ILUSTRATO PICTURES INTERNATIONAL Overview
ILUS is aNevada 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 toChevron , 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 asQuality 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. 54 Table of Contents 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:
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 inUkraine are among other factors that can impact our financial performance. In particular, changes in theU.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 generalU.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 inthe United States as well as additional technological and strategic advancement. ILUS therefore acquired Bull-Head Products, aTennessee 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 onJune 30, 2022 , and for further strategically aligned acquisitions. InFebruary 2022 , ILUS hired a Chief Financial Officer (CFO) for the Company and inJune 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 theU.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 withAL Shola Al Modea Safety and Security LLC being the last onDecember 13, 2022 . ILUS is in the process of launching an approved investment project inSerbia , 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 theRepublic of Serbia and ILUS will with the investment receive incentive funds from theRepublic 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 inSerbia andSerbia is planned to be ILUS' main production hub for vehicles and equipment outside ofthe 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 anInvestment Bank to complete a planned subsidiary IPO. ILUS plans to appointStrategic Advisors to strengthen the organization and its corporate governance for its first planned subsidiary up list to a major stock exchange. In ourJuly 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 endedDecember 31, 2022 . 55 Table of Contents First Half of 2023 ILUS acquired 52% of Quality International Co Ltd FCZ onJanuary 18, 2023 and 51% ofPetro Line FZ LLC onJanuary 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 inthe United States ,United Arab Emirates ,United Kingdom andRepublic of Serbia . The company plans to further expand its manufacturing inthe United States and toSpain 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 additionalStrategic 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
· Industrial & Manufacturing:
· Emergency & Response:
· Mining & Renewable Energy:
· Defense:
Total forecasted Revenue FY2023:
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. 56 Table of Contents
Results of Operations for the Years Ended
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, namelyFirebug Group (FB Fire Technologies Ltd andFirebug Mechanical Equipment LLC ) with both companies engaged in the business of manufacturing firefighting equipment and firefighting vehicles for global customers, andBright 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 ofQuality 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. 57 Table of Contents Geographical presence Presently our operations are spread acrossUnited States ,United Arab Emirates ,United Kingdom , andRepublic of Serbia , however we plan to further expand our regional presence and aim to expand our manufacturing operations inthe United States and toSpain during 2023. Figures in USD Region Wise Revenue 2021 2022 United States 10,930,000 12,242,551 International Operations 333,875 66,101,580 (Rest of the World) Gross Profit Figures in USD Jan -Dec 2022 Jan- Dec 2021 Change $ Emergency Response Division 6,688,741 3,774,091 2,914,650 Industrial & Manufacturing Division 21,672,132 0 21,672,132 Gross Profit 28,360,873 3,774,091 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.
Industrial &
Year 2021 Emergency & Response Division Manufacturing
Division
Revenue 11,263,875 0
Cost of Revenue 7,489,784 0
Operating expensesSelling,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 58 Table of Contents
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 expensesSelling,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 18,919,459 1,165,229 17,754,230
Industrial & Manufacturing 11,471,127 0 11,471,127
Operating Expenses 30,390,586 1,165,229 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
59 Table of Contents Net Income We incurred net income for the group of$4,559,375 for the year endedDecember 31, 2022 , compared to a net income of$13,980,477 for the same period endedDecember 31, 2021 . The main driver for the decrease in net income for the year endedDecember 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
On
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 23,758,170 (1,504,760)
Net Cash (used in) provided by Investing Activities (57,714,835) (1,629,716)
Net Cash (used in) provided by Financing Activities 35,258,699 3,309,812
Net Increase in Cash & Cash Equivalents 1,302,034 175,336
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 customeradvances. 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. 60 Table of Contents Financing Activities Balance Sheet As ofDecember 31,2022 Currency: US Dollars DecemberDecember 31,2022 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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Table of Contents
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.
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