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x`x[1]

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2022

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from              to             .

 

Commission file number:   000-56487

 

ILUSTRATO PICTURES INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

 

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

 

26 Broadway, Suite 934

New York, NY 10004

(Address of principal executive offices) (Zip Code)

 

917-522-3202

(Registrant’s telephone number, including area code)

 

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered under Section 12(b) of the Exchange Act: None

 

Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $0.001 per share.

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐    No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐   No ☒

 

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. Yes ☒   No ☐ 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒   No ☐ 

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

 

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. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

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 ☐ No ☒ 

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter $116,980,824

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 1,379,080,699 shares as of April 5, 2023

 

  

 1 
Table of Contents 

 

TABLE OF CONTENTS

 

PART I    
     
ITEM 1. BUSINESS  
     
ITEM 1A. RISK FACTORS  
     
ITEM 1B. UNRESOLVED STAFF COMMENTS  
     
ITEM 2. PROPERTIES  
     
ITEM 3. LEGAL PROCEEDINGS  
     
ITEM 4. MINE SAFETY DISCLOSURES  
     
PART II    
     
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES  
     
ITEM 6. SELECTED FINANCIAL DATA  
     
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  
     
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  
     
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA  
     
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE  
     
ITEM 9A. CONTROLS AND PROCEDURES  
     
ITEM 9B. OTHER INFORMATION  
     
ITEM 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections  
     
PART III    
     
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE  
     
ITEM 11. EXECUTIVE COMPENSATION  
     
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS  
     
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE  
     
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES  
     
PART IV    
     
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES  
     
ITEM 16. 10-K SUMMARY  
     
SIGNATURES  
   

 

As used in this Annual Report on Form 10-K, unless the context otherwise requires, the terms the “Company,” “Registrant,” “we,” “us,” “our,” “Ilustrato Pictures,” or “ILUS” refer to Ilustrato Pictures International, Inc., a Nevada corporation.

 

FORWARD-LOOKING STATEMENTS

 

This Annual Report on Form 10-K contains statements that relate to future events and expectations and, as such, constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements, other than purely historical information, including estimates, projections, statements relating to our strategies, outlook, business and financial prospects, business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” 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. 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. Forward-looking statements are not guarantees of future performance. Although we believe that the expectations reflected in any forward-looking statements are based on reasonable assumptions, these expectations may not be attained and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks, uncertainties, and changes in circumstances, many of which are beyond our control.

 

For a discussion of some of the specific factors that could cause actual results to differ materially from the information contained in this report, see the following sections of this report: Part I, Item 1A. “Risk Factors,” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Market projections are subject to the risks discussed in this report and other risks in the market. We disclaim any intention or obligation to update publicly any forward-looking statements, whether in response to new information, future events or otherwise, except as required by applicable law. 

  

 2 
Table of Contents 

 

PART I

 

ITEM 1. BUSINESS

 

Business Overview

 

ILUS is a Nevada corporation operating out of New York, London, and Dubai, focused on adding shareholder value through innovation and growth. The company has acquired and incorporated businesses in the global public safety and technology, engineering, and manufacturing industries. Historically, the company has evolved out of the public safety sector mainly through the development and manufacture of Emergency Services products, including Emergency Response vehicles, Special Vehicle conversions, Commercial EVs, and IoT Technology. ILUS also intends to acquire complimentary companies, which have disruptive technology and strong management and potential for rapid growth that may benefit from cross pollination of territories, products, and skills offered by our other group companies.

 

ILUS functions as a holding company, which operates through its subsidiaries within the public safety, technology, engineering, and manufacturing sectors. Our principal operating subsidiaries and their respective businesses are discussed in detail below. ILUS wholly owns or has a controlling stake in each of its subsidiaries which conduct their business operations with relative autonomy and are evaluated on their individual performance based upon the type of products and services they offer. Our strategy is to acquire manufacturing capability, routes to market and technology advancements in well-defined geographic, demographic and/or product niches within the business sectors that ILUS is focused on.

  

Organizational Structure

The below graphic shows our organizational structure, with ILUS as the “Parent” company and operations primarily carried out through the operating subsidiaries. The subsidiaries are identified in the figure below and are placed in three distinct divisions within their own existing or planned public companies, designed as Special Purpose Vehicles (SPV’s) formed to fulfil each division’s specific business purpose and activity. A fourth defense division has been incorporated is planned in line with potential future acquisitions that are contemplated for in this division, as well as acquisitions contemplated for other divisions. We intend to disclose these acquisitions, as they happen, in our ongoing reports with the Securities and Exchange Commission. The divisions are listed below followed by the graphic:

  1. Emergency Response

 

  2. Industrial & Manufacturing

 

  3. Mining & Renewable Energy

 

  4. Defense

 

 3 
Table of Contents 

 

  • ILUS was incorporated in Nevada on April 27, 2010. ILUS functions as a Mergers and Acquisitions company, which concentrates on providing strategic management oversight that includes financial, administration, marketing, and human resources support to its operating companies. Therefore, in terms of revenue generation, ILUS itself relies on fees, dividends, and other distributions from its acquired operating companies as the principal source of cash flow to meet its obligations. Additional information regarding the cash flow and liquidity needs of the Parent can be found in the Liquidity and Capital Resources section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

  • FB Fire Technologies Ltd. (Firebug Group – UK) was incorporated on December 8, 2014. ILUS acquired 100% of this company on June 10, 2020, under a signed Share Purchase Agreement. This company is engaged in the business of manufacturing firefighting equipment and firefighting vehicles for global customers.

 

  • 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.

 

  • 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.

 

  • 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.

 

  • 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.

 

  • The Vehicle Converters (TVC) was incorporated in 2006. ILUS owns 100% of the company. Ownership was transferred to ILUS after ILUS acquired the brand name, intellectual property, and employees of the company on March 25, 2022. Following ongoing due diligence which determined that the company was in a difficult financial position due to the Covid-19 pandemic, ILUS agreed to take ownership of the company from previous management in order to restructure and rebuild it so that it would cooperate with Firebug Mechanical Equipment LLC out of Dubai, United Arab Emirates. This company is engaged in the business of specialist vehicle conversions and as planned, collaborates closely with Firebug Mechanical Equipment LLC to deliver converted vehicles to their customers.

 

  • 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.

 

  • 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.

 

  • 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.  

 

  • Quality Industrial Corp. was originally incorporated on May 4, 1998. Quality industrial is quoted on the OTC Markets under the symbol “QIND.”  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.

 

  • 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.
  • 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.
  • Petro Line FZ LLC is a United Arab Emirates registered a company that operates an oil refinery providing oil refining services. Quality Industrial Corp. signed the definitive Share Purchase Agreement on January 27, 2023, to acquire a 51% interest in Petro Line FZ-LLC.
     

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Our Offices

 

Our offices are located at the following locations:

 

  1. 26 Broadway, Suite 934, New York, NY 10004

 

  2. Al Marsa Street 66, 11th Floor, Office 1105, Dubai Marina P.O. Box 32923, Dubai

 

  3. Matrix@Dinnington. Nobel Way, Sheffield S25 3QB, United Kingdom

 

Our primary office telephone number is +1 917-522-3202. Our website address is https://ilus-group.com and our email address is ir@ilus-group.com. Information contained on, or accessible through, our website is not a part of, and is not incorporated by reference into this Annual Report.

 

Intellectual Property

 

The following overview concerns the intellectual property matters of our company and its subsidiaries. Specific detail as to each subsidiary, if applicable, is contained in the section titled “Our Operating Subsidiaries” below.

 

Patents and other proprietary rights are important to our business and can provide us with a competitive advantage. We also rely on trade secrets, design and manufacturing know-how, continuing technological innovations, and licensing opportunities to maintain and improve our competitive position. While the Company uses reasonable efforts to protect its trade and business secrets, the Company cannot assure that its employees, consultants, contractors, or advisors will not, unintentionally, or willfully, disclose the Company's trade secrets to competitors or other third parties. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Moreover, the Company's competitors may independently develop equivalent knowledge, methods, and know-how. We periodically review third-party proprietary rights, including patents and patent applications, in an effort to avoid infringement on third-party proprietary rights and protect our own, identify licensing or partnership opportunities and monitor the intellectual property claims of others. Any infringement of the Company's proprietary rights could result in significant litigation costs, and any failure to adequately protect could result in the Company's competitors offering similar products, potentially resulting in loss of a competitive advantage and decreased revenue.

 

Existing patent, copyright, trademark, and trade secret laws afford only limited protection. In addition, the laws of some foreign countries do not protect the Company's proprietary rights to the same extent as do the laws of the United States. Therefore, the Company may not be able to protect the Company's proprietary rights against unauthorized third-party use. Enforcing a claim that a third party illegally obtained and is using the Company's trade secrets could be expensive and time consuming, and the outcome of such a claim is unpredictable. Litigation may be necessary in the future to protect the Company's trade secrets or to determine the validity and scope of the proprietary rights of others. This litigation could result in substantial costs and diversion of resources and could materially adversely affect the Company's future operating results.

We own a portfolio of intellectual property in our group, including 3 patents in the operating company, FB Fire Technologies Ltd. (FireBug Group), as well as confidential technical information and technological expertise in the manufacturing of firefighting technology.

While we consider our patents to be valued assets, we do not believe that our competitive position is dependent primarily on our patents or that our operations are dependent upon any single patent to manufacture our products. We nevertheless face intellectual property-related risks. For more information on these risks, see “Item 1A. Risk Factors.”

The Company owns the trademark ILUS.

 

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Competition

 

The following overview covers the competition we encounter within markets we operate in and those we intend to expand into. Specific detail as to each subsidiary, if applicable, is contained in the section titled “Our Operating Subsidiaries” below.

 

The Public Safety Technology, Engineering, Industrial, Manufacturing, Mining and Renewable Energy sectors are highly competitive and continually evolving as participants strive to distinguish themselves within their markets and compete within their respective industry. While we do face intense competition in some divisions of our business from companies that have been established long before ours and have a strong global reach, we have also developed our own disruptive technology for which there is no known direct competition within that particular sector. We strive to advance our Technology, Engineering & Manufacturing capabilities in each sector ahead of our competitors to gain market share. Our ability to continue to compete effectively also depends upon our ability to attract the required skills, as well as to retain and motivate our existing employees and to compensate employees competitively. We believe that we have competitive strengths that position us favorably in our lines of business. However, our industry is dominated by long-standing companies, and we are continuously strategizing to increase our market share. These long-standing companies are often larger and have more resources to their disposable to retain market share. We believe that, in many of the sectors where we operate, the technology offered by our competitors is outdated and we have a competitive advantage through the innovative technology we offer.

 

A list of competitors for our operating companies can be found in the table below:

 

Type Competitor Name HQ Location Date Founded Website Public/Private
Manufacturer Oshkosh Corp - Pierce Manufacturing WI, USA 1917 https://www.oshkoshcorp.com/ Public 
Manufacturer REV Fire Group - Ferrara, KME, Spartan, E-ONE, Smeal WI, USA 2010 https://revgroup.com/ Public 
Manufacturer IDEX Corporation IL, USA 1988 https://www.idexcorp.com/ Public 
Manufacturer Rosenbauer  Leonding, Austria 1866 https://www.rosenbauer.com/en/uae/rosenbauer-world Public 
Manufacturer Task Force Tips IN, USA 1971 Task Force Tips - Task Force Tips Home Page (tft.com) Private
Manufacturer Akron Brass OH, USA 1918 https://www.akronbrass.com/ Public 
Manufacturer Elkhart Brass IN, USA 1902 https://www.elkhartbrass.com/ Private
Manufacturer Delta Fire Norwich, USA 1980 https://www.deltafire.co.uk/ Private
Manufacturer Ziegler Brussels, Belgium 1908 https://www.zieglergroup.com/ Private
Manufacturer Iveco Magirus Baden-Württemberg Germany 1864 https://www.iveco.com/corporate-en/company/pages/magirus.aspx Private
Supplier/Distributor WS Darley IL, USA 1908 https://www.darley.com/ Private
Supplier/Distributor United Fire AZ, USA 1968 https://www.unitedfire.net/ Private
Supplier/Distributor Safe Fleet MO, USA 2013 https://www.safefleet.net/ Private
Manufacturer  United Safety & Survivability Corp PA, USA 1984 https://unitedsafetycorporation.com/ Private
Supplier/Distributor MES Fire TX, USA 2001 https://www.mesfire.com Private
Manufacturer Marioff Vantaa, Finland 1991 http://www.marioff.com/en/ Private
Manufacturer Ansul WI, USA 1915 www.ansul.com Private
Manufacturer & Supplier Waterous MN, USA 1844 https://www.waterousco.com/ Private
Manufacturer Flaim Melbourne, Australia 2017 https://flaimsystems.com/ Private
Supplier/Distributor Western States Fire Protection CO, USA 1985 https://www.wsfp.com/ Private
Manufacturer Kidde Fire Systems MA, USA 1917 https://www.kidde-fenwal.com/ Private
Manufacturer Cascade Fire Equipment OR, USA 1985 https://cascadefire.com/ Private
Manufacturer Draeger Lubeck, Germany  1889 https://www.draeger.com Private
Manufacturer IFS Solutions TX, USA 1979 https://ifsolutions.com Private
Manufacturer Harris Pye Glamorgan, UK 1978 https://www.harrispye.com Private
Manufacturer Aarya Engineering Sharjah, UAE 2005 http://www.aaryaengg.com Private

 

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Below is a list of competitors and ILUS competitive advantages:

 

Category Competitor Name Competitor of ERT Advantages
Firefighting Vehicles Oshkosh Corp - Pierce Manufacturing FireBug patented water mist technology & lightweight polypropylene rapid response vehicle technology
Firefighting Vehicles REV Fire Group - Ferrara, KME, Spartan, E-ONE, Smeal FireBug patented water mist technology & lightweight polypropylene rapid response vehicle technology
Firefighting Equipment IDEX Corporation FireBug patented water mist technology & lightweight polypropylene rapid response vehicle technology
Firefighting Vehicles Rosenbauer  FireBug patented water mist technology & lightweight polypropylene rapid response vehicle technology
Firefighting Equipment Task Force Tips FireBug patented water mist technology in firefighting equipment
Firefighting Equipment Akron Brass FireBug patented water mist technology in firefighting equipment
Firefighting Equipment Elkhart Brass FireBug patented water mist technology in firefighting equipment
Firefighting Equipment Delta Fire FireBug patented water mist technology in firefighting equipment
Firefighting Vehicles Ziegler FireBug patented water mist technology & lightweight polypropylene rapid response vehicle technology
Firefighting Vehicles Iveco Magirus FireBug patented water mist technology & lightweight polypropylene rapid response vehicle technology
Firefighting Equipment WS Darley FireBug patented water mist technology & lightweight polypropylene rapid response vehicle technology
Fire Safety  United Fire FireBug patented water mist nozzle technology for more effective and efficient firefighting equipment & fixed fire suppression systems
Fire Safety  Safe Fleet FireBug patented water mist nozzle technology for more effective and efficient firefighting equipment & fixed fire suppression systems
Fire Safety  United Safety & Survivability Corp FireBug patented water mist nozzle technology for more effective and efficient firefighting equipment & fixed fire suppression systems
Fire Safety  MES Fire Georgia Fire & Rescue Supply exclusive distributors of world's largest brands and patented technology supported by an experienced team of firefighters, renowned service and reputation
Fire Protection Marioff FireBug patented water mist nozzle technology for more effective and effective fixed fire suppression systems
Fire Protection Ansul FireBug patented water mist nozzle technology for more effective and efficient firefighting equipment & fixed fire suppression systems
Fire Protection Western States Fire Protection FireBug patented water mist nozzle technology for more effective and efficient firefighting equipment & fixed fire suppression systems
Fire Protection Kidde Fire Systems FireBug patented water mist nozzle technology for more effective and efficient firefighting equipment & fixed fire suppression systems
Process Equipment  IFS Solutions Quality International  extensive list of global multinationals as references and 1750 employees operating from over 10m square feet of manufacturing facilities & two port facilities - no outsourcing needed therefore competitive for complete turnkey projects
Process Equipment  Harris Pye Quality International  extensive list of global multinationals as references and 1750 employees operating from over 10m square feet of manufacturing facilities & two port facilities - no outsourcing needed therefore competitive for complete turnkey projects
Process Equipment  Aarya Engineering Quality International  extensive list of global multinationals as references and 1750 employees operating from over 10m square feet of manufacturing facilities & two port facilities - no outsourcing needed therefore competitive for complete turnkey projects

 

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Government Regulations

 

The following overview concerns government regulations that affect our company and its subsidiaries. Specific detail as to each subsidiary, if applicable, is contained in the section titled “Our Operating Subsidiaries” below.

 

In certain markets, some of our products require government approvals and some of our companies require specific operating licenses. Our operating companies remain compliant with the required licenses and approvals in order to operate within their respective markets and/or geographic territories. Approvals may also be required for the award of government contracts, and these are provided accordingly as required.

 

Environmental, Health and Safety Laws and Regulations

 

Our ongoing global operations are subject to a wide range of federal, state, local and foreign environmental, health and safety laws and regulations. These laws and regulations relate to the generation, storage, handling, use, release, disposal and transportation of hazardous materials and wastes, environmental cleanup, the health and safety of our employees and the fuel economy and emissions of the vehicles we manufacture. Compliance with these laws, regulations, permits, and approvals is a significant factor in our business. Certain of our operations require permits or other approvals from governmental authorities, and certain of these permits and approvals are subject to expiration, denial, revocation, or modification under various circumstances. We have expended resources, both financial and managerial, to comply with required regulations and we maintain procedures designed to foster and ensure compliance. We are committed to protecting our employees and the environment against any manufacturing related risks. In addition, we may be responsible under environmental laws and regulations for the investigation, remediation, and monitoring, as well as associated costs, expenses and third-party damages, including tort liability and natural resource damages, relating to past or present releases of hazardous substances on or from our properties or the properties of our predecessor companies, or third-party sites to which we or our predecessor companies have sent hazardous waste for disposal or treatment. Liability under these laws may be imposed without regard to fault and may be joint and several.

 

However, our failure to comply with applicable environmental, health and safety laws and regulations or permit or approval requirements could result in substantial liabilities or civil or criminal fines or penalties or enforcement actions, including regulatory or judicial orders enjoining or curtailing operations or requiring remedial or corrective measures, installation of pollution control equipment or other actions, as well as business disruptions, which could have a material adverse effect on our business, financial condition and operating results. 

 

Employees

 

As of December 31, 2022, Ilustrato Pictures International Inc. had approximately 5 employees in the Parent company and there were approximately 1800 that are employees of the subsidiaries. The Parent employees and those employed by their respective subsidiary, are not currently represented by a labor union or collective bargaining agreement. We believe that our relationship with our employees is good.

 

Our Operating Subsidiaries

 

ILUS provides strategic management oversight as well as financial, administration, marketing, and human resources support to the operating companies within its subsidiaries. Therefore, in terms of revenue generation ILUS itself relies on fees, dividends, and other distributions from its acquired operating companies as the principal source of cash flow to meet its obligations. Additional information regarding the cash flow and liquidity needs of the Parent can be found in the Liquidity and Capital Resources section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

  

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ILUS currently has three distinct subsidiaries (also known as divisions). The company is also planning a fourth subsidiary focused on the Defense sector. The respective operating companies within each subsidiary are listed below:

 

  1. Emergency & Response subsidiary (under ERT):

 

  a. Firebug Group

 

  b. The Vehicle Converters LLC

 

  c. Bright Concept and protection System LLC

 

  d. Bull Head Products Inc.

 

  e. Georgia Fire & Rescue Supply LLC
     
  f. AL Shola Al Modea Safety and Security LLC.

 

  2. Process & Manufacturing subsidiary (under ERT) - (Special Purpose Vehicle - QIND):

 

  a. Quality International Co Ltd FCZ
     
  b. Petro Line FZ LLC

 

  3. Mining & Renewable Energy subsidiary:

 

  a. Replay Solutions

 

  4. Defense subsidiary:

 

  a. Hyperion Defence Solutions

 

Emergency Response Technologies Inc.

 

ILUS is primarily focused on the emergency response sector through its wholly owned subsidiary, Emergency Response Technologies Inc. (“ERT”). Under this subsidiary, ILUS aims to provide technology that protects communities, front line personnel and assets by acquiring technology and solutions for the emergency response sector. This sector includes Fire and Rescue Services, Law Enforcement, Emergency Medical Services and Emergency Management.

 

Firebug Group

 

FireBug is a firefighting equipment and vehicle manufacturer which specializes in disruptive water mist technology and rapid response vehicles. FireBug’s equipment is designed to offer increased fire fighter safety with reduced water consumption. This technology enables smaller, more cost-effective vehicles for rapid fire and emergency response. The company was formed in the UK and currently operates from the following two locations:

  • Matrix@Dinnington Business Centre, Nobel Way Dinnington, Sheffield S25 3QB, United Kingdom

 

  • Warehouse G04, 79th Street, DIRC Warehouse Complex, DIP 2, Dubai, United Arab Emirates

 

On May 10, 2020, FB Technologies Global, Inc., wholly owned by Nicolas Link, acquired shares of ILUS stock, consisting of 10,000,000 Pref A Shares, 60,741,000 Pref D shares and 360,000,000 common shares, from the prior CEO, Larson Elmore, for an aggregate purchase price of $140,000.

 

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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 3,172,175 shares of Class E Preferred Stock. BrohF Holdings Ltd. was issued 672,175 shares and Artem Belov was issued 2,500,000 shares of Preferred Class E stock. A final tranche of shares for debt conversion will be issued conditional upon the audited financials for 2022.

 

On 26 January 2021, ILUS (The “Buyer”) acquired 100% of the shares in Firebug Mechanical Equipment L.L.C. and 100% of the shares in FB Fire Technologies Ltd. Both companies were contributed to ILUS without consideration.

 

The FireBug range of products consists of the following:

 

  1. MistNozzle handheld firefighting nozzles

 

     

 

 

The MistNozzle handheld firefighting nozzles is a specialist firefighting nozzle/branch, which produces a fine water mist enabling it to extinguish multiple classes of fires without the use of chemical agents. The product is designed to increase efficiency, utilize less water, and increase fire fighter safety. The MistNozzle range is designed, developed, and manufactured in the UK. It uses proven micron technology from the fire fixed suppression system industry. The MistNozzle uses science in order to provide superior fire cooling and extinguishing. Its low-pressure water mist technology makes it more efficient than comparative firefighting nozzles. The MistNozzle has one-click switch-function technology, allowing the user to easily transition between Jet Mode and Water Mist Mode, minimizing room for error and ensuring safe mode selection. The plug-and-play functionality of the MistNozzle works with most existing hose types on most existing fire trucks. The nozzle has been specifically designed for ease of use with minimal training required for safe and effective use. With water being a valuable resource the world over, the MistNozzle deliberately uses less water during operation. The water mist produced by the MistNozzle absorbs 2257kj of energy per liter verses conventional technology which absorbs 335kj per liter. The MistNozzle also combats the effects of smoke within the fire environment, providing effective and in some cases, lifesaving smoke scrubbing capability.

 

  2. Mongoose external firefighting lance

 

   

 

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FireBug’s Mongoose is a handheld firefighting nozzle with an extension lance that allows it to be inserted from the exterior of a structure into an area such as a room (compartment) in order to cool the area and suppress the fire. The Mongoose system is comprised of the water mist attack nozzle and a battery-operated hole cutting drill. Either the drill or the firefighters compartment entry tools are used to breach the structure and create the necessary hole through which the Mongoose is inserted. This method provides safer access to the compartment. The Mongoose has been designed to ensure the correct kinetic energy will overcome the pressures created by the fire. Water mist droplets are transformed into steam by the heat which consumes energy, removes oxygen, and consequently cools the gases and inhibits re-ignition. The Mongoose can deliver 40–50-micron water mist droplets covering a large surface area into a compartment which rapidly cools the area, scrubs the smoke, and suppresses the fire. The Mongoose is completely unique in that it can operate on an existing fire truck on existing hose lines, without requiring a separate pump and hose reel.

 

  3. MistMax and Maverick firefighting pumps

 

 

FireBug’s MistMax is a portable low-pressure water mist & fire suppression skid. The self-contained skid unit is designed to fit in a standard pick-up truck or on a UTV such as the E-Raptor electric UTV. The MistMax is an easy-to-use, lightweight, and reliable solution which can be used by both non-technical operators and experienced firefighters. The MistMax uses Firebug’s proprietary technology including customized eductor mixer, a specialized pulsating diaphragm pump, front winding geared hose reel, easy to use control panel, custom engineered baffled water tank and the Mini MistNozzle which features Firebug’s water stream colliding and atomizing technology.

FireBug’s Maverick is a self-priming, high-water volume, light portable pump which is designed as multi-purpose firefighting skid unit that can be portable or permanently fixed in a firefighting vehicle. It has the capability to operate a hose reel or lay flat hose connected to a water supply tank or it can lift water from an open water source or obtain it from a pressure fed supply such as a floating pump.

  4. Floating Pumps

 

     

 

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Firebug offers a range of floating pumps which are designed for pumping water from streams, lakes, hard-to-reach sources of water, or flooded areas. The range of floating pumps offer practical features and easy-to-use operation. Features include high impact resistance, compact size and light weight, powerful Honda or Briggs & Stratton engines, bronze impellers for marine use where required, specialized strainers and optional external fuel tanks.

 

  5. Firefighting BacPac.

 

     

 

Firebug’s BacPac has been designed to provide rapid response firefighting capabilities using either water, foam or additive. The BacPac system contains a sophisticated internal mechanical rotor, which is used in the generation of WaterMist or foam (RAFS foam). The spindle and impellor rotate at high speeds mixing the foam that allows optimum extinguishing. The device increases the range of the discharge by at least 200% and is 6 times more efficient than any other known foam system, including CAFS.

 

  6. E-Raptor Commercial Electric Utility Vehicle

 

   

 

 

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Manufactured by FireBug, the E-Raptor range consists of commercial electric utility vehicles for several rugged applications. The E-Raptor 6x6 is the world’s only 6-wheel electric utility vehicle. With 80km range on a single charge, the E-Raptor is fit for most industrial, agricultural, and rapid emergency response applications. The E-Raptor can carry a maximum load weight of 3500 Lbs. The E-Raptor range is manufactured by FireBug as it complements its rapid response firefighting vehicle solutions for confined and congested spaces.

  

  7. Rapid Intervention Vehicles

 

     

 

FireBug’s rapid intervention vehicle solutions range from small electric utility vehicles with bespoke firefighting systems to pick-up trucks with firefighting and rescue systems, right up to customized firefighting appliances. FireBug specializes in providing bespoke vehicle solutions for rapid emergency response in congested areas, industrial facilities, shopping malls, marinas, airports, resorts, and communities which require their own firefighting or rescue vehicle capability.

 

  8. Lightweight Co-Polymer Vehicle Bodies and Water Tanks

 

     

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FireBug manufactures high quality, lightweight co-polymer vehicle bodies and tanks primarily for the emergency response sector. Depending on customer requirements, FireBug provides only the tank or vehicle superstructure or the fully equipped complete vehicle. Utilizing the latest in plastic cutting and welding technology, FireBug produces its plastic vehicle bodies and tanks from a highly durable and recyclable plastic material which has a 25-year guarantee.

Intellectual Property

FireBug’s patents are listed below:

 

 Category  Short title Long Title Reference
Patent BacPac Apparatus and method for fighting fires GB2520561
Patent Spinning Regulating Unit Fluid mixer device and method GB2548074
Patent Mongoose Fire-fighting apparatus and method of firefighting GB2568684

 

No patents have been licensed from third parties.

 

Competition

 

Below is some of FireBug’s competitors and competitive advantages:

 

Competitor Name Competitor of FireBug Advantages
Oshkosh Corp - Pierce Manufacturing FireBug patented water mist technology & lightweight polypropylene rapid response vehicle technology
REV Fire Group - Ferrara, KME, Spartan, E-ONE, Smeal FireBug patented water mist technology & lightweight polypropylene rapid response vehicle technology
IDEX Corporation FireBug patented water mist technology & lightweight polypropylene rapid response vehicle technology
Rosenbauer  FireBug patented water mist technology & lightweight polypropylene rapid response vehicle technology
Task Force Tips FireBug patented water mist technology in firefighting equipment
Akron Brass FireBug patented water mist technology in firefighting equipment
Elkhart Brass FireBug patented water mist technology in firefighting equipment
Delta Fire FireBug patented water mist technology in firefighting equipment
Ziegler FireBug patented water mist technology & lightweight polypropylene rapid response vehicle technology
Iveco Magirus FireBug patented water mist technology & lightweight polypropylene rapid response vehicle technology
WS Darley FireBug patented water mist technology & lightweight polypropylene rapid response vehicle technology
United Fire FireBug patented water mist nozzle technology for more effective and efficient firefighting equipment & fixed fire suppression systems
Safe Fleet FireBug patented water mist nozzle technology for more effective and efficient firefighting equipment & fixed fire suppression systems
United Safety & Survivability Corp FireBug patented water mist nozzle technology for more effective and efficient firefighting equipment & fixed fire suppression systems
Marioff FireBug patented water mist nozzle technology for more effective and effective fixed fire suppression systems
Ansul FireBug patented water mist nozzle technology for more effective and efficient firefighting equipment & fixed fire suppression systems
Western States Fire Protection FireBug patented water mist nozzle technology for more effective and efficient firefighting equipment & fixed fire suppression systems
Kidde Fire Systems FireBug patented water mist nozzle technology for more effective and efficient firefighting equipment & fixed fire suppression systems

 

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Employees

As of December 31, 2022, we had approximately 21 employees in Firebug Group. The employees are not currently represented by a labor union or collective bargaining agreement. We believe that our relationship with our employees is good.

 

The Vehicle Converters LLC

The Vehicle Converters (TVC) is a specialist vehicle converter which is operates from Warehouse G04, 79th Street, DIRC Warehouse Complex, DIP 2, Dubai, United Arab Emirates.

On 25 March 2021 ILUS (The “Buyer”) acquired 100% of the brand name and all other rights, title, and interest in The Vehicle Converters a company beneficially owned by Danny Kourosh (The “Seller”) for the sum of $20,500 (Twenty Thousand Five Hundred) in consideration.

 

The Vehicle Converters have operated for more than 15 years fabricating and converting specialized vehicles for specialist applications such as mobile clinics, ambulances, military transportation, oil, and gas, camping vehicles and mobile food trucks. The company focuses on sales in the Middle East and North African markets.

The Vehicle Converters completes various types of vehicle conversions as per customer requirements. Some examples can be found below:

 

   

 

   

 

   

 

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Competition

 

A list of TVC’s competitors is provided below:

 

  • Bespoke Trailers

 

  • BOTT Vehicle Conversions

 

  • DAW Automobile Assembly FZCO

 

  • Transtech

 

Employees

As of December 31, 2022, we have 1 employee in Vehicle Converters. The employee is currently not represented by a labor union or collective bargaining agreement. We believe that our relationship with our employee is good. Employees from Firebug Mechanical Equipment L.L.C., which operates from the same manufacturing facility in Dubai, United Arab Emirates, are used for vehicle conversions by The Vehicle Converters.

 

Bright Concept Detection and Protection System LLC

 

Bright Concept Detection and Protection System LLC (BCD Fire) designs, installs, commissions, maintains and distributes fire protection, fire detection, evacuation, access control and security systems across the Middle East region. The company is located at Warehouse G04, 79th Street, DIRC Warehouse Complex, DIP 2, Dubai, United Arab Emirates.

 

On 13 April 2021, ILUS (The “Buyer”) acquired 100% of the assets, liabilities and shares of Bright Concepts Detection & Protection Systems LLC, a company beneficially owned by Narinder Chadha & Partners (The “Seller”). As consideration, the buyer paid the seller 250,000 AED (Two hundred and fifty thousand) immediately on signing of the Sales Purchase agreement and agreed to pay the seller 10,000 AED (Ten thousand) monthly for 24 months starting from May 2021. The Buyer also issued the seller 1,000,000 (1 million) restricted shares in the public company llustrato Pictures International Inc. (Symbol: ILUS).

 

BCD Fire delivers turnkey projects which incorporate specification, design, installation, support, and maintenance at sites such as hotels, shopping malls, residential and commercial buildings as well as industrial facilities.

 

 

 

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Competition

 

A list of BCD Fire’s competitors is provided below:

 

  • MAF Fire Safety & Security LLC

 

  • Blue Flame Fire Fighting LLC

 

  • Safety Line LLC

 

  • BTFS Fire Protection

 

Employees

 

As of December 31, 2022, BCD Fire had approximately 24 employees. The employees are currently not represented by a labor union or collective bargaining agreement. We believe that our relationship with our employees is good.

 

Bull Head Products Inc.

 

Bull Head Products Inc. is a specialist aluminum truck bed manufacturer and vehicle converter located at 387 Thorngrove Pike, Kodak Tennessee, 37764, USA.

 

On January 1, 2022, ILUS (The “Buyer”) acquired 100% of the 1000 (one thousand) shares of Bull Head Products Inc., a company beneficially owned by George Joe Chudina and Dorothy Lee Chudina (The “Sellers”). As consideration, the Buyer agreed to pay the Sellers an aggregate cash purchase price of $500,000 (Five Hundred Thousand) on the condition that certain agreed Targets and Key Performance indices are met. The Buyer paid a fixed sum of $300,000 (Three Hundred Thousand) upon closing and the remaining $200,000 (Two Hundred Thousand) will be paid by the Buyer over a one-year period after closing to the extent the business operations of Bull Head Products Inc. meet mutually agreeable performance thresholds referenced in Exhibit B in the SPA filed with this Form 10-K and in the schedule below. The Buyer also issued the Sellers 6,750 (Six Thousand Seven Hundred and Fifty) restricted Class F Preferred Shares in Buyer.

 

To Qualify for the 2nd Payment of $ 100,000, minimum turnover of $320,000 (Excluding all taxes) must be achieved for the period from January 1, 2022, to June 30, 2022, or as per the following table. To Qualify for the 3rd Payment of $ 100,000, minimum turnover of $320,000 (Excluding all taxes) must be achieved for the period from 1 July, 2022, to December 31, 2022, or as per the following table:

 

Turnover Target Percentage of Target Aggregate Payment
$320,000 Greater than 100% $100,000
$320,000 90-99 $90,000
$320,000 80-89 $80,000
$320,000 70-79 $70,000
$320,000 60-69 $60,000
$320,000 50-59 $50,000
$320,000 less than 50% $0

 

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Bull Head Products designs, manufactures and installs its aluminum truck beds and vehicle conversions for customers across the United States. Its customers come from several sectors, including wildland fire fighting. The company's products are built with 100% aluminum for optimal performance and reliability.

 

   

 

Bull Head Products operates from its Kodak, Tennessee facility, with many truck beds and conversions being completed and installed in the facility and many being shipped to dealers and distributors for installation.

 

During the past 18 months, Bull Head Products faced some supply chain issues as a direct result of the disruption in supply chains across the world due to the Covid-19 pandemic. Whilst every effort is made to source materials from additional suppliers, this can sometimes lead to an increase in price. The company has therefore increased its principal suppliers of raw materials to the following suppliers:

 

  • Eastern Metal Supplies

 

  • Tennessee Valley Fasteners

 

  • Buyers Products Company

 

  • Fastenal

 

  • McMaster Carr

 

  • Joseph T. Ryerson

 

  • Triple S Steel

 

Bull Head Products manufactures and installs its products for both private individuals and businesses who require a specific type of aluminum flatbed for their truck or fleet of trucks. The company services a wide range of new and repeat customers and there is no dependency on any one single customer.

 

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Intellectual Property

Bull Head Products Inc has a Registered Trademark for the company logo. Originally it was registered under the name of George Chudina, and then changed to Bull Head Products Inc. and has subsequently been renewed.

 Category  Title Reference
Trademark Bull Head Products Mark 3397385

 

The above trademark certificate is provided in the Exhibits.

 

Competition

 

As Bull Head Products manufactures all of its truck beds from 100% aluminum, it does not currently have direct competitors to the company’s knowledge. Companies which offer comparable products use a combination of aluminum sheeting and steel frames which are prone to rust and decay. However, a list of some these competitive companies is listed below:

 

  · CM Truck Beds

 

  · Hillsboro Industries

 

  · Pine Hill Manufacturing

 

  · Knapheide Manufacturing

 

Employees

 

As of December 31, 2022, we had approximately 9 employees in Bull Head Products. The employees are currently not represented by a labor union or collective bargaining agreement. We believe that our relationship with our employees is good.

 

Georgia Fire & Rescue Supply LLC

 

Georgia Fire & Rescue Supply LLC (Georgia Fire) is a distributor of equipment to the firefighting, law enforcement and Emergency Medical Services industries. The company is located at 107 P Rickman Industrial Drive, Canton, Georgia, 30115, USA

 

On February 22, 2022, ILUS (The “Buyer”) acquired 100% of the shares of Georgia Fire & Rescue Supply LLC, a company beneficially owned by Barbara Jean Whidby (The “Seller”). As consideration, the buyer agreed to pay the seller an aggregate cash purchase price of $900,000 (Nine Hundred Thousand Dollars) on the condition that certain agreed Targets and Key Performance indices are met referenced in Exhibit B in the SPA filed with this Form 10-K. The Buyer paid a fixed sum of $680,000 (Six Hundred Eighty Thousand) upon closing and the remaining $220,000 (Two Hundred Twenty Thousand Dollars) will be paid by the Buyer over a one-year period after closing to the extent the business operations of Georgia Fire & Rescue Supply, LLC meet mutually agreeable performance thresholds displayed in table below. The Buyer also issued the seller 1,500 (One Thousand Five Hundred) restricted Class F Preferred Shares in Buyer.

 

Minimum Turnover (gross revenue) for 2022 and Quarter 1 (Excluding all taxes)- must be achieved for the period from January 1, 2022, to December 31, 2022, or as per the following table:

 

2022 Turnover Target Q1 Turnover Target Percentage of Target Aggregate Payment
$3,200,000 $800,000 Greater than 100% $170,000
$3,200,000 $800,000 90-99 $153,000
$3,200,000 $800,000 80-89 $136,000
$3,200,000 $800,000 70-79 $119,000
$3,200,000 $800,000 60-69 $102,000
$3,200,000 $800,000 50-59 $85,000
$3,200,000 $800,000 less than 50% $0

 

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The company receives enquiries and orders through the following means:

 

  · e-commerce website - https://www.georgiafirerescue.com

 

  · retail location in Canton, Georgia

 

  · field sales representatives who call on and demonstrate products to potential customers

 

  · participation in industry trade shows and events.

The company's products are delivered to the customer from its distribution warehouse in Canton, Georgia or shipped directly from the manufacturer to the end customer.

 

   

Georgia Fire has a customer base of over 1,800 customers and currently distributes over 95 brands as follows:

 

AED Superstore Flamefighter Corp Pollard Water
Agility Tech Corp Fox Fury Poly Tech
Airstar Space Lighting FoxFire Professional Life Support
Ajax Rescue Tools Froggy’s Fog R & B Fabrications
Ansell Full Source Ram Air Gear Dryer
Black Diamond Gemtor Rescue Technology
Bluewater Groves-Ready Rack Rhyno - We Cut the Glass
Boston Leather Helly Hansen Ringers Gloves
Boswell Oil Hi-Lift RIT Safety Solutions
Brightstar Highwater Hose Inc Rocky Boots
Brooks Equipment Holmatro RollNRack
Bullard Husky Portable S&H Fire Products
BullDog Hose Innotex Sam Carbis Solutions Group
C & S Supply Kroll SCI Structural Composites
CET Fire Pumps Mfg. Lakeland Fire Smoke Trainer
CMC Rescue Lakeland Industries Inc Starrett
Con-Space Leader-Tempest STC Footwear
Council Tool Lifeliners Streamlight
Cox Reels Lion Boots by Thorogood Super Vac
Denko Foam Logistics Task Force Tips
Desert Diamond Industries Mercedes Textiles Limited Team Equipment Inc
Dewalt National Foam Tele-Lite
Diablo Nightstick Thorogood Boots
Dräger Nupla Trellchem
Dragon Fire Gloves ORS True North Gear
Duo Safety Ladders Paratech Turtle Plastics
ESS Eye Safety Systems Pelican Unifire
EVAC Systems Performance Adv. Co. Vanguard Safety Wear
Fire Hooks Unlimited Phillips Warthog
Firefly Signs Plastix Plus Wehr Engineering
FireQuip PMI Zephyr Tools
FireBug   Ziamatic Corporation

 

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Georgia Fire is an official Dealer of Holmatro Products and partakes in the Holmatro Coop Marketing Program. Through this program, Georgia Fire & Rescue Supply has access to logo’s, product images and information, and a dealer reward scheme. All promotions of the Holmatro range of products by Georgia Fire & Rescue Supply has to be reviewed and approved by Holmatro.

  

Competition

 

A list of Georgia Fire’s competitors is provided below:

 

  · Fire Safety USA

 

  · MES Fire

 

  · Cascade Fire Equipment

 

  · All Hands Fire

 

  · US Fire & Safety Equipment Co

Employees

 

As of December 31, 2022, we had approximately 13 employees in Georgia Fire. The employees are currently not represented by a labor union or collective bargaining agreement. We believe that our relationship with our employees is good.

 

Quality Industrial Corp.

 

On May 28, 2022, Modern Art Foundation Inc. (“Modern Art”) Rene Lauritsen and Fastbase Holding Inc. agreed to transfer 77,669,078 shares of common stock in Wikisoft Corp. to Ilustrato Pictures International Inc. (“Ilustrato”). Pursuant to a Stock Transfer Agreement, the company purchased the shares for an aggregate amount of $500,000. Wikisoft Corp. has since changed its name to Quality Industrial Corp. and its OTC Ticker was changed from WSFT to QIND.

 

As a result of the above transaction, there was a change in control of the Company. The 77,669,078 shares transferred amounts to approximately 77% of the outstanding shares in Quality Industrial Corp. Consequently, ILUS now unilaterally controls the election of our board of directors and the direction of QIND. As a result of the Change of Control, Mr. Quintal resigned as Chairman of the Board, and Mr. Link was appointed as the Chairman of the Board.

 

Quality International Co Ltd FCZ

 

Quality Industrial Corp. signed a binding Letter of Intent on June 30, 2022, to acquire a 51% interest in Quality International Co Ltd FCZ from the shareholders of Quality International Co Ltd FZC. The agreement is predicated upon the execution and delivery of a definitive Stock Purchase Agreement for the transaction. The parties agreed to act in good faith towards the execution of that agreement following the completion of due diligence.

 

The Agreement contemplated a period of due diligence followed by entry into a definitive Share Purchase Agreement. On January 18, 2023, we entered into a definitive Share Purchase Agreement (the “Purchase Agreement”) with the shareholders of Quality International, which agreement provided for our purchase of 52% of the shares of Quality International Co Ltd FZC.

 

The purchase price for the 52% of the Shares shall be up to $137,000,000 in cash, paid in tranches, subject to achievement of financial milestones presented in a schedule of payments set forth in the Purchase Agreement disclosed in the Exhibits. The tranches will be payable over a period of 2 years until the audited financials for the year ended December 31, 2024

 

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QIND has paid the initial $1,000,000 tranche, and the transaction closed on March 1, 2023, with signing of the closing documents referenced in the definitive Stock Purchase Agreement. Over the next 210 days QIND will contribute two tranches of $81,000,000 in total. The remaining $55,000,000 of the Purchase Agreement will be paid out in three additional tranches conditional upon Quality International meeting their audited EBITDA targets for 2023 and 2024 referenced in the SPA filed with this Form 10-K and displayed in the table set below.

 

Tranche Timeframe and Conditions Amount Paid By Paid To
1 Paid after signing of Letter of Intent (June 28, 2022) $1,000,000 (paid) First Party Gerab National Enterprise LLC
2 Following signing of this Agreement and subject to closing as per clause 1.03, payment to be made on or before 18 February 2023. $15,000,000 First Party Quality International Co Ltd FZC
3 On or before 210 calendar days after Closing $66,000,000 First Party $39,000,000 to Gerab National Enterprise LLC and $6,000,000 to Saseendran Kodapully Ramakrishnan and $21,000,000 to Quality International Co Ltd FZC
4 Within 30 days of H1 2023 Auditor Certified Financials *$14,000,000 First Party $6,000,000 to Gerab National Enterprise LLC and $5,000,000 to Saseendran Kodapully Ramakrishnan and $3,000,000 to Quality International Co Ltd FZC
*Based on H1 2023 Forecast being met:

EBITDA target: $ 11,164,105

 

5 Within 30 days of Year End 2023 Audited Financials *$20,000,000 First Party *$15,000,000 to Gerab National Enterprise LLC and $2,000,000 to Saseendran Kodapully Ramakrishnan  and $3,000,000 to Quality International Co Ltd FZC

*Based on Year End 2023 Forecast being met - EBITDA target: $ 22,328,211

 

6 Within 30 days of Year End 2024 Audited Financials *$21,000,000 First Party $15,000,000 to Gerab National Enterprise LLC and $3,000,000 to Saseendran Kodapully Ramakrishnan and $3,000,000 to Quality International Co Ltd FZC

*Based on Year End 2024 Forecast being met - EBITDA target: $ 27,144,231

 

 

We will take two non-paid board seats of Quality International and there shall be two other non-paid board seats for existing Company shareholders. A final board seat will be independent and chosen by us and the Company’s shareholders.

 

The Purchase Agreement also contains certain restrictive covenants whereby the shareholders selling the Shares are prohibited from (a) competing with the business of the Quality Industrial, (b) soliciting employees of the Company and (c) intentionally interfering with the Company’s business relationships, in each case during the two-year period immediately following the Closing on March 6, 2023.

 

Quality International Co Ltd FCZ is a United Arab Emirates based process manufacturing company and manufacturer of custom solutions for the oil and gas, power/energy, water, desalination, wastewater, offshore and public safety industries. The company has oil and gas industry certifications in place and is on several global preferred vendor lists.

 

   

 

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Intellectual Property

Quality International Co Ltd FCZ does not have own its own registered Intellectual Property rights. The company’s Intellectual Property resides in its specific manufacturing processes, capability, compliance and certifications which have made it a trusted manufacturer for many large global multinationals including but not limited to BP, Shell, Total, Chevron, Sonatrach, Sasol, Gasco.

 

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Certifications

 

Quality International Co Ltd FCZ has the following certifications:

 

 Category  Type Reference
Certification ISO 9001: 2015 Hamriyah Facility
Certification ISO 14001:2015 Hamriyah Facility
Certification ISO 45001:2018 Hamriyah Facility
Certification Manufacturer and Welding Shop acc. To AD 2000-Code / DIN EN ISO 3834 Hamriyah Facility
Certification ASME U Certificate of Authorization for Pressure vessels Hamriyah Facility
Certification ASME U2 Authorization to Manufacture Class 1 and Class 2 pressure vessels Hamriyah Facility
Certification ASME S Authorization to manufacture and assembly of power boilers Hamriyah Facility
Certification National Board of Boiler & Pressure Vessel Inspectors – Accreditation of “R” Repair Organizations Hamriyah Facility
Certification National Board of Boiler & Pressure Vessel Inspectors – Authorised to apply “NB” mark and register pressure vessels. Hamriyah Facility

 

 

Competition

 

A list of some Quality Industrial Corp’s competitors is provided below:

 

  • IFS Solutions

 

  • Harris Pye

 

  • Aarya Engineering

 

Employees

 

As of December 31, 2022, we had approximately 1750 employees in Quality International Co Ltd FCZ. The employees are currently not represented by a labor union or collective bargaining agreement. We believe that our relationship with our employees is good.

 

Replay Solutions

 

Replay Solutions was incorporated by ILUS on the 1st of March 2022. The company recycles and recovers precious metals from electronic and other forms of waste through the use of mechanical and chemical treatments. The company’s “closed loop” concept utilizes electronic waste (E-Waste) and several other types of waste as resources not only to extract precious metals but to re-use all materials such as the plastics which are obtained. The company recycles cleanly, safely, and sustainably from items such as, but not limited to Print Circuit Boards (PCB), Cable wire and car radiators. The waste is shredded, crushed, and ground into powder form before an airflow and an electrostatic separator is used to separate the materials into metal and fibers. From and further refining processes, the various precious metals are obtained.

 

     

 

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Competition

 

A list of Replay Solution's competitors is provided below:

 

  · Enviroserve

 

  · Evciler

 

  · Mint Innovation

 

  · Muller Guttenbrunn Group

Employees

 

As of December 31, 2022, we had approximately 3 employees in Replay Solutions. The employees are currently not represented by a labor union or collective bargaining agreement. We believe that our relationship with our employees is good.

 

AL Shola Al Modea Safety and Security LLC

 

On December 13, 2022, the company has signed a Share Purchase Agreement to acquire 51% control of AL Shola Al Modea Safety and Security LLC (ASSS), an established fire safety company registered in the United Arab Emirates. The total purchase price is up to $714,000. The first tranche of $100,000 has been paid and the remaining three tranches with a total of $610,00 are conditional upon certain agreed Targets and Key Performance indices are met referenced in clause 1.02 in the SPA filed with this Form 10-K and scheduled below.

 

Tranche   Timeframe and Conditions   Amount   Paid By   Paid To
1     Payment within 7 days of closing proposed transaction – Time of signing SPA.   $ 100,000     ILUS   ASSS
2     To be Paid as a Loan to the Seller within 45 days after signing the SPA and Loan Agreement (Exhibit 3). The loan would be converted into Equity if the Company meets the agreed Revenue Forecast (Exhibit 2) and achieves a valuation of $2,000,000 (Two Million USD), until then it would be considered a loan. Repayment of the Loan shall be made as per the Loan Agreement (Exhibit 3) before disbursement of dividends.   $ 306,000     ILUS   ASSS
3     Paid after end of H1 2023, provided forecasted revenue and EBITDA forecasts are met for the first 6 months of 2023. (Exhibit 2)   $ 200,000     ILUS   ASSS
4     Paid after end of 2023, provided forecasted revenue and EBITDA forecasts are met for 2023. (Exhibit 2)   $ 200,000     ILUS   ASSS
5     Paid after end of H1 2024, provided forecasted revenue and EBITDA forecasts are met for the first 6 months of 2023. (Exhibit 2)   $ 214,000     ILUS   ASSS

 

 

Exhibit 2 - Target Financials as per ASSS / Agreed Revenue Forecast to be achieved:

 

USD 2023 2024 2025 2026 2027
Revenues        1.987.747        2.450.647        2.804.629        2.940.776        3.076.923
EBITDA           238.530           367.597           420.694           470.524           523.077

 

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Competition

 

A list of ASSS’s competitors is provided below:

 

  • MAF Fire Safety & Security LLC

 

  • Blue Flame Fire Fighting LLC

 

  • Safety Line LLC

 

  • BTFS Fire Protection

 

Employees

 

As of December 31, 2022, we had approximately 32 employees in AL Shola Al Modea Safety and Security LLC. The employees are currently not represented by a labor union or collective bargaining agreement. We believe that our relationship with our employees is good.

 

Petro Line FZ-LLC 

 

On January 27, 2022, QIND, a subsidiary of the Company signed a Share Purchase Agreement to acquire 51% control of Petro Line FZ-LLC (Petro Line), an established an oil refinery providing oil refining services registered in the United Arab Emirates. The purchase price for the Shares shall be up to $1,530,000 in cash, paid in three tranches, subject to the achievement of financial milestones presented in a schedule of payments which are set forth in the Purchase Agreement filed with this Form 10-K and scheduled below.

 

 

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Tranche   Timeframe and Conditions   Amount   Paid By   Paid To
1     To be paid within 14 days of signing this Share Purchase Agreement (closing). Payment to be utilized towards the restoration of the RAK facility with factory restoration to be completed and full operational capacity obtained within 2 months from the date of payment.   $ 500,000     QIND   Petro Line
2     To be paid on or within 6 Months after closing, provided mutually agreed performance and KPIs are met.   $ 500,000     QIND   Petro Line
3     To be paid on or within 12 Months after closing, provided mutually agreed performance and KPIs are met.   $ 500,000     QIND   Petro Line

 

 

Seller shall provide QIND with accurate forecasts in writing on the future performance (as per SPA) of the Company. Minimum agreed performance and KPIs for tranches 2 & 3 are set forth below.

 

Year EBIDTA USD
2023 1,609,671.17
2024 1,690,154.73

 

Competition

 

A list of Petro Line FZ-LLC competitors is provided below:

 

  • Takreer Refinery
  • Eagle Oil Refining Co LLC

 

Employees

 

As of December 31, 2022, we had approximately 18 employees in Petro Line FZ-LLC. The employees are currently not represented by a labor union or collective bargaining agreement. We believe that our relationship with our employees is good.

 

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.

 

Ilustrato Pictures International Inc has applied to the District Court, Clark County, Nevada to have 40,000,000 shares with Ambrose & Keith cancelled as they were issued in error in 2018 as the deal never completed. The case has been won on September 15, 2022, in favor of the company and the court order was received on January 23, 2023. The transfer agent cancelled the 40,000,000 shares on February 17, 2023.

 

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. We have potential counterclaims being prepared against the former CEO, arising due to improper action and lack of disclosures. The company has disputed the claim and argue that Larson Elmore has been misleading the company and its shareholders on various matters including but not limited to liabilities, company commitments and due diligence items presented by Larson Elmore during the takeover process. We are in the process of a settlement discussion and have obtained an extension of time to respond while this process occurs.

 

We have been named as a defendant in an action commenced by Steve Nicol, who claims that he loaned $12,000 to a subsidiary of ILUS under a promissory note, but that ILUS agreed to assume the note. He further claims that he elected to convert the note and that ILUS failed to convert the note into shares of ILUS common stock. He has alleged breach of contract, declaratory relief, and specific performance to require the company to issue 75,000,000 shares of common stock in ILUS.

 

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We cannot predict whether this action involving our former CEO or Mr. Nicol is likely to result in any material recovery by 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 based upon 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.

 

We may continue to incur legal fees in responding to this and other lawsuits. The expense of defending such litigation may be significant and any sizeable verdict may adversely affect the company. The amount of time to resolve this and any additional lawsuits is unpredictable, and these actions may divert management’s attention from the day-to-day operations of our business, all of which could adversely affect our business, results of operations and cash flows.

 

 Smaller Reporting Company

 

The Company is a “smaller reporting company” as defined in Rule 12b-2 under the Exchange Act. There are certain exemptions available to us as a smaller reporting company, including: (1) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act; (2) scaled executive compensation disclosures; and (3) the requirement to provide only two years of audited financial statements, instead of three years. As long as we maintain our status as a “smaller reporting company”, these exemptions will continue to be available to us.

 

Corporate History

 

We were incorporated as 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 Ilustrato Pictures Ltd., a British Columbia corporation (“Ilustrato BC”), whereby we acquired all of the issued and outstanding common stock of Ilustrato BC and the shareholders of Ilustrato BC received 1,200,000 shares of our common stock, which represented approximately 15% of our outstanding common stock following the acquisition. 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”). 

 

Ilustrato BC was in the business of developing, for international release, feature theatrical films to be financed and distributed domestically by Chinese production companies.

 

On February 11, 2016, Barton Hollow, LLC, a Nevada limited liability company, and stockholder of the Company, filed an Application for Appointment of Custodian pursuant to Section 78.347 of the Nevada Revised Statutes in the District Court for Clark County, Nevada. Barton Hollow was subsequently appointed custodian of the Company by Order of the Court on Apri1 5, 2016. In accordance with the provisions of the Order, Barton Hollow thereafter moved to reinstate the Company with the State of Nevada, provide for the election of interim officers and directors, and call and hold a stockholder meeting.

 

On April 1, 2016, Barton Hollow, together with the newly elected director of the Company, caused the Company to enter into a Letter of Intent to merge with Cache Cabinetry, LLC, an Arizona limited liability company. Cache Cabinetry was a cabinet and design company headquartered in Scottsdale, Arizona that focused on the design and supply of kitchen furnishings to residential clients. Pursuant to the Letter of intent, the parties thereto would endeavor to arrive at, and enter 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 Company caused 360,000,000 shares of its common stock to be issued to the members.

 

Subsequently, on Apri1 6, 2016, the Company and Cache Cabinetry, LLC entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”). As a result, the stockholders of the Company elected Derrick McWilliams the President and Chief Executive Officer of Cache Cabinetry, LLC, who, along with Barton Hollow, ratified and approved the Merger Agreement and Merger

 

The Merger closed on June 3, 2016. Upon closing, Cache Cabinetry, LLC. merged into a newly created subsidiary of the Company with the members of Cache Cabinetry, LLC receiving shares of common stock of the Company as consideration. Therefore upon closing of the Merger, Cache Cabinetry, LLC. was the surviving corporation in the merger and wholly owned subsidiary of the Company.

 

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In August 2019 the Company 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 preferred Class D shares – 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.

 

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. These shares do not have voting rights.

 

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.

 

On May 29, 2020, the 10,000,000 preferred A and preferred 60,741,000 D shares were transferred to FB Technologies Global, Inc.

 

On August 26, 2021, the company amended Class B Shares to 100,000,000 shares with par value $0.001 that convert at 100 common shares 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 $0.001 that convert at 100 common shares for every 1 preferred class F share with no voting rights and no dividends.

 

The company’s subsidiaries were acquired on the following dates:

 

January 26, 2021, acquired Firebug Group

 

March 25, 2021, acquired The Vehicle Converters LLC

 

April 13, 2021, acquired Bright Concept Detection and Protection System LLC

 

February 11, 2022, acquired Bull Head Products Inc.

 

March 31, 2022, acquired Georgia Fire & Rescue Supply LLC

 

May 28, 2022, acquired Wikisoft Corporation (now Quality Industrial Corp.)

 

December 13, 2022, acquired Al Shola Al Modea Safety and Security LLC

 

January 18, 2023, acquired Quality International Co Ltd FCZ (binding LOI signed on June 30, 2022)

 

January 27, 2023, acquired Petro Line FZ LLC 

 

February 13, 2023, incorporation of Hyperion Defence Solutions

 

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Additional Information

 

The public may read and copy any materials the Company files with the SEC in the SEC’s Public Reference Section, Room 1580, 100 F Street N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Section by calling the SEC at 1-800-SEC-0330. Additionally, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, which can be found at http://www.sec.gov.

 

ITEM 1A. RISK FACTORS

 

An investment in our securities involves a high degree of risk. In addition to the other information contained in this Annual Report on Form 10-K, prospective investors should carefully consider the following risks before investing in our securities. If any of the following risks actually occur, as well as other risks not currently known to us or that we currently consider immaterial, our business, operating results and financial condition could be materially adversely affected. As a result, the trading price of our common stock could decline, and investors may lose all or part of their investment in our common stock.

 

Risk Related to Covid 19

 

Our business and future operations may be adversely affected by epidemics and pandemics, such as the COVID-19 outbreak.

 

We may face risks related to health epidemics and pandemics or other outbreaks of communicable diseases, which could result in a widespread health crisis that could adversely affect general commercial activity and the economies and financial markets of the world as a whole. For example, the outbreak of COVID-19, which originated in China, was declared by the World Health Organization to be a “pandemic,” and spread across the globe. A health epidemic or pandemic or other outbreak of communicable diseases, such as the COVID-19 pandemic, poses the risk that we, or our current and potential business partners may be disrupted or prevented from conducting business activities for certain periods of time, the durations of which are uncertain, and may otherwise experience significant impairments of business activities, including due to operational shutdowns or suspensions that may be requested or mandated by national or local governmental authorities or self-imposed by us, our users or other business partners. While it is not possible at this time to estimate the full impact that COVID-19 could have on our business, potential users, or other potential business partners, the continued spread of COVID-19, the measures taken by the local and federal government, actions taken to protect employees, and the impact of the pandemic on various business activities could adversely affect our results of operations and financial condition. COVID-19 has not recently had any material impact on our operations, supply chain, liquidity or capital resources. During the lockdowns we however saw significant shipping delays, consumer orders on hold due to budgetary restrictions as well as a slow-down in our planned acquisitions due to flight restrictions limiting on site due diligence. The company has as a mitigant to future COVID-19 outbreaks increased its number of suppliers of raw materials to reduce the risk of production capabilities and order back-logs.

 

 Risks Relating to Macro Conditions and Our Financial Condition

 

Our ability to generate the significant amount of cash needed to service our debt obligations and our ability to refinance all or a portion of our indebtedness or obtain additional financing depends on many factors, many of which may be beyond our control.

 

Our ability to make scheduled payments on, or to refinance our obligations under, our debt, will depend on our financial and operating performance, which, in turn, will be subject to prevailing economic and competitive conditions and to the financial and business factors, many of which may be beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations, that currently anticipated business opportunities will be realized on schedule or at all, or that future borrowings will be available to us in amounts sufficient to enable us to service our indebtedness and any amounts borrowed under future credit facilities, or to fund our other liquidity needs.

 

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We will use cash to pay the principal and interest on our debt. These payments limit funds otherwise available for working capital, capital expenditures, acquisitions, collaborations and other purposes. As a result of these obligations, our current liabilities may exceed our current assets. We may need to take on additional debt as we expand in our industry, which could increase our ratio of debt to equity. The need to service our debt may limit funds available for other purposes and our inability to service debt in the future could lead to acceleration of our debt and foreclosure on assets.

 

Although this is presently not the case, nor do we currently foresee it, we cannot assure that we will be able to refinance any of our indebtedness or obtain additional financing as well as prevailing market conditions. As a result, we could face liquidity problems and might be required to dispose of material assets or operations to meet our indebtedness service and other obligations.

 

The lending documents restrict, and any agreements governing future indebtedness may restrict, our ability to dispose of assets and use the proceeds from any such dispositions. We cannot assure we will be able to consummate any asset sales, or if we do, what the timing of the sales will be or whether the proceeds that we realize will be adequate to meet indebtedness service obligations when due.

 

If we are unable to successfully identify, complete and integrate acquisitions, our results of operations could be adversely affected.

 

Acquisitions have been and will continue to be a significant component of our growth strategy. We seek to identify and complete acquisitions and may continue to make strategic acquisitions. Our previous or future acquisitions may not be successful or may not generate the financial benefits that we expected to achieve at the time of acquisition. In addition, there can be no assurance that we will be able to locate suitable acquisition candidates in the future or acquire them on acceptable terms or, because of competition in the marketplace and limitations imposed by the agreements governing our indebtedness or the availability of capital, that we will be able to finance future acquisitions. Acquisitions involve special risks, including, without limitation, the potential assumption of unanticipated liabilities and contingencies, difficulty in assimilating the operations and personnel of the acquired businesses, disruption of our existing business, dissipation of our limited management resources and impairment of relationships with employees and customers of the acquired business as a result of changes in ownership. While we believe that strategic acquisitions can improve our competitiveness and profitability, these activities could have a material adverse effect on our business, financial condition, and operating results. We may incur significant costs such as transaction fees, professional service fees and other costs related to future acquisitions. We may also incur integration costs following the completion of any such acquisitions as we integrate the acquired business with the rest of our Company. Although we expect that the realization of efficiencies related to the integration of any acquired businesses will offset the incremental transaction and acquisition-related costs over time, this net financial benefit may not be achieved in the near term, or at all.

 

Inability to Continue Developing New Products.

 

Our ability to continue to grow organically is tied in large part to our ability to continue to develop new products. A failure to continue to develop and deliver new, innovative, and competitive products to the market could limit sales growth and negatively impact our Company and our financial condition, results of operations and cash flow.

 

Risks associated with climate change and other environmental impacts, and increased focus and evolving views of our customers, shareholders, and other stakeholders on climate change issues, could negatively affect our business and operations.

 

The effects of climate change create short and long-term financial risks to our business, both in the U.S. and globally. We have significant operations located in regions that have been, and may in the future be, exposed to significant weather events and other natural disasters. Climate related changes can increase variability in or otherwise impact natural disasters, including weather patterns, with the potential for increased frequency and severity of significant weather events (e.g., flooding, hurricanes, and tropical storms), natural hazards (e.g., increased wildfire risk), rising mean temperature and sea levels, and long-term changes in precipitation patterns (e.g., drought, desertification, and/or poor water quality). We expect climate change could affect our facilities, operations, employees, and communities in the future, particularly at facilities in coastal areas and areas prone to extreme weather events and water scarcity. Our suppliers are also subject to natural disasters that could affect their ability to deliver or perform under our contracts, including as a result of disruptions to their workforce and critical infrastructure. Disruptions also impact the availability and cost of materials needed for manufacturing and could increase insurance and other operating costs.

 

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Increased worldwide focus on climate change has led to legislative and regulatory efforts to combat both potential causes and adverse impacts of climate change, including regulation of greenhouse gas emissions. New or more stringent laws and regulations related to greenhouse gas emissions and other climate change related concerns may adversely affect us, our suppliers, and our customers. Some of our facilities are, for example, engaged in manufacturing processes that produce greenhouse gas emissions, including carbon dioxide, or rely on products from others that do so. We have worked for years to reduce our reliance on fossil-based energy sources, to decrease our greenhouse gas emissions, to reduce our consumption of water and production of waste, and to ensure our compliance with environmental regulations where we operate, enhancing our record of environmental sustainability. However, new, and evolving laws and regulations could mandate different or more restrictive standards, could require capital investments to transition to low carbon technologies, could adversely impact our ongoing operations, and could require changes on a more accelerated time frame. Our suppliers may face similar challenges and incur additional compliance costs that are passed on to us. These direct and indirect costs may adversely impact our results

 

We may be adversely affected by the effects of inflation.

 

Inflation in wages, materials, parts, equipment, and other costs has the potential to adversely affect our results of operations, cash flows and financial position by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices, we charge our customers for our products and services. In addition, the existence of inflation in the economy has the potential to result in higher interest rates, which could result in higher borrowing costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects. The Company has currently experienced inflationary pressures on its supply chain due to increased shipping costs, increased energy prices for manufacture of our commercial products as well as increased prices from suppliers of raw materials. We have so far been able to offset inflationary pressure to consumers, but it cannot be guaranteed that that our results of operations will not be adversely affected by inflation in the future and could reduce sales and/or operating margins, and overall financial performance.

 

We are Dependent on the Availability of Raw Materials, Parts and Components Used in our Products.

 

While the Company manufactures certain parts and components used in its products, the Company also requires substantial amounts of raw materials and purchases certain parts and components from suppliers. The availability of and prices for raw materials, parts and components may be subject to curtailment or change due to, among other things, suppliers’ allocations to other purchasers, interruptions in production by suppliers, including due to geopolitical or civil unrest, unfavorable economic or industry conditions, labor disruptions, supply chain disruptions, catastrophic weather events, natural disasters, the occurrence of a contagious disease or illness, changes in exchange rates and prevailing price levels. Any change in the supply of, or price for, these raw materials or parts and components could materially affect the Company and its financial condition, results of operations and cash flow.

 

Using the recent example of our acquisition, Bull Head Products Inc., the demand for new trucks has not declined during Covid-19, but instead there was a delay in the delivery of new Pickup trucks due to a shortage of electronic chips. Historically, 68% of the truck beds built by Bull Head Products are for installation of a truck bed on a new pickup truck. There has not been a significant shift to installation on older trucks, but instead, the customers wait for confirmation of the delivery of new trucks before ordering a new truck bed. Bull Head Products Inc. also has order backlogs of over 9 months due to customers waiting for their new trucks to be delivered. One-third of our current enquiries are impacted by a delay in delivery of new pick-up trucks, which presents a risk to Bull Head Products Inc.

 

Increases in the price of commodities could impact the cost or price of our products, which could impact our ability to sustain and grow earnings.

 

Our manufacturing processes consume significant amounts of raw materials, the costs of which are subject to worldwide supply and demand factors, as well as other factors beyond our control. Raw material price fluctuations may adversely affect our results. We purchase, directly and indirectly through component purchases, significant amounts of plastic, aluminum, steel, and other raw materials. In the past raw material prices have experienced volatility which has been unforeseen and unexpected. Commodity pricing has fluctuated over the past few years and may continue to do so in the future. Such fluctuations could have a material effect on our results of operations, balance sheets and cash flows and impact the comparability of our results between financial periods.

 

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We May be Subject to Loss in Market Share and Market Acceptance as a Result of Performance Failures, Manufacturing Errors, Delays or Shortages.

 

There is a risk that for unforeseen reasons we may be required to repair or replace products in use or to reimburse customers for products that fail to work or meet strict performance criteria. To date, we have experienced some product failures related to electronic and mechanical components within equipment and vehicles. These are either repaired under warranty or at cost to the customer or under a maintenance agreement.

 

Other disruptions in the supply chain process or product sales and fulfilment systems for any reason, including equipment malfunction, failure to follow specific protocols and procedures, supplier facility shut-downs, defective raw materials, wars and conflict, natural disasters such as hurricanes, tornadoes or wildfires, property damage from riots, and other environmental factors and the impact of epidemics or pandemics, such as Covid-19, and actions by businesses, communities and governments in response, could lead to launch delays, product shortage, unanticipated costs, lost revenues and damage to our reputation.

 

We have taken steps to limit remedies for product failure to the repair or replacement of malfunctioning or non-compliant products or services, and also attempt to exclude or minimize exposure to product and related liabilities by including in our standard agreements warranty disclaimers and disclaimers for consequential and related damages as well as limitations on our aggregate liability. From time to time, in certain sales transactions, we may negotiate liability provisions that vary from such standard forms. There is a risk that our contractual provisions may not adequately minimize our product and related liabilities or that such provisions may be unenforceable. We intend to carry product liability insurance, but coverage we secure may not be adequate to cover potential claims. Moreover, to the extent we have to repair, reimburse, or expend funds to cover customer service issues, our results of operations will be negatively affected.

 

We Will Rely in Part Upon Sales Reps, Retailers and Distribution Partners to Distribute our Products, and We May Be Adversely Affected if Those Parties do not Actively Promote our Products or Pursue Customers Who Would Have a Potential Demand for our Products.

 

We estimate that a significant portion of our revenue will come from sales to partners through sales reps, retailers, distributors, and resellers. Some of these relationships have not been formalized in detailed contracts and may be subject to termination at any time. Even where these relationships are formalized in a detailed contract, the agreements are often terminable with little or no notice and subject to periodic amendment. We cannot control the amount and timing of resources that our partners devote to activities on our behalf.

 

We intend to continue to seek strategic relationships to distribute, license and sell certain of our products. We, however, may not be able to negotiate acceptable relationships in the future and cannot predict whether current or future relationships will be successful.

 

The Markets the Company operates in are Highly Competitive which Could Reduce Sales and Operating Margins.

 

Most of the Company’s products are sold in competitive markets. Maintaining and improving a competitive position will require continued investment in manufacturing, engineering, quality standards, marketing, customer service and support and distribution networks. The Company may not be successful in maintaining its competitive position. The Company’s competitors may develop products and methods that are more efficient or may adapt quicker to new technologies or evolving customer requirements. The Company may not be able to compete successfully with existing competitors or with new competitors. Pricing pressures may require the Company to adjust the prices of products to stay competitive. Failure to continue competing successfully could reduce sales, operating margins, and overall financial performance.

 

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The Company’s Business Operations May Be Adversely Affected by Information Systems Interruptions or Cybersecurity Intrusions.

 

The Company depends on various information technologies to administer, store, and support multiple business activities. If these systems are damaged, cease to function properly or are subject to cyber-security attacks, such as those involving unauthorized access, malicious software and/or other intrusions, the Company could experience production downtimes, operational delays, other detrimental impacts on operations or the ability to provide products and services to its customers, the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation or improper use of the Company’s systems or networks, financial losses from remedial actions, loss of business or potential liability, penalties, fines and/or damage to the Company’s reputation. While the Company attempts to mitigate these risks by employing a number of measures, including having hired an IT manager with cyber security expertise, who reports directly to our management team, employee training, technical security controls and maintenance of backup and protective systems, the Company’s systems, networks, products, and services remain potentially vulnerable to known or unknown threats, any of which could have a material adverse effect on the Company and its financial condition or results of operations. Further, given the unpredictability, nature, and scope of cyber-security attacks, it is possible that potential vulnerabilities could go undetected for an extended period. We have currently not been subject to material cybersecurity breaches in our supply chain, software, or services used in our products, services, or business. A severe future cybersecurity incident in our supply chain could however reduce sales, operating margins, and overall financial performance.

 

With the strategy establishing and expanding our defense subsidiary, which may become involved in defense contracting, we may face increased cyber and security threats that can range from attacks common to most industries, but could have even greater financial or reputational impact, to advanced persistent threats on our defense programs, which could involve information that is considered a matter of national security.  

Our long-term success depends, in part, on our ability to operate and expand internationally, and our business is susceptible to risks associated with international operations.

 

Currently, we maintain operations in the United States, the United Kingdom, the Republic of Serbia and the United Arab Emirates, and plan to continue our efforts to expand globally, in jurisdictions where we do not currently operate including, but not limited to, Spain, Uruguay and South Africa. The Company expects international operations and export sales to continue to constitute the majority of our sales and assets in the foreseeable future. For the year ended December 31, 2022, the international operations constituted 84.4% of our total sales of which part of the international operation include international sales to US costumers. Managing a global organization is difficult, time consuming and expensive, and any international expansion efforts that we undertake may not be profitable in the near or long term. Although we have operating experience in many foreign jurisdictions, we must still continue to make significant investments to build our international operations. The Company’s sales from international operations and sales from export are both subject in varying degrees to risks inherent in doing business outside the U.S. These risks include the following:

 

  • Costs, risks and uncertainties associated with tailoring our services in international jurisdictions as needed to better address both the needs of customers, and the threats of local competitors;

 

  • Risks of economic instability, including due to inflation;

 

  • Uncertainties in forecasting revenues and expenses in markets where we have not previously operated;

 

  • Costs and risks associated with local and national laws and regulations governing the industries in which we operate, health and safety, climate change and sustainability, and labor and employment;

 

  • Operational and compliance challenges caused by distance, language, and cultural differences;

 

  • Costs and risks associated with compliance with international tax laws and regulations;

 

  • Costs and risks associated with compliance with the U.S. Foreign Corrupt Practices Act and other laws in the United States related to conducting business outside the United States, as well as the laws and regulations of non-U.S. jurisdictions governing bribery and other corrupt business activities;

 

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  • Costs and risks associated with human trafficking, modern slavery and forced labor reporting, training and due diligence laws and regulations in various jurisdictions;

 

  • Being subject to other laws and regulations, including laws governing online advertising and other Internet activities, email and other messaging, collection and use of personal information, ownership of intellectual property, taxation and other activities important to our online business practices;

 

  • Currency exchange rate fluctuations and restrictions on currency repatriation;

 

  • Competition with companies that understand the local market better than we do or that have preexisting relationships with regulators and customers in those markets;

 

  • Adverse effects resulting from the U.K.’s exit from the European Union (commonly known as “Brexit”)

 

  • Reduced or varied protection for intellectual property rights in some countries;

 

  • Disruption of operations from labor and political disturbances;

 

  • Withdrawal from or renegotiation of international trade agreements and other restrictions on the trade between the United States and other countries;

 

  • Changes in tariff and trade barriers; and

 

  • geopolitical events, including natural disasters, climate change, public health issues, political instability (such as war between Ukraine and Russia), terrorism, insurrection, or war.

 

Entry into certain transactions with foreign entities now or in the future may be subject to government regulations, including review related to foreign direct investment by U.S. or foreign government entities. If a transaction with a foreign entity is subject to regulatory review, such regulatory review might limit our ability to enter into the desired strategic alliance and thus our ability to carry out our long-term business strategy.

 

Operating in international markets also requires significant management attention and financial resources. The investment and additional resources required to establish operations and manage growth in other countries may not produce desired levels of revenue or profitability and could instead result in increased costs without a corresponding benefit. We cannot guarantee that our international operations or expansion efforts will be successful.

 

Any of these events as well as related events not aforementioned, could have a materially adverse impact on the Company and its operations.

 

Uncertainty Related to Environmental Regulation and Industry Standards, as well as Physical Risks of Climate Change, Could Impact the Company’s Results of Operations and Financial Position.

 

Increased public awareness and concern regarding environmental risks, including global climate change, may result in more international, regional and/or federal requirements or industry standards to reduce or mitigate global warming and other environmental risks. New climate change laws and regulations could require the Company to change its manufacturing processes or obtain substitute materials that may cost more or be less available for its manufacturing operations. Various jurisdictions in which the Company does business have implemented, or in the future could implement or amend, restrictions on emissions of carbon dioxide or other greenhouse gases, limitations or restrictions on water use, the production of single use plastics, regulations on energy management and waste management and other climate change-based rules and regulations, which may increase the Company’s expenses and adversely affect its operating results. In addition, the physical risks of climate change may impact the availability and cost of materials, sources and supply of energy, product demand and manufacturing and could increase insurance and other operating costs. The expected future increased worldwide regulatory activity relating to climate change could expand the nature, scope, and complexity of matters that the Company is required to control, assess, and report. If environmental laws or regulations or industry standards are either changed or adopted and impose significant operational restrictions and compliance requirements upon the Company, its suppliers, its customers or its products, or the Company's operations are disrupted due to physical impacts of climate change on the Company, its customers or its suppliers, the Company's business, results of operations and financial condition could be adversely impacted.

 

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Significant Movements in Foreign Currency Exchange Rates May Harm the Company’s Financial Results.

 

The Company is exposed to fluctuations in foreign currency exchange rates, particularly with respect to the Euro, British Pound, Indian Rupee, UAE Dirham and Serbian Dinar. Any significant change in the value of the currencies of the countries in which the Company does business against the U.S. Dollar could affect the Company’s ability to sell products competitively and control its cost structure, which could have a material adverse effect on results of operations.

 

A Significant or Sustained Decline in Commodity Prices Including Oil Could Negatively Impact the Levels of Expenditures by Certain of the Company’s Customers.

 

Demand for the Company’s products depends, in part, on the level of new and planned expenditures by certain of its customers. The level of expenditures by the Company’s customers is dependent on, among other factors, general economic conditions, availability of credit, economic conditions within their respective industries and expectations of future market behavior. The Company’s profitability may be adversely affected during any periods of unexpected or rapid increases in interest rates and volatility in commodity prices, including oil, can negatively affect the level of these activities and especially impact our Industrial & Manufacturing division and can result in postponement of capital spending decisions or the delay or cancellation of existing orders. The ability of the Company’s customers to finance capital investment and maintenance may also be affected by the conditions in their industries. Reduced demand for the Company’s products could result in the delay or cancellation of existing orders or lead to excess manufacturing capacity, which unfavorably impacts the absorption of fixed manufacturing costs. This reduced demand could have a material adverse effect on the Company and its financial condition and results of operations.

  

We are dependent on financing for the continuation of our operations.

 

It can at times be difficult to predict our capital needs on a monthly, quarterly, or annual basis. Our future is dependent upon our ability to obtain profitable operations or financing. We reserve the right to seek additional funds through private placements of our common stock and/or through debt financing. We do not have financing in place at this time for all future planned acquisitions. We may not have access to financing or on terms that are acceptable to us. Any lack of funds from operations or fundraisings for any shortage could be detrimental to our ability to continue operations and negatively impact us and our financial condition, results of operations and cash flow.

 

Risks Related to Legal, Accounting and Regulatory Matters

 

An Unfavorable Outcome of Any Pending Contingencies or Litigation Could Adversely Affect the Company.

 

We have been named as a defendant in a lawsuit, and we may be named in additional litigation, all of which will require significant management time and attention and result in significant legal expenses and may result in an unfavorable outcome, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

 

We have been named as a defendant in an action commenced by our former CEO, Larson Elmore. A case also 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. We have potential counterclaims against the former CEO which are being prepared due to improper action and lack of disclosures. The company has disputed the claim and argue that Larson Elmore has been misleading the company and its shareholders on various matters including but not limited to liabilities, company commitments and due diligence items presented by Larson Elmore during the takeover process. We are in the process of a settlement discussion and have obtained an extension of time to respond while this process occurs.

 

We have been named as a defendant in an action commenced by Steve Nicol, who claims that he loaned $12,000 on or about May 23, 2017, to Cache Cabinetry, LLC a subsidiary of ILUS under a promissory note, but that ILUS agreed to assume the note. He further claims that he elected to convert the note and that ILUS failed to convert the note into shares of ILUS common stock. He has alleged breach of contract, declaratory relief, and specific performance to require the company to issue 75,000,000 shares of common stock in ILUS.

 

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We cannot predict whether the action against involving our former CEO or Mr. Nicol is likely to result in any material recovery by or expense to our company. In general, we lack much information and evidence to support the assertions of financial statements prior to the current management taking over and there are chances that preceding management of the company might have missed compliances for which we are not aware. Thus, the company may have to bear consequences for that from authorities. We cannot reasonably ascertain an amount for those contingencies.

 

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 upon 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.

 

We may continue to incur legal fees in responding to these and other lawsuits. The expense of defending such litigation may be significant and any sizeable verdict may adversely affect the company. The amount of time to resolve this and any additional lawsuits is unpredictable, and these actions may divert management’s attention from the day-to-day operations of our business, all of which could adversely affect our business, results of operations and cash flows. For additional detail related to this risk, see Item 8, “Legal Proceedings”.

 
The Sale of our Products Involves Potential Product Liability and Related Risks that Could Expose us to Significant Insurance and Loss Expenses.

 

We face an inherent risk of exposure to product liability claims if the use of our products results in, or is believed to have resulted in, illness or injury. Any product liability claim may increase our costs and adversely affect our revenue and operating income. Moreover, liability claims arising from a serious adverse event may increase our costs through higher insurance premiums and deductibles for our insurances we have with Firebug Group, Georgia Fire and Bull Head Products and may make it more difficult to secure adequate insurance coverage in the future. In addition, our product liability insurance may fail to cover future product liability claims, which, if adversely determined, could subject us to substantial monetary damages. Georgia Fire, Bull Head Products and Firebug all have General Liability Cover.

  

Failure by us to Maintain the Proprietary Nature of our Technology, Intellectual Property and Manufacturing Processes Could Have a Material Adverse Effect on our Business, Operating Results, Financial Condition, Stock Price, and on our Ability to Compete Effectively.

 

We principally rely upon patent, trademark, copyright, trade secret and contract law to establish and protect our proprietary rights. There is a risk that claims allowed on any patent licenses or trademarks we hold may not be broad enough to protect our technology. In addition, our patent licenses or trademarks may be challenged, invalidated, or circumvented and we cannot be certain that the rights granted thereunder will provide competitive advantages to us. Moreover, any current or future issued or licensed patents, or trademarks, or currently existing or future developed trade secrets or know-how may not afford sufficient protection against competitors with similar technologies or processes, and the possibility exists that certain of our already issued patents or trademarks may infringe upon third party patents or trademarks or be designed around by others. In addition, there is a risk that others may independently develop proprietary technologies and processes, which are the same as, substantially equivalent, or superior to ours, or become available in the market at a lower price.

 

In addition, foreign laws treat the protection of proprietary rights differently from laws in the United States and may not protect our proprietary rights to the same extent as U.S. laws. The failure of foreign laws or judicial systems to adequately protect our proprietary rights or intellectual property, including intellectual property developed on our behalf by foreign contractors or subcontractors may have a material adverse effect on our business, operations, financial results, and stock price.

 

There is a risk that we have infringed or in the future will infringe patents or trademarks owned by others, that we will need to acquire licenses under patents or trademarks belonging to others for technology potentially useful or necessary to us, and that licenses will not be available to us on acceptable terms, if at all.

 

We may have to litigate to enforce our patents or trademarks or to determine the scope and validity of other parties’ proprietary rights. Litigation could be very costly and divert management’s attention. An adverse outcome in any litigation may have a severe negative effect on our financial results and stock price. To determine the priority of inventions, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office or oppositions in foreign patent and trademark offices, which could result in substantial cost and limitations on the scope or validity of our patents or trademarks.

 

We also rely on trade secrets and proprietary know-how, which we seek to protect by confidentiality agreements with our employees, consultants, service providers and third parties. There is a risk that these agreements may be breached, and that the remedies available to us may not be adequate. In addition, our trade secrets and proprietary know-how may otherwise become known to or be independently discovered by others.

 

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Compliance with Changing Regulation of Corporate Governance and Public Disclosure May Result in Additional Expenses.

 

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and new SEC regulations, are creating uncertainty for companies such as ours. These new or changed laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, we intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, our reputation may be harmed.

 

If we Fail to Comply with the Rules under the Sarbanes-Oxley Act Related to Accounting Controls and Procedures, or if Material Weaknesses or Other Deficiencies are Discovered in our Internal Accounting Procedures, our Stock Price Could Decline Significantly.

 

Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent auditors addressing these assessments. We are in the process of documenting and testing our internal control procedures, and we may identify material weaknesses in our internal control over financial reporting and other deficiencies. If material weaknesses and deficiencies are detected, it could cause investors to lose confidence in our Company and result in a decline in our stock price and consequently affect our financial condition. In addition, if we fail to achieve and maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our Common Stock could drop significantly. In addition, we cannot be certain that additional material weaknesses or significant deficiencies in our internal controls will not be discovered in the future.

 

Failure To Comply with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act or Other Applicable Anti-bribery Laws Could Have an Adverse Effect on the Company.

 

The U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business. Recent years have seen a substantial increase in anti-bribery law enforcement activity with more frequent and aggressive investigations and enforcement proceedings by both the Department of Justice and the SEC, increased enforcement activity by non-U.S. regulators and increases in criminal and civil proceedings brought against companies and individuals. The Company’s policies mandate compliance with all anti-bribery laws. However, the Company operates in certain countries that are recognized as having governmental and commercial corruption. The Company’s internal control policies and procedures may not always protect it from reckless or criminal acts committed by employees or third-party intermediaries. Violations of these anti-bribery laws may result in criminal or civil sanctions, which could have a material adverse effect on the Company and its financial condition and results of operations.

 

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Changes in Tax laws or Exposure to Additional Income Tax Liabilities Could have a Material Impact on our Company, the Results of Operations, Financial Conditions and Cash Flows.

 

We are subject to income taxes, as well as non-income-based taxes in the jurisdictions in which we operate, as well as jurisdictions such as the United States, in which we intend to have operations. The tax laws in these could change on a prospective or retroactive basis, and any such changes could adversely affect us and our effective tax rate.

 

Taxation regulation in territories around the world can also change very quickly, which may mean that all the implications for businesses may not have been fully thought through by the regulating authorities before final guidelines and laws are issued. Furthermore, any changes made by tax authorities, together with other legislative changes, to the mandatory sharing of company information (financial and operational) with tax authorities on both a local and global basis, could lead to disagreements between jurisdictions with respect to the proper allocation of profits between such jurisdictions. We therefore continuously monitor changes to tax regulation and double tax treaties between the territories in which we operate. We also maintain a comprehensive transfer pricing policy to govern the flow of funds between various tax territories. 

 

We are further subject to ongoing tax audits in the various jurisdictions in which we operate. We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provisions. However, there can be no assurance that we will accurately predict the outcomes of these audits, which could have a material impact on the business, financial condition, results of operations, and cash flows.

 

While we have recorded reserves for potential payments to various tax authorities related to uncertain tax positions, the calculation of such tax liabilities involves the application of complex tax regulations in many jurisdictions. Therefore, any dispute with a tax authority may result in payment that is significantly different from our estimates. If the payment proves to be less than the recorded reserves, the reversal of the liabilities would generally result in tax benefits being recognized in the period when we determine the liabilities to be no longer necessary. Conversely, if the payment proves to be more than the reserves, we could incur additional charges, and these could have a materially adverse effect on the business, financial condition, results of operations, and cash flows.

 

Laws and Regulations Governing International Business Operations Could Adversely Impact Our Company.

 

The US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), and the Bureau of Industry and Security at the US Department of Commerce (“BIS”) administer certain laws and regulations that restrict US persons and, in some instances, non-US persons, in conducting activities, transacting business with, or making investments in certain countries, governments, entities and individuals subject to US economic sanctions.

 

Our international operations subject us to these laws and regulations, which are complex, restrict business dealings with certain countries, governments, entities, and individuals, and are constantly changing. Further restrictions may be enacted, amended, enforced, or interpreted in a manner that materially impacts our operations. From time to time, certain subsidiaries have limited business dealings in countries subject to comprehensive sanctions.

 

Certain of our subsidiaries sell products, and may provide related services, to distributors and other purchasing bodies in such countries. These business dealings represent an insignificant amount of our consolidated revenues and income but expose us to a heightened risk of violating applicable sanctions regulations. Violations of these regulations are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts and revocations or restrictions of licenses, as well as criminal fines and imprisonment.

 

We have established policies and procedures designed to assist with compliance with such laws and regulations. However, there can be no assurance that these will prevent us from violating these regulations in every transaction in which we may engage. As such a violation could adversely affect our reputation, business, financial condition, results of operations and cash flows.

 

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We are subject to changes in contract estimates in our Defense and Industrial & Manufacturing Divisions

We account for substantially all long-term contracts in the Defense and Industrial & Manufacturing Divisions utilizing the cost-to-cost method of percentage-of-completion accounting. This accounting requires judgment relative to assessing risks, estimating revenues and costs, and making assumptions regarding the timing of receipt of delivery orders from our customer and technical issues. Due to the size and nature of these contracts, the estimation of total revenues and costs is complicated and subject to many variables. We must make assumptions regarding for example expected increases in material costs, wages and employee benefits, engineering hours, productivity and availability of labor and allocated fixed costs. Changes to production costs, overhead rates, learning curves and/or supplier performance can also impact these estimates. Furthermore, under the revenue recognition accounting rules, we can only include units in our estimates of overall contract profitability after we have received a firm delivery order for those units. Because new orders have the potential to significantly change the overall profitability of cumulative orders received to date, particularly early in the contract when fewer overall units are on order, the period in which we receive those orders will impact the estimated life-to-date contract profitability. Changes in underlying assumptions, circumstances or estimates could have a material adverse effect on our net sales, financial condition and/or profitability.

General Risk Factors

 

The Company’s Success Depends on Its Executive Management and Other Key Personnel.

 

The Company’s future success depends to a significant degree on the skills, experience and efforts of its executive management and other key personnel and their ability to provide the Company with uninterrupted leadership and direction. The loss of the services of any of the executive officers or a failure to provide adequate succession plans for key personnel could have an adverse impact on the Company. The availability of highly qualified talent is limited and the competition for talent is robust. However, the Company provides long-term equity awards and certain other benefits for its executive officers which provides incentives for them to make a commitment to the Company. The Company’s future success will depend on its ability to have adequate succession plans in place and to attract, retain and develop qualified personnel. A failure to efficiently replace executive management members and other key personnel and to attract, retain and develop new qualified personnel could have an adverse effect on the Company’s operations and implementation of its strategic plan.

 

Challenges with Respect to Labor Availability Could Negatively Impact the Company’s Ability to Operate or Grow the Business.

 

The Company’s success depends in part on the ability of its businesses to proactively attract, motivate, and retain a qualified and highly skilled workforce in an intensely competitive labor market. A failure to attract, motivate and retain highly skilled personnel could adversely affect the Company’s operating results or its ability to operate or grow the business. Additionally, any labor stoppages or labor disruptions, including due to geopolitical unrest, unfavorable economic or industry conditions, catastrophic weather events, natural disasters or the occurrence of a contagious disease or illness could adversely affect the Company’s operating results or its ability to operate or grow the business.

 

Risks Related to our Management and Control Persons

 

Our largest shareholder, officer, director, Nicolas Link holds substantial control over the company and is able to influence all corporate matters, which could be deemed by shareholders as not always being in their best interests.

 

Nicolas Link, our Chief Executive Officer (Principal Executive Officer & Chairman of the Board of Directors) with his company, FB Technologies Global, Inc. Dubai, U.A.E , owns approximately 2% of the outstanding shares of common stock, owns all of the outstanding shares of Class A Preferred Stock, Class B Preferred Stock and Class D Preferred Stock and owns 15% of the outstanding shares of Class F Preferred Stock.

 

Our common stock is entitled to one vote per share on all matters submitted to a vote of the stockholders, including the election of directors. Each share of Class A Preferred Stock is entitled to vote together with the holders of our common stock on all matters submitted to shareholders at a rate of 500 votes, including the election of directors. Each share of Class D Preferred Stock is entitled to vote together with the holders of our common stock on all matters submitted to shareholders at a rate of 500 votes, including the election of directors.

 

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There are 1,379,080,699 shares of common stock outstanding, which amounts to 1,379,080,699 votes on matters requiring a shareholder vote. While Mr. Link owns only 2% of the outstanding common shares, with the Series A Preferred Stock that Mr. Link owns, he has the power over 5,000,000,000 votes and with the Series D Preferred Stock, he has the power to over 30,370,500,000 additional votes on matters requiring a shareholder vote, including the election of directors. He will have voting power over every aspect of our business.

 

By virtue of his ownership of common stock and preferred stock, Mr. Link is able to exercise significant influence over all matters requiring approval by our stockholders, including the election of directors, the approval of significant corporate transactions, and any change of control of our company. 

 

Our officers and directors are located outside of the U.S., so it will be difficult to effect service of process and enforcement of legal judgments upon our officers and directors.

 

Our officers and directors are located outside of the United States and reside in the U.A.E, U.K., and Denmark. As a result, it may be difficult to effect service of process within the United States and enforce judgments of the US courts obtained against our executive officers and directors. Particularly, our shareholders may not be able to:

 

• Effect service of process in the U.S. on any of our officers and directors;

 

• Enforce judgments obtained in U.S. courts against our officers and directors based upon the civil liability provisions of the U.S. federal securities laws;

 

• Enforce, in a court outside of the U.S., judgments of U.S. courts based on the civil liability provisions of the U.S. federal securities laws; and

 

• Bring an original action in a court in the U.A.E, U.K., or Denmark to enforce liabilities against any of our officers and directors based upon the U.S. federal securities laws.

 

We are dependent on the continued services of our Director and Chairman and if we fail to keep them or fail to attract and retain qualified senior executives and key technical personnel, our business may not be able to expand.

 

We are dependent on the continued availability of Chairman, Nicolas Link and Director, John-Paul Backwell, and the availability of new executives to implement our business plans. The market for skilled employees is highly competitive, especially for employees in our industry. Although we expect that our planned compensation programs will be intended to attract and retain the employees required for us to be successful, there can be no assurance that we will be able to retain all our key employees or a sufficient number to execute our plans, nor can there be any assurance we will be able to continue to attract new employees as required.

 

Our lack of adequate D&O insurance may also make it difficult for us to retain and attract talented and skilled directors and officers.

 

In the future we may be subject to litigation, including potential class action and stockholder derivative actions. Risks associated with legal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. To date, we have not obtained directors and officers liability (“D&O”) insurance, but the company is currently investigating and plans to obtain one. Without adequate D&O insurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to the Company could have a material adverse effect on our financial condition, results of operations and liquidity. Furthermore, our lack of adequate D&O insurance may make it difficult for us to retain and attract talented and skilled directors and officers, which could adversely affect our business. 

 

Our Officers and Key Personnel may voluntarily terminate their relationship with us at any time, and competition for qualified personnel is lengthy, costly, and disruptive.

 

If we lose the services of our officers and key personnel and fail to replace them if they depart, we could experience a negative effect on our financial results and stock price. The loss and our failure to attract, integrate, motivate, and retain additional key employees could have a material adverse effect on our business, operating and financial results and stock price.

 

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Risks Relating to our Common Stock

 

We may conduct offerings of our equity securities in the future, in which case your proportionate interest may become diluted.

 

We may be required to conduct equity offerings in the future to finance our current projects or to finance subsequent projects that we decide to undertake. If our common stock shares are issued in return for additional funds, the price per share could be lower than that paid by our current shareholders but with the aim to increase overall value for all shareholders. We anticipate continuing to rely on equity sales of our common stock shares in order to fund our business operations. If we issue additional common stock shares or securities convertible into shares of our common stock, your percentage interest in us could become diluted.

 

Our common stock price may be volatile and could fluctuate, which could result in substantial losses for investors.

 

Our common stock is quoted on the OTC Pink Market under the symbol, “ILUS.” The market price of our common stock is likely to be volatile and could fluctuate in price in response to various factors, many of which are beyond our control, including:

 

  • government regulation of our Company and operations.

 

  • the establishment of partnerships.

 

  • intellectual property disputes.

 

  • additions or departures of key personnel.

 

  • sales of our common stock.

 

  • our ability to integrate operations, technology, products, and services.

 

  • our ability to execute our business plan.

 

  • operating results below expectations.

 

  • loss of any strategic relationship.

 

  • industry developments.

 

  • economic and other external factors; and

 

  • period-to-period fluctuations in our financial results.

  

In addition, the securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

 

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Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales could occur, could cause our stock price to fall.

 

The market price of our common stock could decline significantly as a result of sales of a large number of shares of our common stock. If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the contractual and securities law restrictions on resale of such common stock lapse, or after those shares become registered for resale pursuant to an effective registration statement, the trading price of our common stock could decline. As of March 31, 2023, a total of 1,379,080,699 shares of our common stock were outstanding. Of those shares, 1,190,797,366 are currently without restriction, in the public market. Upon the effectiveness of any registration statement, we could elect to file with respect to any outstanding shares of common stock, any sales of those shares or any perception in the market that such sales may occur could cause the trading price of our common stock to decline.

 

The issuance of shares of our common stock upon conversion or exercise of preferred stock, warrants and convertible notes, will dilute ownership to existing shareholders and may cause our stock price to fall.

 

Any issuance of additional common stock by us in the future as a result of the conversion or exercise of warrants, convertible notes, preferred stock, or debt settlements would result in dilution to our existing shareholders. Such issuances could be made at a price that reflects a discount or a premium to the then-current trading price of our common stock. Moreover, the perception in the public market that shareholders might sell shares of our stock or that we could make a significant issuance of additional common stock in the future could depress the market for our shares. These sales, or the perception that these sales might occur, could depress the market price of our common stock, or make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

 

We have issued shares of our common stock, as well as other securities such as warrants, convertible notes, preferred stock, or debt settlements, which are convertible into shares of our common stock, in financing transactions that are deemed to be “restricted securities,” as that term is defined in Rule 144 promulgated under the Securities Act. From time to time, certain of our shareholders or derivative security holders may be eligible to sell all or some of their restricted shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, subject to certain limitations. The resale pursuant to Rule 144 of shares acquired from us in private transactions could cause our stock price to decline significantly.

  

We have never declared or paid any cash dividends or distributions on our capital stock.

 

We have never declared or paid any cash dividends or distributions on our capital stock. While we may not anticipate paying a dividend in the short-term and we currently intend to retain short-term earnings for growth, we may do so in the medium to long-term future.

 

The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant. There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.

 

We may become involved in securities class action litigation that could divert management’s attention and harm our business.

 

The stock market in general, have experienced extreme price and volume fluctuations. These fluctuations have often been unrelated or disproportionate to the operating performance of the companies involved. If these fluctuations occur in the future, the market price of our shares could fall regardless of our operating performance. In the past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation has often been brought against that company. If the market price or volume of our shares suffers extreme fluctuations, then we may become involved in this type of litigation, which would be expensive and divert management’s attention and resources from managing our business.

 

As a public company, we may also from time to time make forward-looking statements about future operating results and provide some financial guidance to the public markets. Projections may not be timely made and set at expected performance levels and could affect the price of our shares.

 

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Our common stock is currently deemed a “penny stock,” which makes it more difficult for our investors to sell their shares.

 

Our common stock is currently deemed a “penny stock,” which makes it more difficult for our investors to sell their shares. The SEC has adopted rule 3a51-1 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires:

 

  • that a broker or dealer approve a person’s account for transactions in penny stocks, and
  • the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

 

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:

 

  • obtain financial information and investment experience objectives of the person, and
  • make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:

 

  • sets forth the basis on which the broker or dealer made the suitability determination and
  • that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

 

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock. 

 

Risks Relating to Our Company and Industry

 

The success of our business depends on our ability to maintain and enhance our reputation and brand.

 

We believe that our reputation in our industry is of significant importance to the success of our business. A well-recognized brand is critical to increasing our customer base and, in turn, increasing our revenue. Since the industry is highly competitive, our ability to remain competitive depends to a large extent on our ability to maintain and enhance our reputation and brand, which could be difficult and expensive. To maintain and enhance our reputation and brand, we need to successfully manage many aspects of our business, such as cost-effective marketing campaigns to increase brand recognition and awareness in a highly competitive market. We cannot assure you, however, that these activities will be successful and achieve the brand promotion goals we expect. If we fail to maintain and enhance our reputation and brand, or if we incur excessive expenses in our efforts to do so, our business, financial conditions and results of operations could be adversely affected.

 

In the event that we are unable to successfully compete in our industry, we may not see lower profit margins

 

We face substantial competition in our industry. Due to our smaller size, it can be assumed that some of our competitors have greater financial, technical, and other competitive resources. Accordingly, these competitors may have already begun to establish superior technologies in our industry. We will attempt to compete against these competitors by developing technology that exceed what is offered by our competitors. However, we cannot assure you that our technology will outperform competing technology, or that our competitors will not develop new products or services that exceed what we provide. In addition, we may face competition based on price. If our competitors lower the prices on their products, then it may not be possible for us to market our products at prices that are economically viable. Increased competition could result in:

 

  • Lower than projected revenues;

 

  • Price reductions and lower profit margins.

 

Any one of these results could adversely affect our business, financial condition, and results of operations.

 

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In addition, our competitors may develop competing products that achieve greater market acceptance. It is also possible that new competitors may emerge and acquire significant market share. Our inability to achieve sales and revenue due to competition will have an adverse effect on our business, financial condition, and results of operations.

 

If we are unable to successfully manage growth, our operations could be adversely affected.

 

Our progress is expected to require the full utilization of our management, financial and other resources. Our ability to manage growth effectively will depend on our ability to improve and expand operations, including our financial and management information systems, and to recruit, train and manage personnel. There can be no absolute assurance that management will be able to manage growth effectively.

 

If we do not properly manage the growth of our business, we may experience significant strains on our management and operations and disruptions in our business. Various risks arise when companies and industries grow quickly. If our business or industry grows too quickly, our ability to meet customer demand in a timely and efficient manner could be challenged. We may also experience development delays as we seek to meet increased demand for our services and platform. Our failure to properly manage the growth that we or our industry might experience could negatively impact our ability to execute on our operating plan and, accordingly, could have an adverse impact on our business, our cash flow and results of operations, and our reputation with our current or potential customers.

 

We may fail to successfully integrate acquisitions or otherwise be unable to benefit from pursuing acquisitions.

 

We believe there are meaningful opportunities to grow through acquisitions and joint ventures across all service categories and we expect to continue a strategy of selectively identifying and acquiring businesses with complementary services. We may be unable to identify, negotiate, and complete suitable acquisition opportunities on reasonable terms. There can be no assurance that any business acquired by us will be successfully integrated with our operations or prove to be profitable to us. We may incur future liabilities related to acquisitions. Should any of the following problems, or others, occur as a result of our acquisition strategy, the impact could be material:

 

  • difficulties integrating personnel from acquired entities and other corporate cultures into our business; difficulties integrating information systems;

 

  • the potential loss of key employees of acquired companies;

 

  • the assumption of liabilities and exposure to undisclosed or unknown liabilities of acquired companies; or the diversion of management attention from existing operations.

  

The elimination of monetary liability against our directors, officers and employees under our Articles of Incorporation and the existence of indemnification rights to our directors, officers and employees may result in substantial expenditures by our Company and may discourage lawsuits against our directors, officers, and employees.

 

Our Articles of Incorporation contain provisions that eliminate the liability of our directors for monetary damages to our Company and shareholders. Our bylaws also require us to indemnify our officers and directors. We may also have contractual indemnification obligations under our agreements with our directors, officers, and employees. The foregoing indemnification obligations could result in our company incurring substantial expenditures to cover the cost of settlement or damage awards against directors, officers, and employees that we may be unable to recoup. These provisions and resulting costs may also discourage our company from bringing a lawsuit against directors, officers, and employees for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our shareholders against our directors, officers, and employees even though such actions, if successful, might otherwise benefit our Company and shareholders.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

This information is not required for smaller reporting companies.

 

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ITEM 2. PROPERTIES

 

We lease factories and offices in the US, Dubai, and the UK. The lease agreements are filed as exhibits with this Form 10-K.

 

Bull Head Products Inc. has a lease at $3000/month, on a month-to-month basis.  The property located at 87 Thorngrove Pike, Kodak Tennessee, 37764, USA.  has an 8k sq. ft. building used for the manufacture of aluminum truck beds. Bull Head Products Inc. plans to move to a bigger premises to facilitate growth, but there is currently a shortage of industrial buildings for lease with our required minimum of 15k sq. ft. at a reasonable price per square foot (current average rate $17.50/sq. ft.).

 

Firebug Group has a factory with 14k sq. ft located at Warehouse G04, 79th Street, DIRC Warehouse Complex, DIP 2, Dubai, United Arab Emirates with lease payments of $ 3630/month with the right but not the obligation to renew annually on March 28 of each year and has an office located at Matrix@Dinnington Business Centre, Nobel Way Dinnington, Sheffield S25 3QB, United Kingdom.

 

Ilustrato Pictures International Inc. has offices located at Al Marsa Street 66, 11th Floor, Office 1105, Dubai Marina P.O. Box 32923, Dubai, UAE, 4k sq. ft., with lease payments of $9870/month renewable annually on February 24 of each year and a virtual office at 26 Broadway, Suite 934, New York NY10004, USA.  The cost per month is $99.00 and is renewed every 3 months.

 

Georgia Fire & Rescue Supply has a lease of $6,375 per month renewable on April 10, 2024. The property is 9,250 sq. ft., and used as a warehouse, offices and a section to service and repair tools used in the fire and rescue range of products. The property is located at 107 P Rickman Industrial Drive, Canton, Georgia, 30115, USA.

 

Quality industrial Corp. has a virtual office at 315 Montgomery Street, 94104 San Francisco, CA, USA. The cost per month is $109 and is renewed annually.

 

Quality International Co Ltd FCZ lease facilities on the addresses Hamriyah Free Zone), PO Box: 50622, Sharjah-UAE. set in table below with the square meter sizes and monthly leasing prices as indicated per facility.  In total Quality International Co Ltd FCZ lease property exceeding 220,000 square meters.

 

Plot No   Area
SqM		   Annual Rent in USD (3,67 AED)
  22C/1       10.090     $ 285.204  
  22C/2       10.844          
  6C-01B       6.989     $ 47.609  
  6C-02       81.791     $ 557.159  
  6C-03       46.179     $ 314.571  
  6C-04       16.000     $ 108.992  
  HD-22D       30.843     $ 588.286  
  HD-22E       15.000     $ 286.104  
  HD-22F       4.114     $ 78.469  
  Total       221.850     $ 2.266.393  

 

AL Shola Al Modea Safety and Security LLC

 

The company currently leases and operates facilities from the following two locations:

 

  • Head Office, Hamsah Building - A 112 Zaa'beel St - Al Karama, Dubai, United Arab Emirates - Commercial space of 594 sqm, Price AED 26,112.00, renewed annually on March 1

 

  • 112 Zabeel Road, 1st Floor, Hamsah Building Block A, Dubai, United Arab Emirates - Office space of 113 sqm, Price AED 89,700.00, renewed annually on May 10.

 

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 Petro Line FZ LLC leases and operates facilities from the following two locations which are renewed annually:

 

•Plot PL018, Al Hulaila lndustrial Zone-FZ, Dubai, United Arab Emirates -space of 2525.64 sqm, Price AED 88,397.40.
•Plot PL024, Al Hulaila lndustrial Zone-FZ, Dubai, United Arab Emirates - space of 3205.74 sqm, Price AED 89,700.00.

 

ITEM 3.   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.

 

Ilustrato Pictures International Inc has applied to the District Court, Clark County, Nevada to have 40,000,000 shares with Ambrose & Keith cancelled as they were issued in error in 2018 as the deal never completed. The case has been won on September 15, 2022, in favor of the company and the court order was received on January 23, 2023. The transfer agent cancelled the 40,000,000 shares on February 17, 2023.

 

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. We have potential counterclaims being prepared against the former CEO, arising due to improper action and lack of disclosures. The company has disputed the claim and argue that Larson Elmore has been misleading the company and its shareholders on various matters including but not limited to liabilities, company commitments and due diligence items presented by Larson Elmore during the takeover process. We are in the process of a settlement discussion and have obtained an extension of time to respond while this process occurs.

 

We have been named as a defendant in an action commenced by Steve Nicol, who claims that he loaned $12,000 to a subsidiary of ILUS under a promissory note, but that ILUS agreed to assume the note. He further claims that he elected to convert the note and that ILUS failed to convert the note into shares of ILUS common stock. He has alleged breach of contract, declaratory relief, and specific performance to require the company to issue 75,000,000 shares of common stock in ILUS.

 

We cannot predict whether this action involving our former CEO or Mr. Nicol is likely to result in any material recovery by 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 based upon 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.

 

We may continue to incur legal fees in responding to this and other lawsuits. The expense of defending such litigation may be significant and any sizeable verdict may adversely affect the company. The amount of time to resolve this and any additional lawsuits is unpredictable, and these actions may divert management’s attention from the day-to-day operations of our business, all of which could adversely affect our business, results of operations and cash flows.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

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PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

Market Information.

 

Our common stock is qualified for quotation on the OTC Markets- OTC Pink under the symbol “ILUS” and has been quoted on the OTC Pink since 2013.

 

Holders

 

As of December 31, 2022, we had 33 shareholders of record of common stock per transfer agent’s shareholder list with others in street name.

 

Dividends

 

The Company has not paid any cash dividends to date and does not anticipate or contemplate paying any dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the growth of the Registrant’s business.

 

The Company has not declared any cash dividends since inception and does not anticipate paying any cash dividends in the foreseeable future. The payment of cash dividends is within the discretion of the Board of Directors and will depend on the Company’s earnings, capital requirements, financial condition, and other relevant factors. There are no restrictions that currently limit the Company’s ability to pay cash, or other, dividends on its Common Stock other than those generally imposed by applicable state law.

 

Equity Compensation Plan Information

 

The Company does not currently have an equity compensation plan in place other than equity compensation described in the individual employee contracts.

 

Common and Preferred Stock

 

Our authorized capital stock consists of 2,000,000,000 shares of common stock and 235,741,000 shares of preferred stock, par value $0.001 per share. As of March 31, 2023, there were 1,379,080,699 shares of our common stock issued and outstanding and 77,313,175 shares of our preferred stock issued and outstanding.

 

Options and Warrants

 

On February 4, 2022, a Common Share Purchase Warrant was issued to Discover Growth Fund, LLC, of the $2,000,000.00 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 $1,200,000.00 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.

 

On January 26, 2023, we issued a common stock purchase warrant to Jefferson Street Capital for the $100,000.00 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.

 

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Debt Securities 

  

On January 28, 2022, the company entered into a convertible note with RB Capital Partners Inc. – Brett Rosen for the amount of $500,000. The note is convertible at a fixed price $0.20 and bears 5% interest per annum. The note matures on January 27, 2024.

 

On February 04, 2022, the company entered into a convertible note with Discover Growth Fund LLC – John Burke for the amount of $2,000,000. The note is convertible at a 35% below the lowest past 15-day share price and bears 12% interest per annum. The note matures on February 4, 2023.

 

On April 26, 2022, the company entered into a convertible note with RB Capital Partners Inc., for the amount of $500,000. The note is convertible into common stock at the rate of $0.20 and bears 5% interest per annum. The note matures on April 25, 2024.

 

On May 20, 2022, the company entered into a convertible note with RB Capital Partners Inc., for the amount of $500,000. The note is convertible into common stock at the rate of $0.50 and bears 5% interest per annum. The note matures on May 19, 2024.

 

On May 27, 2022, the company entered into a convertible note with RB Capital Partners Inc., for the amount of $500,000. The note is convertible into common stock at the rate of $0.50 and bears 5% interest per annum. The note matures on May 26, 2024.

 

On June 01, 2022, the company entered into a convertible note with RB Capital Partners Inc., for the amount of $1,000,000. The note is convertible into common stock at the rate of $0.50 and bears 5% interest per annum. The note matures on May 31, 2024.

 

On July 12, 2022, the company entered into a convertible note with RB Capital Partners Inc., for the amount of $500,000. The note is convertible into common stock at the rate of $0.50 and bears 5% interest per annum. The note matures on July 11, 2024.

 

On August 10, 2022, the company entered into a convertible note with RB Capital Partners Inc., for the amount of $500,000. The note is convertible into common stock at the rate of $0.50 and bears 5% interest per annum. The note matures on August 09, 2024.

 

On August 25, 2022, the company entered into a convertible note with RB Capital Partners Inc., for the amount of $200,000. The note is convertible into common stock at the rate of $0.50 and bears 5% interest per annum. The note matures on August 24, 2024.

 

On September 22, 2022, the company entered into a convertible note with RB Capital Partners Inc., for the amount of $650,000. The note is convertible into common stock at the rate of $0.50 and bears 5% interest per annum. The note matures on September 20, 2024.

 

On November 14, 2022, the company entered into a convertible note with RB Capital Partners Inc., for the amount of $400,000. The note is convertible into common stock at the rate of $0.50 and bears 5% interest per annum. The note matures on November 13, 2024.

 

On December 2, 2022, the company entered into a convertible note with AJB Capital Investment LLC for the amount of $1,200,000. The note is convertible into common stock upon an event of default at the rate equal to volume weighted average trading price of the specified period and bears 12% interest. The note matures on June 01, 2023.

 

On January 26, 2023, the company entered into a convertible note with Jefferson Street Capital for the amount of $100,000. The note is convertible into common stock upon an event of default at the rate equal to volume weighted average trading price of the specified period and bears 12% interest. The note matures on July 26, 2023.

 

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Transfer Agent 

 

The Company’s transfer agent is Pacific Stock Transfer, Inc. located at 6725 Via Austi Pkwy, Suite 300 Las Vegas, NV 89119 with a phone number at (800) 785-7782. Our previous transfer agent was Securities Transfer Corporation located at 2901 N. Dallas Parkway suite 280, Plano TX 75093 with a phone number at 469-633-0101

The change in transfer agent had an effective date of March 10, 2023.

  

Equity Compensation Plans

 

We have no equity compensation plans other than equity compensation described in the individual employee contracts.

 

Recent Sales of Unregistered Securities  

 

The following information represents securities sold by the Company since the December 31, 2019, which were not registered under the Securities Act. Included are sales of reacquired securities, as well as new issues, securities issued in exchange for property, services, or other securities, and new securities resulting from the modification of outstanding securities.

 

On March 19, 2020, we issued 60,741,000 shares of Preferred Class D stock as compensation to Larson Elmore for the acquisition of Ilustrato Pictures International Inc. pursuant to Agreement with Larson Elmore for an aggregate price of $60,741.00.

 

On June 4, 2020, we issued 672,175 shares of Preferred Class E stock as compensation to BrohF Holdings Ltd, Hamza Nasko for conversion of debt into preferred shares for an aggregate price of $672.175.  

 

On June 4, 2020, we issued 2,500,000 shares of Preferred Class E stock as compensation to Artem Belov for conversion of debt with FB Fire Technologies Ltd for an aggregate price of $2,500.00.

 

On January 27, 2021, we issued 76,000,000 shares of Common stock to GPL Ventures LLC for settlement of a convertible note for an aggregate price of $76,000.00.

 

On February 3, 2021, we issued 84,000,000 shares of Common stock to GPL Ventures LLC for settlement of a convertible note for an aggregate price of $84,000.00.

 

On February 11, 2021, we issued 84,000,000 shares of Common stock to GPL Ventures LLC for settlement of a convertible note for an aggregate price of $84,000.00.

 

On February 19, 2021, we issued 20,000,000 shares of Common stock to GPL Ventures LLC for settlement of a convertible note for an aggregate offering price of $20,000.00.

 

On March 17, 2021, we issued 20,000,000 shares of Common stock to GPL Ventures LLC for settlement of a convertible note for an aggregate offering price of $20,000.00.

 

On March 26, 2021, we issued 50,000,000 shares of Common stock to GPL Ventures LLC for settlement of a convertible note for an aggregate price of $50,000.00.

 

On March 29, 2021, we issued 20,000,000 shares of Common stock to GPL Ventures LLC for settlement of a convertible note for an aggregate price of $20,000.00.

 

On April 20, 2021, we issued 10,000,000 shares of Common stock to GPL Ventures LLC for settlement of a convertible note for an aggregate price of $10,000.00.

 

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On April 28, 2021, we issued 10,000,000 shares of Common stock to GPL Ventures LLC for settlement of a convertible note for an aggregate price of $10,000.00.

 

On May 14, 2021, we issued 46,000,000 shares of Common stock to GPL Ventures LLC for settlement of a convertible note for an aggregate price of $46,000.00.

 

On May 14, 2021, we issued 34,000,000 shares of Common stock to GPL Ventures LLC for settlement of a convertible note for an aggregate price of $34,000.00.

 

On July 9, 2021, we issued 80,000,000 shares of Common stock to GPL Ventures LLC for settlement of a convertible note for an aggregate price of $80,000.00.

 

On September 10, 2021, we converted 185,000,000 of common stock held by FB Technologies Global Inc into 1,850,000 Preferred Class B Shares in agreement with FB Technologies Global Inc.

 

On September 14, 2021, we issued 5,000,000 shares of Common stock to Mohamed Suhail Abdool Hamid for an agreement to purchase shares for an aggregate price of $5,000.00.

 

On September 14, 2021, we issued 6,000,000 shares of Common stock to Riefqah Abrahams for an agreement to purchase shares for an aggregate price of $6,000.00.

 

On September 14, 2021, we issued 5,000,000 shares of Common stock to Zander Boshoff for an agreement to purchase shares for an aggregate price of $5,000.00.

 

On September 14, 2021, we issued 6,000,000 shares of Common stock to Albertus Willem Burger for an agreement to purchase shares for an aggregate price of $6,000.00.

 

On September 14, 2021, we issued 2,500,000 shares of Common stock to Nicolas Bernd Jonischkeit for an agreement to purchase shares for an aggregate price of $2,500.00.

 

On September 14, 2021, we issued 5,000,000 Shares of Common stock to Kyle Kotz for an agreement to purchase shares for an aggregate price of $5,000.00.

 

On September 14, 2021, we issued 5,000,000 shares of Common stock to Chantelle l’Anson-Sparks for an agreement to purchase shares for an aggregate offering price of $5,000.00.

 

On September 14, 2021, we issued 2,500,000 shares of Common stock as compensation to Jason Brown for services supplied to the company for an aggregate price of $2,500.00.

 

On September 14, 2021, we issued 10,000,000 shares of Common stock to Louise Bennett for staff compensation for an aggregate price of $10,000.00.

 

On September 14, 2021, we issued 5,000,000 shares of Common stock to Trygve Slette for an agreement to purchase shares for an aggregate price of $5,000.00.

 

On September 14, 2021, we issued 500,000 shares of Common stock as compensation to Cameron Cox for services supplied to the company for an aggregate price of $500.00.

 

On September 14, 2021, we issued 1,500,000 shares of preferred class F to Louise Bennett as staff compensation for an aggregate price of $150,000.00.

 

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On September 14, 2021, we issued 2,500,000 shares of preferred class F as compensation to James Gibbons for an agreement to purchase shares for an aggregate price of $250,000.00.

 

On September 14, 2021, we issued 1,050,000 shares of preferred class F to John-Paul Backwell as staff compensation for an aggregate price of $105,000.00.

 

On September 20, 2021, we issued 1,000,000 shares of preferred class F as compensation to Cicero Transact Group Inc Michael Woloshin pursuant to a pre-existing warrant with the company which was proven to be valid and hereby honored for an aggregate price of $100,000.00.

 

On September 20, 2021, we issued 3,333,333 shares of Common stock to Lawrence Gillet for an agreement to purchase shares for an aggregate price of $3,333.33.

 

On September 21, 2021, we issued 700,000 shares of Common stock to Eli Safdieh, AES Capital Management LLC for an agreement to purchase shares for an aggregate price of $700.00.

 

On September 21, 2021, we issued 700,000 shares of Common stock to Arin LLC Adam Ringer for an agreement to purchase shares for an aggregate price of $700.00.

 

On September 23, 2021, we issued 2,500,000 shares of Common stock to Benjamin Scott Richards for an agreement to purchase share for an aggregate price of $2,500.00.

 

On September 23, 2021, we issued 2,500,000 shares of Common stock to Fernando Parker for an agreement to purchase shares for an aggregate price of $2,500.00.

 

On September 30, 2021, we converted 35,000,000 of common stock to 350,000 Preferred Class B Shares for FB Technologies Global Inc.

 

On October 4, 2021, we converted 250,000 Preferred Class F shares to 25,000,000 shares of Common stock for Cicero Transact Group Inc.

 

On December 16, 2021, we issued 75,000,000 shares of Common stock as compensation to GPL Ventures LLC for settlement of a convertible note for an aggregate price of $75,000.00.

 

On February 7, 2022, we issued 20,000,000 shares of Common stock as compensation to Discover Growth Fund, John Burke as commitment shares for an aggregate price of $4,000,000.00.

 

On February 16, 2022, we issued 50,000,000 shares of Common stock as compensation to Luki Ventures Inc. Alex Blondel for acquiring a GPL note and converting to shares for an aggregate price of $7,000,000.00.

 

On April 13, 2022, we issued 6,500 shares of preferred class F stock as compensation to George Joe Chudina for the purchase of Bull Head Products Inc for an aggregate price of $85,150.00.

 

On April 13, 2022, we issued 250 shares of preferred class F stock as compensation to Sheila A. Hansen for services in the purchase of Bull Head Products Inc for an aggregate price of $3.275.

 

On April 28, 2022, we converted 250,000 Preferred Class F shares to 25,000,000 shares of common stock for Cicero Transact Group Inc.

 

On May 4, 2022, we issued 53,000,000 shares of common stock as compensation to RB Capital Partners Inc. for conversion of a convertible note for an aggregate price of $530,000,00.

 

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On May 17, 2022, we converted 120,000,000 of common stock to 1,200,000 shares of preferred class B stock for FB Technologies Global Inc.

 

On July 26, 2022, we issued 53,700,000 shares of common stock as compensation to RB Capital Partners Inc. for conversion of a convertible note for an aggregate price of $537,000.00.

 

On September 28, 2022, we issued 1,500 shares of preferred class F stock as compensation to Barbara J Whidby for the purchase of Georgia Fire Rescue Supply LLC for an aggregate price of $13,800.00.

 

On November 8, 2022, we issued 10,000,000 shares of common stock as compensation to AES Capital Management LLC. for conversion of a convertible note for an aggregate price of $390,000.00.

 

On December 5, 2022, we issued 35,000 preferred Class F shares to Krishnan Krishnamoorthy as staff compensation for an aggregate price of $273,700.00.

 

On December 5, 2022, we issued 25,000 preferred Class F shares to Carsten Kjems Falk as staff compensation for an aggregate price of $195,500.00.

 

On December 5, 2022, we issued 10,000 shares of preferred class F to Annemarie Leo-Smith as staff compensation for an aggregate price of $78,200.00.

 

On December 5, 2022, we issued 75,000 shares of preferred class F to Daniel Link as staff compensation for an aggregate price of $586,500.00.

 

On December 5, 2022, we issued 15,000 shares of preferred class F to Irina Shatalova as staff compensation for an aggregate price of $117,300.00.

 

On December 5, 2022, we issued 250,000 shares of preferred class F to Nicolas Link as staff compensation for an aggregate price of $1,955,000.00.

 

On December 5, 2022, we issued 15,000 shares of preferred class F to Abel Tshingambo Kayomb as staff compensation for an offering price of $117,300.00.

  

On December 08, 2022, we cancelled 10,000,000 shares of common stock held by Louise Bennett.

 

On December 08, 2022, we cancelled 1,300,000 shares of preferred class F held by Louise Bennett.

 

On December 08, 2022, we cancelled 800,000 shares of preferred class F held by John-Paul Backwell.

 

On December 08, 2022, we cancelled 2,250,000 shares of preferred class F held by James Gibbons.

 

On December 9, 2022, we issued 12,000,000 shares of common stock as commitment shares to AJB Capital Investment LLC for an aggregate price of $480,000.00. 

 

On December 9, 2022, we issued 18,000,000 shares of common stock as commitment shares to AJB Capital Investment LLC for an aggregate price of $720,000.00. 

 

On March 17, 2023, we issued 10,000,000 shares of common stock as commitment shares to AJB Capital Investment LLC for an aggregate price of $400,000.00.

 

On March 21, 2023, we issued 53,850,000 shares of common stock as compensation to RB Capital Partners Inc. for conversion of a convertible note for an aggregate price of $538,500,00.

 

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The sales and issuances of the securities described below were made pursuant to the exemptions from registration contained in Section 4(a)(2) of the Securities Act and Regulation D under the Securities Act. Each purchaser represented that such purchaser’s intention to acquire the shares for investment only and not with a view toward distribution. We requested our stock transfer agent to affix appropriate legends to the stock certificate issued to each purchaser and the transfer agent affixed the appropriate legends. Each purchaser was given adequate access to sufficient information about us to make an informed investment decision.

 

ITEM 6. SELECTED FINANCIAL DATA

 

We are not required to provide the information required by this item because we are a smaller reporting company.

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Overview

 

ILUS is a Nevada Corporation primarily focused on the public safety, industrial and renewable energy sectors. Through its wholly owned subsidiary, Emergency Response Technologies Inc. (“ERT”), ILUS aims to provide technology that protects communities, front line personnel and assets by acquiring technology and solutions for the emergency response sector. This sector includes Fire and Rescue Services, Law Enforcement, Emergency Medical Services and Emergency Management. The company also has an Industrial and Manufacturing subsidiary, Quality Industrial Corp., which is focused on the acquisition and growth of process manufacturing and industrial companies. Furthermore, the company has a Mining and Renewable Energy subsidiary which is focused on the incorporation, acquisition, and growth of companies in the sustainable mining and renewable energy sectors.

 

ILUS has four distinct divisions which together serve a diverse global customer base. An overview of the current divisions is found below:

 

Emergency Response division:

 

Emergency Response Technologies is a subsidiary of ILUS, whose operating companies design, manufacture and distribute specialty equipment, vehicles and related parts and services. We provide firefighting equipment, firefighting vehicles, firefighting vehicle superstructures, distribution of equipment for emergency services, fire protection equipment sales, installation, and maintenance as well as servicing/maintenance of Firefighting, Rescue and Emergency Medical Services equipment.

 

Industrial & Manufacturing division:

 

This division is specialized in the manufacturing and assembling of process equipment, piping, and modules for the oil, gas, and energy sectors with over two decades of experience and key end-users in the Oil & Gas, Off-shore, Refineries & Petrochemical, Waste-water treatment plants and Chemical, Fertilizer, Metals & Mineral Processing industries. The international end-users include such as, but not limited to Chevron, BP, Shell, Total, Sasol, Gasco. The sub-division has capabilities of undertaking design, detailed engineering, procurement, fabrication, site erection, commissioning, testing & handing over of process equipment. The funding obligations for acquisitions such as Quality International Co Ltd FCZ and Petro Line FZ LLC, by our publicly listed industrial subsidiary, Quality Industrial Corp. (OTC: QIND), are currently funded by QIND itself as are the ongoing obligations for future acquisitions by the subsidiary.

 

Mining & Renewable Energy division:

 

This division is engaged in the Mining & Renewable Energy industry currently through its subsidiary Replay Solutions with recycling and recovery of precious metals from electronic waste. We incorporate a ‘Closed loop’ concept where we use E – Waste and data destruction as a resource not only to extract precious metals but to reuse all materials found in E-Waste such as plastics. We recycle cleanly, safely, and sustainably on items such as, but not limited to Print Circuit Boards (PCB) and precious metals, Cable wire, car radiator shredding and separation. We shred, crush, and grind the board to powder form and then use an airflow and an electrostatic separator to separate the materials into metal and fibers.

 

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Defense Division: 

 

This division is engaged in the Defense industry currently through its subsidiary Hyperion Defence Solutions where it aims to provide customers with the technological capability, solutions and services that will protect their warfighters and provide them with a technological advantage in the following key areas: Joint Close Air Support (JCAS), Counter Improvised Explosive Devices (CIED), Security Risk Management, Simulation Technology and Services.

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 of our products 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.

 

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 improvements initiatives. The benefits of these integration efforts may not positively impact our financial results in the short-term but has 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 and Plan of Operations

 

First Half of 2022

 

In the first half of 2022, ILUS planned to acquire specific manufacturing and distribution capability in the United States as well as additional technological and strategic advancement. ILUS therefore acquired Bull-Head Products, a Tennessee based manufacturer specialist vehicle truck beds and vehicle conversions, Georgia Fire & Rescue, Georgian based distributor of firefighting equipment, and Quality Industrial Corp. a Special Purpose Vehicle listed on the OTCQB intended for the acquisition Quality International Co Ltd FCZ which the company signed a binding letter of intent to acquire on June 30, 2022, and for further strategically aligned acquisitions. In February 2022, ILUS hired a Chief Financial Officer (CFO) for the Company and in June 2022 ILUS hired a Chief Commercial Officer.

 

Second Half of 2022

 

In the second half of 2022, ILUS completed its audit process for 2020 and 2021 therefore it filed this Form 10-12G Registration Statement with the U.S. Securities and Exchange Commission (the "SEC") to become a fully reporting company. In the second half of 2022, the company expected to acquire other companies in the Emergency Response technology and manufacturing sectors. We have 7 acquisitions completed for the financial year of 2022 with AL Shola Al Modea Safety and Security LLC being the last on December 13, 2022. ILUS is in the process of launching an approved investment project in Serbia, whereby it has been approved to obtain subsidies from the Serbian government for the employment of Serbian nationals, for the property and for the required machinery and equipment to manufacture commercial Electric Utility Vehicles currently used for emergency response purposes as sold by our Emergency Response division, as well as for industrial, hospitality and agricultural purposes. The project has been approved by the Republic of Serbia and ILUS will with the investment receive incentive funds from the Republic of Serbia equivalent to 35% of the gross salaries of all hires and 25% of all capital expenditure (CAPEX). The total amount of government subsidies for ILUS EV Technologies is expected to be upwards of $8 million for its first investment project in Serbia and Serbia is planned to be ILUS’ main production hub for vehicles and equipment outside of the United States. ILUS has secured a large site on the outskirts of Cacak and also has the option to secure manufacturing facilities in Rekovac, Kragujevac and Jagodina. The company is engaged with an Investment Bank to complete a planned subsidiary IPO. ILUS plans to appoint Strategic Advisors to strengthen the organization and its corporate governance for its first planned subsidiary up list to a major stock exchange. In our July 13, 2022, press release, we updated our revenue forecast to a run rate revenue of $140 million for 2022 due to current progress and the agreed acquisitions at the time expected to close in the 3rd quarter. The company had run rate revenue of $142.24 million if annualizing the audited revenue for the three months ended December 31, 2022.

 

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First Half of 2023

 

ILUS acquired 52% of Quality International Co Ltd FCZ on January 18, 2023 and 51% of Petro Line FZ LLC on January 27, 2023. Quality International Co Ltd FCZ currently has signed purchase orders of $150M in various stages of the manufacturing process and an additional $220M in expected orders. QIND will, following the acquisitions, disclose any known trends or uncertainties that have had or that the company reasonably expects will have a material impact on net sales or revenues or income from continuing operations. In the first half of 2023, ILUS plans to complete additional Emergency Response Technologies acquisitions, as well as integrate newer acquisitions into the group. We are presently manufacturing in the United States, United Arab Emirates, United Kingdom and Republic of Serbia. The company plans to further expand its manufacturing in the United States and to Spain during the first half of 2023. The company also plans to further expand operations through its newly formed Defense subsidiary. The focus will be on the international expansion of its subsidiaries through strategically aligned acquisitions and the growth of the operating companies. ILUS anticipates hiring additional finance, legal and acquisition personnel to facilitate and manage the growth as well as additional Strategic Advisors, consisting of experienced individuals from the Emergency Response, Industrial, Manufacturing, Mining, and Renewable Energy sectors.

 

Second Half of 2023

 

In the second half of 2023, ILUS plans to continue the international expansion of its subsidiaries by increasing sales and operational efficiencies as well as the completion of additional strategically aligned acquisitions. The company plans to focus on the completion of additional Quality Industrial Corp., Replay Solutions and Defense acquisitions during this period. Additional focus will go towards the ongoing consolidation and integration of acquisitions as well as increased manufacturing of the company’s emergency response products in the United States.

 

Financial Revenue Forecasts

 

For the FY 2023 the company forecasts revenue upwards of $200M for its four divisions. The following revenue per division is forecasted for the FY2023:

 

·Industrial & Manufacturing: $150M
·Emergency & Response: $30M
·Mining & Renewable Energy: $10M
·Defense: $10M

Total forecasted Revenue FY2023: $200M

The company will, disclose any known trends or uncertainties that have had or that the company reasonably expects will have a material impact on net sales or revenues or income from continuing operations in its ongoing filing obligations. The above forecast is based upon historic performance and known purchase orders at the time of filing If any of the risks referenced in Item 1A should occur, as well as other risks not currently known to the company or that we currently consider immaterial, our business, operating results and financial condition could be materially adversely affected.

 

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Results of Operations for the Years Ended December 31, 2022, and 2021

 

Performance in 2022 Compared with 2021

 

    Currency: US Dollars
    Jan - Dec 2022   Jan - Dec 2021   Change $
Net Sales     78,344,131       11,263,875        67,080,256
     Cost of Sales     49,983,258       7,489,784        42,493,474
Gross Profit     28,360,873       3,774,091        24,586,782
Gross Margin     36 %     34 %     2%
General, Selling & Administration Expenses     30,390,586       1,165,229       29,225,357
Operating Income     (2,029,712)       2,608,862        (4,638,574)

  

Net Sales

 

For the year 2021, ILUS acquired three companies, namely Firebug Group (FB Fire Technologies Ltd and Firebug Mechanical Equipment LLC) with both companies engaged in the business of manufacturing firefighting equipment and firefighting vehicles for global customers, and Bright Concept Detection and Protection System LLC (BCD Fire) a company engaged in the business of sales, distribution, installation and maintenance of Fire Protection and Security systems and lastly, The Vehicle Converters LLC, a company engaged in the conversion of specialized vehicles for specialist applications such as mobile clinics, ambulances, defense and oil field transportation.

The revenue earned in the year 2021 corresponds to the above three subsidiaries, in-house operations and the manufacturing of Firefighting Equipment.

Our 2022 revenue increased to $78,344,131 from $11,263,875 in 2021. The increase in revenue is primarily a result of the acquisition of Quality International by our Industrial & Manufacturing subsidiary and the newly acquired companies in our Emergency Response subsidiary. Quality International has been consolidated for the last three quarters of 2022 following the signed binding letter of intent for its acquisition in Q2, 2022. There were no operations in our Industrial & Manufacturing division for the year 2021. Further, 2022 financial results of Emergency & Response Segment are comprised of six subsidiaries versus three subsidiaries in the year 2021.

Figures In USD

 Division Year 2021 Year 2022
Emergency & Response 11,263,875 12,740,458
Industrial & Manufacturing 0 65,603,673
Total Revenue 11,263,875 78,344,131

 

We believe we have made substantial progress in our Industrial & Manufacturing division (QIND) in this fiscal year. The Company will allocate financial, technical and sales resources for our recently acquired subsidiaries with the aim 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 anticipate hiring executives and personnel with specific industry experience and fields of expertise to streamline financial reporting, compliance, Investor Relations and to improve our corporate governance in line with an anticipated uplist to a national exchange.

In our Emergency & Response Technologies subsidiary, our challenge is to bring some operating companies up to the high level of performance of our top performing businesses. We will continue to focus on improving the performance of lagging businesses through actions which include but are not limited to; targeted and more robust sales and marketing efforts, appointment of new distributors and dealers where applicable, enhanced product development, active measures to ensure that payment terms are met by customers, and significant efforts to reduce indirect costs as well as general and administrative costs.

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Geographical presence

Presently our operations are spread across 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 and to Spain during 2023.

Figures in USD

Region Wise Revenue 2021 2022
United States 10,930,000 12,242,551

International Operations

(Rest of the World)

       333,875

66,101,580

 

 

Gross Profit

 

                   Figures in USD   Jan -Dec 2022  Jan- Dec 2021  Change $

Emergency Response Division

Industrial & Manufacturing Division

Gross Profit

6,688,741

21,672,132

28,360,873

3,774,091

0

3,774,091

2,914,650

21,672,132

24,586,782

 

Consolidated gross profit increased by $28.3 million in the fiscal year 2022 primarily due to higher gross profit in the Industrial & Manufacturing division along with increase in gross profit in the Emergency response segment.

The increase in gross profit in the Emergency Response Division is primarily the result of increased efficiencies resulting from operational improvement initiatives and higher volume leverage, favorable price/cost and productivity.

Subsidiary Income Statement

In the year 2021, only one Subsidiary, Emergency & Response Technologies was operational, and it was comprised of 3 operating companies.

 
 
Year 2021 Emergency & Response Division Industrial & Manufacturing Division  
Revenue                                        11,263,875 0  
Cost of Revenue                                          7,489,784 0  
Operating expenses      
Selling,General & Admin Expenses                                          1,165,229 0  
Profit from Operations                                          2,608,862 0  
Non- Operating expenses

463,886 

    
Finance Cost                                             —  0  
Depreciation                                                  —  0  
Other Non- operating Expenses                                                —  0  
Non- Operating Income      
Premium on Investment                                        11,835,500 0  
Net Income                                       13,980,477 0  

 

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In the year 2022, both Emergency & Response Technologies and our Industrial & Manufacturing Subsidiaries were revenue generating. Emergency Response Technologies comprised 6 Subsidiaries whereas the Industrial & Manufacturing Division comprised only one subsidiary in the year 2022.

 

Year 2022 Emergency & Response Division Industrial & Manufacturing Division    
Revenue                                        12,740,458                                    65,603,673    
Cost of Revenue                                          6,051,717                                    43,931.541    
Operating expenses        
Selling,General & Admin Expenses                                          18,919,459                                      11,471,127    
Profit from Operations                                           (12,230,717)                                    10,201,005    
Non- Operating expenses        
Finance Cost —   —    
Depreciation                                                242,050 —    
Other Non- operating Expenses                                             (4,147,739)                                         4,147,739    
Non- Operating Income      
Premium on Investment                                          6,111,135                                                     —     
Other Non- operating Income                                                        —                                             720,003    
Net Income                                          (2,213,891)                                      6,773,267    
Net Income of the Group                                                                       —                                            4,559,375    

 

Selling, General and Administrative Expenses/ Operating expenses

 

                   Figures in USD   Jan -Dec 2022  Jan- Dec 2021  Change $

Emergency Response Division

Industrial & Manufacturing

Operating Expenses

18,919,459

11,471,127

30,390,586

1,165,229

0

1,165,229

17,754,230

11,471,127 

29,225,357

 

Selling, general and administrative (“SG&A”) expenses corresponding to the Emergency Response Technologies subsidiary have increased primarily due to the impact from acquisitions, resource investments, product development, marketing, and employee-related costs. Such expenses were higher in 2022, as more companies were acquired under this segment and a larger amount was spent towards the strengthening and growth of our companies in this segment to increase both revenue and profitability in 2023 and 2024 as well as longer term growth.

 

Other Income/ Expense

 

During the year 2021, company earned $11 Million on account of premium received of the investment and non-operating expenses corresponds to Finance Cost.

 

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Net Income 

 

We incurred net income for the group of $4,559,375 for the year ended December 31, 2022, compared to a net income of $13,980,477 for the same period ended December 31, 2021. The main driver for the decrease in net income for the year ended December 31, 2022, was an increase in SG&A as referenced above. 

 

Liquidity and Capital Resources

Our primary requirements for liquidity and capital are working capital, expansion of existing manufacturing facilities, product development and certification, new acquisitions and existing acquisition tranche payments, debt service payments and general corporate operational needs. Historically, these cash requirements have been met through cash provided by financing activities.

 

Based on management’s current expectations and available information, the Company believes its increase in operations and cash available from Financing activities will be sufficient to meet its operating cash requirements, planned capital expenditures, interest and principal payments on all borrowings, for the foreseeable future.

 

The Company continues to actively monitor its liquidity position and working capital needs and prioritizes capital expenditure related to capacity and strategic investments. The Company remains in a stable overall position regarding capital resources and liquidity, which the Company believes is adequate to meet its projected needs.

 

Additionally, if aligned businesses are available for acquisition upon acceptable terms, the Company may obtain all or a portion of the financing for these acquisitions through the incurrence of additional borrowings.

 

On December 31, 2022, working capital was $59 million. Furthermore, as of December 31, 2022, the Company’s cash and cash equivalents totaled $2 million, of which $xxx million was held outside of the United States.

 

On December 31, 2022, we had a working capital deficit of $15.85 million compared with a working capital of $3.82 million as of December 31, 2021. The deficit is due a loan payable of $82M for the acquisition of Quality International.

 

Cash Flow Summary

 

The following table shows summary cash flows for fiscal years 2022 and 2021:

 

                   Figures in USD   Jan -Dec 2022  Jan- Dec 2021

Net Cash (used in) provided by Operating Activities

Net Cash (used in) provided by Investing Activities

Net Cash (used in) provided by Financing Activities

Net Increase in Cash & Cash Equivalents

23,758,170

(57,714,835)

35,258,699

1,302,034

(1,504,760)

(1,629,716)

3,309,812

175,336

 

Operating Cash Flows

 

Net cash used in operating activities for the fiscal year 2022 was $33 million, compared to net cash provided by operating activities in the year 2021 which was $13 million. The decrease in positive cash generation from operating activities for the fiscal year 2022 is related to an increase in accounts receivable, an increase in inventories due to supply chain, an increase in accounts payable and higher purchases of inventory, partially offset by an increase in customer advances.

 

Investing Cash Flows

 

Investing activities used cash of $60 million for acquisitions in the fiscal year 2022.The increase in net cash used for investing activities was primarily due to increased investment primarily in acquisitions.

 

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Financing Activities

Balance Sheet
As of December 31,2022
     Currency: US Dollars
    December 31,2022     December 31, 2021 
ASSETS          
    Cash & Cash Equivalents   1,478,702    176,668 
    Other Current Assets   137,712,306    13,769,621 
    Total Current Assets   139,191,009    13,946,289 
    Non-Current Assets   18,368,326    16,187,530 
    Fixed Assets   93,858,128    1,460,640 
    Total Assets   251,417,462    31,594,459 
LIABILITIES AND STOCKHOLDERS’ EQUITY          
LIABILITIES          
    Current liabilities   155,038,043    10,124,692 
     Total Current Liabilities   155,038,043    10,124,692 
    Long term Liabilities                     40,262,287    3,398,838 
    Total Long-term liabilities   40,262,287    3,398,838 
EQUITY          
    Stockholders Equity   56,117,132    18,070,929 
    56,117,132    18,070,929 
    Total liabilities and stockholders’ equity   251,417,462    31,594,459 

 

 

Statement of Profit & Loss
       Currency: US Dollars  
       Jan -Dec 2022        Jan- Dec 2021  
Net Sales     78,344,131       11,263,875  
     Cost of Sales     49,983,258       7,489,784  
Gross Profit     28,360,873       3,774,091  
General, Selling & Administration Expenses     30,390,586       1,165,229  
Operating Income     (2,029,712 )     2,608,862  
Non-Operating Income     6,831,138       11,835,500  
Non-Operating Expenses     —         463,8856  
Depreciation     242,050          
Net Income attributable to ILUS     4,559,375       13,980,477  

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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 generate increased 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.

 

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

 

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.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are not required to provide the information required by this Item because we are a smaller reporting company.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

The financial statements required by this Item 8 are included in this Annual Report following Item 15 hereof. As a smaller reporting company, we are not required to provide supplementary financial information.

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report, being December 31, 2022. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

Based upon that evaluation, including our Chief Executive Officer and Chief Financial Officer, we have concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this annual report.

 

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Management’s Annual Report on Internal Control over Financing Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of December 31, 2022, our internal control over financial reporting was not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

 

We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending December 31, 2023: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

 

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to an exemption for non-accelerated filers set forth in Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

 

ITEM 9B. OTHER INFORMATION

 

None.

 

ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 

None.

  

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PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

 

The following information sets forth the names, ages, and positions of our current directors and executive officers.

 

Name   Age   Date Appointed and Offices Held
Nicolas Link     42    

Appointed on January 14, 2021

 

Chief Executive Officer (Principal Executive Officer & Chairman of the Board of Directors) and member of the Board of Directors

             
John-Paul Backwell     42    

 Appointed on July 1, 2021

 

Managing Director

           

 

 

Louise Bennett     52    

Appointed on February 1, 2021

 

Chief Operational Officer

             
Krishnan Krishnamoorthy     56    

Appointed on February 2, 2022

 

Chief Financial Officer (principal financial/accounting officer)

             

 

 

Carsten Kjems Falk

    

 

 

48

    

 Appointed on June 1, 2022

 

Chief Commercial Officer

 

 

Set forth below is a brief description of the background and business experience of each of our current executive officers and directors.

 

Nicolas Link (Chief Executive Officer, Chairman and Directors)

 

Mr. Link is a serial Entrepreneur. He has started, grown, and exited multiple companies in the UK, Dubai, China, Poland & South Africa.

 

Mr. Link joined the Company on January 14, 2021, as our CEO and Chairman of the Board of Directors. From May 28, 2022, Mr. Mr. Link holds the position as Chairman of the Board of Directors at Quality Industrial Corp. “QIND” a Subsidiary of the Company. From April 8, 2022, Mr. Link holds the position as Chairman of the Board of Directors at Dear Cashmere Holding Co. (Swifty Global) “DRCR”. From November 1, 2014, Mr. Link holds the position as CEO and Chairman of the Board of Directors at Firebug Group, an operating company. On December 7, 2022, Mr. Link was appointed as CEO and Chairman of the Board of Directors for CGrowth Capital, Inc (CGRA).

 

Aside from that provided above, Mr. Link does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.

 

We believe that Mr. Link is qualified to serve on our Board of Directors because of, but not limited to, his experience in growing several companies in the public safety industry and his extensive network.

 

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John-Paul Backwell (Managing Director)

 

Mr. Backwell joined the Company on July 1, 2021, as our Managing Director. From May 28, 2022, Mr. Backwell was appointed as Chief Commercial Officer at Quality Industrial Corp. “QIND”, a Subsidiary of the Company. On October 21, 2022, Mr. Backwell resigned as CCO of Quality Industrial Corp. and was appointed as Chief Executive Officer of Quality Industrial Corp. From February 1, 2022, Mr. Backwell also holds the position as Director at Emergency Response Technologies. a Subsidiary of the Company. From November 1, 2014, Mr. Backwell has held the position of Director at FB Fire Technologies, an operating Company.

 

Mr. Backwell has 25 years’ experience in the development and leadership of Global Sales Teams predominantly in the fields of Public Safety and Security with a focus on disruptive technology.

 

Aside from that provided above, Mr. Backwell does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.

 

We believe that Mr. Backwell is qualified to serve on our Board of Directors because of, but not limited to, his extensive experience in the public safety industry, his business management, and global sales experience.

 

Louise Bennett (Chief Operations Officer)

 

Mrs. Bennett joined the Company on February 1, 2021, as our Chief Operations Officer. From May 28, 2022, Mrs. Bennett also holds the position of Chief Operations Officer at Quality Industrial Corp. “QIND” a Subsidiary of the Company. From March 1, 2014, Mrs. Bennett holds the position of General Manager at FB Fire Technologies, an operating company. 

Mrs. Bennett possesses more than 25 years' experience in senior operational management of global engineering, manufacturing, and distribution businesses.

 

Aside from that provided above, Mrs. Bennett does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.

 

Krishna Krishnamoorthy (Chief Financial Officer)

 

Mr. Moorthy joined the Company on February 2, 2022, as our Chief Financial Officer. From May 28, 2022, Mr. Moorthy holds the position as Chief Financial Officer at Quality Industrial Corp. “QIND” a Subsidiary of the Company. From August 2020 Jan 2022. Mr. Moorthy worked as Group CFO with Bahrain Ship Repair Engineering Company. From December 2019 to August 2020 Mr. Moorthy worked as CFO for Firebug, an operating company. From 2018 to 2019 Mr. Moorthy worked as Group CFO at HO Holdings.

 

Mr. Moorthy possesses 35 years’ senior Financial Management experience of Public and Private companies in London, Dubai, Singapore & India. Mr. Moorthy holds a Ph. D LLB and MBA.

 

Aside from that provided above, Mr. Krishnamoorthy does not hold and has not held over the past five years other directorships in any company with a class of securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.

 

Carsten Kjems Falk (Chief Commercial Officer)

 

Mr. Falk joined the Company on June 1, 2022, as our Chief Commercial Officer. From June 1st, 2020, Mr. Falk held the position as Wikisoft Corp.’s “WSFT” (now Quality Industrial Corp. “QIND”) a Subsidiary of the Company and signed a new contract as Chief Executive Officer on September 1, 2020. On October 21, 2022, Mr. Falk resigned as CEO of Quality Industrial Corp. and was appointed as Chief Commercial Officer of Quality Industrial Corp. From 2013 to 2019, Mr. Falk was Chief Executive Officer at Domino’s Pizza DK. Mr. Falk holds a master’s degree in mathematics. 

 

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Mr. Falk has a proven track record, including successfully winning two Gazelle Prizes in 2017 and 2018 respectively from the leading financial newspaper in Denmark, and has been awarded twice for best in global online sales by Domino’s International in 2016 and 2018 respectively. Mr. Falk’s resume also includes business acceleration and driving profitable growth for B2B and B2C Venture capital owned companies in Europe.

 

Aside from that provided above, Mr. Falk does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.

 

Term of Office

 

Our directors are appointed to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board, subject to their respective employment agreements.

 

Family Relationships

 

There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.

 

Involvement in Certain Legal Proceedings

 

During the past 10 years, none of our current directors, nominees for directors or current executive officers has been involved in any legal proceeding identified in Item 401(f) of Regulation S-K.

  

Committees

 

We do not have a separately designated standing audit committee. The entire board of directors performs the functions of an audit committee, but no written charter governs the actions of the board of directors when performing the functions of that would generally be performed by an audit committee. The board of directors approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the board of directors reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor.

 

For the fiscal year ending December 31, 2022, and 2021, the board of directors:

 

Reviewed and discussed the audited financial statements with management and reviewed and discussed the written disclosures and the letter from our independent auditors on the matters relating to the auditor's independence.

 

Based upon the board of directors’ review and discussion of the matters above, the board of directors authorized inclusion of the audited financial statements for the year ended December 31, 2022, and 2021, to be included in this Registration Statement on Form 10-K filed with the Securities and Exchange Commission.

 

Code of Ethics & Insider Trading Policy

 

We have adopted a Code of Ethics & Insider Trading Policy which applies to our executive officers, directors and employees, a copy of our code of ethics is filed as Exhibit 14.1 and 14.2 to our Annual Report on Form 10-K for the year ended December 31, 2022..

 

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ITEM 11. EXECUTIVE COMPENSATION.

  

The following summary compensation table sets forth all compensation awarded to, earned by, or paid to our named executive officers paid by us during the years ended December 31, 2022, and 2021.

 

2021 & 2022 Summary Compensation Table

 

  Year   Salary $   Bonus $    Stock Awards $   Option Awards $ Non-Equity Incentive Plan Compensation $   Non-Qualified Deferred Compensation Earnings $   All Other Compensation $ Totals $  
 Nicolas Link   2021   109,000.00   —     —     —     —       —       —     109,000.00
    2022   123,840.00       1,955,000.00                       2,078,840,00
 John-Paul Backwell**   2021   54,518.39   —     25,000.00   —     —       —       —     79,518.39
    2022   133,875.00       —                         133,875.00
 Louise Bennett**   2021   48,840.00   —     20,000.00   —     —       —       —     68,840.00
    2022   79,050.00       —                         79,050.00
Krishna Krishnamoorthy*   2021   —   —     —     —     —       —       —     — 
    2022   117,180.00       273,700.00                       390,880.00
Carsten Falk*   2021   —   —     —     —     —       —       —     — 
    2022   52,500.00       195,500.00                   —     248,000.00
                                                                   

 

*Salary paid to Mr. Moorthy and Mr. Falk has been considered from their date of employment with the company as CFO and CCO respectively.

 

** Stock awards issued to John-Paul Backwell and Louise Bennett in the year 2021 were partially cancelled on December 5, 2022. Stock Awards in 2021, displays the shares held by each officer as of December 31, 2022.

 

Stock-awards to executives are in compliance with ASC 718 and recognized in the consolidated statement of operations based on their fair values at the date of grant. Par value deemed as fair value for 2021 audited financials.

  

Narrative Disclosure to Summary Compensation Table

 

Employment Agreements

 

Officers and Directors of the Company have an employee agreement with the parent Company. The agreements also govern their employment in the majority owned subsidiary Quality Industrial Corp. All salaries are paid by ILUS and stock-based compensation is as a combination from both companies.

 

Nicolas Link (Chief Executive Officer & Chairman)

 

The company entered into an employment agreement with Mr. Link on January 14, 2021, in his capacity as Chief Executive Officer and Chairman. Pursuant to the agreement, the company agreed to pay Mr. Link a salary of $123,840 per annum. For entering the amended employment agreement on June 30, 2022, Mr. Link will be issued 2,750,000 QIND common shares in 2023 and was issued 250,000 shares of Class F Shares convertible into 25,000,000 common shares in Ilustrato Pictures International Inc. on December 5, 2022. Lock-up of the shares will be under rule 144. If Mr. Link should resign, he will be considered a corporate insider according to rule 144 for a full year and can during any given week not sell or transfer more than 2.5% of the average weekly trading volume over the previous 30 days average trading volume. During the following year, Mr. Link can sell 25% of any remain shares per quarter. The company has the right of first refusal to acquire the shares or match any written offer by a third party for the shares.

  

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Mr. Link is eligible for the Company Officer’s Short Term Incentive Program (STIP), a Performance Based Target opportunity. Mr. Links target opportunity equals 5,000,000 common shares in the company and 1,000,000 common shares in the subsidiary Quality Industrial Corp. intended to qualify as performance-based compensation under Internal Revenue Code section 162(m). The STIP can range from 0% to a maximum target based on performance against agreed plan. The Board of Directors reserves the right to amend the Bonus Structure based on market conditions and overall performance of the Company. The targets will be negotiated with the Board of Directors and compensation paid out once a year after the filing of the annual results effective from the month after the filing, for the first time with the 2022 annual results. The board of directors will after the annual result discretionarily decide if the STIP is stock-based equity, cash pay-out or a combination in the company or its subsidiaries. The targets for the Officer for each term are as per the Officer’s Key Performance Indices (KPI) Agreement.

 

If the company or any of its subsidiaries should up list to a National Exchange through an initial public offering (IPO) the Chief Executive Officer is entitled to an appropriate market based salary in accordance with the size and performance of the business, payable in 12 equal monthly payments, on the last day of every month, plus annual bonus in line with a revised appropriate Short Term Incentive Program (STIP), shares in an up list or IPO of the company or its subsidiaries, all subject to approval by the Board of Directors.

 

The Chief Executive Officer is also eligible of up to 30 days per year excluding public holidays and may not carry over any unused vacation from prior years and is eligible to participate in all health and welfare benefits provided to other employees of the Company (other than any severance plans) or similar own insurance paid by the company.

 

The Chief Executive Officer is also eligible for vacation, paid sick days, mobile and internet and expenses incurred for travel, nights away from home, dining, entertainment etc.

 

If the Chief Executive Officer’s employment is terminated by the Company for Cause, or if his employment with the Company ends due to death, "permanent and total disability", or due to a voluntary termination of employment by The Chief Executive Officer without Good Reason, then The Chief Executive Officer shall only be entitled to any earned but unpaid compensation as well as any other amounts or benefits owing to The Chief Executive Officer under the terms of any employee benefit plan of the Company.

 

If the Chief Executive Officer’s employment with the Company is terminated by the Company in connection with a non-renewal of the Agreement without Cause or for reasons other than Cause, death, "permanent and total disability” or is voluntarily terminated by The Officer for Good Reason, then The Officer shall be entitled to the Severance Benefits as well as his Accrued Benefits. In the event the Director becomes entitled to receive severance benefits the Company shall pay and provide for a period of 6 months after the Date of Termination, the Director’s then current base salary per month, a pro rata portion of any annual bonus that the Director would have been entitled to receive. 

 

The foregoing description of the employment agreement does not purport to be complete and is qualified in its entirety by the full text of the employment contract in exhibit 10.1.

 

John-Paul Backwell (Managing Director)

 

The company entered into an employment agreement with Mr. Backwell on July 1, 2021, in his capacity as Managing Director. Pursuant to the agreement, the company agreed to pay Mr. Backwell a salary of $133,875 per annum. Mr. Backwell was issued 1,050,000 Preferred F Shares on September 14, 2021. In accordance with his amended employee agreement signed on June 30, 2022, Mr. Backwell had 800,000 preferred F Shares cancelled on December 8, 2022, and currently holds 250,000 shares of Class F Shares convertible into 25,000,000 common shares in Ilustrato Pictures International Inc. In accordance with his amended employee agreement, Mr. Backwell will be issued 2,250,000 QIND common shares in 2023. Lock-up of the shares will be under rule 144. If Mr. Backwell should resign, he will be considered a corporate insider according to rule 144 for a full year and can during any given week not sell or transfer more than 2.5% of the average weekly trading volume over the previous 30 days average trading volume. During the following year, Mr. Backwell can sell 25% of any remain shares per quarter. The company has the right of first refusal to acquire the shares or match any written offer by a third party for the shares.

 

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Mr. Backwell is eligible for the Company Officer’s Short Term Incentive Program (STIP), a Performance Based Target opportunity. Mr. Backwell’s target opportunity equals 5,000,000 common shares in the company and 1,000,000 common shares in the subsidiary Quality Industrial Corp. intended to qualify as performance-based compensation under Internal Revenue Code section 162(m). The STIP can range from 0% to a maximum target based on performance against agreed plan. The Board of Directors reserves the right to amend the Bonus Structure based on market conditions and overall performance of the Company. The targets will be negotiated with the Board of Directors and compensation paid out once a year after the filing of the annual results effective from the month after the filing, for the first time with the 2022 annual results. The board of directors will after the annual result discretionarily decide if the STIP is stock-based equity, cash pay-out or a combination in the company or its subsidiaries. The targets for the Officer for each term are as per the Officer’s Key Performance Indices (KPI) Agreement.

 

If the company or any of its subsidiaries should up list to a National Exchange through an initial public offering (IPO) the Managing Director is entitled to an appropriate market based salary in accordance with the size and performance of the business, payable in 12 equal monthly payments, on the last day of every month, plus annual bonus in line with a revised appropriate Short Term Incentive Program (STIP), shares in an up list or IPO of the company or its subsidiaries, all subject to approval by the Board of Directors.

 

The Managing Director is also eligible of up to 30 days per year excluding public holidays and may not carry over any unused vacation from prior years and is eligible to participate in all health and welfare benefits provided to other employees of the Company (other than any severance plans) or similar own insurance paid by the company.

 

The Managing Director is also eligible for vacation, paid sick days, mobile and internet and expenses incurred for travel, nights away from home, dining, entertainment etc.

 

If the Managing Director’s employment is terminated by the Company for Cause, or if his employment with the Company ends due to death, “permanent and total disability”, or due to a voluntary termination of employment by The Managing Director without Good Reason, then The Managing Director shall only be entitled to any earned but unpaid compensation as well as any other amounts or benefits owing to The Managing Director under the terms of any employee benefit plan of the Company.

 

If the Managing Director’s employment with the Company is terminated by the Company in connection with a non-renewal of the Agreement without Cause or for reasons other than Cause, death, “permanent and total disability” or is voluntarily terminated by The Officer for Good Reason, then The Officer shall be entitled to the Severance Benefits as well as his Accrued Benefits. In the event the Officer becomes entitled to receive severance benefits the Company shall pay and provide for a period of 3 months after the Date of Termination, the Officer’s then current base salary per month, a pro rata portion of any annual bonus that the Officer would have been entitled to receive. 

 

The foregoing description of the employment agreement does not purport to be complete and is qualified in its entirety by the full text of the employment contract in exhibit 10.2.

 

Louise Bennett (Chief Operations Officer)

 

The company entered into an employment agreement with Mrs. Bennett on February 1, 2021, in her capacity as Chief Operations Officer. Pursuant to the agreement, the company agreed to pay Mrs. Bennett a salary of $53,280 per annum. Mrs. Bennett was issued 1,500,000 Pref F Shares and 10,000,000 common shares of ILUS on September 14, 2021. On 30th June 2022 an amended contract was entered into with a salary of $81,000 per annum. In accordance with her amended employee agreement signed on June 30, 2022, Mrs. Bennett had 850,000 Preferred F Shares and 10,000,000 common shares cancelled on December 8, 2022, and currently hold 200,000 shares of Class F Shares convertible into 20,000,000 common shares in Ilustrato Pictures International Inc. In accordance with her amended employee agreement, Mrs. Bennett will also be issued 500,000 QIND common shares in 2023. Lock-up of the shares will be under rule 144. If Mrs. Bennett should resign, she will be considered a corporate insider according to rule 144 for a full year and can during any given week not sell or transfer more than 2.5% of the average weekly trading volume over the previous 30 days average trading volume. During the following year, Mrs. Bennett can sell 25% of any remain shares per quarter. The company has the right of first refusal to acquire the shares or match any written offer by a third party for the shares.

 

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Mrs. Bennett is eligible for the Company Officer’s Short Term Incentive Program (STIP), a Performance Based Target opportunity. Mrs. Bennett’s target opportunity equals 2,500,000 common shares in the company and 250,000 common shares in the subsidiary Quality Industrial Corp. intended to qualify as performance-based compensation under Internal Revenue Code section 162(m). The STIP can range from 0% to a maximum target based on performance against agreed plan. The Board of Directors reserves the right to amend the Bonus Structure based on market conditions and overall performance of the Company. The targets will be negotiated with the Board of Directors and compensation paid out once a year after the filing of the annual results effective from the month after the filing, for the first time with the 2022 annual results. The board of directors will after the annual result discretionarily decide if the STIP is stock-based equity, cash pay-out or a combination in the company or its subsidiaries. The targets for the Officer for each term are as per the Officer’s Key Performance Indices (KPI) Agreement.

 

If the company or any of its subsidiaries should up list to a National Exchange through an initial public offering (IPO) the Chief Operations Officer is entitled to an appropriate market based salary in accordance with the size and performance of the business, payable in 12 equal monthly payments, on the last day of every month, plus annual bonus in line with a revised appropriate Short Term Incentive Program(STIP), shares in an up list or IPO of the company or its subsidiaries, all subject to approval by the Board of Directors.

 

The Chief Operations Officer is also eligible of up to 30 days per year excluding public holidays and may not carry over any unused vacation from prior years and is eligible to participate in all health and welfare benefits provided to other employees of the Company (other than any severance plans) or similar own insurance paid by the company.

 

The Chief Operations Officer is also eligible for vacation, paid sick days, mobile and internet and expenses incurred for travel, nights away from home, dining, entertainment etc.

 

If the Chief Operations Officer’s employment is terminated by the Company for Cause, or if her employment with the Company ends due to death, “permanent and total disability”, or due to a voluntary termination of employment by The Chief Operations Officer without Good Reason, then The Chief Operations Officer shall only be entitled to any earned but unpaid compensation as well as any other amounts or benefits owing to The Chief Operations Officer under the terms of any employee benefit plan of the Company.

 

If the Chief Operations Officer’s employment with the Company is terminated by the Company in connection with a non-renewal of the Agreement without Cause or for reasons other than Cause, death, “permanent and total disability” or is voluntarily terminated by The Officer for Good Reason, then The Officer shall be entitled to the Severance Benefits as well as her Accrued Benefits. In the event the Officer becomes entitled to receive severance benefits the Company shall pay and provide for a period of 3 months after the Date of Termination, the Officer’s then current base salary per month, a pro rata portion of any annual bonus that the Officer would have been entitled to receive.

 

The foregoing description of the employment agreement does not purport to be complete and is qualified in its entirety by the full text of the employment contract in exhibit 10.3. 

 

Krishnan Krishnamoorthy (Chief Financial Officer)

 

The company entered into an employment agreement with Mr. Krishnamoorthy on February 2, 2022, in his capacity as Chief Financial Officer. Pursuant to the agreement, the company agreed to pay Mr. Moorthy a salary of $130,000 per annum. In accordance with his amended employee agreement signed on June 30, 2022, Mr. Krishnamoorthy was issued 35,000 shares of Class F Shares in Ilustrato Pictures International Inc. on December 5, 2022, convertible into 3,500,000 common shares in Ilustrato Pictures International Inc. In accordance with his amended employee agreement, Mr. Krishnamoorthy will also be issued 2,250,000 QIND common shares in 2023. Lock-up of the shares will be under rule 144. If Mr. Krishnamoorthy should resign, he will be considered a corporate insider according to rule 144 for a full year and can during any given week not sell or transfer more than 2.5% of the average weekly trading volume over the previous 30 days average trading volume. During the following year, Mr. Krishnamoorthy can sell 25% of any remain shares per quarter. The company has the right of first refusal to acquire the shares or match any written offer by a third party for the shares.

 

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Mr. Krishnamoorthy is eligible for the Company Officer’s Short Term Incentive Program (STIP), a Performance Based Target opportunity. Mr. Krishnamoorthy ’s target opportunity equals 2,500,000 common shares in the company and 250,000 common shares in the subsidiary Quality Industrial Corp. intended to qualify as performance-based compensation under Internal Revenue Code section 162(m). The STIP can range from 0% to a maximum target based on performance against agreed plan. The Board of Directors reserves the right to amend the Bonus Structure based on market conditions and overall performance of the Company. The targets will be negotiated with the Board of Directors and compensation paid out once a year after the filing of the annual results effective from the month after the filing, for the first time with the 2022 annual results. The board of directors will after the annual result discretionarily decide if the STIP is stock-based equity, cash pay-out or a combination in the company or its subsidiaries. The targets for the Officer for each term are as per the Officer’s Key Performance Indices (KPI) Agreement.

 

If the company or any of its subsidiaries should up list to a National Exchange through an initial public offering (IPO), the Chief Financial Officer is entitled to an appropriate market-based salary in accordance with the size and performance of the business, payable in 12 equal monthly payments, on the last day of every month, plus annual bonus in line with a revised appropriate Short Term Incentive Program (STIP), all subject to approval by the Board of Directors.

 

The Chief Financial Officer is also eligible of up to 30 days per year excluding public holidays and may not carry over any unused vacation from prior years and is eligible to participate in all health and welfare benefits provided to other employees of the Company (other than any severance plans) or similar own insurance paid by the company.

 

The Chief Financial Officer is also eligible for vacation, paid sick days, mobile and internet and expenses incurred for travel, nights away from home, dining, entertainment etc.

 

If the Chief Financial Officer’s employment is terminated by the Company for Cause, or if his employment with the Company ends due to death, “permanent and total disability”, or due to a voluntary termination of employment by The Chief Financial Officer without Good Reason, then The Chief Financial Officer shall only be entitled to any earned but unpaid compensation as well as any other amounts or benefits owing to The Chief Financial Officer under the terms of any employee benefit plan of the Company.

 

If the Chief Financial Officer’s employment with the Company is terminated by the Company in connection with a non-renewal of the Agreement without Cause or for reasons other than Cause, death, “permanent and total disability” or is voluntarily terminated by The Officer for Good Reason, then The Officer shall be entitled to the Severance Benefits as well as his Accrued Benefits. In the event the Officer becomes entitled to receive severance benefits the Company shall pay and provide for a period of 3 months after the Date of Termination, the Officer’s then current base salary per month, a pro rata portion of any annual bonus that the Officer would have been entitled to receive.

 

The foregoing description of the employment agreement does not purport to be complete and is qualified in its entirety by the full text of the employment contract in exhibit 10.4.

 

Carsten Kjems Falk (Chief Commercial Officer)

 

The company entered into an employment agreement with Mr. Falk on June 1, 2022, in his capacity as Chief Commercial Officer. Pursuant to the agreement, the company agreed to pay Mr. Falk a salary of $90,000 per annum starting June 2022. Mr. Falk was issued 25,000 Pref F Shares in ILUS on December 5, 2022, convertible into 2,500,000 common shares in Ilustrato Pictures International Inc. Mr. Falk will also be issued 2,250,000 common shares in QIND in 2023, for entering the employment agreement on June 1, 2022, and waiving all liabilities as CEO in the subsidiary Quality Industrial Corp. Lock-up of the shares will be under rule 144. If Mr. Falk should resign, he will be considered a corporate insider according to rule 144 for a full year and can during any given week not sell or transfer more than 2.5% of the average weekly trading volume over the previous 30 days average trading volume. During the following year, Mr. Falk can sell 25% of any remain shares per quarter.

 

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Mr. Falk is eligible for the Company Officer’s Short Term Incentive Program (STIP), a Performance Based Target opportunity. Mr. Falk’s target opportunity equals 3,500,000 common shares in the company and 250,000 common shares in the subsidiary Quality Industrial Corp. intended to qualify as performance-based compensation under Internal Revenue Code section 162(m). Any bonus compensation will be pro-rated according to the start date of the Officer. The STIP can range from 0% to a maximum target based on performance against agreed plan. The Board of Directors reserves the right to amend the Bonus Structure based on market conditions and overall performance of the Company. The targets will be negotiated with the Chairman of the board and compensation paid out once a year after the filing of the annual results effective from the month after the filing, for the first time with the 2022 annual results. The board of directors will after the annual result discretionarily decide if the STIP is stock-based equity, cash pay-out or a combination in the company or its subsidiaries. The targets for the Officer for each term are as per the Officer’s Key Performance Indices (KPI) Agreement.

 

If the company or any of its subsidiaries should up list to a National Exchange through an initial public offering (IPO) the Chief Commercial Officer is entitled to an appropriate market-based salary in accordance with the size and performance of the business, payable in 12 equal monthly payments, on the last day of every month, plus annual bonus in line with a revised appropriate Short Term Incentive Program (STIP), all subject to approval by the Board of Directors.

 

The Chief Commercial Officer is also eligible of up to 30 days per year excluding public holidays and may not carry over any unused vacation from prior years and is eligible to participate in all health and welfare benefits provided to other employees of the Company (other than any severance plans) or similar own insurance paid by the company.

 

The Chief Commercial Officer is also eligible for vacation, paid sick days, mobile and internet and expenses incurred for travel, nights away from home, dining, entertainment etc.

 

If the Chief Commercial Officer’s employment is terminated by the Company for Cause, or if his employment with the Company ends due to death, "permanent and total disability", or due to a voluntary non-renewal of this Agreement by the Company or due to a voluntary termination of employment by The Chief Commercial Officer without Good Reason, then The Chief Commercial Officer shall only be entitled to any earned but unpaid compensation as well as any other amounts or benefits owing to The Chief Commercial Officer under the terms of any employee benefit plan of the Company.

 

If the Chief Commercial Officer’s employment with the Company is terminated by the Company in connection with a non-renewal of the Agreement without Cause or for reasons other than Cause, death, "permanent and total disability” or is voluntarily terminated by The Officer for Good Reason, then The Officer shall be entitled to the Severance Benefits as well as his Accrued Benefits. In the event the Officer becomes entitled to receive severance benefits the Company shall pay and provide for a period of 3 months after the Date of Termination, the Officer’s then current base salary per month, a pro rata portion of any annual bonus that the Officer would have been entitled to receive.

 

The foregoing description of the employment agreement does not purport to be complete and is qualified in its entirety by the full text of the employment contract in exhibit 10.5.

 

 

Outstanding Equity Awards at Fiscal Year-End

 

Other than as discussed above, no executive officer received any equity awards, or holds exercisable or un-exercisable options, as of the years ended December 31, 2022, and 2021.

 

Long-Term Incentive Plans

 

There are no arrangements or plans in which the Company would provide pension, retirement or similar benefits for our Director or executive officer other than described in the individual contracts.

 

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Compensation Committee

 

The Company currently does not have a compensation committee of the Board of Directors. The Board of Directors determines executive compensation.

 

Compensation of Directors

 

Directors are permitted to receive fixed fees and other compensation for their services as Directors. The Board of Directors has the authority to fix the compensation of Directors. No amounts have been paid to, or accrued to, Directors in such capacity.

 

Director Independence

 

The Board of Directors is currently composed of one member, which is Nicolas Linkl. Aside from him, no director qualifies as independent in accordance with the published listing requirements of the NASDAQ Global Market. The NASDAQ independence definition includes a series of objective tests, such as that the Director is not, and has not been for at least three years, one of the Company’s employees and that neither the Director, nor any of his family members has engaged in various types of business dealings with us.

 

Security Holders Recommendations to Board of Directors

 

The Company welcomes comments and questions from the shareholders. However, while the Company appreciates all comments from shareholders, it may not be able to individually respond to all communications.

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 

The following table sets forth certain information known to us regarding beneficial ownership of our capital stock as of March 31, 2023, for (i) all executive officers and director as a group and (ii) each person, or group of affiliated persons, known by us to be the beneficial owner of more than five percent (5%) of our capital stock. All addresses are 26 Broadway, Suite 934, New York, NY 10004 unless otherwise indicated.

 

Name & Address of Beneficial Owner Common Stock Class A Preferred Stock Class B Preferred Stock Class D Preferred Stock

Class E Preferred

Stock

Class F Preferred

Stock

  No. of shares Owned Percent of Class No. of shares Owned Percent of Class No. of shares Owned Percent of Class No. of shares Owned Percent of Class No. of shares Owned Percent of Class No. of shares Owned Percent of Class
FB Technologies Global, Inc, - Nicolas Link, Dubai, U.A.E. (2) 20,000,000(3) 2% 10,000,000 100%         3,400,000 100%      60,741,000 100% - - 250,000   15.3%
Krishnan Krishnamoorthy, Dubai, U.A. E. - - - - - - - - - -  35,000 2.1%
Carstem Kjems Falk, Frederiksberg, Denmark - - - - - - - - - -  25,000  1.5%
Louise Bennett, Doncaster,United Kingdom - - - - - - - - - - 200,000 12.2%
John-Paul Backwell, Cheshire,United Kingdom - - - - - - - - - - 250,000 15.3%
All Directors and Executive Officers as a Group (5 persons) and 5% Holders   20,000,000 3%      10,000,000 100%         3,400,000 100%      60,741,000 100% - - 760,000 46.5%

 

  (1) Pursuant to Rules 13d-3 and 13d-5 of the Exchange Act, beneficial ownership includes any shares as to which a shareholder has sole or shared voting power or investment power, and any shares which the shareholder has the right to acquire within 60 days, including upon exercise of common shares purchase options or warrants.
  (2) The percentage is based on 1,379,080,699 shares of common stock outstanding, 10,000,000 shares of Class A Preferred Stock outstanding, 3,400,000 shares of Class B Preferred Stock outstanding, 60,741,000 shares of Class D Preferred Stock outstanding, 3,172,175 shares of Class E Preferred Stock outstanding, and 1,633,250 shares of Class F Preferred stock outstanding, as of April 5, 2023.
  (3) Includes 20,000,000 shares held by FB Technologies Global, Inc. in which Mr. Link has voting and dispositive control, 10,000,000 shares of Class A Preferred Stock held by FB Technologies Global, Inc. in which Mr. Link has voting and dispositive control that converts into 30,000,000 shares of common stock and 60,741,000 shares of Class D Preferred Stock held by FB Technologies Global, Inc. in which Mr. Link has voting and dispositive control that converts into 30,370,500,000 shares of common stock.

 

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

Other than described below or 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 $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any director, executive officer, holder of 5% or more of any class of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest. 

 

The Company issued 75,000 preferred class F shares to Daniel Link as staff compensation for an aggregate price of $586,500 on December 5, 2022.

 

Director Independence

 

The Board of Directors is currently composed of one member. Mr. Nicholas Link does not qualify as independent in accordance with the published listing requirements of the NASDAQ Global Market. The NASDAQ independence definition includes a series of objective tests, such as that the Director is not, and has not been for at least three years, one of the Company’s employees and that neither the Director, nor any of his family members has engaged in various types of business dealings with us.

 

Indemnification

 

Under our bylaws, every person who was or is a party to, or is threatened to be made a party to, or is involved in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that he is or was our director or officer, or is or was serving at our request as a director or officer of another corporation, or as its representative in a partnership, joint venture, trust, or other enterprise, shall be indemnified and held harmless to the fullest extent legally permissible under the laws of the State of Nevada from time to time against all expenses, liability, and loss (including attorneys’ fees judgments, fines, and amounts paid or to be paid in settlement) reasonably incurred or suffered by him or her in connection therewith. Such right of indemnification shall be a contract right, which may be enforced in any manner desired by such person. The expenses of officers and directors incurred in defending a civil or criminal action, suit, or proceeding must be paid by us as they are incurred and in advance of the final disposition of the action, suit, or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by us. Such right of indemnification shall not be exclusive of any other right which such directors, officers, or representatives may have or hereafter acquire, and, without limiting the generality of such statement, they shall be entitled to their respective rights of indemnification under any bylaw, agreement, vote of shareholders, provision of law, or otherwise.

 

 Without limiting the application of the foregoing, our board of directors may adopt bylaws from time to time with respect to indemnification, to provide at all times the fullest indemnification permitted by the laws of the State of Nevada, and may cause us to purchase and maintain insurance on behalf of any person who is or was our director or officer, or is or was serving at our request as a director or officer of another corporation, or as its representative in a partnership, joint venture, trust, or other enterprise against any liability asserted against such person and incurred in any such capacity or arising out of such status, whether or not we would have the power to indemnify such person. The indemnification provided shall continue as to a person who has ceased to be a director, officer, employee, or agent, and shall inure to the benefit of the heirs, executors and administrators of such person.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

 

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

 

The following table sets forth the fees billed to our company for the years ended December 31, 2022, and 2021, for professional services rendered by our independent registered public accounting firm Pipara & Co LLP:

 

Fees   2022   2021
  Audit Fees   $ 47,000      $ 20,000 
  Audit-Related Fees              
  Tax Fees              
  All Other Fees              
  Total   $ 47,000      $  20,000 

 

 Audit Fees

 

Audit fees were for professional services rendered for the audits of our annual financial statements and for review of our quarterly financial statements during the 2022 and 2021 fiscal years.

 

Audit-related Fees

 

This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees”.

 

Tax Fees

 

As our independent registered public accountants did not provide any services to us for tax compliance, tax advice and tax planning during the fiscal years ended December 31, 2022, and 2021, no tax fees were billed or paid during those fiscal years.

 

All Other Fees

 

Our independent registered public accountants did not provide any products and services not disclosed in the table above during the 2022 and 2021 fiscal years. As a result, there were no other fees billed or paid during those fiscal years.

 

Pre-Approval Policies and Procedures

 

Our board of directors, which acts as our audit committee, pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by our board of directors before the respective services were rendered.

 

Our board of directors has considered the nature and amount of fees billed by our independent registered public accounting firm and believe that the provision of services for activities unrelated to the audit is compatible with maintaining their respective independence.

 

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PART IV

 

ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.

 

We have filed the exhibits listed on the accompanying Exhibit Index of this Annual Report and below in this Item 15:

 

  (a) Financial Statements

 

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS 

  

Report of Independent Registered Public Accounting Firm; F-1
Consolidated Balance Sheets as of December 31, 2022, and 2021; F-2
Consolidated Statements of Operations for the years ended December 31, 2022, and 2021; F-3
Consolidated Statements of Stockholders’ Equity as of December 31, 2022, and 2021; F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2022, and 2021; and F-5
Notes to Consolidated Financial Statements. F-6

 

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Report of Independent Registered Public Accounting Firm

 

To the Shareholders and the Board of Directors of Ilustrato Pictures International, Inc.

 

 

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of Ilustrato Pictures International, Inc. (the Company)(“Ilus”) as of December 31, 2022, and 2021, the related statements of income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “Consolidated financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

 

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of December 31, 2022, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 06, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

 

Company’s Ability to Continue as a Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note No. 21 to the financial statements, 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, collect due 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.

 

Ilus 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. Refer No. 21 for accounts receivable in detail.

Review of Bull Head Products Inc. and Georgia Fire & Rescue Supply LLC (Subsidiary)

 

Review of Bull Head Products Inc. (“Bull Head”) and Georgia Fire & Rescue Supply LLC (“Georgia”), subsidiaries of Ilus, together with its financial statements are reviewed by an independent auditor. As Ilus's auditors, we have relied on the Review report issued by Bullhead & Georgia's independent auditor. Bullhead & Georgia's financial statements were prepared in accordance with US GAAP, and an independent auditor find no material misstatement in financial statement based on US GAAP. The independent auditor also evaluated the adequacy of Bullhead and Georgia's accounting and internal control systems and found them to be satisfactory.

 

Critical Audit Matter

 

Ilustrato Pictures International, Inc. is currently involved in legal matters towards its ownership of FB Fire Technologies Ltd. (“FB Fire”). In its previously filed Form 10 with the SEC, ILUS listed FB Fire as a subsidiary. However, due to the ongoing uncertainty regarding the outcome of the litigation on lien marked shares, ILUS has decided not to consolidate FB Fire's financial statements with its own. Management has informed us that the lawyers representing ILUS in the case are unable to predict the outcome with certainty. Refer Note No. 19 for details captured by ILUS for this litigation.

 

 

 

For, Pipara & Co LLP (6841)

/s/  Pipara & Co LLP

 

We have served as the Company’s auditor since 2021 Place: Ahmedabad, India

Date: April 06, 2023

 

 

New York Office:

1270, Ave of Americas,

Rockfeller Center, FL7,

New York – 10020, USA

 

  

Corporate Office:

“Pipara Corporate House”

Near Bandhan Bank Ltd.,

Netaji Marg, Law Garden,

Ahmedabad - 380006, INDIA

  

Mumbai Office:

#3, 13th floor, Tradelink,

‘E’ Wing, A - Block, Kamala

Mills, Senapati Bapat Marg,

Lower Parej, Mumbai - 400013

  

Delhi Office:

1602, Ambadeep Building,

KG Marg, Connaught Place

New Delhi- 110001

  

Contact:

T: +1 (646) 387 - 2034

F: 91 79 40 370376

E:usa@pipara.com

naman@piara.com 

 

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 ILUSTRATO PICTURES INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEETS

(AUDITED)

 

     Dec 31, 2022  Dec 31, 2021
ASSETS        
Current Assets        
Cash and Cash Equivalents 3  $1,478,702   $176,668 
Accounts Receivables     60,690,812    —   
Inventory     1,877,905    —   
Inventory (work-in-progress)     58,081,202    —   
Other Current Assets 4   17,062,388    13,769,621 
Total Current Assets     139,191,009    13,946,289 
Other Assets 7   18,368,326    16,187,530 
Right of use of asset     11,906,654    —   
Goodwill     60,310,468    —   
Property, Plant and Equipment 8   21,017,415    1,460,640 
Intangible Assets 9   623,592      
Total Non Current Assets     112,226,454    17,648,169 
Total Assets     251,417,462    31,594,459 
LIABILITIES AND STOCKHOLDERS' EQUITY            
Current Liabilities            
Account Payable     52,141,842   $—   
Current lease liability     836,382      
Other Current liabilities 10   102,059,819    10,124,692 
Total Current Liabilities     155,038,043    10,124,692 
Non-current liabilities            
Notes Payable     10,550,000    848,838 
Non current lease liability     13,696,729    —   
Other non- current liabilities 11   16,015,558    2,550,000 
Total Non-Current Liabilities     40,262,287    3,398,838 
Total Liabilities     195,300,330    13,523,530 
Stockholders' Equity           
 Common Stock: 2,000,000,000 shares authorized, $0.001 par value, 1,271,530,699 issued and outstanding 12   1,355,230    1,243,531 
 Preferred Stock: 235,741,000 authorized, $0.001 par value, 12          
 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 and 2,200,000 issued and outstanding as of December 31, 2022 and 2021, respectively     3,400    2,200 
 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, 1,633,250 and 5,800,000 issued and outstanding as of December 31, 2022 and 2021, respectively     1,633    5,800 
 Additional Paid-in-capital     20,631,261    3,664,118 
Other Comprehensive Income     (20,666)   —   
Non controlling Interest     24,386,712    —   
Retained Earnings     5,126,274    13,081,367 
Net Income     4,559,375    —   
Total Stockholders' Equity     56,117,132    18,070,929 
             
Total Liabilities and Stockholders' Equity     251,417,462    31,594,459 

 

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

 

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ILUSTRATO PICTURES INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(AUDITED)

               
    For the year ended
   December 31,2021   December 31,2021
NET REVENUE   78,344,131    11,263,875
Total Net Revenue   78,344,131    11,263,875
          
COST OF REVENUE   49,983,258    7,489,784
          
GROSS PROFIT   28,360,873    3,774,091
Operating Expenses         
General, Selling & Administrative Expenses   30,390,586    1,165,229
Total Operating Expense   30,390,586    1,165,229
PROFIT/ LOSS FROM OPERATIONS   (2,029,712)   2,608,862
Non- Operating Expenses   —      463,886
Non-Operating Income   6,831,138    11,835,500
Depreciation   242,050    —  
NET PROFIT/ LOSS   4,559,375    13,980,477

 

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

 

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ILUSTRATO PICTURES INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(AUDITED)  

                                                                                                                         
ILUSTRATO PICTURES INTERNATIONAL INC.
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  Additional Paid in Capital  Accumulated Deficit  Total Stock Holders' Equity
   Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount         
Balance as at December 31, 2020
   767,297,366   $1,183,282    10,000,000   $10,000    —      —      60,741,000   $60,741    3,175,172   $3,172    —      —     $2,846,812   $(899,110)  $3,204,897 
Balance June 30, 2021   1,221,297,366   $1,221,297    10,000,000   $10,000    —      —      60,741,000   $60,741    3,172,175   $3,172    —      —     $2,846,812   $11,936,144   $16,078,166 
Shares issued   (77,766,667)   (77,766)   —      —      2,200,000   $2,200    —      —      —      —      6,050,000   $6,050   $—     $801,076   $731,560 
Balance Sept 30,2021   1,143,530,699   $1,143,531    10,000,000   $10,000    2,200,000   $2,200    60,741,000   $60,741    3,172,175   $3,172    6,050,000   $6,050   $2,846,812   $12,737,220   $16,809,726 
Shares issued   100,000,000   $100,000    —      —      —      —      —      —      —      —      (250,000)  $(250)  $(25,500)  $1,186,922   $1,261,172 
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   $636,636   $831,382 
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 
Share Capital of Subsidiary   —      —      —      —      —      —      —      —      —      —      —      —      —      —      —   
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   $1,271,530   $10,000,000   $10,000    3,400,000   $3,400    60,741,000   $60,741    3,172,175   $3,172    5,556,750   $5,557   $15,579,335   $3,261,190   $20,194,925 
Common Stock issued   53,700,000   $53,700    —     $—      —      —      —     $—      —     $—      —      —     $—     $—     $53,700 
Preferred Stock issued   —     $—      —     $—      —      —      —     $—      —     $—      1500   $2   $—     $—     $2 
Current Quarter Income   —      —      —      —      —      —      —      —      —      —      —      —      —     $1,187,494   $1,187,494 
Changes in Additional Capital   —      —      —      —      —      —      —      —      —      —      —      —     $563,900    —     $563,900 
 Foreign exchange adjustment   —      —      —      —      —      —      —      —      —      —      —      —      —     $17,158   $17,158 
Balance September 30,2022   1,325,230,699   $1,325,230    10,000,000   $10,000    3,400,000   $3,400    60,741,000   $60,741    3,172,175   $3,172    5,558,250   $5,559   $16,143,235   $4,465,842   $22,017,179 
Share Capital of subsidiaries  $563,393                                                                       
Total Shareholders Equity as of 30.09.2022   22,580,572                                                                       
Common stock issued   40,000,000   $40,000    —     $—      —      —      —     $—      —     $—      —     $—     $12,487,500   $—     $12,527,500 
Common stock cancelled   (10,000,000)  $(10,000)   —      —      —      —      —      —      —      —      —      —      —     $—     $(10,000)
Prefered stock issued   —     $—      —     $—      —      —      —      —      —      —      425,000    425   $3,425,292   $—     $3,425,717 
Prefered stock cancelled   —     $—      —     $—      —      —      —      —      —      —      (4,350,000)   (4,350)  $(11,424,766)   —     $(11,429,116)
changes in Retained earnings   —      —      —      —      —      —      —      —      —      —      —      —      —     $639,766   $639,766 
Current year Income   —     $—      —     $—      —      —      —     $—      —     $—      —      —     $—     $4,559,375   $4,559,375 
 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    31,730,420 
Share capital of Subsidiaries   24,386,712                                                                       
Total Shareholders Equity as of 31.12.2022   56,117,132                                                                       

 

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

 

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ILUSTRATO PICTURES INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(AUDITED) 

                 
   For 12 months ended  For 12 months ended
   Dec 31,2022  Dec 31,2021
CASH FLOWS FROM OPERATING ACTIVITIES      
Net Loss/ Profit   4,559,375    13,980,477 
Adjustment to reconcile net gain (loss) to net cash          
Non Cash Stock Compensation Expense   —      —   
Premium on Investment   —      (11,835,500)
Depreciation Expense   —      4,577 
Gratuity Provision        31,042 
Finance cost   2,600,838    149,724 
Discount on Convertible Notes   186,666    276,018 
Changes in Assets and Liabilities, net          
Other Current Assets   (123,942,685)   (13,769,621)
Goodwill   —      (399,319)
Other Current Liabilities   144,913,351    10,093,649 
Decrease in Accrued Liabilities   —      (6,304)
Decrease in Deferred Liabilities   —      (26,003)
Decrease in Real estate earnest funds   —      (3,500)
Net cash (used in) provided by operating activities   28,317,545    (1,504,760)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Addition of Fixed Assets   (92,397,489)   (1,465,216)
Changes in Non-current assets   (2,180,796)   —   
Changes in Non- Current Liabilities   36,863,449      
Investment in Dear Cashmere Holding Co.   —      (164,500)
Net cash (used In) provided by investing activities   (57,714,835)   (1,629,716)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Fund raised through notes   8,450,000    2,850,000 
Common Stock issued   111,700    476,233 
Preferred Stock Issued   1,200    8,250 
Transfer of Preferred Stock   (4,167)   (250)
Finance cost   (2,600,838)   (149,724)
Discount on convertible Notes   (186,666)   (276,018)
Additional Paid up Capital   28,670,815    401,321 
Changes in Retained Earnings   816,655     
Net cash (used in) provided by financing activities   35,258,699    3,309,812 
           
Net change in cash, cash equivalents and restricted cash   1,302,034    175,336 
Cash, cash equivalents and restricted cash, beginning of the year   176,668    1,332 
Cash, cash equivalents and restricted cash, end of the year   1,478,702    176,668 

 

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

 

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ILUSTRATO PICTURES INTERNATIONAL INC.

Notes to Financial Statements Year Ended December 31, 2022

 

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 November 30.2012, 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 Internatinal 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 Internatinal 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 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 3,172,175 shares of Series E Preferred Stock for their shares 360,000,000 common shares, 60,741,000 Preference D and 10,000,000 Preference A Shares. A final tranche of preference shares subject to performance to be issued in Quarter 1 of 2022. The merger consummated during the 1st quarter of 2021. We have got effective control over FB Fire Technologies Ltd. on January 14, 2021. 

 

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(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.

 

(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.

 

(R) Petro Line FZ LLC is is a United Arab Emirates registered a company that operates an oil refinery providing oil refining services. Quality Industrial Corp. signed the definitive Share Purchase Agreement on January 27, 2023, to acquire a 51% interest in Petro Line FZ-LLC.

 

Note 2: Summary of significant Accounting Policies Revenue Recognition

The company applies paragraph 605-10-S99-1 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: (i) persuasive evidence of an arrangement exists, (ii) the sale price is fixed or determinable, (iii) collectability is reasonable assured and (iv) goods have been shipped and/or services rendered.

 

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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.

 

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.

 

The company account for stock-based payments to non-employees in accordance with ASC 505-50, “Equity-Based Payments to Non-Employees.” Stock-based payments to non-employees include grants of stock, grants of stock options and issuances of warrants that are recognized in the consolidated statements of operation based on the value of the vested portion of the award over the requisite service period as measured at its then-current fair value as of each financial reporting date.

 

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 earning (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.

 

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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.

 

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. The company determines there is no operating segment to be reported as on December 31, 2022 and December 31, 2021.

 

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.

 

Leases

 

The Company accounts for leases with escalation clauses and rent holidays on a straight-line basis in accordance with Accounting Standards Codification (ASC) 840, “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. There is no lease arrangement during the year ending December 31, 2022 and December 31, 2021.

 

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.

 

Rounding Off

 

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

 

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Note 3: Cash and Cash Equivalents

 

Particulars  December 31,2022  December 31,2021
Cash in Hand   12,085    16,827 
Balance with Banks   1,466,358    159,841 
Total   1,478,443    176,668 

 

Note 4: Other Current Assets

 

Particulars  December 31, 2022  December 31, 2021
Staff  Advances  $7,487   $9,310
Inventory:         
Closing stock of finished goods   —      1,046,960
Closing balance of work-in-progress   —      62,297
Loans advanced   2,551,606    —  
Accounts receivable   —      10,077,351
Advance given to suppliers   7,572,440    76,760
Director's current accounts   2,096,777     
Statutory dues receivable   46,326    —  
Deposits   1,550,914    25,942
Accrual of discount on notes   100,000     
Prepayments/Prepaid Assets   150,566    74,553
Other current assets   2,986,271    2,396,448
Total  $17,062,388   $13,769,621

 

Note 5: 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 Internatinal 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.

 

The Unsupported Goodwill has been written off in the current financial year as on December 31, 2022. The Additional Goodwill has been generated through our acquisition of Bull Head Products Inc., Georgia Fire & Rescue and Quality Industrial Corp.

 

Note 6: Capital Advances 

 

No Capital Advances in the financial statement of the company as on December 31, 2022.

 

Note 7: Other Assets 

 

Particulars  December 31, 2022  December 31, 2021
Investments:          
Investment in FB Fire Technology Ltd.   1,678,955    —   
Investment in TVC   20,500    —   
Long Term Investment   4,668,870    16,187,530 
Investment in Dear Cashmere Holding Co.   12,000,000    —   
Total  $18,368,326   $16,187,530 

 

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Note 8: Fixed Assets

Particulars  December 31, 2022  December 31, 2021
Tangible Assets      
Land and Buildings  $ 256    $ 22,158 
Plant and Machineries   20,850,805    77,625 
Furniture, Fixtures and Fittings   63,712    30,126 
Vehicles   70,326    2,725 
Computer and Computer Equipment   31,067    42,774 
Office Equipment   1,248    —   
Marketing Assets   28,903    —   
Total  $21,017,415   $204,311 

 

Note 9: Intangible Assets

 

Closing balance of work-in-progress  December 31, 2022  December 31, 2021
Intangible Assets        
Intellectual Property Rights   617,240     1,249,977  
Website   6,112    6,112 
Trade Mark   240    240 
Total  $623,592   $1,256,329 

 

Balance of Property, Plant and Equipment has been disclosed in note no. 8, represents its carrying amount which is cost after providing accumulated depreciation and accumulated impairment losses, if any.

 

Note 10: Other Current Liabilities

 

Particulars  December 31, 2022  December 31, 2021
Credit Cards  $6,895   $2,578,225 
Bank Overdraft   101,141      
Loans Payable   82,235,560    6,394,428 
Deposits   3,015      
Payroll Liabilty   119,987      
Tax Payable   31,421      
Provision for Management Charge   6,400      
Accrued Interest on Convertible Notes   31,855      
Accrued Expenses   1,303,229    1,152,039 
Borrowings   18,220,315      
Total  $102,059,819   $10,124,692 

 

Note 11: Other Non Current Liabilities

 

Particulars  December 31, 2022  December 31, 2021
Provision for Convertible Notes  $1,155,338   $848,838 
Accounts Payable   —        
Convertible Promissory Notes Payable   —        
Discount on Convertible Notes   —        
Borrowings from Financial Institution   12,378,098      
Interest on Convertible Notes   461,994      
Employees' End of Service Benefits   1,953,853    —   
Defined Benefit Obligation (Gratuity)   60,683      
Other Current Liabilities   5,593    2,550,000 
Total  $16,015,558   $3,398.838 

 

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Note 12: 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.

 

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 $0.001 that convert at 100 common shares for every 1 preferred class F share with no voting rights and no dividends.

As of December 31, 2021,there are 1,243,530,699 shares of the Company’s common stock issued and outstanding.

As of September 30, 2022, the number of shares outstanding of our Common Stock was 1,325,230,699. 

Note 13: Marketing and Sales expenses

 

Particulars  December 31, 2022  December 31, 2021
Sales  $70,289,341   $11,263,875 
Sales from Services   8,054,790    —   
Exhibition and Conference charges   —      —   
Warranty Claims   —      —   
Total  $78,344,131   $11,263,875 

 

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Note 14: General, Administration and Other expenses

 

Particulars  December 31, 2022  December 31, 2021
Administration and General Expense  $13,714,993   $393,863 
Selling and Distribution Expense   486,314    158,876 
Financial Expense   4,362,743    —   
Payroll Expense   4,831,635    391,017 
Other Expenses   6,994,901    130,017 
Total  $30,390,586   $1,165,229 

 

Note 15 : Net Loss Per Share

         
Particulars December 31, 2022 December 31, 2021

Basic EPS

Numerator

Net income / (loss)

 

 

4,559,375

 

 

13,980,477
Net Income attributable to common stock holders $ 4,559,375 $  13,980,477

Denominator

Weighted average shares outstanding

 

1,355,230,699

 

1,050,462,845

Number of shares used for basic EPS computation 1,355,230,699 1,050,462,845
Basic EPS $ 0.0034 $ (0.0017)

 

Diluted EPS

Numerator

Net income / (loss)

 

 

 

4,559,375

 

 

 

13,980,477

Net Income attributable to common stock holders $ 4,559,375 $ 13,980,477
Denominator

 

1,355,230,699

 

1,050,462,845

Number of shares used for basic EPS computation
Conversion of Class A preferred stock to common stock 30,000,000 30,000,000
Conversion of Class B preferred stock to common stock 65,589,041 65,589,041
Conversion of Class D preferred stock to common stock 30,370,500,000 30,370,500,000
Conversion of Class F preferred stock to common stock 158,602,740 158,602,740
Number of shares used for diluted EPS computation 31,979,922,480 31,516,551,886
Diluted EPS $ 0.00 $ 0.00

 

Note 16: 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 $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any director, executive officer, holder of 5% or more of any class of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest.

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Note 17: Commitment and Contingencies

 

(1)  Contingencies towards government authorities 

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.

Due to above facts, we lack much information and evidence to support the assertions of financial statements and there are chances that preceding management of the company might have missed compliances for which we are not aware. Thus, our company may have to bear consequences for that from authorities. We cannot reasonably ascertain an amount for those contingencies.

(2)    We are not aware of any other commitments or contingencies that may take place in future as a result of past transactions by preceding management

Note 18: Consolidation basis of Mergers & Acquisitions

 

Following companies are consolidating basis of Mergers & Acquisitions of management

1)ILUS International UK Ltd.
   
2)Firebug Mechanical Equipment LLC.

 

3)Bull Head Products Inc.

 

4)Georgia Fire & Rescue

 

5)Bright Concept and protection System LLC

 

6)Quality Industrial Corp.

 

Note 19: Litigations with preceding management.

 

FB Fire Technology Ltd:

 

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.

 

Ilustrato Pictures International Inc:

 

Ilustrato Pictures International Inc has applied to the District Court, Clark County, Nevada to have 40,000,000 shares with Ambrose & Keith canceled as they were issued in error in 2018 as the deal was never completed. The case has been won on September 15, 2022, in favor of the company and the court order was received on January 23, 2023. The transfer agent cancelled the 40,000,000 shares on February 17, 2023.

 

We have been named as a defendant in an action commenced by Steve Nicol, who claims that he loaned $12,000 to a subsidiary of ILUS under a promissory note, but that ILUS agreed to assume the note. He further claims that he elected to convert the note and that ILUS failed to convert the note into shares of ILUS common stock. He has alleged breach of contract, declaratory relief, and specific performance to require the company to issue 75,000,000 shares of common stock in ILUS.  

 

We have been named as a defendant in an action commenced by our former CEO, Larson Elmore. A case also 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. We have potential counterclaims against the former CEO which are being prepared to arise out of improper action and lack of disclosures. We are in the process of a settlement discussion and have obtained an extension of time to respond while this process occurs.

 

We cannot predict whether the action against involving our former CEO or Mr. Nicol 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.

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Note 20: Update of Financial Statements

 

 

The previously issued financial statements have been updated to reflect the true and fair position and performance of the company.

 

Note 21: 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, 2022 the Company also had a working capital deficit and an accumulated deficit. These factors raise 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 current year.

 

Note 22: Notes Payable

 

The following is the list of Notes payable as of December 31, 2022. 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.

 

a.On June 14, 2021, the company entered into a convertible note with GPL Ventures LLC – Alexander Dillon, for the amount of $500,000. The note is convertible at 25% below the average past 10-day share price. The note was assigned to RB Capital note assigned from GPL Ventures LLC to RB Capital on October 24, 2022.

 

b.On January 28, 2022, the company entered into a convertible note with RB Capital Partners Inc. – Brett Rosen for the amount of $500,000. The note is convertible at a fixed price $0.20 and bears 5% interest per annum. The note matures on January 27, 2024.

 

c.On February 04, 2022, the company entered into a convertible note with Discover Growth Fund LLC – John Burke for the amount of $2,000,000. The note is convertible at a 35% below the lowest past 15-day share price and bears 12% interest per annum. The note matures on February 4, 2023.

 

d.On April 26, 2022, the company entered into a convertible note with RB Capital Partners Inc., for the amount of $500,000. The note is convertible into common stock at the rate of $0.20 and bears 5% interest per annum. The note matures on April 25, 2024.

 

e.On May 20, 2022, the company entered into a convertible note with RB Capital Partners Inc., for the amount of $500,000. The note is convertible into common stock at the rate of $0.50 and bears 5% interest per annum. The note matures on May 19, 2024.

 

f.On May 27, 2022, the company entered into a convertible note with RB Capital Partners Inc., for the amount of $500,000. The note is convertible into common stock at the rate of $0.50 and bears 5% interest per annum. The note matures on May 26, 2024.

 

g.On June 01, 2022, the company entered into a convertible note with RB Capital Partners Inc., for the amount of $1,000,000. The note is convertible into common stock at the rate of $0.50 and bears 5% interest per annum. The note matures on May 31, 2024.

 

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h.On July 12, 2022, the company entered into a convertible note with RB Capital Partners Inc., for the amount of $500,000. The note is convertible into common stock at the rate of $0.50 and bears 5% interest per annum. The note matures on July 11, 2024.

 

i.On August 10, 2022, the company entered into a convertible note with RB Capital Partners Inc., for the amount of $500,000. The note is convertible into common stock at the rate of $0.50 and bears 5% interest per annum. The note matures on August 09, 2024.

 

j.On August 25, 2022, the company entered into a convertible note with RB Capital Partners Inc., for the amount of $200,000. The note is convertible into common stock at the rate of $0.50 and bears 5% interest per annum. The note matures on August 24, 2024.

 

k.On September 21, 2022, the company entered into a convertible note with RB Capital Partners Inc., for the amount of $650,000. The note is convertible into common stock at the rate of $0.50 and bears 5% interest per annum. The note matures on September 20, 2024.

 

l.On November 14, 2022, the company entered into a convertible note with RB Capital Partners Inc., for the amount of $400,000. The note is convertible into common stock at the rate of $0.50 and bears 5% interest per annum. The note matures on November 13, 2024.

 

m.On December 02, 2022, the company entered into a convertible note with AJB Capital Investment LLC for the amount of $1,200,000. The note is convertible into common stock upon an event of default at the rate equal to volume weighted average trading price of the specified period and bears 12% interest. The note matures on June 01, 2023.

Long term Liabilities include payment towards convertible notes, interest thereon and lease liabilities along with bank Borrowings of our newly acquired subsidiary.

Note 23: Subsequent Events

 

The Agreement contemplated a period of due diligence and revaluation followed by entry into a definitive Stock Purchase Agreement. On January 18, 2023, we entered into a definitive Stock Purchase Agreement (the “Purchase Agreement”) with the shareholders of Quality International, which agreement provided for our purchase of 52% (increased by 1% over the Agreement) of the shares of Quality International Co Ltd FZC (the “Shares”).

On January 27, 2023, our subsidiary Quality Industrial Corp. entered into a definitive Stock Purchase Agreement (the “Purchase Agreement”) with the shareholders of Petro Line FZ-LLC (“Petro Line”), a United Arab Emirates headquartered company to purchase 51% of the outstanding shares (the “Shares”). Petro Line is a revenue generating and profitable company that operates an oil refinery providing oil refining services. 

ILUS International Inc. (OTC: ILUS) is a Mergers and Acquisitions company focused on acquiring and growing companies in the public safety, industrial, defense and renewable sectors. The company has incorporated Hyperion Defense Solutions to roll out its defense sector growth through several acquisitions and partnerships which are currently in progress.

Hyperion Defense Solutions (Hyperion) was formed 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.

 

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(b) The following exhibits are filed as a part of this Annual Report on Form 10-K:

 

Exhibit No.   Exhibit Name 
     
2.1   Share Purchase Agreement, dated December 13,.2022 (4)
2.2   Share Purchase Agreement, dated April 13,.2021 (4)
2.3   Share Purchase Agreement, dated January 1. 2022 (4)
2.4   Share Purchase Agreement, dated December 23,.2021 (4)
2.5   Share Purchase Agreement, dated January 26,.2021 (4)
2.6   Share Purchase Agreement, dated January 26,.2021 (4)
2.7   Share Purchase Agreement, dated February 15, 2022 (4)
2.8   Share Purchase Agreement, dated May 10, 2020 (4)
2.9   Share Purchase Agreement, dated January 18, 2023 (2)
2.10   Share Purchase Agreement, dated January 27, 2023 (3)
2.11   Brand Purchase Agreement, dated March 25, 2021*
2.12   Share Purchase Agreement, dated May 28, 2022
2.13   Share Purchase Agreement, dated June 10, 2020
3.1   Articles of Incorporation (incorporated by reference to the Form S-1 Registration Statement filed with the SEC on July 16, 2010)
3.2   Certificate of Amendment, dated April 25, 2012 (1)
3.3   Certificate of Amendment, dated February 11, 2013 (1)
3.4   Certificate of Change, dated February 12, 2013 (1)
3.5   Certificate of Amendment filed by Custodian, dated April 11, 2016 (1)
3.6   Certificate of Amendment, dated June 15, 2016 (1)
3.7   Certificate of Amendment, dated March 21, 2019 (1)
3.8   Certificate of Amendment, dated April 11, 2019 (1)
3.9   Certificate of Designation for preferred Classes A, B and C, dated August 5, 2019 (1)
3.10   Certificate of Amendment, dated February 2, 2021 (1)
3.11   Certificate of Designation for preferred Classes D, dated February 14, 2020 (1)
3.12   Certificate of Amendment, dated March 2, 2021 (1)
3.13   Certificate of Designation for preferred Class E, dated May 28, 2020 (1)
3.14   Amended Certificate of Designation for Class B, dated August 23, 2021 (1)
3.15   Certificate of Designation for preferred Class F, dated August 24, 2021 (1)
3.16   Second Amended Certificate of Designation for Class B, dated August 26, 2021 (1)
3.17   Amended Certificate of Designation for Class F, dated August 26, 2021 (1)
3.18   Bylaws (incorporated by reference to the Form S-1 Registration Statement filed with the SEC on July 16, 2010)
4.1   Convertible Promissory Note, dated January 28, 2022 with RB Capital Partners Inc. (1)
4.2   Convertible Promissory Note, dated February 4, 2022 with Discover Growth Fund, LLC (1)
4.3   Convertible Promissory Note, dated April 26, 2022 with RB Capital Partners Inc. (1)
4.4   Convertible Promissory Note, dated May 20, 2022 with RB Capital Partners Inc. (1)
4.5   Convertible Promissory Note, dated May 27, 2022 with RB Capital Partners Inc. (1)
4.6   Convertible Promissory Note, dated June 1, 2022 with RB Capital Partners Inc. (1)
4.7   Convertible Promissory Note, dated July 12, 2022 with RB Capital Partners Inc. (1)
4.8   Convertible Promissory Note, dated August 10, 2022 with RB Capital Partners Inc. (1)
4.9   Convertible Promissory Note, dated September 21, 2022 with RB Capital Partners Inc. (1)
4.10   Common Share Purchase Warrant, dated February 22, 2022 to Discover Growth Fund, LLC (1)
4.11   Convertible Promissory Note, dated August 25, 2022 with RB Capital Partners Inc. (4)
4.12 Convertible Promissory Note, dated November 14, 2022 with RB Capital Partners Inc. (4)
4.13   Convertible Promissory Note, dated December 2, 2022 with AJB Capital Investments, LLC (4)
4.14   Convertible Stock Purchase Warrant, dated December 2, 2022 with AJB Capital Investments, LLC (4)
4.15   Convertible Promissory Note, dated January 26, 2023 with Jefferson Street Capital LLC*
4.16   Convertible Stock Purchase Warrant, dated January 26, 2023 with Jefferson Street Capital LLC*
4.17   Amended Convertible Stock Purchase Warrant, dated March 8, 2023,  with AJB Capital Investments, LLC*
4.18   Amended Convertible Promissory Note, dated March 8, 2023, with AJB Capital Investments, LLC*
10.1   Amended Employment Agreement with Nicholas Link, dated January 14, 2021 (1)
10.2   Amended Employment Agreement with John-Paul Backwell, dated July 1, 2021 (1)
10.3   Amended Employment Agreement with Louise Bennett, dated February 1, 2021 (1)
10.4   Amended Employment Agreement with Krishna Moorthy, dated February 2, 2022 (1)
10.5   Employment Agreement with Carsten Falk, dated June 1, 2022 (1)
10.6 Lease Agreement with Ass, dated May 17, 2022 (4)
10.7   Lease Agreement with Bullhead, dated December 22, 2021 (4)
10.8   Lease Agreement with Firebug, dated May 24, 2022 (4)
10.9   Lease Agreement with Georgia Fire & Rescue Supply, dated March 17, 2022 (4)
10.10   Lease Agreement with ILUS, dated July 21, 2022 (4)
10.11   Lease Agreement with Quality Industrial, dated October 31, 2021 (4)
10.12 Lease Agreement with Quality International, dated June 6, 2022 (4)
10.13   Lease Agreement with Quality International, dated September 13, 2020 (4)
10.14   Lease Agreement with Quality International, dated September 13, 2020 (4)
10.15   Lease Agreement with Quality International, dated September 13, 2020 (4)
10.16   Lease Agreement with Quality International, dated September 6, 2018 (4)
10.17   Lease Agreement with Quality International, dated September 6, 2018 (4)
10.18   Lease Agreement with Quality International, dated September 6, 2018 (4)
10.19   Lease Agreement with Quality International, dated September 6, 2018 (4)
10.20   Lease Agreement with Petro Line, dated August 15, 2018*
10.21   Lease Agreement with Petro Line, dated August 15, 2018*
14.1   Code of Ethics (1)
14.2   Insider Trading Policy, dated March 10, 2023
21.1   List of Subsidiaries (1)
31.1*   Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*   Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*   Certification of principal executive officer and principal financial and accounting officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.
101.INS XBRL Instance Document*
101.SCH XBRL Taxonomy Extension Schema*
101.CAL XBRL Taxonomy Calculation Linkbase*
101.LAB XBRL Taxonomy Label Linkbase*
101.PRE XBRL Definition Linkbase Document*
101.DEF XBRL Definition Linkbase Document*
     

*Filed herewith.

 

  (1) Incorporated by reference to the Registration Statement on Form 10 filed with the Securities and Exchange Commission on October 19, 2022.
  (2) Incorporated by reference to the Registration Statement on 8-K filed with the Securities and Exchange Commission on January 18, 2023
  (3) Incorporated by reference to the Registration Statement on 8-K filed with the Securities and Exchange Commission on January 31, 2023
  (4) Incorporated by reference to the Registration Statement on Form 10/A filed with the Securities and Exchange Commission on February 1, 2023.

 

ITEM 16. 10-K SUMMARY

 

None

 

 77 
Table of Contents 

 

SIGNATURES 

 

Ilustrato Pictures International, Inc.

 

By: /s/ Nicolas Link  
 

Name: Nicolas Link

Title: Chief Executive Officer (principal executive officer)

 

Date: April 7, 2023  

 

 

     

 

By: /s/ Krishnan Krishnamoorthy  
 

Name: Krishnan Krishnamoorthy

Title: Chief Financial Officer (principal financial officer and principal accounting officer)

 

Date: April 7, 2023 

 

 

     
     

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. 

 

By: /s/ Nicolas Link  
 

Name: Nicolas Link

Title: Chief Executive Officer (principal executive officer)

 

Date: April 7, 2023  

 

 

     

 

By: /s/ Krishnan Krishnamoorthy  
 

Name: Krishnan Krishnamoorthy

Title: Chief Financial Officer (principal financial officer and principal accounting officer)

 

Date: April 7, 2023 

 

 

     

 

By: /s/ Nicholas Link  
 

Name: Nicholas Link

Title: Chairperson and Director

 

Date: April 7, 2023 

 

 

 78 

 

BRAND PURCHASE AGREEMENT

 

 

 

This Agreement to Purchase/ Sell Brand (the "Agreement") is made and effective the 25th of March 2021,

 

BETWEEN:The Vehicle Converters LLC (the "Vendor"), a corporation organized and existing under the laws of the UAE, with its head office located at: Warehouse No 4, Al Aweer warehouse Ras Al Khor Ind., Dubai

 

AND:ILUS International Inc (the "Buyer"), a corporation organized and existing under the state of the Nevada, with its head office located at 26 Broadway Suite 934, New York USA

 

WHEREAS, at the time of entering into this Agreement, the Seller holds the rights to transfer ownership of TVC Brand and all other rights, title and interest in the Brand held by the Seller.

 

WHEREAS,

Seller agrees to sell to Buyer, and Buyer agrees to acquire from Seller, all rights, title, and interest in and to the Brand; and

 

WHEREAS,

this Agreement describes the terms, conditions, rights and obligations of the Seller and Buyer in connection with the sale and purchase of the Brand.

 

THEREFORE, in consideration of the Brand Fee paid by the Buyer to the Seller, the Seller and Buyer hereby agree as follows

 

1.Buyer will pay Seller for the Brand and for all obligations specified in this Agreement, if any, as the full and complete purchase price, the sum of $20,500 (USD Twenty Thousand Five hundred) (the “Purchase Price”).

 

2.The purchase price to be paid in cash, Bank transfer or bank checks, within 30days from the date of this agreement.

 

3.The Buyer agrees that, unless and until the transaction is completed in accordance with this agreement, the buyer shall keep confidential all confidential information obtained by the buyer from the Vendor or the Corporation about the Vendor and the business and affairs of the Corporation.

 

4.The buyer shall not use the Company’s trade name and/or trademark in any manner other than that which is permitted by the seller.

 

5.The Vendor covenants with the Purchaser/ Buyer that, in consideration of the closing of this agreement, the Vendor will not operate similar type of business or in any way aid and assist any other person to operate such a business for a period of 3 years from the date of closing.

 

  
 
6.All the terms, representations and warranties shall survive the closing. This Agreement shall bind and inure to the benefit of the Seller and Buyer and their respective heirs, executors, administrators, successors, and assigns.

 

7.If this Agreement shall contain any term or provision which shall be invalid or against public policy or if the application of same is invalid or against public policy, then, the remainder of this Agreement shall not be affected thereby and shall remain in full force and effect.

 

8.IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed in triplicate on the day and year first above written.

 

This agreement executed on behalf of the Buyer constitutes an offer to purchase which can only be accepted by the Vendor by return of at least one originally accepted copy of agreement to the Purchaser failing which the offer becomes null and void. If this offer becomes null and void or is validly revoked before acceptance or this agreement is not completed by the Purchaser for any valid reason, any deposit tendered with it on behalf of the Purchaser shall be returned without penalty or interest.

 

 

Signed, Sealed and Delivered in the Presence of:

 

 

VENDOR   PURCHASER  
       
       
       
/s/ Danny Kourosh Link   /s/ Nicolas Link  
Authorized Signature   Authorized Signature  
       
       
Mr Danny Kourosh Link, CEO   Mr Nicolas Link, CEO  
Name and Title   Name and Title  

 

 2 
 

 

SHARE PURCHASE AGREEMENT

By and Among

CERTAIN SHAREHOLDERS OF WIKISOFT CORP

And

Ilustrato Pictures International Inc.

Dated as of May 28 2022

 

 

 

 

 

 

THIS SHARE PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of May 28 2022, by and between:

(1)the parties identified on the signature page hereto (each, a “Seller”); and
(2)Ilustrato Pictures International, Inc, a Nevada corporation (“Investor” or “Purchaser”).

Each Seller and the Purchaser are herein referred to each as a “Party” and collectively as the “Parties”.

 

RECITALS

 

     WHEREAS, as of the date of this Agreement, each Seller owns that number of shares of Common Stock (“Common Stock”) of Wikisoft Corp a Nevada Corporation with offices at 315 Montgomery Street, San Francisco, CA 94104 (the “Company”); and

 

(B)     WHEREAS, the Seller wishes to sell to the Purchaser, and the Purchaser wishes to purchase from the Sellers, an aggregate of 77,669,078 shares of Common Stock of the Company (the “Purchased Shares”) upon the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants hereinafter set forth, and intending to be legally bound, the Parties hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1Certain Definitions. For purposes of this Agreement:

 

  
 

“Business Day” means any day that is not a Saturday, a Sunday, legal holiday or other day on which banks are required or authorized by Law to be closed in the PRC, Hong Kong or New York.

“Company Transfer Agent” means Pacific Stock Transfer Company, Inc. “Contract” means, as to any Person, a contract, agreement, indenture, note, bond, loan,

instrument, lease, mortgage, franchise, license, commitment, purchase order, and other legally binding arrangement, whether written or oral.

 

“Encumbrance” means any security interests, mortgages, liens, pledges, charges, reservations, restrictions, rights of way, options, rights of first refusal, community property interests, equitable interests, conditional sale or other title retention agreements, any agreement to provide any of the foregoing and all other encumbrances, whether or not relating to the extension of credit or the borrowing of money, whether imposed by contract, Law, equity or otherwise.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

“Governmental Authority” means any government of any nation, federation, province or state or any other political subdivision thereof, any entity, authority or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any government authority, agency, department, board, commission or instrumentality of the United States or any other country, or any political subdivision thereof, any court, tribunal or arbitrator, and any self-regulatory organization.

“Governmental Order” means any order, ruling, decision, verdict, decree, writ, subpoena, mandate, command, directive, consent, approval, award, judgment, injunction or other similar determination or finding by, before or under the supervision of any Governmental

Authority. “Law” or “Laws” means any and all provisions of any applicable constitution, treaty,

statute, law, regulation, ordinance, code, rule, or rule of common law, any governmental approval, concession, grant, franchise, license, agreement, directive, requirement, or other governmental restriction or any similar form of decision of, or determination by, or any interpretation or administration of any of the foregoing by, any Governmental Authority, in each case as amended, and any and all applicable Governmental Orders.

“Liability” means any direct or indirect liability, indebtedness, claim, loss, damage, deficiency, obligation or responsibility, fixed or unfixed, liquidated or unliquidated, secured or unsecured, accrued, absolute or contingent.

“Person” means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including a “person” as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government.

 

 2 
 

“SEC” means the Securities and Exchange Commission of the United States of America or any other federal agency at the time administering the Securities Act.

“Securities Act” means the Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

 

“Securities Laws” means the Securities Act, the Exchange Act, and any other applicable Law regulating securities or takeover matters.

“Share Purchase Agreements” means, collectively, this Agreement and those certain other share purchase agreements, dated as of the date hereof, in respect of the purchase and transfer of certain Common Stock of the Company.

“Transaction Documents” means, collectively, this Agreement, the other Share Purchase Agreements, the note purchase agreements entered into by the parties, and any other agreements, documents or certificates delivered pursuant hereto or thereto.

1.2    Other Defined Terms. The following terms have the meanings set forth in the Sections set forth below:

 

Defined Term   Section 
      
“Agreement”   Preamble 
“Authorization”   Section 3.1(d) 
“Closing”   Section 2.2 
“Company”   Recitals 
“Disclosing Party”   Section 4.1(a) 
“Indemnified Party”   Section 7.2 
“Indemnifying Party”   Section 7.2 
“Losses”   Section 7.2 
“Common Stock”   Recitals 
“Party” and “Parties”   Preamble 
“Purchase Price”   Section 2.1 
“Purchased Shares”   Recitals 
“Purchaser”   Preamble 
“Seller”   Preamble 

1.3  Interpretation and Rules of Construction. References to the singular include references to the plural and vice versa. The words “include,” “includes” and “including” when used in this Agreement shall be deemed to be followed by the phrase “without limitation.” The words “to the extent” when used in this Agreement shall be deemed to be followed by the phrase “and only to the extent.” Unless the context otherwise requires, references in this Agreement to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of,

 

 3 
 

and Exhibits and Schedules to, this Agreement and Exhibits and Schedules to this Agreement shall be deemed to form part of this Agreement. Unless the context otherwise requires, the words “hereof,” “hereby” and “herein” and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section or provision of this Agreement. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. References in this Agreement to US$ shall be to United States dollars and to cash shall be to cash in U.S. dollars.

 

ARTICLE II

PURCHASE AND SALE

 

2.1Purchase and Sale of Purchase Shares; Purchase Price.

Subject to the terms and conditions of this Agreement, at the Closing, each Seller agrees to sell and deliver to the Purchaser, and the Purchaser agrees to purchase from each Seller such number of Purchased Shares, free and clear of any and all Encumbrances, and for such purchase price as set forth opposite the Purchaser’s name on Exhibit A. The total purchase price payable by the Purchaser for the Purchased Shares is herein referred to as the “Purchase Price”.

 

 

2.2Closing.

Subject to the terms and conditions of this Agreement, the closing of the purchase, sale and delivery of the Purchased Shares pursuant to this Agreement (the “Closing”) shall take place as soon as possible following the satisfaction or waiver of the conditions to the obligations of the Parties set forth in Article V with respect to the Closing (other than such conditions as may, by their terms, only be satisfied on the date of the Closing).

2.3Closing Deliverables by the Purchaser.

On the date of the Closing, the Purchaser shall remit the Purchase Price to the Seller (as set forth in Exhibit A), in accordance with wire instructions provided by the Seller to the Purchaser, in immediately available funds.

2.4Closing Deliverables by the Seller.

At the Closing, each Seller shall have (I) delivered to the Company Transfer Agent (x) required instruments of transfer by the Seller with respect to the sale of the Purchased Shares to the Purchaser (the “Instrument of Transfer”) and (y) deliver a new share certificate to the Purchaser evidencing the Purchased Shares

 

 4 
 

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1  Representations and Warranties of the Seller. Each Seller, severally and not jointly hereby represents and warrants to the Purchaser that each of the representations and warranties contained in this Section 3.1 is true, complete and not misleading as of the date of this Agreement, and each of such representations and warranties shall be true, complete and not misleading on and as of the date of the Closing, with the same effect as if made on and as of the date of the Closing (unless such representation or warranty by its term speaks of a specified date, in which case the accuracy of such representation or warranty will be determined with respect to such date).

(a)      Organization, Good Standing and Qualification. Each Seller (if an entity) is duly incorporated, validly existing and in good standing under the laws of the jurisdiction in its jurisdiction of formation.

(b)      Authority. Each Seller has all requisite capacity, power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Seller of this Agreement and the consummation by the Seller of the transactions contemplated hereby have been duly authorized by all requisite corporate or other action on the part of the Seller. This Agreement has been duly executed and delivered by the Seller and constitutes legal, valid and binding obligations of the Seller, enforceable against the Seller in accordance with their respective terms, subject to applicable Laws.

(c)      Noncontravention. The execution, delivery and performance by the Seller of this Agreement and the consummation of the transactions contemplated hereby, do not and shall not

(i) conflict with or violate any provision of its constitutional documents, any applicable Law or any Governmental Order to which the Seller is subject or (ii) conflict with, result in any breach of or creation of an Encumbrance under, constitute a default (with or without notice or lapse of time, or both) under, require any notice or consent under, or give to others any rights of termination, acceleration or cancellation of, any Contract to which the Seller is a party or by which it is bound or to which any of its assets or properties are subject, other than, in the case of (ii) above, any such conflicts, breaches, defaults, accelerations or rights that would not materially impair or delay the Seller’s ability to perform its obligations under this Agreement or to consummate the transactions contemplated hereby and thereby.

(d)      Consents and Approvals. The execution, delivery and performance by the Seller of this Agreement and the consummation of the transactions contemplated hereby do not and shall not require any consent of, action by or in respect of, or filing, submission or registration with, or giving of any notice to, any Governmental Authority or any other Person (each, an “Authorization”) to be obtained or made by the Seller, except (i) for such Authorizations as have already been obtained or made by the Seller before the date hereof, (ii) for the filing of a Schedule 13D or an amended Schedule 13G by the Seller with the SEC, or (iii) as otherwise explicitly provided in this Agreement.

(e)Title. The Purchased Shares are fully paid and nonassessable, and to the knowledge

 

 5 
 

of the Seller, are duly authorized and validly issued by the Company. The Seller is the sole record and beneficial owner of the Purchased Shares, free and clear of any and all Encumbrances whatsoever and with no restrictions on the rights and other incidents of record and beneficial ownership pertaining thereto (except for any restrictions on transfer under applicable Securities Laws). The Seller has good and marketable title to the Purchased Shares and the sole and absolute authority to transfer the Purchased Shares to the Purchaser pursuant to this Agreement. Immediately following the Closing, the Purchaser shall acquire good and valid title to the Purchased Shares that are being purchased hereunder, free and clear of any and all Encumbrances. There are no outstanding options, warrants, rights (preemptive or otherwise), calls, Contracts or other binding commitments to which the Seller is a party or by which the Seller is bound to sell any of the Purchased Shares. Except for the transactions contemplated hereunder, the Seller has not assigned, transferred, sold, distributed, pledged or otherwise disposed of or agreed to dispose of all or any portion, or any interest in, the Purchased Shares.

(f)       Investment Experience. The Seller is able to fend for itself and has sufficient knowledge and experience in financial and business matters, including disposing of the Purchased Shares, and is capable of evaluating the merits and risks of the transactions contemplated hereunder. The sale and delivery of the Purchased Shares hereunder is for its own account, and the Seller has independently and without reliance upon the Purchaser or any representative of the Purchaser and based on such information as the Seller has deemed appropriate in its independent judgment, made its own analysis and decision to sell the Purchased Shares pursuant to this Agreement.

(g)      Brokers. No Person is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Seller.

3.2    Representations and Warranties of the Purchaser. The Purchaser represents and warrants to each Seller that each of the representations and warranties contained in this Section 3.2 is true, complete and not misleading as of the date of this Agreement, and each of such representations and warranties shall be true, complete and not misleading on and as of the date of the Closing, with the same effect as if made on and as of the date of the Closing (unless such representation or warranty by its term speaks of a specified date, in which case the accuracy of such representation or warranty will be determined with respect to such date).

(a)      Organization, Good Standing and Qualification. The Purchaser is duly organized, validly existing and in good standing under the law of its jurisdiction of formation.

(b)      Authority. The Purchaser has all requisite capacity, power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Purchaser of this Agreement

 

 6 
 

and the consummation by the Purchaser of the transactions contemplated hereby have been duly authorized by all requisite corporate or other action on the part of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser and constitutes legal, valid and binding obligations of the Purchaser, enforceable against the Purchaser in accordance with their respective terms, subject to applicable Law.

(c)      Noncontravention. The execution, delivery and performance by the Purchaser of this Agreement and the consummation of the transactions contemplated hereby, do not and shall not (i) conflict with or violate any provision of its constitutional documents, any applicable Law or any Governmental Order to which the Purchaser is subject or (ii) conflict with, result in any breach of or creation of an Encumbrance under, constitute a default (with or without notice or lapse of time, or both) under, require any notice or consent under, or give to others any rights of termination, acceleration or cancellation of, any Contract to which the Purchaser is a party or by which it is bound or to which any of its assets or properties are subject, other than, in the case of

(ii) above, any such conflicts, breaches, defaults, accelerations or rights that would not materially impair or delay the Purchaser’s ability to perform its obligations under this Agreement or to consummate the transactions contemplated hereby and thereby.

(d)Consents and Approvals. The execution, delivery and performance by the

Purchaser

of this Agreement and the consummation of the transactions contemplated hereby do not and shall not require any Authorizations to be obtained or made by the Purchaser, except (i) for such Authorizations as have already been obtained or made by the Purchaser before the date hereof, (ii) for the filing of a Schedule 13D by the Purchaser with the SEC, or (iii) as otherwise explicitly provided in this Agreement.

 

(e)      Investment Experience. The Purchaser is able to fend for itself and has sufficient knowledge and experience in financial and business matters, including purchase of the Purchased Shares, and is capable of evaluating the merits and risks of the transactions contemplated hereunder. The purchase of the Purchased Shares hereunder is for its own account, and the Purchaser has independently and without reliance upon the Seller or any representative of the Seller and based on such information as the Purchaser has deemed appropriate in its independent judgment, made its own analysis and decision to purchase the Purchased Shares pursuant to this Agreement.

(f)       Brokers. No Person is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Purchaser.

 

ARTICLE IV

COVENANTS AND AGREEMENTS

 

4.1Compliance Matters.
(a)None of the Parties shall, at any time, issue or make any reports, statements or

 

 7 
 

releases to the public with respect to this Agreement, any other Transaction Documents, or the transactions contemplated hereby or thereby, without the consent of the other Parties, which consent shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, in the event that any Party is requested or becomes legally compelled (including without limitation any reports or filings required to be made with the SEC) to disclose the existence of this Agreement or content of any of terms of the transaction, such Party (the “Disclosing Party”) shall provide the other Party with prompt written notice of that fact and shall consult with the other Party regarding such disclosure, and in any event, the Disclosing Party shall furnish only that portion of the information that is legally required.

(b)   Solely as it relates to the sale of the Purchased Shares, the Seller shall be responsible for paying all taxes (if any) that are required to be paid by the Seller pursuant to applicable tax Laws.

4.2Sales Lockout

(a) To the extent a Seller has shares of Common Stock of the Company remaining after the consummation of the transactions set forth herein, the requisite Seller agrees that for a period of 1 year, commencing form the date of this Agreement, such Seller shall not liquidate, sell, loan against, hypothecate or otherwise dispose of any such remaining shares.

 

ARTICLE V

CONDITIONS TO CLOSING

5.1     Conditions to Obligations of each Seller. The obligations of each Seller to consummate the transactions contemplated by this Agreement at the Closing are subject to the satisfaction on or prior to the Closing of the conditions set forth below, unless waived in writing by the Seller.

(a)                      Representations and Warranties. All representations and warranties made by the

Purchaser in Section 3.2 (i) that are not qualified as to “materiality” shall be true and correct in all material respects as of the Closing and (ii) that are qualified as to “materiality” shall be true and correct as of the Closing, except to the extent such representations and warranties are made as of another date, in which case such representations and warranties shall be true and correct in all material respects or true and correct, as the case may be, as of such other date.

(b)                      Performance of Obligations. The Purchaser shall have performed or complied in all

material respects with all obligations and covenants required to be performed by it under this Agreement prior to or at the Closing.

(c)                      No Order. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law or Governmental Order (whether temporary,

 

 8 
 

preliminary or permanent) that has the effect of making the transactions contemplated by this Agreement illegal or otherwise restraining or prohibiting the consummation of such transactions or would (i) substantially delay the consummation in any material aspect of such transactions, or (ii) ) render any Party unable to consummate such transactions.

(d)                      Consents. The Purchaser shall have obtained any and all Authorizations necessary

or appropriate for consummation by the Purchaser of the purchase of the Purchased Shares on or prior to the date of the Closing, all of which shall be in full force and effect.

(e)                      No Suspension. No stop order or suspension of trading shall have been imposed by

the SEC or any other Governmental Authority with respect to public trading of the Common Stock of the Company.

(f)                       Other Closing Deliveries. The Purchaser shall have delivered the other closing

deliveries set forth in Section 2.3.

5.2   Conditions to Obligations of the Purchaser. The obligations of the Purchaser to consummate the transactions contemplated by this Agreement at the Closing are subject to the satisfaction on or prior to the Closing of the conditions set forth below, unless waived in writing by the Purchaser or a deemed waiver by the Purchaser pursuant to Section 8.6.

(a)                      Representations and Warranties. All representations and warranties made by each Seller in Section 3.1 (i) that are not qualified as to “materiality” shall be true and correct in all material respects as of the Closing and (ii) that are qualified as to “materiality” shall be true and correct as of the Closing, except to the extent such representations and warranties are made as of another date, in which case such representations and warranties shall be true and correct in all material respects or true and correct, as the case may be, as of such other date.

(b)                      Performance of Obligations. Each Seller shall have performed or complied in all

material respects with all obligations and covenants required to be performed by it under this Agreement prior to or as of the Closing.

(c)                      No Order. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law or Governmental Order (whether temporary, preliminary or permanent) that has the effect of making the transactions contemplated by this Agreement illegal or otherwise restraining or prohibiting the consummation of such transactions or would (i) substantially delay the consummation in any material aspect of such transactions, or (ii) render any Party unable to consummate such transactions.

 

 9 
 

(d)                      Consents. Each Seller shall have obtained any and all Authorizations necessary or

appropriate for consummation by such Seller of the sale of the Purchased Shares on or prior to the date of the Closing, all of which shall be in full force and effect.

(e)                      No Suspension. No stop order or suspension of trading shall have been imposed by

the SEC or any other Governmental Authority with respect to public trading of the Common Stock of the Company.

(f)                       Other Closing Deliveries. The Seller shall have delivered the other closing deliveries

set forth in Section 2.4.

 

ARTICLE VI TERMINATION

6.1  Termination. Notwithstanding anything to the contrary contained in this Agreement, this Agreement may be terminated at any time prior to the Closing:

(a)      by the mutual written consent of a Seller and the Purchaser (with respect to the transaction between those particular parties);

(b)      by either a Seller or the Purchaser, upon written notice to the other Party, if any Governmental Authority shall have issued any Governmental Order or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such Governmental Order shall have become final and nonappealable;

(c)      by the Purchaser in the event of any material breach of any representation, warranty, covenant or agreement of a Seller contained herein and the failure of the Seller to cure such breach within seven (7) days after receipt of notice from the Purchaser requesting such breach to be cured; or

(d)      by a Seller in the event of any material breach of any representation, warranty, covenant or agreement of the Purchaser contained herein and the failure of the Purchaser to cure such breach within seven (7) days after receipt of notice from the Seller requesting such breach to be cured.

 

6.2  Notice of Termination. Any Party desiring to terminate this Agreement pursuant to Section 6.1 shall give written notice of such termination to the other Party.

6.3  Effect of Termination. In the event of termination of this Agreement as provided in Section 6.1, this Agreement shall forthwith become null and void and there shall be no Liability on the part of any Party except for this Section 6.3 and Article VII and Article VIII, each of which shall survive termination; provided, however, nothing herein shall relieve any Party from Liability for any breach of any of the representations, warranties, covenants or agreements set forth in this Agreement occurring prior to such termination.

 

 10 
 

ARTICLE VII INDEMNIFICATION

7.1Survival of Representations, Warranties, Covenants and Agreements.

(a)      Notwithstanding any investigation or examination conducted with respect to, or any knowledge acquired (or capable of being acquired) about, the accuracy or inaccuracy of any representation or warranty made by or on behalf of the Parties, all representations and warranties contained in this Agreement or any certificate delivered in connection herewith shall be deemed

to be material and to have been relied upon by the Parties.

(b)All such representations and warranties made by a Seller set forth in Section 3.1

and the Purchaser in Section 3.2 shall survive the Closing and shall remain in full force and effect until the expiration of the applicable statute of limitations, if any; provided, however, such expiration shall not affect the rights of any Indemnified Party under Article VII or otherwise to seek recovery of Losses arising out of any fraud, willful breach or intentional misrepresentation.

(c)      If a claim for indemnification has been timely made pursuant to Section 7.3, such representation and warranty shall continue to survive and be fully effective and enforceable until a final and non-appealable order or judgment of a court of competent jurisdiction. The covenants and agreements of any Party contained in this Agreement shall survive the Closing until they are terminated, whether by performance thereof, their express terms or as a matter of applicable Law.

7.2Indemnification. A Seller (an “Indemnifying Party”) agrees to defend and

hold

harmless the Purchaser, its managers, partners, directors, officers, members, employees, attorneys, accountants, agents and representatives, and its heirs, successors, and permitted assigns (each an “Indemnified Party”) from and against all liabilities, losses, and damages, together with all reasonable and documented out-of-pocket costs and expenses related thereto (including, without limitation, reasonable and documented out-of-pocket legal and accounting fees and expenses) (“Losses”) based upon or arising out of, or otherwise in connection with (a) any material inaccuracy or breach of any representation and warranty of such Indemnifying Party, or (b) any material breach of any covenant and agreement of such Indemnifying Party.

7.3     Notice of Claims; Procedures. If any Indemnified Party makes any claim against any Indemnifying Party for indemnification under this Article VII, the claim shall be in writing and shall state in general terms the facts upon which such Indemnified Party makes the claim. If the Indemnifying Party does not notify the Indemnified Party in writing within twenty (20) Business Days from receipt of such claim that the Indemnifying Party disputes such claim, the Indemnifying Party shall be deemed to have accepted and agreed with such claim. In the event of any claim or demand asserted against an Indemnified Party by a third party upon which the Indemnified Party may claim indemnification, the Indemnifying Party shall give written notice to the Indemnified Party within twenty (20) Business Days after receipt from the Indemnified Party of such claim or demand, indicating

 

 11 
 

whether the Indemnifying Party intends to assume the defense of the claim or demand. If the Indemnifying Party assumes the defense, the Indemnifying Party may not agree to any compromise or settlement to which the Indemnified Party has not consented in writing. If the Indemnifying Party elects not to assume the defense or fails to make such an election within the twenty (20) Business Day period, or otherwise fails to continue the defense of the Indemnified Party reasonably and in good faith, the Indemnified Party may assume the defense thereof at the expense of the Indemnifying Party, and a recovery against the Indemnified Party suffered by it in good faith shall be conclusive in its favor against the Indemnifying Party.

 

ARTICLE VIII GENERAL PROVISIONS

8.1  Further Assurances. Each Party agrees that it shall, from time to time on or after the date hereof, do, execute, acknowledge and deliver, and will cause to be done, executed, acknowledged and delivered, all such further acts, deeds, certificates, bills of sale, assignments, transfers, conveyances, powers of attorney, assurances and other documents as may be reasonably requested by the other Party in order to effectuate the transactions contemplated hereby.

 

8.2   Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability and shall not render invalid or unenforceable the remaining terms and provisions of this Agreement or affect the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.

 

8.3  Entire Agreement. This Agreement, together with all schedules and exhibits hereto, constitute the entire agreement of the Parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, among the Parties with respect to the subject matter hereof.

8.4   Assignment. Neither this Agreement nor any of the rights, duties or obligations hereunder may be assigned by any Party without the express written consent of the other Party. Any purported assignment in violation of the foregoing sentence shall be null and void.

8.5  Amendment; Waiver. No modification, amendment or waiver of any provision of this Agreement shall be effective unless such modification, amendment or waiver is approved in writing by each of the Parties. The failure of any Party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such Party thereafter to enforce each and every provision of this Agreement in accordance with its terms. Notwithstanding the foregoing, to the extent that the Purchaser have waived any condition to Closing set forth in Section 5.2 (excluding Sections 5.2(a) and (b)) under any of the other Share Purchase Agreements, the Purchaser shall be deemed to have waived such same condition to Closing under this Agreement.

 

 12 
 

8.6  Specific Performance. The Parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof. It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity.

 

8.7  No Third Party Beneficiaries. This Agreement shall be binding upon and inure solely to the benefit of the Parties and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, except as expressly provided under this Agreement.

 

8.8  Expenses. Except as otherwise specified in this Agreement, all costs and expenses, including, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be borne by the Party incurring such costs and expenses, whether or not the Closing shall have occurred.

8.9  Notices. Any notice required or permitted pursuant to this Agreement shall be given in writing and shall be given either personally or by sending it by courier service, fax, electronic mail or similar means to the address set forth below (or at such other address as such Party may designate by ten (10) days’ advance written notice to the other Parties given in accordance with this 8.9). Where a notice is given personally, delivery shall be deemed to have been effected on receipt (or when delivery is refused). Where a notice is sent by courier service, service of the notice shall be deemed to be effected by properly addressing, pre-paying and sending through an internationally-recognized courier, with a confirmation of delivery, and to have been effected on receipt (or when delivery is refused). Where a notice is sent by fax or electronic mail, service of the notice shall be deemed to be effected by properly addressing, with a written confirmation of delivery, and to have been effected on the day the same is sent as aforesaid if sent during normal business hours of the recipient on a Business Day thereof and otherwise on the next Business Day thereof.

 

(a)If to a Seller: (to the address listed on Exhibit A)

 

 

(b)If to the Purchaser, to the address, email address set forth below the Purchaser’s name on Exhibit A hereto.

8.10 Governing Law. This Agreement shall be governed by and construed under the Laws of the State of New York, without regard to principles of conflict of Laws thereunder. The parties consent to exclusive venue in the city of New York.

 

8.11Counterparts. This Agreement may be executed and delivered in one or

more

counterparts, and by the different Parties in separate counterparts, each of which when executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

[Remainder of page intentionally left blank]

 

 13 
 

 

IN WITNESS WHEREOF, the Parties have caused this Share Purchase Agreement to be executed as of the date first written above by their respective duly authorized representative.

 

SELLERS:

 

 

MODERN ARTS FOUNDATION, INC 72,895,078 SHARES OF COMMON STOCK

 

Signature: /s/ Terjie Aarbogh

 

Name and Title: Terje Aarbogh Director

 

Address 315 Montgomery Street, San Francisco, CA 94104

 

 

FASTBASE HOLDINGS, INC 1,275,000 SHARES OF COMMON STOCK

 

Signature: /s/ Rasmus Refer

 

Name and Title: Rasmus Refer Director

 

Address: 140 E Broadway FL 46, New York, NY 10002

 

 

RENE LAURITSEN 3,499,000 SHARES OF COMMON STOCK

 

Signature: /s/ Rasmus Refer

 

 

Address: FYRREMEJSEVEJ 12, EGAA 8250, DENMARK

 

IN WITNESS WHEREOF, the Parties have caused this Share Purchase Agreement to be executed as of the date first written above by their respective duly authorized representative.

 

 14 
 

 

INVESTOR:

 

Ilustrato Pictures International Inc.

26 Broadway, Suite 934, New York, NY 10004

 

 

 

 

Signature: /s/ Nicolas Link

 

 

Name and Title: Nicolas Link, CEO

 

 15 
 

Exhibit A

 

 

 

Seller Name Address Purchased Shares
Modern Arts Foundation 315 Montgomery Street, San Francisco, CA 94104 72,895,078
Fastbase Holdings, Inc

140 E Broadway FL 46, New

York, NY 10002

 1,275,000
Rene Lauritsen

FYRREMEJSEVEJ 12,

EGAA 8250, DENMARK

 3,499,000
Modern Arts Foundation Purchase Price $469,267.05
Fastbase Holdings, Inc Purchase Price $8,207.90
Rene Lauritsen Purchase Price $22,525.05

 

 16 
 

 

 

SHARE PURCHASE AGREEMENT

 

THIS SHARE PURCHASE AGREEMENT (the "Agreement") made and entered into this 10 day of June 2020.

 

BETWEEN:

 

A.Artem Belov of Leonard-Bernstein-Strasse 8/2/3208, A-1220, Vienna, Austria ("Shareholder A").

 

B.Belart Holding & Trade GmbH a company incorporated in Austria under No FN 3304849 of Praterstrasse 22/2/5, (formerly of Leonard-Bernstein Strasse 8/2/3109), A-1220, Vienna, Austria ("Shareholder B").

 

C.Nicolas Link of 1402 Royal Oceanic Tower, Dubai Marina. Dubai ("Shareholder C").

 

D.Alexander Kolyakin of Juelicher Str, 91, 40477, Dusseldorf, Germany ("Shareholder D")

 

Collectively the "Existing Shareholders" of FB Fire Technologies ltd, a company incorporated in United Kingdom under No. 9343836 whose registered office is at Matrix Business Centre, Nobel Way, Dinnington, (the "Company").

 

and

 

Ilustrato Pictures International Inc. of 26 Broadway, New York, NY 10004 (the "Purchaser")

 

1.BACKGROUND:

 

The Seller agrees to sell the Shares to the Purchaser and the Purchaser agrees to purchase all the Shares from the Seller and 100% of the outstanding shares in FB Fire Technologies ltd. The background to the Share Purchase is as follows:

 

a.At all material times the Company is a private limited company and at the date of this Agreement has an issued share capital of £1 800 900, divided into 180,090,000 of ordinary shares of £0.01 each. This is shown in point C below.
b.There is a further £896,587 which is to be capitalized and is not allocated as of the date of this agreement. This amount will be allocated in full in the same ratio. The total share capital will in fact be £2,697,487.
c.At all material times the Existing Shareholders are the sole registered and beneficial holders of the following number of shares of the Seller issued as fully paid:
·Shareholder A: 100,850,000
·Shareholder B: 59,430,000
·Shareholder C: 19,810,000
·Shareholder D: 0

 

  
 
1.1Shareholder A has invested a total of over EUR 450.000 in share capital, loans, and expenses in the Company setup as well as Services, earlier R&D costs and securing the underlying technology and IP rights for the Company.
1.2Shareholder B has invested a total of EUR 1.299.600, - and GBP 604.680 - and USD 660.000, - as share capital and multiple loans to the Company.
1.3Shareholder D has invested EUR 150.000 in the Company as well as has continuously provided free services to the Company on the condition of being issued 15% of Shares in the Company.
1.4For the purpose of clarity, the investment amounts above do not include interest or currency exchange gains/losses.
1.5It is Agreed that the Purchaser will try to up list to a National Exchange with (ticker: ILUS) llustrato Pictures International Inc, a company currently listed on the OTC market in the USA henceforth referred to as "ILUS".
1.6The Existing Shareholders will be issued shares in ILUS as per Clause 2.
1.7It is acknowledged that Shareholder B wishes to exchange his current shareholding and debt including interest, of the Company in exchange for a different class of shares in ILUS with more liquidity.

 

2.                  THE PURCHASE PRICE

 

IN CONSIDERATION OF the above and as a condition of the parties entering into this Agreement and other valuable consideration, the receipt and sufficiency of which consideration is acknowledged, the parties to this Agreement agree as follows:

 

2.1It is agreed that 2,500,000 ILUS Preference E shares will be issued to Shareholder B or its respective nominated parties for conversion of debt. Each share has a value of $1.00 with a total valuation before redemption of $2,500,000. The shares will be redeemable, convertible, non- cumulative preferred shares.
2.2The preference shares mentioned will carry a 6% annual dividend and 2.25% must be redeemed per quarter, redeemed at 130% of the stated value but non-cumulative and the dividend or redemption does hence not compound per quarter.
2.3Shareholders A, B, C and D will be issued Common shares in ILUS subject to valuation. These shares will be issued no later than 30 days after the public disclosure of the 2022 annual results or upon an up list to a National exchange, whichever takes place first. The quantity of Common shares in ILUS will be determined by the ILUS board of directors.
2.4Furthermore, the Purchaser agrees that 672,175 Preference E shares will be issued to BrohF Holdings Ltd. a creditor of FB Fire Technologies ltd for conversion of debt. Each share has a value of $1.00 with a total valuation before redemption of $672,175. The shares will be redeemable, convertible, non-cumulative preferred shares.

 

 2 
 
3.Representations and Warranties of the Seller

 

The Seller warrants and represents to the Purchaser as follows:

 

3.1The Seller would not be recognized as an issuer, insider, affiliate, or associate of the Corporation as defined or recognized under applicable securities laws and regulations.
3.2Except as provided in the incorporating documents of the Corporation or as indicated on the face of the certificates for the Shares, the Purchaser would not be prevented or restricted in any way from re-selling the Shares in the future.
3.3The Seller is the owner in clear title of the Shares and the Shares are free of any lien, encumbrance, security interests, charges, mortgages, pledges, or adverse claim or other restriction that would prevent the transfer of clear title to the Purchaser.
3.4The Seller is not bound by any agreement that would prevent any transactions connected with this Agreement.
3.5There is no legal action or suit pending against any party, to the knowledge of the Seller, that would materially affect this Agreement.
3.6The Seller warrant and represent to the Purchaser that except as fairly disclosed with sufficient details to identify the nature and scope of the matter disclosed.
3.7The Seller has the legal power and authority to execute and deliver this Agreement and all other documents required to be executed and delivered by the Sellers hereunder and to consummate the transaction contemplated in this Agreement.

 

4.Representations and Warranties of the Purchaser

 

The Purchaser warrants and represents to the Seller as follows:

 

4.1The Purchaser has the legal power and authority to execute and deliver this Agreement and all other documents required to be executed and delivered by the Purchaser hereunder and to consummate the transaction contemplated in this Agreement.
4.2The Purchaser understands the speculative nature and the risks of investments associated with the Company and confirms that it can bear the risk of the investment.
4.3In evaluating the merits of the purchase of the Shares of the Company, the Purchaser has relied solely on his, her or its own investigation concerning the company the Company and has not relied upon any representations provided by the Seller.

 

4.4The Purchaser would not be recognized as an issuer, insider, affiliate, or associate of the Corporation as defined or recognized under applicable securities laws and regulations.

 

4.5The Purchaser is not bound by any agreement that would prevent any transactions connected with this Agreement.
4.6There is no legal action or suit pending against any party, to the knowledge of the Purchaser, that would materially affect this Agreement.

 

5.Closing

 

The closing of the purchase and sale of the Shares (the "Closing") will take place on June 10, 2020 (the "Closing Date") at the offices of the Seller or at such other time and place as the Seller and the Purchaser mutually agree.

 

 3 
 
6.Expenses

 

All parties agree to pay all their own costs and expenses in connection with this Agreement.

 

7.Finder's Fees

 

a)The Buyer will not pay any type of finder's fee to any party to this agreement or to any other individual in connection to this Agreement. Any finders or sellers’ fees relating to this transaction are to be paid by the seller.
b)The Seller warrants and represent that any investment banker or broker or other intermediary who may have facilitated the transaction contemplated by this Agreement and maybe entitled to a fee or commission in connection with said transaction will be paid by the seller. The seller indemnifies and hold harmless all other parties to this Agreement in connection with any claims for brokerage fees or other commissions that may be made by any party pertaining to this Agreement.
c)The seller warrants that they have disclosed all material facts relating to the company during the due diligence period to the best of their knowledge and indemnifies in full the buyer against any claim more than $20,000 which the seller did not disclose previously.

 

8.Dividends

 

8.1Any dividends earned by the Shares and payable before the Closing of this Agreement will belong to the Seller, and any dividends earned by the Shares and payable after the Closing of this Agreement will belong to the Purchaser.
8.2Any rights to vote attached to the Shares will belong to the Seller before the Closing and will belong to the Purchaser after the Closing.

 

9.Governing Law
9.1This Agreement shall be governed by and construed in accordance with the laws of England and Wales.
9.2The parties agree to submit to the exclusive jurisdiction of the courts of England and Wales.

 

10.Additional Clauses

 

10.1No Dividends have been paid, Assets or cash have been removed, sold, or transferred from the company other than in the normal course of business since the completion of the Due Diligence and the closing of this agreement.
10.2The sellers and the company agree that the shares mentioned in clause 3.3. is determined by ILUS’s Board of directors based upon business performance and is at the Boards sole discretion.

 

10.3The Seller will reasonably act in the best interest to support and assist the buyer in all aspects of the business to assist it to meet the objectives and growth. The Seller will not carry out any actions or make any comments which could be damaging to the company or the buyer for an indefinite period from the completion date of this agreement.
10.4The seller, his affiliates or family, will not compete in the same line of business of the company’s main address for a period of 3 years from the date of closing.

 

 4 
 
10.5The Seller will also sign a separate employment contract with the company for which the seller will receive a market rate remuneration to be agreed in the employment contract and is in addition to the purchase price.

 

11.Miscellaneous
11.1Time is of the essence in this Agreement.
11.2This Agreement may be executed in counterparts. Facsimile signatures are binding and are original signatures.
11.3All warranties and representations of the Seller and the Purchaser connected with this Agreement will survive the Closing.
11.4This Agreement will not be assigned either in whole or in part by any party to this Agreement without the written consent of the other party.
11.5Headings are inserted for the convenience of the parties only and are not to be considered when interpreting this Agreement. Words in the singular mean and include the plural and vice versa. Words in the masculine gender include the feminine gender and vice versa. Words in the neuter gender include the masculine gender and the feminine gender and vice versa.
11.6If any term, covenant, condition or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, it is the parties' intent that such provision be reduced in scope by the court only to the extent deemed necessary by that court to render the provision reasonable and enforceable and the remainder of the provisions of this Agreement will in no way be affected, impaired or invalidated as a result.
11.7This Agreement contains the entire agreement between the parties. All negotiations and understandings have been included in this Agreement. Statements or representations which may have been made by any party to this Agreement in the negotiation stages of this Agreement may in some way be inconsistent with this final written Agreement. All such statements are declared to be of no value in this Agreement. Only the written terms of this Agreement will bind the parties.
11.8The Seller and Buyer have taken independent legal advice and are fully aware of their commitment, interpretations, deliverables and understanding of this agreement.
11.9This Agreement and the terms and conditions contained in this Agreement apply to and are binding upon the Seller and the Purchaser and their respective successors, assigns, executors, administrators, beneficiaries, and representatives.
11.10Any dispute or claim arising to or in any way related to this Agreement shall be settled by binding arbitration as per clause 10. All arbitration shall be conducted in accordance with the rules and regulations of Wales and England. The Court shall designate an arbitrator from an approved list of arbitrators following each party's review and deletion of those arbitrators on the approved list having a conflict of interest with either party. Each party shall pay its own expenses associated with such arbitration. A demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter has arisen and in no event shall such demand be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be balanced by the applicable statutes of limitations. The decision of the arbitrators shall be rendered within 60 days of submission of any claim or dispute, shall be in writing and mailed to all the Parties included in the arbitration. The decision of the arbitrator shall be binding upon the parties and judgment in accordance with that decision may be entered in any court having jurisdiction thereof.
11.11Any notices or delivery required here will be deemed completed when hand-delivered, delivered by agent, or seven (7) days after being placed in the post, postage prepaid, to

 

 5 
 

the parties at the addresses contained in this Agreement or as the parties may later designate in writing.

11.12All the rights, remedies and benefits provided by this Agreement will be cumulative and will not be exclusive of any other such rights, remedies and benefits allowed by law.

 

IN WITNESS WHEREOF this Agreement has been duly executed the day and year first before written

Artem Belov   SIGNED by /s/ Nicolas Link
     
SIGNED by /s/ Alexander Kolyakin   Nicolas Link
     
Alexander Kolyakin   for and on behalf of FB Fire Technologies Limited
     
SIGNED by /s/ Artem Belov   SIGNED by /s/ Nicolas Link
     
Artem Belov   Nicolas Link
     
for and on behalf of Trade GmbH   for and on behalf of Ilustrato Pictures International Inc

 6 
 

 

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

Principal Amount: $110,000.00

Issue Date: January 26, 2023

Purchase Price: $100,000.00

 

 

PROMISSORY NOTE

 

FOR VALUE RECEIVED, Ilustrato Pictures International Inc., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of Jefferson Street Capital LLC, a New Jersey limited liability company, or registered assigns (the “Holder”) the sum of $110,000.00 together with any interest as set forth herein, on July 26, 2023 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of twelve percent (12%)(the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”). Interest shall be computed on the basis of a 360 day year and the actual number of days elapsed. Interest shall commence accruing on the Issue Date but shall not be payable until the Note becomes payable (whether at Maturity Date or upon acceleration or by prepayment). All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).

 

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

 

The following terms shall apply to this Note:

 

ARTICLE I. CONVERSION RIGHTS

 

1.1               Conversion Right. Upon an Event of Default (as defined herein) the Holder shall have the right from time to time, and at any time following the date of this Note and ending on the date of payment of the Default Amount (as defined in Article III), each in respect of the remaining outstanding amount of this Note to convert all or any part of the outstanding and unpaid amount of this Note into

 

  
 

fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided in Article III of this Note (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The beneficial ownership limitations on conversion as set forth in the section may NOT be waived by the Holder. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e- mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”); however, if the Notice of Conversion is sent after 6:00pm, New York, New York time the Conversion Date shall be the next business day. The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.4 hereof.

 

1.2Removed and Reserved.

 

1.3               Authorized Shares. The Borrower covenants that during the period the Note is outstanding, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved six times the number of shares that would be issuable upon full conversion of the Note (assuming that the 4.99% limitation set forth in Section 1.1 is not in effect)(based on the respective Conversion Price of the Note (as defined in Section 1.2) in effect from time to time, initially 35,000,000) (the “Reserved Amount”). The Reserved Amount shall be increased (or decreased with the written consent of the Holder) from time to time in accordance with the Borrower’s obligations hereunder. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Note. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common

 

 2 
 

Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

 

If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

 

1.4Method of Conversion.

 

(a)                Mechanics of Conversion. As set forth in Section 1.1 hereof, from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the date of payment of the Default Amount, this Note may be converted by the Holder in whole or in part in accordance with the terms herein, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower (upon payment in full of any amounts owed hereunder).

 

(b)                Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion.

 

(c)                 Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within two (2) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations hereunder, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion.

 

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(d)                Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions set forth herein, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit and Withdrawal at Custodian (“DWAC”) system.

 

(e)                Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline due to action and/or inaction of the Borrower, the Borrower shall pay to the Holder

$2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock (the “Fail to Deliver Fee”); provided; however that the Fail to Deliver Fee shall not be due if the failure is a result of a third party (i.e., transfer agent; and not the result of any failure to pay such transfer agent) despite the best efforts of the Borrower to effect delivery of such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 1.4(e) are justified.

 

1.5               Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless: (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration (such as Rule 144 or a successor rule) (“Rule 144”); or (iii) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement).

 

Any restrictive legend on certificates representing shares of Common Stock issuable upon conversion of this Note shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if the Borrower or its transfer agent shall have received an opinion of counsel from Holder’s counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that (i) a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected; or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act; or otherwise may be sold pursuant to an exemption from registration. In the event that the Company does not reasonably accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration (such as Rule 144), at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

 

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1.6Effect of Certain Events.

 

(a)                Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III). “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

 

(b)                Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Note, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, ten (10) days prior written notice (but in any event at least five (5) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Note. The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

 

(c)                 Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

 

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(d)                Adjustment Due to Dilutive Issuance. If, at any time when any Note is issued and outstanding, the Borrower issues or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, except for shares of Common Stock issued directly to vendors or suppliers of the Borrower in satisfaction of amounts owed to such vendors or suppliers (provided, however, that such vendors or suppliers shall not have an arrangement to transfer, sell or assign such shares of Common Stock prior to the issuance of such shares), any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance.

 

The Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.

 

Additionally, the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will be made upo the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

 

1.7               Prepayment. At any time prior to the date that an Event of Default occurs under this Note, the Borrower shall have the right, exercisable on four (4) Trading Days prior written notice to the Holder of the Note, to prepay the outstanding Principal Amount and interest then due under this Note in accordance with this Section 1.7. Any notice of prepayment hereunder (an “Optional Prepayment

 

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Notice”) shall be delivered to the Holder of the Note at its registered addresses or by email and shall state:

(1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be four (4) Trading Days from the date of the Optional Prepayment Notice (the “Optional Prepayment Date”). Within two (2) Trading Days after the Holder’s receipt of the Optional Prepayment Notice, Holder shall specify in writing payment instructions to the Borrower. On the Optional Prepayment Date, the Borrower shall make payment of the amounts designated below to or upon the order of the Holder as specified by the Holder in writing to the Borrower. If the Borrower exercises its right to prepay the Note in accordance with this Section 1.9, the Borrower shall make payment to the Holder of an amount in cash equal to the sum of: (w) 115% multiplied by the Principal Amount then outstanding plus (x) accrued and unpaid interest on the Principal Amount to the Optional Prepayment Date plus (y) $750.00 to reimburse Holder for administrative fees.

 

ARTICLE II. CERTAIN COVENANTS

 

2.1               Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

 

ARTICLE III. EVENTS OF DEFAULT

 

If any of the following events of default (each, an “Event of Default”) shall occur:

 

3.1               Failure to Pay Principal and Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity or upon acceleration and such breach continues for a period of five (5) days after written notice from the Holder.

 

3.2               Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for two (2) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty-eight (48) hours of a demand from the Holder.

 

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3.3               Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of twenty (20) days after written notice thereof to the Borrower from the Holder.

 

3.4               Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

 

3.5               Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

 

3.6               Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

 

3.7               Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTC (which specifically includes the quotation platforms maintained by the OTC Markets Group) or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.

 

3.8               Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

 

3.9               Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

 

3.10           Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

 

3.11           Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC at any time after 180 days after the Issuance Date for any date or period until this Note is no longer outstanding, if the result of such restatement would, by comparison to the un-restated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

 

3.12           Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

 

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3.13           Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

 

3.14           Unavailability of Rule 144. If, at any time on or after the date which is six (6) months after the Issue Date, the Holder is unable to (i) obtain a standard “144 legal opinion letter” from an attorney reasonably acceptable to the Holder, the Holder’s brokerage firm (and respective clearing firm), and the Borrower’s transfer agent in order to facilitate the Holder’s conversion of any portion of the Note into free trading shares of the Borrower’s Common Stock pursuant to Rule 144, and (ii) thereupon deposit such shares into the Holder’s brokerage account.

 

Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Amount (as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, OR SECTION 3.14, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT AMOUNT (AS DEFINED HEREIN); MULTIPLIED BY

(Z) TWO (2). Upon the occurrence and during the continuation of any Event of Default specified in Sections

3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on this Note or upon acceleration), 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.15, 3.16, 3.17, and/or 3.18,

exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Section 1.4(e) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

 

If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower

 

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remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

 

Upon an Event of Default, at the option of the Holder, the Holder shall be entitled to effect its Conversion Right under Section 1.1 herein and the Conversion Price shall be equal to lesser of the lowest Trading Price during (i) the period commencing on the date of default through the date such default is cured discounted by thirty percent (35%) (the “Default Period”) or (ii) the twenty (20) Trading Day period preceding the Conversion Date discounted by thirty five percent (35%), subject to adjustment as provided in this Note. “Trading Price” means, for any security as of any date, the lowest trade price of the Common Stock on the OTC Pink, OTCQB or applicable trading market as reported by a reliable reporting service designated by the Holder. Holder shall be entitled to deduct $2,500.00 from the conversion amount in each Notice of Conversion to cover Holder’s deposit fees associated with each Notice of Conversion.

 

ARTICLE IV. MISCELLANEOUS

 

4.1               Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

4.2               Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

 

If to the Borrower, to:

 

Ilustrato Pictures International Inc. 13802 N. Scottsdale Road

Suite 139

Scottsdale, AZ 85254 If to the Holder:

Jefferson Street Capital LLC 720 Monroe Street, Suite 401B

Hoboken, New Jersey 07030

 

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4.3               Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

 

4.4               Most Favored Nation. During the period where any monies are owed to the Holder pursuant to this Note, if the Borrower engages in any future financing transactions with a third party investor, the Borrower will provide the Holder with written notice (the “MFN Notice”) thereof promptly but in no event less than 10 days prior to closing any financing transactions. Included with the MFN Notice shall be a copy of all documentation relating to such financing transaction and shall include, upon written request of the Holder, any additional information related to such subsequent investment as may be reasonably requested by the Holder. In the event the Holder determines that the terms of the subsequent investment are preferable to the terms of the securities of the Borrower issued to the Holder pursuant to the terms of the Purchase Agreement, the Holder will notify the Borrower in writing. Promptly after receipt of such written notice from the Holder, the Borrower agrees to amend and restate the Securities (which may include the conversion terms of this Note), to be identical to the instruments evidencing the subsequent investment. Notwithstanding the foregoing, this Section 4.4 shall not apply in respect of (i) an Exempt Issuance, or (ii) an underwritten public offering of Common Stock. “Exempt Issuance” means the issuance of: (a) shares of Common Stock or options to employees, officers, consultants, advisors or directors of the Borrower pursuant to any stock or option plan duly adopted for such purpose by a majority of the members of the Board of Directors or a majority of the members of a committee of directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of this Note and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date hereof, and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Borrower, provided that any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Borrower and in which the Borrower receives benefits in addition to the investment of funds, but shall not include a transaction in which the Borrower is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

 

4.5               Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the Securities and Exchange Commission). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement; and may be assigned by the Holder without the consent of the Borrower.

 

4.6               Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

 

4.7               Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New Jersey or in the federal courts located in New Jersey. The parties to this

 

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Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note, any agreement or any other document delivered in connection with this Note by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

4.8               Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

 

4.9               Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

 

4.10           Future Raises; Repayment from Proceeds. Until the Note is satisfied in full, if the Borrower receives cash proceeds from any source or series of related or unrelated sources, including but not limited to, from the issuance of equity and/or debt securities, the conversion of outstanding warrants of the Borrower, the issuance of securities pursuant to an equity line of credit of the Borrower or the sale of assets, the Borrower shall, within one (1) business day of Borrower’s receipt of such proceeds, inform the Holder of such receipt, following which the Holder shall have the right in its sole discretion to require the Borrower to immediately apply all or any portion of such proceeds to repay all or any portion of this Note. Failure of the Borrower to comply with this provision shall constitute an Event of Default under Section 3.4 of the Note. In the event that such proceeds are received by the Holder prior to the Maturity Date, the required prepayment shall be subject to the terms of Section 1.7 herein.

 

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this on January 26, 2023.

 

ILUSTRATO PICTURES INTERNATIONAL INC.

 

By: /s/ Nicolas Link

Name: Nicolas Link

Title: Chief Executive Officer

 

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EXHIBIT A

NOTICE OF CONVERSION

The undersigned hereby elects to convert $ ________________principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of Ilustrato Pictures International Inc., a Nevada corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of January 26, 2023 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

 

Box Checked as to applicable instructions:

 

[ ] The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

 

Name of DTC Prime Broker:

Account Number:

 

[ ] The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

[Insert Name and Address of Holder Here] Date of conversion: ___________________

Applicable Conversion Price: $_____________________

Number of shares of common stock to be issued

pursuant to conversion of the Notes: _________________

Amount of Principal Balance due remaining

under the Note after this conversion: ____________________

 

JEFFERSON STREET CAPITAL LLC

 

 

By: _______________________________

Name:

Title:

Date:

 

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SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of January 26, 2023 by and between ILUSTRATO PICTURES INTERNATIONAL INC., a Nevada corporation, with headquarters located at 13802 N. Scottsdale Road, Suite 139, Scottsdale, Arizona 85254 (the “Company”), and JEFFERSON STREET CAPITAL LLC, a New Jersey limited liability company, with its address at 720 Monroe Street, Suite C401B, Hoboken, New Jersey 07030 (the “Buyer”).

 

WHEREAS:

 

A.                  The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”);

 

B.                  Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement a Promissory Note of the Company, in the form attached hereto as Exhibit A, in the aggregate principal amount of US$110,000.00 (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares of common stock, $0.001 par value per share, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note;

 

C.                   The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth immediately below its name on the signature pages hereto; and

 

NOW THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:

 

1.PURCHASE AND SALE OF NOTE.

 

a.       Purchase of Note. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages hereto.

 

b.       Form of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and (ii)  the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase Price.

 

  
 

 

c.       Closing Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 5 and Section 6 below, the date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be 12:00 noon, Eastern Standard Time on or about January 26, 2023, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.

 

2.                  REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and warrants to the Company that:

 

a.       Investment Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note (including, without limitation, such additional shares of Common Stock, if any, as are issuable (i) on account of interest on the Note (ii) as a result of the events described in Sections 1.3 and 1.4(g) of the Note or (iii) in payment of the Standard Liquidated Damages Amount (as defined in Section 2(f) below) pursuant to this Agreement, such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and, collectively with the Note, the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.

 

b.       Accredited Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).

 

c.       Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.

 

d.       Information. The Buyer and its advisors, if any, have been, and for so long as the Note remains outstanding will continue to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for so long as the Note remains outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Buyer understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that may constitute a breach of any of the Company's representations and warranties made herein.

 

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e.       Governmental Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.

 

f.        Transfer or Re-sale. The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company, at the cost of the Company, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of the Company, not to exceed $300 per opinion, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, within three (3) business days of delivery of the opinion to the Company, the Company shall pay to the Buyer liquidated damages of three and one half percent (3.5%) of the outstanding amount of the Note per day plus accrued and unpaid interest on the Note, prorated for partial months, in cash or shares at the option of the Buyer (“Standard Liquidated Damages Amount”). If the Buyer elects to be pay the Standard Liquidated Damages Amount in shares of Common Stock, such shares shall be issued at the Conversion Price (as defined in the Note) at the time of payment.

 

g.       Legends. The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities):

 

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“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, or

(b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline (as such term is defined in Section 1.4(d) of the Note), it will be considered an Event of Default pursuant to Section 3.2 of the Note.

 

h.       Authorization; Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.

 

i.         Residency. The Buyer is a resident of the jurisdiction as set forth in the Preamble of this Agreement.

 

3.REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company

represents and warrants to the Buyer that:

 

 4 
 

 

a.       Organization and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. The Company and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith. “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.

 

b.       Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required,

(iii)     this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

 

c.       Capitalization. As of January 20, 2023 the authorized common stock of the Company consists of 2,000,000,000 shares of Common Stock, of which approximately 1,355,230,699 shares are issued and outstanding. Except as disclosed in the SEC Documents, no shares are reserved for issuance pursuant to the Company’s stock option plans, no shares are reserved for issuance pursuant to securities (other than the Note) exercisable for, or convertible into or exchangeable for shares of Common Stock and the Company shall reserve 35,000,000 shares for issuance upon conversion of the Note. All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. Except as disclosed in the SEC Documents, as of the effective date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the

 

 5 
 

 

Company or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Note or the Conversion Shares. The Company has filed in its SEC Documents true and correct copies of the Company’s Certificate of Incorporation as in effect on the date hereof (“Certificate of Incorporation”), the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common Stock of the Company and the material rights of the holders thereof in respect thereto. The Company shall provide the Buyer with a written update of this representation signed by the Company’s Chief Executive on behalf of the Company as of the Closing Date.

 

d.       Issuance of Shares. The issuance of the Note is duly authorized and, upon issuance in accordance with the terms of this Agreement, will be validly issued, fully paid and non- assessable and free from all preemptive or similar rights, taxes, liens, charges and other encumbrances with respect to the issue thereof. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

 

e.       Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.

 

f.        No Conflicts. The execution, delivery and performance of this Agreement and the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or other organizational documents and neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of

 

 6 
 

 

time or both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any property or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement, the Note in accordance with the terms hereof or thereof or to issue and sell the Note in accordance with the terms hereof and to issue the Conversion Shares upon conversion of the Note. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the listing requirements of the Over-the-Counter Bulletin Board (the “OTCBB”), the OTCQB or any similar quotation system, and does not reasonably anticipate that the Common Stock will be delisted by the OTCBB, the OTCQB or any similar quotation system, in the foreseeable future nor are the Company's securities “chilled” by DTC. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

 

g.       SEC Documents; Financial Statements. The Company has timely filed all quarterly and annual reports required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”). The Company has delivered to the Buyer true and complete copies of the SEC Documents, except for such exhibits and incorporated documents, and except as such Documents are available EDGAR filings on the SEC’s sec.gov website. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited

 

 7 
 

 

statements, to normal year-end audit adjustments). Except as set forth in the financial statements of the Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to September 30, 2016, and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial statements, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company. The Company is subject to the reporting requirements of the 1934 Act. For the avoidance of doubt, filing of the documents required in this Section 3(g) via the SEC’s Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”) shall satisfy all delivery requirements of this Section 3(g).

 

h.       Absence of Certain Changes. Since September 30, 2020, there has been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting status of the Company or any of its Subsidiaries.

 

i.         Absence of Litigation. There is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect. Schedule 3(i) contains a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company or any of its Subsidiaries, without regard to whether it would have a Material Adverse Effect. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

 

j.         Patents, Copyrights, etc. The Company and each of its Subsidiaries owns or possesses the requisite licenses or rights to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights (“Intellectual Property”) necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future). Except as disclosed in the SEC Documents, there is no claim or action by any person pertaining to, or proceeding pending, or to the Company’s knowledge threatened, which challenges the right of the Company or of a Subsidiary with respect to any Intellectual Property necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); to the best of the Company’s knowledge, the Company’s or its Subsidiaries’ current and intended products, services and processes do not infringe on any Intellectual Property or other rights held by any person; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing. The Company and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of their Intellectual Property.

 

k.       No Materially Adverse Contracts, Etc. Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material Adverse Effect.

 

 8 
 

 

l.         Tax Status. The Company and each of its Subsidiaries has made or filed all federal, state and foreign income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax. None of the Company’s tax returns is presently being audited by any taxing authority.

 

m.     Certain Transactions. Except for arm’s length transactions pursuant to which the Company or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could obtain from third parties and other than the grant of stock options disclosed on Schedule 3(c), none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

 

n.       Disclosure. All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement and provided to the Buyer pursuant to Section 2(d) hereof and otherwise in connection with the transactions contemplated hereby is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company’s reports filed under the 1934 Act are being incorporated into an effective registration statement filed by the Company under the 1933 Act).

 

o.       Acknowledgment Regarding Buyer’ Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any

 

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similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’ purchase of the Securities. The Company further represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.

 

p.       No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.

 

q.       Brokers. Except for Moody Capital Solutions, Inc., the Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.

 

r.        Permits; Compliance. The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Since September 30, 2016, neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect.

 

s.Environmental Matters.

 

(i)                       There are, to the Company’s knowledge, with respect to the Company or any of its Subsidiaries or any predecessor of the Company, no past or present violations of Environmental Laws (as defined below), releases of any material into the environment, actions, activities, circumstances, conditions, events, incidents, or contractual obligations which may give rise to any common law environmental liability or any liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar federal, state, local or foreign laws and neither the Company nor any of its Subsidiaries has received any notice with respect to any of the foregoing, nor is any action pending or, to the Company’s knowledge, threatened in connection with any of the foregoing. The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions,

 

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discharges, releases or threatened releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

 

(ii)                     Other than those that are or were stored, used or disposed of in compliance with applicable law, no Hazardous Materials are contained on or about any real property currently owned, leased or used by the Company or any of its Subsidiaries, and no Hazardous Materials were released on or about any real property previously owned, leased or used by the Company or any of its Subsidiaries during the period the property was owned, leased or used by the Company or any of its Subsidiaries, except in the normal course of the Company’s or any of its Subsidiaries’ business.

 

(iii)                  There are no underground storage tanks on or under any real property owned, leased or used by the Company or any of its Subsidiaries that are not in compliance with applicable law.

 

t.        Title to Property. Except as disclosed in the SEC Documents the Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects or such as would not have a Material Adverse Effect. Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect.

 

u.       Internal Accounting Controls. Except as disclosed in the SEC Documents the Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s board of directors, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

v.       Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

 

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w.     Solvency. The Company (after giving effect to the transactions contemplated by this Agreement) is solvent (i.e., its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured) and currently the Company has no information that would lead it to reasonably conclude that the Company would not, after giving effect to the transaction contemplated by this Agreement, have the ability to, nor does it intend to take any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature. The Company did not receive a qualified opinion from its auditors with respect to its most recent fiscal year end and, after giving effect to the transactions contemplated by this Agreement, does not anticipate or know of any basis upon which its auditors might issue a qualified opinion in respect of its current fiscal year. For the avoidance of doubt any disclosure of the Borrower’s ability to continue as a “going concern” shall not, by itself, be a violation of this Section 3(w).

 

x.       No Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”). The Company is not controlled by an Investment Company.

 

y. Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect. Upon written request the Company will provide to the Buyer true and correct copies of all policies relating to directors’ and officers’ liability coverage, errors and omissions coverage, and commercial general liability coverage.

 

z.        Bad Actor. No officer or director of the Company would be disqualified under Rule 506(d) of the Securities Act as amended on the basis of being a “bad actor” as that term is established in the September 19, 2013 Small Entity Compliance Guide published by the SEC.

 

aa.   Shell Status. The Company represents that it is not a “shell” issuer and has never been a “shell” issuer, or that if it previously has been a “shell” issuer, that at least twelve (12) months have passed since the Company has reported Form 10 type information indicating that it is no longer a “shell” issuer. Further, the Company will instruct its counsel to either (i) write a 144- 3(a)(9) opinion to allow for salability of the Conversion Shares or (ii) accept such opinion from Holder’s counsel.

 

bb. No-Off Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company or any of its Subsidiaries and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its 1934 Act filings and is not so disclosed or that otherwise could be reasonably likely to have a Material Adverse Effect.

 

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cc.    Manipulation of Price. The Company has not, and to its knowledge no one acting on its behalf has: (i) taken, directly or indirectly, any action designed to cause or to result, or that could reasonably be expected to cause or result, in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company.

 

dd.   Sarbanes-Oxley Act. The Company and each Subsidiary is in material compliance with all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of the date hereof.

 

ee.   Employee Relations. Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or employs any member of a union. The Company believes that its and its Subsidiaries’ relations with their respective employees are good. No executive officer (as defined in Rule 501(f) promulgated under the 1933 Act) or other key employee of the Company or any of its Subsidiaries has notified the Company or any such Subsidiary that such officer intends to leave the Company or any such Subsidiary or otherwise terminate such officer’s employment with the Company or any such Subsidiary. To the knowledge of the Company, no executive officer or other key employee of the Company or any of its Subsidiaries is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non- competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer or other key employee (as the case may be) does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

ff.      Breach of Representations and Warranties by the Company. The Company agrees that if the Company breaches any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement and it being considered an Event of Default under Section 3.5 of the Note, the Company shall pay to the Buyer the Standard Liquidated Damages Amount in cash or in shares of Common Stock at the option of the Company, until such breach is cured. If the Company elects to pay the Standard Liquidated Damages Amounts in shares of Common Stock, such shares shall be issued at the Conversion Price at the time of payment.

 

4.COVENANTS.

 

a.       Best Efforts. The parties shall use their commercially reasonable best efforts to satisfy timely each of the conditions described in Section 7 and 8 of this Agreement.

 

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b.       Form D; Blue Sky Laws. The Company agrees to file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof to the Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Securities for sale to the Buyer at the applicable closing pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyer on or prior to the Closing Date.

 

c.       Use of Proceeds. The Company shall use the proceeds from the sale of the Note for working capital and other general corporate purposes and shall not, directly or indirectly, use such proceeds for any loan to or investment in any other corporation, partnership, enterprise or other person (except in connection with its currently existing direct or indirect Subsidiaries).

 

d.       Financial Information. The Company agrees to send or make available the following reports to the Buyer until the Buyer transfers, assigns, or sells all of the Securities: (i) within ten

(10) days after the filing with the SEC, a copy of its Annual Report on Form 10-K its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii) within one (1) day after release, copies of all press releases issued by the Company or any of its Subsidiaries; and (iii) contemporaneously with the making available or giving to the shareholders of the Company, copies of any notices or other information the Company makes available or gives to such shareholders. For the avoidance of doubt, filing the documents required in (i) above via EDGAR or releasing any documents set forth in (ii) above via a recognized wire service shall satisfy the delivery requirements of this Section 4(e).

 

e.       Listing. The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCBB, OTCQB, OTC Pink or any equivalent replacement exchange, the Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock Exchange (“NYSE”), or the NYSE MKT and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies of any material notices it receives from the OTCBB, OTCQB and any other exchanges or quotation systems on which the Common Stock is then listed regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems. The Company shall pay any and all fees and expenses in connection with satisfying its obligation under this Section 4(f).

 

f.        Corporate Existence. So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed for trading on the OTCBB, OTCQB, OTC Pink, Nasdaq, NasdaqSmallCap, NYSE or AMEX.

 

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g.       No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.

 

h.       Failure to Comply with the 1934 Act. So long as the Buyer beneficially owns the Note, the Company shall comply with the quarterly and annual reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934 Act.

 

i.         Trading Activities. Neither the Buyer nor its affiliates has an open short position (or other hedging or similar transactions) in the Common Stock of the Company and the Buyer agree that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging transactions with respect to the Common Stock of the Company.

 

j.         Restriction on Activities. Commencing as of the date first above written, and until the sooner of the six month anniversary of the date first written above or payment of the Note in full, or full conversion of the Note, the Company shall not, directly or indirectly, without the Buyer’s prior written consent, which consent shall not be unreasonably withheld: (a) change the nature of its business; or (b) sell, divest, acquire, change the structure of any material assets other than in the ordinary course of business.

 

k.       Par Value. If the closing bid price at any time the Note is outstanding falls below $0.001 for five (5) consecutive days, the Company shall cause the par value of its Common Stock to be reduced to $0.0001 or less.

 

l.         Breach of Covenants. The Company agrees that if the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of Default under Section 3.4 of the Note, the Company shall pay to the Buyer the Standard Liquidated Damages Amount in cash or in shares of Common Stock at the option of the Buyer, until such breach is cured, or with respect to Section 4(d) above, the Company shall pay to the Buyer the Standard Liquidated Damages Amount in cash or shares of Common Stock, at the option of the Buyer, upon each violation of such provision. If the Company elects to pay the Standard Liquidated Damages Amounts in shares of Common Stock, such shares shall be issued at the Conversion Price at the time of payment.

 

m.     Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent to issue certificates, registered in the name of the Buyer or its nominee, for the Conversion Shares in such amounts as specified from time to time by the Buyer to the Company upon conversion of the Note in accordance with the terms thereof (the “Irrevocable Transfer Agent Instructions”). In the event that the Borrower proposes to replace its transfer agent, the Borrower shall

 

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provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower. Prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold, all such certificates shall bear the restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that: (i) no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section, and stop transfer instructions to give effect to Section 2(f) hereof (in the case of the Conversion Shares, prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold), will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for Conversion Shares to be issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement; and (iii) it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement. Nothing in this Section shall affect in any way the Buyer’s obligations and agreement set forth in Section 2(g) hereof to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities. If the Buyer provides the Company, at the cost of the Company not to exceed $300, with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act and such sale or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.

 

n.       Transaction Expense Amount. Upon Closing, the Company shall pay US$3,000.00 to Moody Capital Solutions, Inc., a registered broker dealer in accordance with the disbursement authorization hereto.

 

o.       Issuance of Common Stock Purchase Warrant to Buyer. As additional consideration for the Buyer loaning the Purchase Price to the Company, the Company shall issue to the

 

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Buyer, or designees of the Buyer, common stock purchase warrants to purchase 650,000 shares of Common Stock of the Company at an exercise price equal to $0.15 per share (as defined herein) (subject to adjustment as set forth in the Warrant) expiring five years from the Issue Date (the “Warrant”). The Warrant shall be issued and delivered to the Buyer on the Closing Date.

 

5.CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS TO SELL. The

obligation of the Company hereunder to issue and sell the Note to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

 

a.The Buyer shall have executed this Agreement and delivered the same to the

Company.

 

b.The Buyer shall have delivered the Purchase Price in accordance with Section

1(b) above.

 

c.       The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.

 

d.       No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

 

6.CONDITIONS PRECEDENT TO THE BUYER’S OBLIGATION TO PURCHASE. The

obligation of the Buyer hereunder to purchase the Note at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:

 

a.       The Company shall have executed this Agreement, effectuated the Issuance, and delivered the Agreement and Issuance to the Buyer.

 

b.       The Board of Directors of the Company shall have approved by Unanimous Written Consent (the “Consent”) the Issuance and transactions contemplated by this Agreement and the Note and the Company shall have delivered such fully executed Consent to the Buyer.

 

c.       The Company shall have delivered to the Buyer the duly executed Note (in such denominations as the Buyer shall request) and in accordance with Section 1(b) above.

 

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d.       The Irrevocable Transfer Agent Instructions, in form and substance satisfactory to a majority-in-interest of the Buyer, shall have been delivered to and acknowledged in writing by the Company’s Transfer Agent and such fully executed Irrevocable Transfer Agent Instructions shall have been delivered to the Buyer.

 

e.       The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, but not limited to certificates with respect to the Company’s Certificate of Incorporation, By-laws and Board of Directors’ resolutions relating to the transactions contemplated hereby.

 

f.        No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

 

g.       No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations.

 

h.       The Conversion Shares shall have been authorized for quotation on the OTCBB, OTCQB, OTC Pink or any similar quotation system and trading in the Common Stock on the OTCBB, OTCQB or any similar quotation system shall not have been suspended by the SEC or the OTCBB, OTCQB, OTC Pink or any similar quotation system.

 

i.         The Buyer shall have received the Warrant (as defined in the Note) and an Officer’s certificate described in Section 3(c) above, dated as of the Closing Date.

 

 

7.GOVERNING LAW; MISCELLANEOUS.

 

a.       Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement, the Note or any other agreement, certificate, instrument or document contemplated hereby shall be brought only in the state courts of New Jersey or in the federal courts in New Jersey. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action

 

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instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER TRANSACTION DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY

OR THEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

b.       Counterparts; Signatures by Facsimile. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

 

c.       Construction; Headings. This Agreement shall be deemed to be jointly drafted by the Company and the Buyer and shall not be construed against any person as the drafter hereof. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

 

d.       Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

 

e.       Entire Agreement; Amendments. This Agreement, the Note and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.

 

 19 
 

 

f.        Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, email, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by email or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

 

If to the Company, to:

 

Ilustrato Pictures International Inc. 13802 N. Scottsdale Road

Suite 139

Scottsdale, AZ 85254 If to the Buyer, to:

Jefferson Street Capital LLC 720 Monroe Street, Suite 401B Hoboken, New Jersey 07030

 

Each party shall provide notice to the other party of any change in address.

 

g.       Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, subject to Section 2(f), the Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.

 

h.       Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

 

i.         Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder not withstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees

 

 20 
 

 

to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

 

j.         Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

k.       No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

 

l.         Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.

 

m.     Indemnification. In consideration of the Buyer’s execution and delivery of this Agreement and acquiring the Securities hereunder, and in addition to all of the Company’s other obligations under this Agreement or the Note, the Company shall defend, protect, indemnify and hold harmless the Buyer and its stockholders, partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing persons’ agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement or the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in this Agreement or the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby or (c) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company) and arising out of or resulting from (i) the execution, delivery, performance or enforcement of this Agreement or the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby, (ii) any transaction financed or to be financed

 

 21 
 

 

in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, or (iii) the status of the Buyer or holder of the Securities as an investor in the Company pursuant to the transactions contemplated by this Agreement. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable law.

 

 

 

[signature page follows]

 

 22 
 

 

IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.

 

 

ILUSTRATO PICTURES INTERNATIONAL INC.

 

 

By: /s/ Nicolas Link

Name: Nicolas Link

Title: Chief Executive Officer

 

 

 

 

JEFFERSON STREET CAPITAL LLC

 

 

By: /s/ Brian Goldberg

Name: Brian Goldberg

Title: Managing Member

 

 

 

AGGREGATE SUBSCRIPTION AMOUNT:

 

Aggregate Principal Amount of Note: US$110,000.00

 

Aggregate Purchase Price: US$100,000.00

 

 23 
 

 

Exhibit A

 

Note See attached

FIRST AMENDMENT TO

COMMON STOCK PURCHASE WARRANT

 

This FIRST AMENDMENT TO THE COMMON STOCK PURCHASE WARRANT (this “Amendment”), dated as of March 8, 2023 (the “Effective Date”), by and between ILUSTRATO PICTURES INTERNATIONAL, INC., a Nevada corporation, with headquarters located at 26 Broadway, Suite 934, New York, New York 10004 (the “Company”), and AJB CAPITAL INVESTMENTS, LLC, a Delaware limited liability company, with its address at 4700 Sheridan Street, Suite J, Hollywood, FL 33021 (the “Buyer”).

 

WHEREAS:

A.The Company and the Buyer are parties to that certain Common Stock Purchase Warrant for the acquisition of 30,000,000 shares of Common Stock of the Company issued in favor of the Buyer, dated December 2, 2022 (the “Warrant”).

 

B.Section 9 of the Warrant provides that the provisions of the Warrant may be amended if such amendment is in writing and signed by the Buyer.

 

C.The Company and the Buyer desire to amend the Warrant in accordance with the terms of this Amendment.

 

NOW THEREFORE, in consideration of the foregoing recitals and the mutual covenants, representations, warranties, conditions, and agreements hereinafter expressed, the Company and the Buyer hereby agree as follows:

1.Defined Terms. All capitalized terms used in this Amendment and not otherwise defined shall have the meanings given to such terms in the Warrant.
2.Amendment to Section 1(c). Section 1(c) of the Warrant is hereby amended to replace therein each instance of the words “February 28, 2023” with “April 1, 2023”.

3.        No Further Amendment. Except as expressly amended hereby, the Warrant is in all respects ratified and confirmed and all the terms, conditions, and provisions thereof shall remain in full force and effect. This Amendment is limited precisely as written and shall not be deemed to be an amendment to any other term or condition of the Warrant or any other document referred to therein. This Amendment shall be deemed to be in full force and effect from and after the execution of this Amendment by the Company and the Buyer, and the Company and the Buyer shall be bound hereby.

 

[signature page follows]

 

 

  
 

 

IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Amendment to be duly executed as of the date first above written.

 

 

ILUSTRATO PICTURES INTERNATIONAL, INC.

 

 

By: /s/ Nicolas Link

Name: Nicolas Link

Title: Chief Executive Officer

 

 

AJB CAPITAL INVESTMENTS, LLC

 

 

By: /s/ Ari Blaine

Name: Ari Blaine

Title: Manager

 

 2 
 

 

 

FIRST AMENDMENT TO

SECURITIES PURCHASE AGREEMENT

 

This FIRST AMENDMENT TO THE SECURITIES PURCHASE AGREEMENT (this “Amendment”), dated as of March 8, 2023 (the “Effective Date”), by and between ILUSTRATO PICTURES INTERNATIONAL, INC., a Nevada corporation, with headquarters located at 26 Broadway, Suite 934, New York, New York 10004 (the “Company”), and AJB CAPITAL INVESTMENTS, LLC, a Delaware limited liability company, with its address at 4700 Sheridan Street, Suite J, Hollywood, FL 33021 (the “Buyer”).

 

WHEREAS:

A.The Company and the Buyer are parties to that certain Securities Purchase Agreement, dated as of December 2, 2022 (the “Agreement”); and Promissory Note of the Company issued in favor of the Buyer, dated December 2, 2022, in the original principal amount of US$1.200,000.00 (the “Note”).
B.The Company has asked that the Buyer waive certain existing Events of Default under the Note (the “Existing Events of Default) set forth on Appendix A hereto.
C.Section 10(e) of the Agreement provides that the provisions of the Agreement may be amended if such amendment is in writing and signed by the Buyer.
D.The Company and the Buyer desire to amend the Agreement in accordance with the terms of this Amendment.

NOW THEREFORE, in consideration of the foregoing recitals and the mutual covenants, representations, warranties, conditions, and agreements hereinafter expressed, the Company and the Buyer hereby agree as follows:

 

1.Defined Terms. All capitalized terms used in this Amendment and not otherwise defined shall have the meanings given to such terms in the Agreement or the Note, as applicable.

 

2.Amendment to Section 4(m). Section 4(m) of the Agreement is hereby amended to replace the words “February 28, 2023” with “April 1, 2023”.

 

3.Amendment to Section 4(o). Section 4(o) of the Agreement is hereby amended in its entirety to read as follows.

 

o.                  Commitment Fee Shares. The Company shall pay to Buyer, (i) as a commitment fee, One Million Six Hundred Thousand and No/100 United States Dollars (US$1,600,000.00) (the “Commitment Fee”) by issuing to Buyer that number of shares of the Company’s Common Stock equal to such amount. It is agreed that the number of shares of Common Stock issuable to Buyer under this Section 4(o) shall be 40,000,000 (the “Commitment Fee Shares”), reflecting a price per Commitment Fee Share of $0.04; provided, that if the Company issues any shares of Common Stock at a price per share of less than $0.04 prior to the end of

 

 1 
 

 

the Adjustment Period (as defined below), the Company will issue to Buyer additional Commitment Fee Shares such that the price per share of the aggregate amount of Commitment Fee Shares (including such additional Commitment Fee Shares) equals such lower price per share. The Company shall instruct the Transfer Agent to issue three (3) certificates or book entry statements, in the amounts of 18,000,000 shares of Common Stock and 12,000,000 shares of Common Stock and 10,000,000 shares of Common Stock, representing the Commitment Fee Shares issuable to the Buyer, immediately upon the Company’s execution of this Agreement, and shall cause the Transfer Agent to deliver such certificates or book entry statements to Buyer within five (5) business days from the Effective Date. The Buyer shall never be in possession of an amount of Common Stock greater than 4.99% of the issued and outstanding Common Stock of the Company provided, however that this ownership restriction described in this Section may be waived by Buyer, in whole or in part, upon sixty-one (61) days’ prior written notice. In the event any certificate or book entry representing the Commitment Fee Shares issuable hereunder shall not be delivered to the Buyer within the applicable five (5) business day period, same shall be an immediate default under this Agreement and the other Transaction Documents. The Commitment Fee Shares, when issued, shall be deemed to be validly issued, fully paid, and non-assessable shares of the Company’s Common Stock. The Commitment Fee Shares shall be deemed fully earned as of the Effective Date, regardless of the amount or number of Loans made hereunder.

 

(i)                 Adjustments. Subject to Section 4(o)(ii) below, it is the intention of the Company and Buyer that the Buyer shall be able to sell (if Buyer so elects, in Buyer’s sole and absolute discretion) the Commitment Fee Shares, and generate net proceeds (net of all brokerage commissions and other fees or charges payable by Buyer in connection with the sale thereof) from such sale equal to the Commitment Fee. The Buyer shall use its best efforts to sell the Commitment Fee Shares in the principal trading market of the Company’s Common Stock or otherwise, at any time in accordance with applicable securities laws. At any time, and from time to time, the Buyer may elect during the period beginning on the date which is the six (6) month anniversary of the Closing Date and ending on the thirty- nine (39) month anniversary of the Closing Date (the “Adjustment Period”), the Buyer may deliver to the Company a reconciliation statement showing the net proceeds actually received by the Buyer from the sale of the Commitment Fee Shares (the “Sale Reconciliation”). If, as of the date of the delivery by Buyer of the Sale Reconciliation (the “Sale Reconciliation Date”), the Buyer has not realized net proceeds from the sale of such Commitment Fee Shares equal to at least the Commitment Fee, as shown on the Sale Reconciliation, then the Company shall, within five (5) business days, either pay in cash the applicable shortfall amount or immediately take all required action necessary or required in order to cause the issuance of additional shares of Common Stock (priced at the volume weighted average

 2 
 

 

price over the ten (10) day period preceding the applicable Sale Reconciliation Date) to the Buyer in an amount sufficient such that, when sold and the net proceeds thereof are added to the net proceeds from the sale of any of the previously issued and sold Commitment Fee Shares, the Buyer shall have received total net funds equal to the Commitment Fee. If additional shares of Common Stock are issued pursuant to this Section 4(o)(i), and after the sale of such additional issued shares of Common Stock the Buyer still has not received net proceeds equal to at least the Commitment Fee, then the Company shall again be required to immediately take all required action necessary or required in order to cause the issuance of additional shares of Common Stock (or the payment of cash) to the Buyer as contemplated above, and such additional issuances (or cash payments) shall continue until the Buyer has received net proceeds from the sale of such Common Stock equal to the Commitment Fee. In the event additional Common Stock is required to be issued as outlined above, the Company shall instruct the Transfer Agent to issue certificates or book entry statements representing such additional shares of Common Stock to the Buyer as promptly as practicable following the Sale Reconciliation Date, and the Company shall in any event cause the Transfer Agent to deliver such certificates or book entry statements to Buyer within five (5) business days following the Sale Reconciliation Date; provided, that if by the fifth (5th) business day following the Sale Reconciliation Date, the Buyer has not received such additional shares of Common Stock (or payment in cash), the Buyer may notify the Transfer Agent directly of the Company’s obligation to deliver such additional shares of Common Stock, and the Transfer Agent shall issue such additional shares of Common Stock from the Reserved Amount without any further action by the Company. In the event such certificates or book entry statements representing such additional shares of Common Stock issuable hereunder shall not be delivered to the Buyer within ten (10) business days of the Sale Reconciliation Date, same shall be an immediate default under this Agreement and the Transaction Documents. Nothing herein contained shall be interpreted to in any way limit the net proceeds from the sale of the Commitment Fee Shares which shall be generated by the Buyer. The Company’s obligation to pay the Commitment Fee contemplated by this Section 4(o) thru the sale of Commitment Fee Shares, shall be an obligation hereunder, secured by all Transaction Documents. For the avoidance of doubt, all requirements of Rule 144 shall apply to any resale of any additional shares of Common Stock issued by the Company pursuant to an adjustment as described above (to the extent Rule 144 is relied upon in connection with such resale), including, without limitation, holding period requirements.

 

(ii)Reserved.

 

 3 
 

 

4.                  Previously Issued Commitment Fee Shares. The Buyer agrees and acknowledges that the Company has previously issued to the Buyer 30,000,000 shares of Common Stock as Commitment Fee Shares, in satisfaction of the Company’s obligations to issue Commitment Fee Shares to the Buyer under the Agreement as in existence prior to the execution of this Amendment. In connection with the execution of this Amendment, the Buyer and the Company agree and acknowledge that the Company will be obligated to issue to the Buyer an additional amount of Commitment Fee Shares totaling 10,000,000 shares (the “Additional Commitment Fee Shares”), and that, upon such issuance, the Company will have satisfied its obligations under Section 4(o) of the Agreement, as amended by this Amendment.

 

5.                  Issuance of Additional Commitment Fee Shares. Within five (5) business days of the date of this Amendment, the Company, though its transfer agent, will issue to the Buyer the Additional Commitment Fee Shares in one (1) book entry statement.

 

6.                  Waiver. As of the Effective Date, the Buyer waives the Existing Events of Default. The waiver contained herein does not apply to any other Default or Event of Default, other than the Existing Events of Default, which may now or hereafter exist under the Note, the Agreement or the other Transaction Documents. No consent or waiver, express or implied, by the Buyer to or for any breach of or deviation from any covenant, condition, or duty by the Company, including the waiver of the Existing Events of Default, shall be deemed a consent or waiver to or of any other breach of the same or any other covenant, condition, or duty set forth in the Note, the Agreement or the other Transaction Documents. The Buyer’s waiver contained herein does not constitute a course of dealing nor does it constitute a course of conduct.

 

7.Miscellaneous.

 

a.No Further Amendment. Except as expressly amended hereby, the Agreement is in all respects ratified and confirmed and all the terms, conditions, and provisions thereof shall remain in full force and effect. This Amendment is limited precisely as written and shall not be deemed to be an amendment to any other term or condition of the Agreement or any other document referred to therein. This Amendment shall be deemed to be in full force and effect from and after the execution of this Amendment by the Company and the Buyer, and the Company and the Buyer shall be bound hereby.

 

b.Incorporation of Certain Provisions by Reference. The following provisions of the Agreement are hereby incorporated into this Amendment by reference mutatis mutandis: Section 10(a) (Governing Law); Section 10(b) (Counterparts; Signature by Facsimile); Section 10(c) (Construction; Headings); Section 10(d) (Severability); Section 10(e) (Entire Agreement; Amendments), Section 10(k) (No Strict Construction).

 

 

 

 

 

[signature page follows]

 

 

 

 4 
 

 

IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Amendment to be duly executed as of the date first above written.

 

 

ILUSTRATO PICTURES INTERNATIONAL, INC.

 

 

 

 

By: /s/ Nicolas Link

Name: Nicolas Link

Title: Chief Executive Officer

 

 

AJB CAPITAL INVESTMENTS, LLC

 

 

By: /s/ Ari Blaine

Name: Ari Blaine

Title: Manager

 

 5 
 

 

APPENDIX A

 

Events of Default have occurred and are continuing under the Note arising from the Company’s breach of Section 3.3 of the Note providing that it shall constitute an Event of Default if the Company shall fail to register the Commitment Fee Shares as required by the SPA or the Warrant Shares as required by the Warrant, as follows:

 

·Section 4(m) of the SPA provides that no later than February 28, 2023, the Company shall file a registration statement including all the Commitment Fee Shares
·Section 1(c) of the Warrant provides that that no later than February 28, 2023, the Company shall file a registration statement including all the Warrant Shares

 

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EXHIBIT 31.1

 

CERTIFICATIONS

 

I, Nicolas Link, certify that:

 

1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2022 of Ilustrato Pictures International, Inc.;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
   
  a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and;
     
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions);
   
  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

 

Dated: April 10, 2023   /s/ Nicolas Link  
    Nicolas Link  
    Chief Executive Officer  
   

(principal executive officer)

  

 
CERTIFICATIONS

 

I, Krishnan Krishnamoorthy, certify that;

 

1.   I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2022 of Ilustrato Pictures International, Inc. (the “registrant”);

 

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a.   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d.   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a.   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: April 10, 2023

 

/s/ Krishnan Krishnamoorthy

By: Krishnan Krishnamoorthy

Title: Chief Financial Officer

(principal accounting, and financial officer)

 

EXHIBIT 32.1

 

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Annual Report on Form 10-K of Ilustrato Pictures International, Inc. (the “Company”) for the fiscal year ended December 31, 2022 as filed with the Securities and Exchange Commission (the “Report”), I, Nicolas Link, Chief Executive Officer, and I, Krishnan Krishnamoorthy, Chief Financial Officer of the Company certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

 

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

  

Dated: April 10, 2023   /s/ Nicolas Link  
    Nicolas Link  
    Chief Executive Officer  
   

(Principal executive officer)

  

 

 

Dated: April 10, 2023   /s/ Krishnan Krishnamoorthy  
    Krishnan Krishnamoorthy  
    Chief Financial Officer  
   

(Principal accounting and financial officer)

  

 

This certification accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.  

 

 

Insider Trading Policy QIND

Introduction

The Board of Directors of QIND has adopted this policy to provide guidelines to all directors, officers, associates and consultants of QIND with respect to trading in QIND securities, as well as the securities of publicly traded companies with whom QIND has a business relationship.

This policy has been designed to prevent insider trading or even allegations of insider trading. Your strict adherence to this policy will help safeguard QIND’s reputation and will further ensure that QIND conducts its business with the highest level of integrity and in accordance with the highest ethical standards. Each QIND associate is responsible for the consequences of his or her actions. You are responsible for understanding and complying with this policy.

Federal and state securities laws prohibit the purchase or sale of a company’s securities by anyone who is aware of material information about that company that is not generally known or available to the public. These laws also prohibit anyone who is aware of material nonpublic information from disclosing this information to others who may trade. Companies and their controlling persons may also be subject to liability if they fail to take reasonable steps to prevent insider trading by company personnel.

It is important that you understand the breadth of activities that constitute illegal insider trading and the consequences, which can be severe. Cases have been successfully prosecuted against trading by associates through foreign accounts, trading by family members and friends, and trading involving only a small number of shares. Both the U.S. Securities and Exchange Commission (the “SEC”) and the Financial Industry Regulatory Authority (“FINRA”) investigate and are very effective at detecting insider trading. Both the SEC and the U.S. Department of Justice pursue insider trading violations vigorously. 

 

  

 

 

Sanctions and Penalties

Violations of the insider trading laws can result in severe civil and criminal sanctions. For example, under U.S. securities laws, individuals may be subject to imprisonment for up to 20 years, criminal fines of up to $5 million and civil fines of up to three times the profit gained or loss avoided. Failure to comply with this policy may also subject you to sanctions imposed by QIND, up to and including immediate dismissal for cause, whether or not your failure to comply with this policy results in a violation of law.

Persons Covered

As a director, officer, associate or consultant of QIND or its subsidiaries, this policy applies to you. The same restrictions that apply to you apply to your family members who reside with you, anyone else who lives in your household, and any family members who do not live in your household but whose transactions in QIND securities are directed by you or are subject to your influence or control (such as parents or children who consult with you before they trade in QIND securities). You are responsible for making sure that any transaction in securities covered by this policy by any of these people complies with this policy.

Definition of Material Non-Public Information

“Material non-public information” is any material information about QIND that has not yet become publicly available.

Information is “material” if a reasonable investor would likely consider it important in making a decision to buy, hold or sell securities. Any information that could reasonably be expected to affect the price of the security is material. The information may be positive or negative. Financial information is frequently material, even if it covers only part of a fiscal period or less than all of QIND’s operations, since either of these might convey enough information about QIND’s

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consolidated results to be considered material information. Other common examples of information that may be material include:

It is not possible to define all categories of material information, and you should recognize that the public, the media and the courts may use hindsight in judging what is material. Therefore, it is important to err on the safe side and assume information is material if there is any doubt.

Information is “non-public” if it is not generally known or available to the public. Information may still be non-public even though it is widely known within QIND.

Release of information to the media does not immediately mean the information has become publicly available. Information is considered to be available to the public only when it has been released broadly to the marketplace (such as by a press release or an SEC filing) and the investing public has had time to absorb and evaluate it. Ordinarily, information about QIND should not be considered public until at least one full trading day has passed following its formal release to the market. For example, if QIND announces earnings before trading begins on a Tuesday, the first time you can buy or sell QIND securities is the opening of the market on Wednesday (assuming you are not aware of other material non-public information at that time). If, however, QIND announces earnings after trading begins that Tuesday, the first time you can buy or sell QIND securities is the opening of the market on the Thursday.

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Requirements Applicable to Everyone

No trading in QIND securities while aware of material non-public information

You are prohibited from engaging in any transaction in QIND securities while aware of material non-public information about QIND. It makes no difference whether or not you relied upon or used material non-public information in deciding to trade – if you are aware of material non-public information about QIND, the prohibition applies. You should avoid even the appearance of an improper transaction to preserve QIND’s reputation for adhering to the highest ethical standards of conduct.

This prohibition covers virtually all transactions in QIND securities. “Securities” includes common stock, options to purchase common stock, debt securities, preferred stock and derivative securities such as put and call options, warrants, swaps, caps and collars. Transactions in QIND securities include purchases, sales, pledges, hedges, loans and gifts of QIND securities, as well as other direct or indirect transfers of QIND securities. Certain of these transactions are addressed in more detail below and may not be permitted under this policy. This prohibition extends to trades of QIND securities in which you have any “beneficial” or other interest, or over which you exercise investment control, including:

·transactions in QIND securities held in joint accounts or accounts of persons or entities controlled directly or indirectly by you;
·transactions in QIND securities for which you act as trustee, executor or custodian; and
·transactions in any other account or investment involving in any way any QIND securities over which you exercise any direct or indirect control.

 

Stock Option Exercises. This prohibition does not apply to the exercise of stock options issued under QIND plans if the exercise price is paid in cash or through QIND withholding a portion of the shares underlying the options. Similarly, QIND may withhold underlying shares to satisfy tax withholding requirements. This prohibition does apply, however, to sales of the underlying stock and broker-assisted cashless exercises of options, as well as to any other market sales for the purpose of generating the cash needed to cover the costs of exercise.

 

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Vesting of Restricted Stock or Settlement of Performance Stock Units. This prohibition does not apply to the automatic deduction of shares by QIND from your restricted stock or performance stock unit account to satisfy the minimum statutory tax withholding liability upon the vesting of restricted stock or settlement of performance stock units. The prohibition does apply, however, to any open market sale of vested shares, including to satisfy tax liabilities.

10b5-1 Plans. This prohibition does not apply to trades made pursuant to a valid “10b5-1 plan” approved by QIND as described below.

Dividend Reinvestment Plan. This prohibition does not apply to purchases of QIND stock under the QIND dividend reinvestment plan that result from your reinvestment of dividends paid on QIND stock held in such plan. This prohibition does apply, however, to other purchases of QIND stock under the plan that result from additional contributions you choose to make to the dividend reinvestment plan, or to increases or decreases in your level of participation in the plan. This prohibition also applies to your sale of any QIND securities purchased pursuant to the plan.

 

Event-specific restricted periods may apply

Although you are always responsible for monitoring for yourself whether you possess material non-public information, from time-to-time QIND may decide to impose a special “restricted period” on those who are aware of particular information that QIND determines may be considered material non-public information. This kind of restricted period may be imposed in connection with a potential acquisition, a financial analyst conference, an anticipated positive or negative earnings surprise or other material development. If you are subject to the restricted period, you may not trade in any QIND securities, except pursuant to a 10b5 1 plan previously approved by QIND, until notified that the restricted period has ended.

The Legal Counsel, in consultation with the Chief Executive Officer, the Chief Financial Officer and Chief Commercial Officer, will determine whether an event-specific restricted period should be imposed. The existence of an event-specific restricted period will not be generally announced. If you are covered by the event-specific restricted period, you will be notified by the Legal Counsel. Any person made aware of an event-specific restricted period should not disclose the existence of the restricted period to anyone else.

No trading in securities of other companies while aware of material non-public information

QIND may engage in business transactions with companies whose securities are publicly traded. These transactions may include, among other things, mergers, acquisitions, divestitures or renewal or termination of significant contracts or other arrangements. Information learned in connection with these transactions or relationships may constitute material non-public information about the other company. You are prohibited from trading in the securities of these companies while aware of material non-public information about the companies and from communicating that information to any other person for such use.

 

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No “tipping” of material non-public information

You may not pass material non-public information about QIND or any other company on to others or otherwise make unauthorized disclosure or use of this information, regardless of whether you profit or intend to profit by the tipping, disclosure, or use. This practice, known as “tipping”, also violates the securities laws and can result in the same civil and criminal penalties that apply to insider trading, even though you did not trade and did not gain any benefit from another's trading.

Frequent trading of QIND securities is strongly discouraged

Frequent trading of QIND securities can create an appearance of wrongdoing even if the decision to trade was based solely on public information such as stock price ranges and other market events. You are strongly discouraged from trading in QIND securities for short-term trading profits. Daily or frequent trading, which can be time-consuming and distracting, is strongly discouraged. QIND reserves the right to request brokerage account statements to assure compliance with this and other provisions of the policy.

No short sales of QIND securities

You may not engage in short sales of QIND securities (sales of securities that are not then owned), including “sales against the box” (short sales not exceeding the number of shares already owned). Generally, short sales are transactions whereby a person will benefit from a decline in the price of the securities, and QIND believes it is inappropriate for associates to engage in these transactions with respect to QIND securities.

No trading in derivatives of QIND

You may not trade in derivatives of an QIND security, such as exchange-traded put or call options and forward transactions.

No hedging transactions

Certain forms of hedging or monetization transactions may offset a decrease, or limit your ability to profit from an increase, in the value of QIND securities you hold, enabling you to continue to own QIND securities without the full risks and rewards of ownership. QIND believes that such transactions separate the holder's interests from those of other stockholders.

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Therefore, you and any person acting on your behalf are prohibited from purchasing any financial instruments (such as prepaid variable forward contracts, equity swaps, collars or exchange funds) or otherwise engaging in any transactions that hedge or offset any decrease in the market value of QIND securities or limit your ability to profit from an increase in the market value of QIND securities.

No margin accounts or pledges

Securities held in a margin account or pledged as collateral for a loan may be sold without your consent by the broker if you fail to meet a margin call or by the lender in foreclosure if you default on the loan. Because a margin or foreclosure sale may occur at a time when you are aware of material nonpublic information or otherwise are not permitted to trade in QIND securities, you are prohibited from holding QIND securities in a margin account or pledging QIND securities as collateral for a loan.

Limited use of standing orders

Standing orders should be used only for three business days. A standing order placed with a broker to sell or purchase stock at a specified price leaves you with no control over the timing of the transaction. A standing order transaction executed by the broker when you are aware of material nonpublic information may result in unlawful insider trading. A standing order incorporated into a 10b5-1 plan approved by QIND is permitted.

No trading on rumors

Rumors within QIND concerning matters which, if true, would be material non-public information are deemed to constitute material non-public information for purposes of this policy. Accordingly, you should not trade on the basis of these rumors.

Material non-public information must be kept confidential

Material non-public information about QIND or its business partners is the property of QIND, and unauthorized disclosure or use of that information is prohibited. That information should be maintained in strict confidence and should be discussed, even within QIND, only with persons who have a “need to know.” You should exercise the utmost care and circumspection in dealing with information that may be material non-public information. Conversations in public places, such as hallways, elevators, restaurants and airplanes, involving information of a sensitive or confidential nature should be avoided. Written information should be appropriately safeguarded

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and should not be left where it may be seen by persons not entitled to the information. The unauthorized disclosure of information could result in serious consequences to QIND, whether or not the disclosure is made for the purpose of facilitating improper trading in securities.

Participation in electronic bulletin boards, twitter, chat rooms, blogs or websites must be consistent with this Policy

Any written or verbal statement that would be prohibited under the law or under this policy is equally prohibited if made on electronic bulletin boards, chat rooms, blogs, websites or any other form of social media, including the disclosure of material non-public information about QIND or material non-public information with respect to other companies that you come into possession of as an associate of QIND.

Public disclosures should be made only by designated persons

No individuals other than specifically authorized personnel should release material information to the public or respond to inquiries from the media, analysts, investors or others outside of QIND. You should not respond to these inquiries unless expressly authorized to do so and should refer any inquiries to the Vice President, Investor Relations or the Vice President, Corporate Marketing.

Post-employment transactions may be prohibited

The portions of this policy relating to trading while in possession of material non-public information and the use or disclosure of that information continue to apply to transactions in QIND securities even after termination of employment or association with QIND. If you are aware of material non-public information about QIND when your employment or other business relationship with QIND ends, you may not trade in QIND securities or disclose the material non-public information to anyone else until that information is made public or becomes no longer material.

Exceptions

In certain limited circumstances, a transaction otherwise prohibited by this policy may be permitted if, prior to the transaction, the Legal Counsel determines that the transaction is not inconsistent with the purposes of this policy. The existence of a personal financial emergency does not excuse you from compliance with this policy and will not be the basis for an exception to the policy for a transaction that is inconsistent with the purposes of the policy.

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Additional Requirements Applicable to Restricted Persons

“Restricted Persons” are those who are at an enhanced risk of possessing inside information and who therefore must exercise greater diligence to comply with insider trading prohibitions. This group includes all members of the Board of Directors, officers and certain senior finance, legal, HR, business development, investor relations, corporate communication and management associates at corporate headquarters and in QIND’s business units, as well as any other associates in a role that makes it likely they will have involvement with material non-public information. This list is updated on a quarterly basis by the Legal Counsel in consultation with the Chief Financial Officer. You will be notified by the Legal Counsel if you are considered a Restricted Person under this policy.

If you are a Restricted Person that is not a director or executive officer, the procedures set forth in this section of the policy will cease to apply to your transactions in QIND securities upon the expiration of any restricted period that is applicable to your transactions at the time your employment or other relationship with QIND ends. Directors will remain Restricted Persons for a period of six months following the last day of service as a director of QIND, and executive officers will remain Restricted Persons for a period of six months following the last day of employment with QIND. 

Quarterly restricted periods

No Restricted Person may trade in QIND securities during a quarterly restricted period, regardless of whether they are then actually aware of material non-public information.

A quarterly restricted period is in effect with respect to each quarterly earnings announcement, starting on the 15th day of the third month of the applicable QIND fiscal quarter and ending when one full trading day has passed following the public announcement of QIND’s quarterly financial results. QIND has selected this period because it is the time when there is likely to be material non-public information about QIND that may be available to Restricted Persons.

For certain Restricted Persons designated by the Legal Counsel, in consultation with the Chief Executive Officer, the Chief Financial Officer and Chief Commercial Officer from time to time, the quarterly restricted period may start prior to the 15th day of the third month of the quarter.

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Notwithstanding the above, a quarterly restricted period does not prohibit trading in QIND securities pursuant to a valid pre-existing 10b5-1 plan approved by QIND as described below.

Trading pre-clearance requirement for certain Restricted Persons

Certain Restricted Persons designated by the Legal Counsel, in consultation with the Chief Executive Officer, the Chief Financial Officer and the Chief Commercial Officer from time to time, must obtain pre-clearance by QIND’s Legal Counsel or, in his or her absence, QIND’s Chief Financial Officer (each an “Approving Person”) before engaging in any transaction involving QIND securities, including, but not limited to, purchases, sales, and gifts. Those Restricted Persons who are required to obtain pre-clearance will be notified from time to time by the Legal Counsel of the applicable pre-clearance or other procedures applicable to them. Each Approving Person should consult with the other Approving Person, or his or her designee, prior to granting pre-clearance for trades. Neither Approving Person may engage in a transaction in QIND securities unless the other Approving Person has pre-cleared the transaction. 

The Approving Persons are under no obligation to approve a transaction submitted for pre-clearance and may determine not to permit a transaction, even if it would not violate the federal securities laws or a specific provision of this policy. In certain circumstances, other associates may be asked to clear with an Approving Person all proposed transactions before initiating them. The fact that a particular intended trade has been denied pre-clearance should be treated as confidential information and should not be disclosed to any person unless authorized by the Approving Person.

If a request for pre-clearance is approved, you have three business days to effect the transaction (or, if sooner, before commencement of a quarterly or event-specific restricted period). Under no circumstance may a person trade while aware of material non-public information about QIND, even if pre-cleared. Thus, if you become aware of material non-public information after receiving pre-clearance, but before the trade has been executed, you must not effect the pre-cleared transaction.

QIND’s approval of any particular transaction under this pre-clearance procedure does not insulate any Restricted Person from liability under the securities laws. Under the law, the ultimate responsibility for determining whether an individual is aware of material non-public information about QIND rests with that individual in all cases.

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10b5-1 Plans

SEC Rule 10b5-1(c) of the Securities Exchange Act of 1934 permits corporate insiders to establish written trading plans (commonly referred to as “10b5-1 plans”) that can be useful in enabling insiders to plan ahead without fear that they might become exposed to material non-public information that will prevent them from trading. Where a valid 10b5-1 plan has been established at a time when the insider was not in possession of material non-public information, trades executed as specified by the plan do not violate the securities laws or this policy even if the insider is in possession of material non-public information at the time the trade is executed. Trades executed as specified by the plan are not subject to the pre-clearance requirement.

To qualify as a 10b5-1 plan for purposes of this policy, the plan must be approved in advance by the Legal Counsel, and you should allow at least three business days for that approval. One of the factors that the Legal Counsel may consider in determining whether to approve a 10b5-1 plan is compliance with QIND’s applicable minimum stock ownership guidelines. These pre-planned trading programs are available only to officers and such other QIND associates as may be designated from time to time by the Chief Executive Officer, the Chief Financial Officer and the Legal Counsel. For more information about how to establish a 10b5-1 plan, please contact the Legal Counsel. QIND reserves the right to disapprove any submitted plan, and to suspend or instruct you to terminate any plan that it has previously approved.

Inquiries

Any questions about this policy, its application to a proposed transaction, or the requirements of applicable laws should be directed to the Legal Counsel.

 

Version 1.0, March 10, 2023

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