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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q/A

Amendment No. 1 

 

  Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended June 30, 2023

 

  Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from __________ to__________

 

Commission File Number: 000-56239

 

Ilustrato Pictures International, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada   27-2450645
(State or other jurisdiction of
incorporation or organization)
  (IRS Employer
Identification No.)

 

26 Broadway, Suite 934

New York, NY 10004

(Address of principal executive offices)

 

917-522-3202

(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.

[X] Yes [  ] No

 

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). [X] Yes [  ] No

 

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
  Non-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 [X] No

 

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: 1,524,726,965 common shares as of September 12, 2023

 

 1 

  

TABLE OF CONTENTS

 

    Page
PART I – FINANCIAL INFORMATION  
   
Item 1: Financial Statements 3
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations 4
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 10
Item 3: Defaults Upon Senior Securities 11
Item 4: Mine Safety Disclosures 11
Item 5: Other Information 11
Item 6: Exhibits 11

 

 2 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Our financial statements included in this Form 10-Q are as follows:

 

  F-1 Consolidated Balance Sheets as of June 30, 2023 (Unaudited) and December 31, 2022;
  F-2 Consolidated Statements of Operations for the three and six months ended June 30, 2023, and 2022 (Unaudited);
  F-3 Consolidated Statement of Stockholders’ Equity for the periods ended June 30, 2023, and 2022 (Unaudited);
  F-4 Consolidated Statements of Cash Flows for the periods ended June 30, 2023, and 2022 (Unaudited); and
  F-5 Notes to consolidated Financial Statements (Unaudited).

 

These consolidated 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 June 30, 2023, are not necessarily indicative of the results that can be expected for the full year.

 

 3 

 

ILUSTRATO PICTURES INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

      June 30, 2023  Dec 31, 2022
ASSETS               
Current Assets               
Cash and Cash Equivalents   4    1,868,502    1,478,702 
Accounts Receivables   5    83,122,866    60,690,812 
Inventory        2,451,531    1,877,905 
Inventory (work-in-progress)   6    40,622,080    58,081,202 
Other Current Assets   7    16,022,415    17,062,388 
Total Current Assets        144,087,394    139,191,009 
Long term Investments   8    18,606,444    18,368,326 
Right of use of asset   9    11,906,654    11,906,654 
Goodwill   10    60,952,347    60,310,468 
Tangible Assets   11    20,399,670    21,017,415 
Intangible Assets   12    6,352    623,592 
Total Non-Current Assets        111,871,466    112,226,454 
Total Assets        255,958,861    251,417,462 
LIABILITIES AND STOCKHOLDERS' EQUITY               
Current Liabilities   13           
Account Payable        52,473,360    52,141,842 
Current lease liability        835,942    836,382 
Other Current liabilities        102,335,498    102,059,819 
Total Current Liabilities        155,644,800    155,038,043 
Non-current liabilities   14           
Notes Payable        11,890,524    10,550,000 
Non-current lease liability        13,581,728    13,696,729 
Other non-current liabilities        14,621,613    16,015,558 
Total Non-Current Liabilities        40,093,865    40,262,287 
Total Liabilities        195,738,665    195,300,330 
Stockholders' Equity               
Common Stock: 2,000,000,000 shares authorized, $0.001 par value, 1,444,380,699 and 1,355,230,699 issued and outstanding   15    1,444,381    1,355,230 
 Preferred Stock: 235,741,000 authorized, $0.001 par value,   15           
Class A - 10,000,000 authorized; 10,000,000 issued and outstanding        10,000    10,000 
 Class B - 100,000,000 authorized; 3,400,000 issued and outstanding        3,400    3,400 
 Class C - 10,000,000 authorized; 0 issued and outstanding                 
 Class D - 60,741,000 authorized; 60,741,000 issued and outstanding        60,741    60,741 
 Class E - 5,000,000 authorized; 3,172,175 issued and outstanding        3,172    3,172 
 Class F - 50,000,000 authorized; 1,668,250 issued and outstanding        1,668    1,633 
Additional Paid-in-capital        21,665,916    20,631,261 
Other Comprehensive Income   16    7,065    (20,666)
Non-Controlling Interest   17    29,674,043    24,386,712 
Retained Earnings        6,369,586    5,126,274 
Net Income        980,224    4,559,375 
Total Stockholders' Equity        60,220,196    56,117,132 
                
Total Liabilities and Stockholders' Equity        255,958,861    251,417,462 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements. 

 

 F-1 

 

ILUSTRATO PICTURES INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED) 

                                 
   For the Three Months Ended  For the Six months ended
   June 30, 2023  June 30, 2022  June 30, 2023  June 30, 2022
NET REVENUE   23,545,596    19,677,223    43,355,607    22,690,745 
Total Net Revenue   23,545,596    19,677,223    43,355,607    22,690,745 
COST OF REVENUE   15,037,359    13,818,072    28,920,458    14,972,514 
GROSS PROFIT   8,508,237    5,859,150    14,435,149    7,718,231 
Operating Expenses:                    
General, Selling & Administrative Expenses   4,733,262    4,447,852    8,501,667    5,373,877 
Total Operating Expense   4,733,262    4,447,852    8,216,257    5,373,877 
PROFIT/ LOSS FROM OPERATIONS   3,774,975    1,411,298    5,933,482    2,344,354 
Non- Operating Expenses   2,795,915    616,047    4,043,300    912,467 
Non-Operating Income   1,164    337,071    4,704    337,071 
NET PROFIT/ LOSS   980,224    1,132,322    1,894,886    1,768,958 
BASIC EARNING PER SHARE   0.00    0.00    0.00    0.00 
WEIGHTED AVERAGE SHARES OUTSTANDING   1,444,380,699    1,271,530,699    1,444,380,699    1,271,530,699 

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 F-2 

 

ILUSTRATO PICTURES INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(UNAUDITED) 

                                                                                                                               
  

 STATEMENT OF STOCKHOLDERS' EQUITY

                               
Common Stock Preferred Stock - Class A Preferred Stock - Class B Preferred Stock - Class D Preferred Stock - Class E Preferred Stock - Class F
   Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Additional Paid in Capital  Accumulated Deficit  Non-Controlling Interest  Total Stockholders' Equity
Balance December 31,2022   1,355,230,699   1,355,230    10,000,000    $10,000    3,400,000   $ 3,400    60,741,000   60,741    3,172,175   $ 3,172    1,633,250   $ 1,634   20,631,261   $ 9,664,983   $ 24,386,712   $ 56,117,132
Common stock issued   63,850,000    63,850                                                                484,650                548,500
Common stock cancelled   (40,000,000)   (40,000)                                                                     40,000            
Preferred stock issued                                                               35,000    35    2,205                2,240
Preferred stock cancelled                                                                                               
Changes in Retained earnings                                                                                 (1,640,192)          (1,640,192)
Current Quarter Income                                                                                 914,662          914,662
Balance March 31, 2023   1,379,080,699    1,379,081    10,000,000    10,000    3,400,000    3,400    60,741,000    60,741    3,172,175    3,172    1,668,250    1,668    21,118,116    8,979,553    25,693,170    57,248,900
Common stock issued   55,300,000    55,300                                                                547,800                603,100
Preferred converted into Common stock   10,000,000    10,000                                                                                  10,000
Preferred stock converted                                                               (100,000)   (100)                     (100)
Preferred stock issued                                                               100,000    100                      100
Changes in Retainer Earnings                                        (216,412)    (216,412)
Current Quarter Income                                                                                 980,224         980,224
Share of profit transferred to Non-Controlling Interest                                                                                 (2,386,489)    3,980,873    1,594,384
Balance June 30, 2023   1,444,380,699   $1,444,381    10,000,000   $ 10,000    3,400,000   $3,400    60,741,000   $60,741    3,172,175   $3,172    1,668,250   $1,668   $21,665,916   $7,356,876   $29,674,043   $60,220,196

  

 

  

 

 

Common Stock Preferred Stock - Class A Preferred Stock - Class B Preferred Stock - Class D Preferred Stock - Class E Preferred Stock - Class F        
   Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Additional Paid in Capital  Accumulated Deficit   Non-CI    Total Stockholders' Equity
Balance Dec 31, 2021   1,243,530,699    $1,243,530    10,000,000   $10,000    2,200,000   $2,200    60,741,000   $60,741    3,172,175   $3,172    5,800,000    $5,800   $2,821,312   $13,924,142         $ 18,070,929
Shares issued   70,000,000    $70,000                                                                $124,746   $          $ 194,746
Current quarter income                                                                                   636,636             636,636
Balance Mar 31, 2022   1,313,530,699    $1,313,530    10,000,000   $10,000    2,200,000   $2,200    60,741,000   $60,741    3,172,175   $3,172    5,800,000    $5,800   $2,946,058   $14,560,778         $ 18,902,279
Common stock converted into Preferred B   (120,000,000)   $(120,000)                                                                                 $ (120,000)
Preferred Stock Converted to Common Stock   25,000,000     (25,000)                                                                                 $ (25,000)
Convertible notes converted to common stock   53,000,000     (53,000)                                                                                 $ (53,000)
Common stock converted into Preferred                            1,200,000   $1,200                                                          $ 1,200
Preferred Stock Converted to Common Stock                                                                (243,250)    (243)                    $ (243)
Changes in Add Capital                                                                             12,633,277               $ 12,633,277
Current quarter income                                                                                  $1,132,322         $ 1,132,322
Changes in Retained Earnings                                                                                  $(12,431,910)        $ (12,431,910)
Balance June 30, 2022   1,271,530,699    $1,271,531    10,000,000   $10,000    3,400,000   $3,400    60,741,000   $60,741    3,172,175   $3,172    5,556,7500    $5,557   $15,579,335   $3,261,190         $

 

 

20,194,925

   

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 F-3 

  

 ILUSTRATO PICTURES INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED) 

       
   For the Six Months Ended
   June 30, 2023  June 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES          
Net Loss/ Profit   1,894,886    1,768,958 
Adjustment to reconcile net gain (loss) to net cash          
Non- Cash non- operating Expenses   2,245,598    156,402 
Depreciation   1,325,010    576,967 
Finance cost   2,385,596    618,565 
Discount on convertible Notes   135,944    137,500 
Changes in Assets and Liabilities, net          
Current Assets   (4,006,586)   (21,564,311)
Other Current Liabilities   606,757    15,816,779 
Net cash (used In) provided by operating activities   3,980,448    (2,489,140)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Addition/ Disposal of Fixed Assets   (707,206)   638,492 
Changes in Non-current assets   (238,118)   (2,717,090)
Changes in Non- Current Liabilities   (1,508,946)   711,286 
Net cash (used In) provided by investing activities   (2,454,330)   (1,367,312)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Funds raised through notes   2,822,568    5,000,000 
Finance cost   (2,340,898)   (408,772)
Discount on convertible Notes   (135,944)   (137,500)
Note converted   (1,482,044)   (500,000)
Net cash (used in) provided by financing activities   (1,136,318   3,953,728 
           
Net change in cash, cash equivalents and restricted cash   389,800    97,276 
Cash, cash equivalents and restricted cash, beginning of the year   1,478,702   176,668 
Cash, cash equivalents and restricted cash, end of the year   1,868,502    273,944 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 F-4 

 

ILUSTRATO PICTURES INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1. ORGANIZATION, HISTORY AND NATURE OF 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 360,000,000 shares of its common stock.

 

  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, and we eventually got control over activities and books of accounts of Ilustrato Pictures International Inc. from the date January 14, 2021. 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.

 

  g) On June 10, 2020, the Company entered into a definitive agreement with FB Fire Technologies Ltd. for the conversion of debt. The shareholders were issued 2,500,000 shares of Class E Preferred Stock and BrohF Holdings Ltd., a creditor of the company was issued 672,175 shares. A final tranche of shares for debt conversion will be issued to the shareholders following the audited financials for 2022.

  

  h) Firebug Mechanical Equipment LLC (Firebug Group – U.A.E.) was incorporated on May 8, 2017. ILUS acquired 100% of this company on January 26, 2021, under a signed Share Purchase Agreement. This company is engaged in the business of research and development of firefighting technologies as well as the manufacturing firefighting equipment and firefighting vehicles for its customers in the Middle East, Asia, and Africa.

 

  i) Georgia Fire & Rescue Supply LLC (Georgia Fire) was incorporated on the January 21, 2003. ILUS acquired 100% of this company on March 31, 2022, under a signed Share Purchase Agreement. This company is engaged in the business of sales, distribution and servicing/maintenance of Firefighting, Rescue and Emergency Medical Services equipment.

 

  j) Bright Concept Detection and Protection System LLC (BCD Fire) was incorporated on March 18, 2014. ILUS acquired 100% of this company on April 13, 2021, in connection a signed Share Purchase Agreement. This company is engaged in the business of sales, distribution, installation and maintenance of Fire Protection and Security systems.

 

 F-5 

  k) Bull Head Products Inc. was incorporated on June 8, 2007. ILUS acquired 100% of this company on January 1, 2022, under a signed Share Purchase Agreement. This company is engaged in the business of manufacturing of aluminum truck beds and brush truck skid units for firefighting purposes including wildland firefighting.

 

  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.

 

  o) Quality Industrial Corp. was originally incorporated on May 4, 1998. ILUS acquired 77% of this company on May 28, 2022, under a signed Share Purchase Agreement. This company is engaged in the industrial, oil & gas, and manufacturing sectors. Quality Industrial Corp. is a public company which trades on the OTC Market under the ticker QIND and is designed as a Special Purpose Vehicle for our industrial and manufacturing division as well as for our operating company Quality International Co Ltd FCZ and other future acquisitions.

 

  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 51% control of AL Shola Al Modea Safety and Security LLC (ASSS) on December 13, 2022.

 

  q) Quality International Co Ltd FCZ is a United Arab Emirates registered process manufacturing and engineering company. It manufactures custom solutions for the oil and gas, power/energy, water, desalination, wastewater, offshore and public safety industries. Quality Industrial Corp. signed the definitive Share Purchase Agreement on January 18, 2023, to acquire a 52% interest in Quality International Co Ltd FCZ.

  

  s) Hyperion Defense Solutions (Hyperion) was incorporated on February 13, 2023, and alongside two experienced and esteemed British military veterans, Chris Derbyshire, and Tim Grey. Through their combined 34 years of military service and 22 years holding senior roles in the defense sector, they have amassed a wealth of technical expertise and senior roles in the defense sector, senior level contacts as well as an acute understanding of defense customer requirements and military procurement processes.

 

NOTE 2. SUMMARY OF SIGNIFICANT POLICIES

 

Basis of Presentation and Principles of consolidation

 

The accompanying consolidated financial statements represent the results of operations, financial position, and cash flows of ILUS and all of its majority - owned or controlled subsidiaries are prepared in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP). All significant inter-company accounts and transactions have been eliminated. Further, while preparing consolidated financial statements, all the U.S. GAAP principles of consolidation have been followed and non-controlling interest have been recorded separately in the Consolidated Balance sheets.

 

The following companies are consolidated on the basis of Mergers & Acquisitions:

 

  1. ILUS International UK

 

  2. Firebug Mechanical Equipment LLC

 

  3. Bull Head products Inc.

 

  4. Georgia Fire & Rescue supply LLC

 

  5. Bright Concept and protection System LLC

 

  6. Quality Industrial Corp.

 

  7. AL Shola Al Modea Safety and Security LLC

 

 F-6 

 

Use of estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include estimates used to review the Company’s, impairments and estimations of long-lived assets, revenue recognition of Contract based revenue, allowances for uncollectible accounts, and the valuations of non-cash capital stock issuances. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

 

Fair value of financial instruments

 

The carrying value of cash, accounts payable and accrued expenses, and debt approximate their fair values because of the short-term nature of these instruments. Management believes the Company is not exposed to significant interest or credit risks arising from these financial instruments.

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable.

 

•         Level 1. Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.

 

•         Level 2. Quoted prices for similar assets and liabilities in active markets; quoted prices included for identical or similar assets and liabilities that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. These are typically obtained from readily available pricing sources for comparable instruments.

 

•         Level 3. Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own beliefs about the assumptions that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.

  

Revenue Recognition

 

The company applies paragraph 606-10 of the FASB Accounting Standards Codification for revenue recognition. The company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met:

 

  •         persuasive evidence of an arrangement exists,
  •         the sale price is fixed or determinable,
  •        collectability is reasonable assured and
  •        goods have been shipped and/or services rendered.

 

Accounts Receivable

 

Accounts receivable are recorded at face value less an allowance for credit losses. The allowance is an estimate based on historical collection experience, current and future economic and market conditions, and a review of the current status of each customer's trade accounts receivable. Management evaluates the aging of the accounts receivable balances and the financial condition of its customers and all other forward-looking information that is reasonably available to estimate the amount of accounts receivable that may not be collected in the future and before recording the appropriate provision.

 

 F-7 

 

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 receivable are charged off against the allowances when collectability is determined to be permanently impaired.

 

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.

 

The Company calculate 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 costs 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.

 

Concentration of Credit Risk

 

The Company primarily transacts its business with one financial institution. The amount on deposit in that one institution may from time to time exceed the federally insured limit.

 

 F-8 

 

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. A Division overview presented in the Management Discussion and analysis filed with this form 10-Q.

 

Leases

 

The Company accounts for leases with escalation clauses and rent holidays on a straight-line basis in accordance with Accounting Standards Codification (ASC) 842, “Lease”. The deferred rent expenses liability associated with future lease commitments was reported under the caption “Other long-term obligation” on our consolidated balance sheet. The Company has Lease arrangement for which the liability has been recorded separately. Such Lease arrangements corresponds to the operating subsidiary QIND.

 

Recent Accounting Pronouncements

 

The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. Where it is determined that a new accounting pronouncement affects the Company’s financial report, the Company undertakes a study to determine the consequences of the change to its financial statements and assures that there are proper controls in place to ascertain that the Company’s financials properly reflect the change. The Company currently does not have any recent accounting pronouncement that they are studying, and feel may be applicable.

 

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.

 

Rounding Off

 

Figures are rounded off to the nearest $, except value of EPS and number of shares.

 

NOTE 3. GOING CONCERN

 

The accompanying 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.

 

NOTE 4. CASH AND CASH EQUIVALENTS

 

For purposes of the statements of cash flows, in accordance with ASC 230-10-20 the Company considers all highly liquid investments and short-term debt instruments with original maturities of three months or less to be cash equivalents. There was $1,868,502 in cash and cash equivalents as of June 30, 2023, and $1,478,702 as of December 31, 2022, respectively.

 

 F-9 

 

NOTE 5. ACCOUNTS RECEIVABLES

 

Accounts receivables are recorded at face value less an allowance for credit losses. The allowance is an estimate based on historical collection experience, current and future economic and market conditions, and a review of the current status of each customer's trade accounts receivable. Management evaluates the aging of the accounts receivable balances and the financial condition of its customers and all other forward-looking information that is reasonably available to estimate the amount of accounts receivable that may not be collected in the future and before recording the appropriate provision.

 

Major Accounts receivable are from our subsidiary QIND. The duration of such receivables extends from 60 days beyond 12 Months. Payments are received only when a project is completed, and approvals are obtained. Provisions are created based on the estimated irrecoverable amounts determined by referring to past default experience. The majority of accounts receivable extend beyond 12 months and are guaranteed by a shareholder.

 

NOTE 6. INVENTORY - WORK IN PROGRESS

 

Work In Progress only reflects the value of products in intermediate production stages and excludes the value of finished products being held as inventory in anticipation of future sales and raw materials not yet incorporated into an item for sale. 

 

NOTE 7. OTHER CURRENT ASSETS

Particulars   June 30, 2023   December 31, 2022
Retention Receivable     2,590,611        1,485,780  
Loans Advanced     650,715        578,367  
Amount due from Related Party     1,794,218       1,794,218  
Advance given to Suppliers and sub- Contractors     6,650,725       7,572,440  
Statutory Dues Receivables     48,234       46,326  
Deposits     1,547,977       1,550,914  
Accrual of discounts on Notes     93,958       100,000  
Other Receivables     210,000       1,314,832  
Directors Current account     2,118,990                2,096,777  
Staff Advances     8,358       49,605  
Prepayments/ Prepaid Assets      163,616        278,192  
Other Misc. Current Assets    

 

145,013

       194,938  
TOTAL     16,022,415       17,062,388  

Other Misc. Current Assets:

 

Other Misc. Current Assets as mentioned in the above table includes advances paid in connection with the operations of the company.

 

Advances to Suppliers and sub- Contractors: Advances have been paid to the suppliers in the ordinary course of business for procurement of specialized material and equipment required in the process of manufacturing of pressure vessels, tanks, heat exchangers and construction of storage tanks and pipes.  The Industrial and Manufacturing Division engages in the production of process equipment, pressure vessels, and substantial offshore structures. To undertake these projects, the company is required to make substantial upfront investments in materials and machinery. These projects involve many processes and take a long time to complete. 
   
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. 
   
Retention Receivables relates to a percentage of the contract price being retained by the customers for a period of 12 to 18 months (as per contract agreements), for the purpose of repair of damages (if any), that arise as a result of work done on the projects by the Company. These amounts are received at the expiration of the retention period. 
   
Other Receivables represents claims for damages from suppliers. 

 

Related party Advances:

  

As of June 30, 2023, the Company’s subsidiary QIND had amounts due from Gerab National Enterprises (L.L.C) a shareholder of Quality International, of $1,794,218. 

 

 F-10 

 

NOTE 8. LONG TERM INVESTMENTS

 

Particulars  June 30, 2023  December 31, 2022
Investments:          
Investment in FB Fire Technology Ltd.   3,172,175    3,172,175 
Investment in TVC   20,500    20,500 
Capital Advances   4,906,989    1,476,695 
Loan to FB Fire Technologies Ltd         1,678,995 
Investment in Dear Cashmere Holding Co.   12,000,000    12,000,000 
TOTAL   18,606,444    18,368,326 

 

Investment in Dear Cashmere Holding Co. The company received 10,000,000 shares of Common stock in Dear Cashmere Holding Co on May 21, 2021, as compensation for services to provided DRCR such as but not limited to, free rent in Al Marsa Street 66, 11th Floor, Office 1105, Dubai, free use of inhouse accounting, IT and legal team from 2021 until December 31, 2023. Capital advances represents 3,172,175 number of Class E Preferred Stock issued, in advance, at $1 per share amounting $3,172,175 to the shareholders of FB Fire Technologies Ltd. for acquisition of FB Fire Technologies Ltd.

 

Investment in FB Fire technologies represents 3,172,175 number of Class E Preferred Stock issued, in advance, at $1 per share amounting $3,172,175 to the shareholders of FB Fire Technologies Ltd. for acquisition of FB Fire Technologies Ltd. 

 

Capital Advance of $1,496,695 represents amount advanced for two subsidiaries -Bull head and Georgia Fire security LLC. 

 

NOTE 9. RIGHT OF USE ASSETS

 

The Company’s subsidiaries have entered into commercial leases of land for offices, manufacturing yards and storage facilities. The Company determines whether an arrangement contains a lease at inception. A lease liability and corresponding right of use (ROU) asset are recognized for qualifying leased assets based on the present value of fixed and certain index-based lease payments at lease commencement. To determine the present value of lease payments, the Company uses the stated interest rate in the lease, when available, or more commonly a secured incremental borrowing rate that reflects risk, term, and economic environment in which the lease is denominated. The Company has elected not to recognize ROU assets or lease liabilities for leases with a term of twelve months or less. Expense is recognized on a straight-line basis over the lease term for operating leases.

 

NOTE 10. GOODWILL

Goodwill represents the cost of acquired companies in excess of the fair value of the net assets at the acquisition date and is subject to annual impairment. Goodwill is the excess of the purchase price paid for an acquired entity and the amount of the price not assigned to acquired assets and liabilities. It arises when an acquirer pays a high price to acquire a business. This asset only arises from an acquisition and it cannot be generated internally. Goodwill is an intangible asset, and so is listed within the long-term assets section of the acquirer's balance sheet.

 

As a part of the Share Purchase Arrangement between Lee Larson Elmore and FB Technologies Global Inc., Nicolas Link, the owner of FB Technologies Global Inc. replaced Lee Larson Elmore as CEO of Ilustrato Pictures International Inc. on January 14, 2021, and the company finally took control over the activities and books of accounts of Ilustrato Pictures International Inc. from the date of January 14, 2021.

 

The Unsupported Goodwill has been written off in the financial year ending December 31, 2022. The Additional Goodwill has been generated through our acquisition of Bull Head Products Inc., Georgia Fire & Rescue, Quality Industrial Corp and AL Shola Al Modea Safety and Security LLC.  Goodwill accounted 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 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.

 

 F-11 

 

NOTE 11. TANGIBLE ASSETS

Particulars  June 30, 2023  December 31, 2022
Tangible Assets:          
Land and Building   17,147,199    17,390,322 
Plant and machinery   1,335,531    1,419,802 
Furniture, Fixtures and Fittings   168,255    221,329 
Vehicles   58,422    70,326 
Computer and computer Equipment   22,754    31,067 
Capital WIP   1,667,509    1,884,569 
TOTAL   20,399,670    21,017,415 

 

Property, Plant and Equipment

 

Property, Plant and Equipment is 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 lifespan of the respective assets using the straight-line method.

 

The estimated useful lifespans are as follows:

 

 Item   Years
Buildings, related improvements & land improvements   5-25
Machinery & Equipment   3-15
Computer hardware & software   3-10
Furniture & Fixtures   3-15

  

Property, plant and equipment   Plant & Machinery   Leasehold Improvements & Building   Furniture, Fixtures & Office Equipment   Vehicles   Computer and Computer Equipment   Capital work in Progress   Total
As of December 31, 2021     106,528       22,158       30,126       2,725       42,774               204,311  
Additions during the year                      34,833       67,601                         644,954  
Additions on account of acquisition of Subsidiary     25,427,300       27,086,143       5,741,179       1,668,183               1,884,569       61,807,374  
As at December 31, 2022     25,533,828       27,108,301       5,806,138       1,738,509       42,774       1,884,569       62,656,639  
Additions during H1 2023     929,642       313                       (5,630)       (217,060)       707,265  
June 30,2023     26,463,470       27,108,614       5,806,138       1,738,509       37,144       1,667,509       63,363,904  
Accumulated depreciation of the assets acquired as a result of acquisition of subsidiary
As at December 31, 2020     21,416,058       7,542,546       5,251,799       1,743,458                         35,953,861  
Charge for the year     1,633,889       1,071,089       167,975       1,770       —         —         2,874,723  
Eliminated on disposal during the year     —         —         —         (77,636)       —         —         (77,636)  
As at December 31, 2021     23,049,947       8,613,635       5,419,774       1,667,592                         38,750,948  
Charge for the year     1,064,079       1,104,344       165,035       591       11,707       —         2,345,756  
As at December 31, 2022     24,114,026       9,717,979       5,584,809       1,668,183       11,707       0       41,096,704  
Carrying value as at December 31, 2022     1,419,802       17,390,322       221,329       70,326       31,067       1,884,569       21,017,415  
Charge for Half year H1 2023     1,013,913       243,436       53,074       11,904       2,683       —         1,325,010  
Carrying value as at June 30,2023     1,335,531       17,147,199       168,255       58,422       22,754       1,667,509       20,399,670  

 

 

Expenditure that extends the useful lifespan of existing property, plant and equipment are capitalized and depreciated over the remaining useful lifespan of the related asset, Expenditure 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.

 

 F-12 

 

NOTE 12. INTANGIBLE ASSETS

 

Particulars  June 30, 2023  December 31, 2022
Intellectual Rights         617,240 
Website   6,112    6,112 
Trademarks   240    240 
TOTAL   6,352    623,592 

 

NOTE 13. CURRENT LIABILITIES

 

Other Current Liabilities

 

Other Current Liabilities as mentioned in the below table includes short term liabilities. Short term bank borrowings relate to credit-lines and bank borrowings by the company’s subsidiary QIND to meet asset financing and working capital requirements for orders that are in production.

 

Particulars  June 30, 2023  December 31, 2022
Credit Cards   7,228    6,895 
Payable to subsidiaries   81,404,000    82,235,560 
Short Term Bank Borrowings   18,911,641    18,220,315 
Tax Payable   18,191    31,421 
Provision for Expenses   1,328,904    1,303,229 
Accrued Interest for Convertible Notes   77,093    31,855 
Other short-term loan   101,141    101,141 
Payroll Liability   328,116    119,987 
Misc. liabilities   159,184    9,416 
TOTAL   102,335,498    102,059,819 

 

As of June 30, 2023, loan payable – Payable to subsidiaries amounting to $81,404,000 is the liability of the company on account of its acquisition of subsidiaries. The Major portion of $80.5 million is payable in tranches to Quality International as a part of purchase consideration. Other amounts include payment to other subsidiaries, Al Shola Modea Safety and Security LLC, Georgia Fire and Bull head products Inc.

 

Borrowings amounting to $18,911,641, is the current portion of bank borrowings, which correspond to our subsidiary Quality International. As per the applicable accounting standards, Borrowings from financial institutions have been bifurcated into current and non-Current liabilities.

 

NOTE 14. NON – CURRENT LIABILITIES

Particulars  June 30, 2023  December 31, 2022
Provision for Convertible Notes   1,155,338    1,155,338 
Borrowings from Financial Institutions   10,761,062    12,378,098 
Interest On Convertible Notes   658,265    461,994 
Employees’ End of Service Benefits   1,938,218    1,953,853 
Defined Benefit Obligation (Gratuity)   108,730    66,275 
TOTAL   14,621,613    16,015,558 

 

The borrowings from financial institutions amounting to $10,761,062 belong to our subsidiary, Quality International. These terms loans were acquired from commercial banks in the UAE for the purchase of machinery and equipment. These term loans carry financing costs at commercial rates plus 1 to 3-month EIBOR per annum.

 

 F-13 

 

 Options and Warrants

 

In accordance with ASC 470, detachable warrants issued are allocated to the two elements based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance, the portion of the proceeds assigned to the warrants credited to paid-in capital, and the remainder to the debt instrument.

 

On February 4, 2022, a Common Share Purchase Warrant was issued to Discover Growth Fund, LLC, of the $2,000,000 convertible promissory note of even date herewith (the “Note”), , 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, 20,000,000 of the Company’s common shares (the “Warrant Shares”) (whereby such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant) at the Exercise Price of $0.275, per share then in effect. 

 

On December 2, 2022, we issued a common stock purchase warrant to AJB Capital Investment LLC for the $1,200,000 convertible promissory note. 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, 30,000,000 of the Company’s common shares (the “Warrant Shares”) (whereby such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant) at the Exercise Price per share then in effect. The Warrant was later amended on March 8, 2023, and May 12, 2023.

 

On January 26, 2023, we issued a common stock purchase warrant to Jefferson Street Capital for the $100,000 convertible promissory note. 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, 650,000 of the Company’s common shares (the “Warrant Shares”) (whereby such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant) at the Exercise Price per share then in effect.

 

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, 200,000 of the Company’s common shares (the “Warrant Shares”) (whereby such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant) at the Exercise Price per share then in effect

 

NOTE 15. 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 (2,000,000,000) shares, of which all shares are common stock, with a par value of one-tenth of one cent ($0.001) per share. The Company also created the following 30,000,000 preferred shares with a par value of $0.001 to be designated Class A, B and C.

 

Class A – 10,000,000 preferred shares that convert at 3 common shares for every 1 preferred class A share and voting rights of 500 common shares for every 1 preferred class A share. All 10,000,000 preferred class A shares have been issued to the Company’s CEO.

 

Class B – 10,000,000 preferred shares that convert at 3 common shares for every 1 preferred class B common share.

 

Class C – 10,000,000 preferred shares that convert at 2 common shares for every 1 preferred class C common share with voting rights of 100 common shares for every 1 preferred class C share.

 

On February 14, 2020 the Company designated Class D– 60,741,000 preferred shares; par value $0.001 that convert at 500 common shares for every 1 preferred class D common share with voting rights of 500 common shares for every 1 preferred class D share.

 

 F-14 

 

On May 28, 2020, the Company designated preferred Class E shares - 5,000,000 preferred shares; par value $0.001; non-cumulative. Dividends are 6% a year commencing a year after issuance. Dividends to be paid annually. Redeemable at $1.00 per share, 2.25% must be redeemed per quarter, commencing one year after issuance, and shall be redeemed at 130% premium to the redemption value. The shares do not have voting rights.

 

On August 26, 2021, the company amended its Articles of Incorporation to updated authorized Class B preferred shares to 100,000,000 (10,000,000 previously) with par value $0.001 that will be converted at 100 common shares (3 common shares previously) for every 1 preferred Class B Share with voting rights of 100 common shares for every 1 preferred class B share. Dividends to be paid according to the company’s dividend policy agreed by the board from time to time.

 

On July 20, 2021, the Company designed preferred Class F shares – 50,000,000 preferred shares; par value $