicle Converters |
F-21
The consideration for the sale of the equity interests in the foregoing
companies was paid by SAML by the issuance of
On
March 19, 2024, we issued
On
March 26, 2024, the Company amended its Articles of Incorporation to authorize it to issue up to three and a half billion (
On March 27, 2024, we issued
On March 27, 2024, our subsidiary QIND entered into
a definitive Stock Purchase Agreement (the “Stock Purchase Agreement”) with the shareholders of Al Shola Al Modea Gas Distribution
LLC (“ASG” or “Al Shola Gas”) to acquire a
NOTE 8: EXPENSES
| GENERAL, SELLING AND ADMINISTRATION EXPENSES | March 31, 2024 | |||
| Administration and General Expense | ||||
| Selling and Distribution Expense | ||||
| Payroll Expense | ||||
| Stock Based Compensation | ||||
| Total | $ | |||
General and administrative expenses include finance administration and human resources, facility costs (including rent), professional service fees, and other general overhead costs to support the company’s operations.
NOTE 9: NET LOSS PER SHARE
| Particulars | March 31, 2024 | March 31, 2023 | ||||||
| Basic EPS | ||||||||
| Numerator | ||||||||
| Net income / (loss) | ( | ) | ( | ) | ||||
| Net Income attributable to common stockholders | $ | ( | ) | $ | ( | ) | ||
| Denominator | ||||||||
| Weighted average shares outstanding | ||||||||
| Number of shares used for basic EPS computation | ||||||||
| Basic EPS | $ | ( | ) | $ | ( | ) | ||
| Diluted EPS | ||||||||
| Numerator | ||||||||
| Net income / (loss) | ( | ) | ( | ) | ||||
| Net Income attributable to common stockholders | $ | ( | ) | $ | ( | ) | ||
| Denominator | ||||||||
| Number of shares used for basic EPS computation | ||||||||
| Conversion of Class A preferred stock to common stock | ||||||||
| Conversion of Class B preferred stock to common stock | ||||||||
| Conversion of Class C preferred stock to common stock | ||||||||
| Conversion of Class D preferred stock to common stock | ||||||||
| Conversion of Class E preferred stock to common stock | ||||||||
| Conversion of Class F preferred stock to common stock | ||||||||
| Number of shares used for diluted EPS computation | ||||||||
| Diluted EPS | $ | ( | ) | $ | ( | ) | ||
F-22
NOTE 10: RELATED PARTY TRANSACTIONS
The transactions described under the heading “Executive
Compensation,” there have not been, and there is not currently proposed, any transaction or series of similar transactions to which
we were or will be a participant in which the amount involved exceeded or will exceed the lesser of $
On April 1, 2024, the Agreement with Quality International was cancelled by the Board of Directors of Quality Industrial Corp. QIND restated its financial statements as of December 31, 2022, that were previously reported on the Original Filing and subsequent amendments. Quality International is no longer considered a related party. The following items reflect the restatements:
As of March 31, 2024, and December 31, 2023,
the Company had amounts due to Quality Industrial Corp. (“QIND”), a subsidiary of the Company, of $
On December 5, 2022, we issued
On December 5, 2022, we issued
On December 5,
2022, we issued
On December 5, 2022, we issued
On December 08, 2022, we cancelled
F-23
On December 08, 2022, we cancelled
On December 08, 2022, we cancelled
On April 12, 2023,
On May 4, 2023, QIND issued to Nicolas Link
On May 4, 2023, QIND issued to John-Paul Backwell
On May 4, 2023, QIND issued to Carsten Kjems Falk
On May 4, 2023, QIND issued to Krishnan Krishnamoorthy
On May 4, 2023, QIND issued to Louise Bennett
On September 15, 2023, QIND issued to Nicolas
Link
On September 15, 2023, QIND issued to John-Paul
Backwell
On September 15, 2023, QIND issued to Carsten
Kjems Falk
On September 15, 2023, QIND issued to Louise Bennett
On April 3, 2024,
we issued
On April 3, 2024, we issued
On May 14, 2024, QIND issued to John-Paul Backwell
F-24
NOTE 11: CONSOLIDATION BASIS
Following companies are consolidating basis of Mergers & Acquisitions as of March 31, 2024:
| 1) | ILUS International US |
| 2) | ILUS International UK Ltd. |
| 4) | Firebug Mechanical Equipment LLC. |
| 5) | Bull Head Products Inc. |
| 6) | Georgia Fire & Rescue |
| 7) | Bright Concept and protection System LLC |
| 8) | Quality Industrial Corp. |
| 9) | Al Shola Al Modea Safety and Security LLC |
| 10) | Al Shola Al Modea Gas and Distribution LLC |
| 11) | Samsara Luggage Inc. |
NOTE 12: LEGAL PROCEEDINGS
From time to time, we may become party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. Aside from the below, we are not currently a party, as plaintiff or defendant, to any legal proceedings that we believe to be material or which, individually or in the aggregate, would be expected to have a material effect on our business, financial condition or results of operation if determined adversely to us.
We have been named as a defendant in an action commenced by our former CEO, Larson Elmore. A case has been filed in the Eight Judicial District Court of the State of Nevada (Case No. A-22-858343-C). Plaintiff alleges that we breached a stock purchase agreement dated May 10, 2020, and promissory notes and is therefore entitled to damages. On May 28, 2024, Lee Larson Elmore (Elmore), Ilustrato Pictures International, Inc. (“ILUS”) Nicholas Link (Link), and FB Technologies Global Inc. (collectively the parties) have agreed to resolve all claims existing between themselves. In exchange for the satisfaction of the disputed promissory note (note) and release of all claims between these parties, ILUS shall:
| 1. | Convert the remainder of the note to | |
| 2. | Pay, or cause to be paid, to Elmore the total of $ |
F-25
We
have been named as a defendant in an action commenced by Steve Nicol, who claims that he loaned $
We have been named as a defendant in an action commenced by Black Ice
Advisors LLC, regarding a historic note entered into by the previous CEO, Larson Elmore with a principal amount of $
We cannot predict whether the action against Steve Nicol and Black Ice Advisors is likely to result in any material recovery or expense to our company. Where it is reasonably possible to do so, the Company accrues estimates of the probable costs for the resolution of these matters. These estimates are based on 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 assumption.
NOTE 13: GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Currently, the Company has incurred operating losses, and as of December 31, 2023, the Company also had a working capital deficit and an accumulated deficit. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
Management also believes the Company needs to raise additional capital for working capital purpose. There is no assurance that such financing will be available in the future. The conditions described above raise substantial doubt about our ability to continue as a going concern. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going Ilustrato Pictures International Inc. recorded all revenue generated from selected customers on a credit basis. At the end of the year, accounts receivable for the previous year and the current year have not been collected. The management has represented that they will collect the cash for all outstanding account receivables due from the previous years and the current year.
NOTE 14: SUBSEQUENT EVENTS
On
April 1, 2024, we issued
On
April 1, 2024, we issued
On
April 1, 2024, ILUS entered into a consolidated note payable with a principal amount of $
F-26
On
April 3, 2024, we issued
On
April 11, 2024, John-Paul Backwell converted
On
April 11, 2024, Dan Link converted
On
April 15, 2024, ILUS entered into a note payable with a principal amount of $
On
April 15, 2024, we issued
On
May 6, 2024, the company entered into a convertible note with RB Capital Partners Inc., for the amount of $
On
May 6, 2024, the company cancelled debt of in the amount of $
On
May 7, 2024, the company signed an addendum to a convertible note dated June 1, 2022, with RB Capital Partners Inc., for the amount of
$
principal
and interest amount borrowed hereunder by $
On
May 8, 2024, Alexander Kolyakin converted
On May 17, 2024, ILUS entered into a note payable with a principal
amount of $
On
May 20, 2024, ILUS entered into a note payable with a principal amount of $
On
May 20, 2024, the company issued
F-27
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors that could have a material adverse effect on our operations and future prospects on a consolidated basis include but are not limited to changes in economic conditions, incorporating acquisitions, changes in the supply chain for raw materials, effects of Covid and wars, including the Ukraine war, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
General
The following is a discussion by management of its view of the Company’s business, financial condition, and corporate performance for the past year. The purpose of this information is to give management’s recap of the past year, and to give an understanding of management’s current outlook for the near future. This section is meant to be read in conjunction with the Financial Statements of this Quarterly Report on Form 10-Q.
Overview
ILUS is a Nevada-based corporation that primarily focuses on serving the public safety, industrial, and renewable energy sectors. The company aims to provide advanced technology solutions through its wholly owned subsidiary Emergency Response Technologies (ERT). ERT’s technology aims to protect communities, assets, and frontline personnel by acquiring the latest technology and solutions for the emergency response industry. This industry includes emergency medical services, fire and rescue services, law enforcement, and emergency management. The company also has a subsidiary named Quality Industrial Corp. which focuses on acquiring and growing process manufacturing and industrial companies.
Factors Affecting Our Performance
The primary factors affecting our results of operations include:
General Macro Economic Conditions
Our business is impacted by the global economic environment, employment levels, consumer confidence, government, and municipal spending. Global instability in securities markets and the war in Ukraine are among other factors that can impact our financial performance. In particular, changes in the U.S. economic climate can impact the demand for our product range. In addition, the impact of taxes and fees can have a dramatic effect on the availability, lead times and costs associated with raw materials and parts for our product range.
2
Our purchases are discretionary by nature and therefore sensitive to the availability of financing, consumer confidence, and unemployment levels among other factors and are affected by general U.S. and global economic conditions, which create risks that future economic downturns will further reduce consumer demand and negatively impact our sales.
While less economically sensitive than the Emergency Response sector, the Industrial and Manufacturing sectors are also impacted by the overall economic environment. Tenders can be withdrawn and lead times for the manufacturing can be affected which can result in cancellation of orders if not delivered on time.
Impact of Acquisitions
Historically, a significant component of our growth has been through the acquisition of businesses in our targeted sectors. We typically incur upfront costs as we incorporate and integrate acquired businesses into our operating philosophy and operational excellence. This includes the consolidation of supplies and raw materials, optimized logistics and production processes, and other restructuring and improvement initiatives. The benefits of these integration efforts may not positively impact our financial results in the short term but have historically positively impacted medium to long-term results.
We recognize acquired assets and liabilities at fair value. This includes the recognition of identified intangible assets and goodwill. In addition, assets acquired, and liabilities assumed generally include tangible assets, as well as contingent assets and liabilities.
Recent Developments
On March 27, 2024, the company’s subsidiary QIND, entered into a definitive Stock Purchase Agreement with the shareholders of Al Shola Al Modea Gas Distribution LLC (“ASG” or “Al Shola Gas”) to acquire a 51% interest in ASG. The Closing of the transaction took place when both parties signed the definitive Share Purchase Agreement. Al Shola Gas is an Engineering and Distribution Company in the LPG Industry in the United Arab Emirates and was established in 1980. The company is one of the region’s leading suppliers and contractors of LPG centralized pipeline systems and is approved by The General Directorate of Civil Defense, Government of Dubai, as a Central Gas Contractor and LPG Supplier. Al Shola Gas has been consolidated into the financials for the quarter ended March 31, 2024.
On April 1, 2024, after several failed effort negotiations to restructure the deal and obtain information from the selling shareholders of Quality International, the Purchase Agreement with Quality International was terminated by Quality International and subsequently, the Board of Directors of QIND and ILUS approved the cancellation of the agreement with Quality International Co Ltd FZC signed on January 18, 2023, and amended on July 27, 2023. The company is in the process of unwinding the transaction, with management aiming to recover the investment or parts of it. However, if recovery proves unattainable, the investment may need to be written off in the future.
Planned Developments
ILUS has recently re-evaluated its business strategy and decided to divest its Defense Division to expedite growth in its Emergency Response and Industrial & Manufacturing Divisions. This strategic move is aimed at optimizing the company’s resources and focusing its efforts on areas that are expected to yield higher returns and have a more significant impact on its overall performance. By streamlining its operations and aligning its core competencies with the evolving market demands, ILUS aims to enhance its market position and deliver enhanced value to its stakeholders.
ILUS is taking strategic steps to expand its portfolio and manufacturing capabilities. By mid-2024, the company plans to acquire additional Emergency Response and Industrial companies. To support its expansion, the company plans to hire additional personnel in finance and legal as well as appoint strategic advisors with extensive experience in the Emergency Response, Industrial, and Manufacturing sectors.
Our top priorities include consolidating our recent acquisitions, increasing production of emergency response products in the US, and completing the Reverse Mergers of SAML and QIND with National Exchange-listed companies in the first half of 2024. Furthermore, we intend to issue an equity dividend in the form of SAML shares to ILUS shareholders following our sale of Emergency Response Technologies assets to SAML.
3
Results of Operation for the Three Months Ended March 31, 2024, and 2023
Revenues
We earned $4,185,987 in revenue for the three months ended March 31, 2024, compared with a revenue of $1,652,161 in revenue for the three months ended March 31, 2023.
Operating Expenses
Operating expenses increased from $2,966,148 for the three months ended March 31, 2023, to $1,236,099 for the three months ended March 31, 2023. Our increase in operating expenses in Q1 2024 were mainly as a result of administrative and operating costs associated with the business activities of our subsidiaries QIND and SAML.
We anticipate that our operating expenses will increase as QIND and SAML undertake its expansion plans associated with all operating businesses.
Non-Operating Expenses
We had other non-operating expenses of $425,664 for the three months ended March 31, 2024, as compared $425,974 in other expenses for the same period ended 2023. The expenses were mainly the result of Depreciation on Fixed assets and Interest on Convertible notes.
Non-Operating Income
We had other non-operating income of $399,067 for the three months ended March 31, 2024, as compared $3,450 for the same period ended 2023. Our other income in Q1 2024 was a result of the reversal of interest payments on the loan agreements with Mahavir and Artelliq which have been unwound with the cancellation of the agreement with Quality International.
Net Income/Net Loss
We incurred Net loss of $1,951,939 for the three months ended March 31, 2024, compared to a net loss of $1,200,585 for the three months ended March 31, 2023. The increase in Net loss for the quarter ended March 31, 2024, is a result increased operational spend to facilitate growth of the company and it subsidiaries..
Divisional Income Statement
The Company is organized into two divisions based on the similarity of products, customers served, common use of facilities, and economic characteristics. The Company’s segments are as follows:
| 1. | Emergency Response |
| 2. | Industrial & Manufacturing |
4
All intersegment transactions have been eliminated in consolidation.
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Emergency & Response Division | ||||||||
| Revenue | $ | 1,099,000 | 1,652,161 | |||||
| Cost Of Goods Sold | 779,000 | 1,178,281 | ||||||
| Gross Profit | 320,000 | 473,880 | ||||||
| Total Operating Expenses | 1,234,000 | 1,593,469 | ||||||
| Operating Loss | (914,000 | ) | (1,119,589 | ) | ||||
| Net Loss | $ | (993,000 | ) | $ | (1,116,048 | ) | ||
Our revenue decreased to $1,099,000 for the three months ended March 31, 2024, from $1,652,161 in 2023, constituting a 33.5% decrease QoQ. Gross profit percentage decreased to 29.1% for the three months ended March 31, 2024, from 28.6% in 2023. Focus for the quarter has been to drive higher margin orders and hereby increase our Gross Profit.
Operating expenses decreased to $1,234,000 for the three months ended March 31, 2024, $1,593,469 in 2023, primarily due to optimizing product development, marketing, and employee-related costs.
Due to the revenue decline and optimized operations, we incurred a loss in net loss of $993,000 for the three months ended March 31, 2024, compared to a loss of $1,116,048 for the same period in 2023.
For the coming year 2024, the Company will continue to allocate financial, technical and sales resources for recently acquired subsidiaries to positively impact their financial results through increased sales orders and efficiency. Allocated personnel will primarily focus on accelerating sales and marketing efforts, product development, international market expansion, optimizing of supply chain and production processes, overall increased profitability while continuing with the integration and optimization of current operating companies. With the group expansion and growth, we also intend to hire executives and personnel with specific industry experience and fields of expertise to streamline financial reporting, compliance, and Investor Relations and to improve our corporate governance.
| For
the Three Months Ended | ||||||||
| March 31, 2024 | March 31, 2023 | |||||||
| Industrial & Manufacturing Division | ||||||||
| Revenue | 3,086,519 | — | ||||||
| Cost of revenues | 1,942,279 | — | ||||||
| Gross profit | 1,144,240 | — | ||||||
| Total Operating Expenses | 673,310 | 65,013 | ||||||
| Profit/ loss from Operations | 470,930 | (65,013 | ) | |||||
| Non-Operating expenses | 92,044 | 19,523 | ||||||
| Non-Operating Income | 379,554 | — | ||||||
| Net loss/ profit | 758,440 | $ | (84,536 | ) | ||||
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For our Industrial and Manufacturing Division the Operating Revenue increased to $3,086,519 for the quarter ended March 31, 2024, compared to $0 for the year ended March 31, 2023. The increase in revenue, were the result of the consolidation of Al Shola Gas For our Industrial and Manufacturing Division the Operating expenses increased to $673,310 for the year ended March 31, 2024, compared to $65,013 for the year ended March 31, 2023. Our increase in operating expenses in 2023, was mainly the result of consolidation of Al Shola Gas in our subsidiary QIND. Our Subsidiary QIND acquired 51% interest in Al Shola Gas on March 23, 2024, and will be consolidating the profitable operating company into the financials from Q1 2024.
We incurred Net Income of $758,440 for the three months ended March 31, 2024, compared to a net loss of $84,536 for the three months ended March 31, 2023. The increase in Net Profit for the quarter ended March 31, 2024, is a result of Net Income from our acquisition of Al Shola Gas and the reversal of interest payments on the loan agreements with Mahavir and Artelliq.
Liquidity and Capital Resources
As of March 31, 2024, we had total current assets of $35,163,751 and total current liabilities of $23,419,523. We had a positive working capital of $11,744,228 as of March 31, 2024. This compares with a working capital of $11,384,674 as of December 31, 2023.
Operating activities used $2,009,067 in cash for the three months ended March 31, 2024, as compared with $43,231,133 provided in cash for the three months ended March 31, 2023. Our positive operating cash flow for Q1 2024 was mainly the result of growth in core business activities being higher operating profit and in the accounts receivables.
Investing activities used $8,485,903 in cash for the three months ended March 31, 2024, as compared with $3,914,573 provided in cash for the three months ended March 31, 2023.
Financing activities provided $10,578,735 in cash for the three months ended March 31, 2024, as compared with $48,415,110 used in cash provided for the same period ended 2023. Our financing cash flow for Q1 2024 was mainly the result of Finance costs, proceeds from the issuance of convertible notes and changes in retained earnings.
Going Concern
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.
Management evaluated all relevant conditions and events that are reasonably known or reasonably knowable, in the aggregate, as of the date the consolidated financial statements are issued and determined. The Company’s ability to continue as a going concern is dependent on the Company’s ability to continue to generate sufficient revenues and raise capital within one year from the date of filing.
Over the next twelve months, management plans to use borrowings and security sales to mitigate the effects of cash flow deficits; however, no assurance can be given that debt or equity financing, if and when required, will be available.
Impact of Acquisitions
Historically a significant component of our growth has been through the acquisition of businesses in our targeted sectors. We typically incur upfront costs as we incorporate and integrate acquired businesses into our operating philosophy and operational excellence. This includes consolidation of supplies and raw materials, optimized logistics and production processes, and other restructuring and improvements initiatives. The benefits of these integration efforts and upcoming planned acquisitions may not positively impact our financial results in the short term but has historically been the case in the medium to long term.
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Critical Accounting Policies
In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of inherently uncertain matters. Our critical accounting policies are disclosed in the Notes of our unaudited financial statements included in this Quarterly Report on Form 10-Q.
Goodwill
The Company continues to review its goodwill for possible impairment or loss of value at least annually or more frequently upon the occurrence of an event or when circumstances indicate that a reporting unit’s carrying amount is greater than its fair value. On March 31, 2024, we performed a goodwill impairment evaluation. We performed a qualitative assessment of factors to determine whether it was necessary to perform the goodwill impairment test. Based on the results of the work performed, the Company has concluded that no impairment loss was warranted on March 31, 2024. Factors including non-renewal of a major contract or other substantial changes in business conditions could have a material adverse effect on the valuation of goodwill in future periods and the resulting charge could be material to the future periods’ results of operations.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Recently Issued Accounting Pronouncements
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the accounting for goodwill impairments by eliminating step two from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. ASU 2017-04 also clarifies that an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The new standard is effective for fiscal years beginning after December 15, 2019, for both interim and annual reporting periods. The Company is currently assessing the potential impact of the adoption of ASU 2017-04 on its consolidated financial statements.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
A smaller reporting company is not required to provide the information required by this Item.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
As required by SEC Rule 15d-15, our management carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q.
Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during the quarter ended March 31, 2024, that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.
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Part II: Other Information
Item 1 - Legal Proceedings
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers, or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interests.
Item 1A. Risk Factors
There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
Item 5. Other Information
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Item 6. Exhibits
| * | Incorporated by reference to the Registration Statement on Form 10-K filed with the Securities and Exchange Commission on May 1, 2024 |
| ** | Provided herewith |
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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 thereunto duly authorized.
| Ilustrato Pictures International Inc. | ||
| Date: | June 7, 2024 | |
| By: | /s/ Nicolas Link | |
| Nicolas Link | ||
| Title: | Chief
Executive Officer (principal executive) |
|
| Ilustrato Pictures International Inc. | ||
| Date: | June 7, 2024 | |
| By: | /s/ Krishnan Krishnamoorthy | |
| Krishnan Krishnamoorthy | ||
| Title: | Chief
Financial Officer (principal accounting and financial officer) |
|
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