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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-Q



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



For the quarterly period ended March 31, 2023



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



For the transition period from __________ to__________



Commission File Number: 000-56239



Ilustrato Pictures International, Inc.

(Exact name of registrant as specified in its charter)



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



26 Broadway, Suite 934

New York, NY 10004

(Address of principal executive offices)



917-522-3202

(Registrant’s telephone number)

____________

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



Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X] Yes [  ] No



Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [  ]
No



Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.



| | Large accelerated filer | ☐                       | Accelerated filer         | ☐
| | ----------------------- | ----------------------- | ------------------------- | -
| | Non-accelerated filer   | ☒                       | Smaller reporting company | ☒
| |                         | Emerging growth company | ☐                        



If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act. [  ]



Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No



Securities registered pursuant to Section 12(b) of the Act: None



State the number of shares outstanding of each of the issuer’s classes
of common stock, as of the latest practicable date: 1,391,080,699common shares as of May
22, 2023



1


Table of Contents








TABLE OF CONTENTS



|                               |                                                                                       | Page
|------------------------------ | ------------------------------------------------------------------------------------- | ----
|PART I – FINANCIAL INFORMATION |                                                                                      
|                               |                                                                                      
|Item 1:                        | Financial Statements                                                                  | 3   
|Item 2:                        | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4   
|Item 3:                        | Quantitative and Qualitative Disclosures About Market Risk                            | 9   
|Item 4:                        | Controls and Procedures                                                               | 9   
|                               |                                                                                       |     
|PART II – OTHER INFORMATION    |                                                                                      
|                               |                                                                                      
|Item 1:                        | Legal Proceedings                                                                     | 10  
|Item 1A:                       | Risk Factors                                                                          | 10  
|Item 2:                        | Unregistered Sales of Equity Securities and Use of Proceeds                           | 11  
|Item 3:                        | Defaults Upon Senior Securities                                                       | 11  
|Item 4:                        | Mine Safety Disclosures                                                               | 11  
|Item 5:                        | Other Information                                                                     | 11  
|Item 6:                        | Exhibits                                                                              | 11  



2


Table of Contents




PART I - FINANCIAL INFORMATION



Item 1. Financial Statements



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



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



These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions
to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating
results for the interim period ended March 31, 2023, are not necessarily indicative of the results that can be expected for the full year.



3


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ILUSTRATO PICTURES INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



|                                                                                                     |  |    | March 31, 2023 |             | Dec 31, 2022
|---------------------------------------------------------------------------------------------------- |  | -- | -------------- | ----------- | ------------
|ASSETS                                                                                               |  |    |                |             |             
|Current Assets                                                                                       |  |    |                |             |             
|Cash and Cash Equivalents                                                                            |  | 4  |                | 1,436,346   |             
|Accounts Receivables                                                                                 |  | 5  |                | 71,474,512  |             
|Inventory                                                                                            |  |    |                | 2,105,228   |             
|Inventory (work-in-progress)                                                                         |  | 6  |                | 45,223,416  |             
|Other Current Assets                                                                                 |  | 7  |                | 17,156,638  |             
|Total Current Assets                                                                                 |  |    |                | 137,396,140 |             
|Long term Investments                                                                                |  | 8  |                | 18,357,437  |             
|Right of use of asset                                                                                |  | 9  |                | 11,906,654  |             
|Goodwill                                                                                             |  | 10 |                | 60,952,347  |             
|Tangible Assets                                                                                      |  | 11 |                | 21,700,264  |             
|Intangible Assets                                                                                    |  | 12 |                | 699,690     |             
|Total Non-Current Assets                                                                             |  |    |                | 113,616,392 |             
|Total Assets                                                                                         |  |    |                | 251,012,532 |             
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                 |  |    |                |             |             
|Current Liabilities                                                                                  |  | 13 |                |             |             
|Account Payable                                                                                      |  |    |                | 48,154,978  |             
|Current lease liability                                                                              |  |    |                | 835,820     |             
|Other Current liabilities                                                                            |  |    |                | 104,584,361 |             
|Total Current Liabilities                                                                            |  |    |                | 153,575,159 |             
|Non-current liabilities                                                                              |  | 14 |                |             |             
|Notes Payable                                                                                        |  |    |                | 10,360,000  |             
|Non-current lease liability                                                                          |  |    |                | 15,641,887  |             
|Other non-current liabilities                                                                        |  |    |                | 14,186,586  |             
|Total Non-Current Liabilities                                                                        |  |    |                | 40,188,473  |             
|Total Liabilities                                                                                    |  |    |                | 193,763,632 |             
|Stockholders' Equity                                                                                 |  |    |                |             |             
|Common Stock: 2,000,000,000 shares authorized, $0.001 par value,1,379,080,699 issued and outstanding |  | 15 |                | 1,379,081   |             
|Preferred Stock: 235,741,000 authorized, $0.001 par value,                                           |  | 15 |                |             |             
|Class A - 10,000,000 authorized; 10,000,000 issued and outstanding                                   |  |    |                | 10,000      |             
|Class B - 100,000,000 authorized; 3,400,000 issued and outstanding                                   |  |    |                | 3,400       |             
|Class C - 10,000,000 authorized; 0 issued and outstanding                                            |  |    |                | —           |             
|Class D - 60,741,000 authorized; 60,741,000 issued and outstanding                                   |  |    |                | 60,741      |             
|Class E - 5,000,000 authorized; 3,172,175 issued and outstanding                                     |  |    |                | 3,172       |             
|Class F - 50,000,000 authorized; 1,668,250 issued and outstanding                                    |  |    |                | 1,668       |             
|Additional Paid-in-capital                                                                           |  |    |                | 21,118,116  |             
|Other
    Comprehensive Income                                                                       |  | 16 |                | 18,874      |             
|Non-Controlling Interest                                                                             |  | 17 |                | 25,693,170  |             
|Retained Earnings                                                                                    |  |    |                | 8,046,017   |             
|Net Income                                                                                           |  |    |                | 914,662     |             
|Total Stockholders' Equity                                                                           |  |    |                | 57,248,900  |             
|                                                                                                     |  |    |                |             |             
|Total Liabilities and Stockholders' Equity                                                           |  |    |                | 251,012,532 |             



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



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ILUSTRATO PICTURES INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

|                                               |  |                           |               |                    |  |  |               | 
|---------------------------------------------- |  | ------------------------- | ------------- | ------------------ |  |  | ------------- | 
|                                               |  | For
    the Quarter Ended
|                                               |  | March
    31, 2023        |               | March
    31, 2022
|NET
    REVENUE                                |  |                           | 19,810,011    |                    |  |  | 3,013,522     | 
|Total
    Net Revenue                          |  |                           | 19,810,011    |                    |  |  | 3,013,522     | 
|COST
    OF REVENUE                            |  |                           | 13,883,099    |                    |  |  | 1,154,441     | 
|GROSS
    PROFIT                               |  |                           | 5,926,912     |                    |  |  | 1,859,081     | 
|Operating
    Expenses:                        |  |                           |               |                    |  |  |               | 
|General,
    Selling & Administrative Expenses |  |                           | 3,118,674     |                    |  |  | 1,222,445     | 
|Total
    Operating Expense                    |  |                           | 3,118,674     |                    |  |  | 1,222,445     | 
|PROFIT/
    LOSS FROM OPERATIONS               |  |                           | 2,808,238     |                    |  |  | 636,636       | 
|Non-
    Operating Expenses                    |  |                           | 1,247,385     |                    |  |  | —             | 
|Non-Operating
    Income                       |  |                           | 3,540         |                    |  |  | —             | 
|Depreciation                                   |  |                           | 649,732       |                    |  |  | —             | 
|NET
    PROFIT/ LOSS                           |  |                           | 914,662       |                    |  |  | 636,636       | 
|BASIC
    EARNING PER SHARE                    |  |                           | 0.00          |                    |  |  | 0.00          | 
|WEIGHTED
    AVERAGE SHARES OUTSTANDING        |  |                           | 1,379,080,699 |                    |  |  | 1,313,530,699 | 



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



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ILUSTRATO PICTURES INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(UNAUDITED)

|                                                |  |                  |               |                               |  |                               |           |                               |  |                               |            |                               |  |        |        |        |  |        |           |        |  |        |       |        |  |                                |            |                         |  |                                |        |  |  |  |           |  |  |  |       |  |  |  |           |  |  |  |       |  |  |  |            |  |  |  |            |   |  |  |            |  
|----------------------------------------------- |  | ---------------- | ------------- | ----------------------------- |  | ----------------------------- | --------- | ----------------------------- |  | ----------------------------- | ---------- | ----------------------------- |  | ------ | ------ | ------ |  | ------ | --------- | ------ |  | ------ | ----- | ------ |  | ------------------------------ | ---------- | ----------------------- |  | ------------------------------ | ------ |  |  |  | --------- |  |  |  | ----- |  |  |  | --------- |  |  |  | ----- |  |  |  | ---------- |  |  |  | ---------- | - |  |  | ---------- | -
|STATEMENT
    OF STOCKHOLDERS' EQUITY          
|                                                |  | Common
    Stock |               | Preferred
    Stock - Class A |  | Preferred
    Stock - Class B |           | Preferred
    Stock - Class D |  | Preferred
    Stock - Class E |            | Preferred
    Stock - Class F |  |        |        |        |  |       
|                                                |  | Shares           |               | Amount                        |  | Shares                        |           | Amount                        |  | Shares                        |            | Amount                        |  | Shares |        | Amount |  | Shares |           | Amount |  | Shares |       | Amount |  | Additional
    Paid in Capital |            | Accumulated
    Deficit |  | Total
    Stockholders' Equity
|Balance
    December 31,2022                    |  |                  | 1,355,230,699 |                               |  |                               | 1,355,230 |                               |  |                               | 10,000,000 |                               |  |        | 10,000 |        |  |        | 3,400,000 |        |  |        | 3,400 |        |  |                                | 60,741,000 |                         |  |                                | 60,741 |  |  |  | 3,172,175 |  |  |  | 3,172 |  |  |  | 1,633,250 |  |  |  | 1,634 |  |  |  | 20,631,261 |  |  |  | 9,664,983  |   |  |  | 31,730,420 |  
|Non-Controlling Interest                        |  |                  | 24,386,712    |                               |  |                               | —         |                               |  |                               | —          |                               |  |        | —      |        |  |        | —         |        |  |        | —     |        |  |                                | —          |                         |  |                                | —      |  |  |  | —         |  |  |  | —     |  |  |  | —         |  |  |  | —     |  |  |  | —          |  |  |  | —          |   |  |  | —          |  
|Total
    Shareholders’ Equity as of 12.31.2022 |  |                  | 56,117,132    |                               |  |                               |           |                               |  |                               |            |                               |  |        |        |        |  |        |           |        |  |        |       |        |  |                                |            |                         |  |                                |        |  |  |  |           |  |  |  |       |  |  |  |           |  |  |  |       |  |  |  |            |  |  |  |            |   |  |  |            |  
|Common
    stock issued                         |  |                  | 63,850,000    |                               |  |                               | 63,850    |                               |  |                               | —          |                               |  |        | —      |        |  |        | —         |        |  |        | —     |        |  |                                | —          |                         |  |                                | —      |  |  |  | —         |  |  |  | —     |  |  |  | —         |  |  |  | —     |  |  |  | 484,650    |  |  |  | —          |   |  |  | 548,500    |  
|Common
    stock cancelled                      |  |                  | (40,000,000   | )                             |  |                               | (40,000   | )                             |  |                               | —          |                               |  |        | —      |        |  |        | —         |        |  |        | —     |        |  |                                | —          |                         |  |                                | —      |  |  |  | —         |  |  |  | —     |  |  |  | —         |  |  |  | —     |  |  |  | —          |  |  |  | 40,000     |   |  |  | —          |  
|Preferred
    stock issued                      |  |                  | —             |                               |  |                               | —         |                               |  |                               | —          |                               |  |        | —      |        |  |        | —         |        |  |        | —     |        |  |                                | —          |                         |  |                                | —      |  |  |  | —         |  |  |  | —     |  |  |  | 35,000    |  |  |  | 35    |  |  |  | 2,205      |  |  |  | —          |   |  |  | 2,240      |  
|Prefered
    stock cancelled                    |  |                  | —             |                               |  |                               | —         |                               |  |                               | —          |                               |  |        | —      |        |  |        | —         |        |  |        | —     |        |  |                                | —          |                         |  |                                | —      |  |  |  | —         |  |  |  | —     |  |  |  | —         |  |  |  | —     |  |  |  | —          |  |  |  | —          |   |  |  | —          |  
|Changes
    in Retained earnings                |  |                  | —             |                               |  |                               | —         |                               |  |                               | —          |                               |  |        | —      |        |  |        | —         |        |  |        | —     |        |  |                                | —          |                         |  |                                | —      |  |  |  | —         |  |  |  | —     |  |  |  | —         |  |  |  | —     |  |  |  | —          |  |  |  | (1,640,192 | ) |  |  | (1,640,192 | )
|Current
    Quarter Income                      |  |                  | —             |                               |  |                               | —         |                               |  |                               | —          |                               |  |        | —      |        |  |        | —         |        |  |        | —     |        |  |                                | —          |                         |  |                                | —      |  |  |  | —         |  |  |  | —     |  |  |  | —         |  |  |  | —     |  |  |  | —          |  |  |  | 914,662    |   |  |  | 914,662    |  
|Balance
    March 31, 2023                      |  |                  | 1,379,080,699 |                               |  |                               | 1,379,081 |                               |  |                               | 10,000,000 |                               |  |        | 10,000 |        |  |        | 3,400,000 |        |  |        | 3,400 |        |  |                                | 60,741,000 |                         |  |                                | 60,741 |  |  |  | 3,172,175 |  |  |  | 3,172 |  |  |  | 1,668,250 |  |  |  | 1,668 |  |  |  | 21,118,116 |  |  |  | 8,979,553  |   |  |  | 31,555,730 |  
|Non-Controlling
    Interest                    |  |                  | 25,693,170    |                               |  |                               | —         |                               |  |                               | —          |                               |  |        | —      |        |  |        | —         |        |  |        | —     |        |  |                                | —          |                         |  |                                | —      |  |  |  | —         |  |  |  | —     |  |  |  | —         |  |  |  | —     |  |  |  | —          |  |  |  | —          |   |  |  | —          |  
|Total
    Shareholders’ Equity as of 03.31.2023 |  |                  | 57,248,900    |                               |  |                               |           |                               |  |                               |            |                               |  |        |        |        |  |        |           |        |  |        |       |        |  |                                |            |                         |  |                                |        |  |  |  |           |  |  |  |       |  |  |  |           |  |  |  |       |  |  |  |            |  |  |  |            |   |  |  |            |  







|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 | 



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





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Table of Contents




ILUSTRATO PICTURES INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

|                                                                      |  |                           |            |                    |  |  |          |  
|--------------------------------------------------------------------- |  | ------------------------- | ---------- | ------------------ |  |  | -------- | -
|                                                                      |  | For
    the Quarter Ended
|                                                                      |  | March
    31, 2023        |            | March
    31, 2022
|CASH
    FLOWS FROM OPERATING ACTIVITIES                              |  |                           |            |                    |  |  |          |  
|Net
    Loss/ Profit                                                  |  |                           | 914,662    |                    |  |  | 636,636  |  
|Adjustment
    to reconcile net gain (loss) to net cash               |  |                           |            |                    |  |  |          |  
|Finance
    cost                                                      |  |                           | 1,147,100  |                    |  |  | —        |  
|Discount
    on convertible Notes                                     |  |                           | 84,168     |                    |  |  | —        |  
|Changes
    in Assets and Liabilities, net                            |  |                           |            |                    |  |  |          |  
|Current
    Assets                                                    |  |                           | 1,752,512  |                    |  |  |          |  
|Other
    Current Liabilities                                         |  |                           | (1,462,884 | )                  |  |  | (364,734 | )
|Net
    cash (used In) provided by operating activities               |  |                           | 2,435,559  |                    |  |  | 271,902  |  
|                                                                      |  |                           | 0          |                    |  |  |          |  
|CASH
    FLOWS FROM INVESTING ACTIVITIES                              |  |                           | 0          |                    |  |  |          |  
|Addition
    of Fixed Assets                                          |  |                           | (682,849   | )                  |  |  | (164,186 | )
|Changes
    in Non-current assets                                     |  |                           | (707,089   | )                  |  |  | —        |  
|Changes
    in Non- Current Liabilities                               |  |                           | 116,186    |                    |  |  | —        |  
|Investment
    in Dear Cashmere Holding Co.                           |  |                           | 0          |                    |  |  | —        |  
|Net
    cash (used In) provided by investing activities               |  |                           | (1,273,753 | )                  |  |  | (164,186 | )
|                                                                      |  |                           |            |                    |  |  |          |  
|CASH
    FLOWS FROM FINANCING ACTIVITIES                              |  |                           |            |                    |  |  |          |  
|Fund
    raised through notes                                         |  |                           | 310,000    |                    |  |  | —        |  
|Common
    Stock issued                                               |  |                           | 23,850     |                    |  |  | —        |  
|Preferred
    Stock Issued                                            |  |                           | 35         |                    |  |  | —        |  
|Finance
    cost                                                      |  |                           | (1,147,100 | )                  |  |  | —        |  
|Discount
    on convertible Notes                                     |  |                           | (84,168    | )                  |  |  | —        |  
|Additional
    Paid-up Capital                                        |  |                           | 486,855    |                    |  |  | —        |  
|Changes
    in Retained Earnings                                      |  |                           | 621,026    |                    |  |  | 194,745  |  
|Note
    converted                                                    |  |                           | (500,000   | )                  |  |  | —        |  
|Net
    cash (used In) provided by financing activities               |  |                           | (289,500   | )                  |  |  | 194,745  |  
|                                                                      |  |                           |            |                    |  |  |          |  
|Net change
    in cash, cash equivalents and restricted cash          |  |                           | (42,356    | )                  |  |  | 302,461  |  
|Cash,
    cash equivalents and restricted cash, beginning of the year |  |                           | 1,478,702  |                    |  |  | 176,668  |  
|Cash,
    cash equivalents and restricted cash, end of the year       |  |                           | 1,436,346  |                    |  |  | 479,129  |  



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



F-4


Table of Contents




ILUSTRATO PICTURES INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1. ORGANIZATION, HISTORY AND NATURE OF BUSINESS



| | a) | We
                                            were incorporated as a Superior Venture Corp. on April 27, 2010, in the State of Nevada for
                                            the purpose of selling wine varietals. On November 9, 2012, we entered into an Exchange Agreement
                                            with the Ilustrato Pictures Ltd., a British Columbia corporation (Ilustrato BC”), whereby
                                            we acquired all the issued and outstanding common stock of Ilustrato BC. On November 30,
                                            2012, Ilustrato BC transferred all of its assets and liabilities to Ilustrato Pictures Limited,
                                            our wholly owned subsidiary in Hong Kong (“Ilustrato HK”). On Februry 11, 2013,
                                            we changed the name to Ilustrato Pictures International, Inc.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | On
                                            April 1, 2016, Barton Hollow, together with the newly elected director of the issuer, caused
                                            the Issuer to enter into a letter of Intent to merger with Cache Cabinetry, LLC, and Arizona
                                            limited liability company. Pursuant to the Letter of Intent, the parties thereto would endeavor
                                            to arrive at, and enter into, a definitive merger agreement providing for the Merger. As
                                            an inducement to the members of Cache Cabinetry, LLC to enter into the Letter of Intent and
                                            thereafter transact, the Issuer caused to be issued to the members 360,000,000 shares of
                                            its common stock.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) | Subsequently,
                                            on April 6, 2016, the Issuer and Cache Cabinetry, LLC entered into a definitive agreement
                                            and Plan of Merger (the “Merger Agreement”). Concomitant therewith, the stockholders
                                            of the Issuer elected Derrick McWilliams, the President of Cache Cabinetry, LLC Chief Executive
                                            Officer of the Issuer, who along with Barton Hollow, ratified and approved the Merger Agreement
                                            and Merger.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d) | The
                                            Merger closed on June3, 2016. The merger is
                                            designed as a reversesubsidiary merger pursuant to Section 368(a)(2)(E)
                                            of the Internal Revenue Code. That is, upon
                                            closing, Cache CabinetryLLC 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 willbe the surviving corporation in itsmerger with the wholly ownedsubsidiary
                                            of the Issuer, therefore has become
                                            the wholly owned operating subsidiary of the
                                            Issuer.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e) | On
                                            November 9th, 2018, the
                                            Company entered into a Term Sheet for Plan of Merger
                                            and Control with Larson Elmore.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | f) | As
                                            a part of share purchase arrangement between Lee Larson Elmore and FB Technologies
Global Inc., Nick Link, the owner of FB Technologies Global Inc. replaced Lee Larson Elmore as CEO of Ilustrato Pictures International
Inc. on January 14, 2021, and we eventually got control over activities and books of accounts of Ilustrato Pictures International Inc.
from the date January 14, 2021. So, we are not aware about facts mentioned above vide note no. 1(A), 1(B), 1(C), 1(D), 1(E), 1(F) and
1(G) 'organization, history and business' as they are related to prior to the date on which control over activities and books of accounts
of Ilustrato Pictures International Inc. were handed over to us. Thus, those events have been reiterated as disclosed in previous fillings
made by the preceding management of the company with SEC.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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



| | h) | Firebug
                                            Mechanical Equipment LLC (FirebugGroup – U.A.E.) was incorporated on May8, 2017. ILUS acquired100% ofthis company on January 26, 2021, undera signed Share Purchase Agreement. This
                                            company is engagedin the business of research and
                                            development of firefighting technologies as well as the manufacturing
                                            firefighting equipment and firefighting vehicles for its customersin
                                            the Middle East, Asia, and
                                            Africa.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-5


Table of Contents




| | i) | Georgia Fire
& Rescue Supply LLC (GeorgiaFire) was
incorporated on the January 21, 2003. ILUS acquired 100% of
this company on March 31, 2022, undera signed Share Purchase Agreement.This companyis 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
                                            (BCDFire) was
                                            incorporated on March 18, 2014. ILUS acquired100%of
                                            this company on April 13,
                                            2021, in connectiona signed Share Purchase
                                            Agreement.This companyis engaged in the
                                            business of sales, distribution, installation
                                            and maintenance of Fire Protection and Securitysystems.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | k) | BullHead Products
                                            Inc. was incorporated on June8, 2007. ILUS
                                            acquired 100%of
                                            this company on January 1,
                                            2022, under a signed Share Purchase Agreement.This company is engagedin the business of manufacturing of aluminum
                                            truck beds and brush truckskid units for firefighting purposes including
                                            wildland firefighting.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | l) | Emergency
                                            Response Technologies, Inc. This
                                            company was incorporated by ILUS onFebruary 22, 2022, as the company’s Emergency
                                            Response Subsidiary. This company is
                                            engagedin 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
                                            engagedin 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 March1, 2022. The companyis 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, undera signed Share Purchase Agreement.This companyis engagedin 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 InternationalCo LtdFCZ and
                                            other future acquisitions.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | p) | AL
                                            SholaAl Modea
                                            Safety and Security LLC is a fire safety companyregistered in the United Arab Emirates.
                                            The companyhas signed a Share Purchase Agreement
                                            to acquire 51%control
                                            of AL SholaAl Modea Safety and Security LLC (ASSS)
                                            on December 13, 2022.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | q) | Quality
                                            InternationalCo
                                            LtdFCZ is a United
                                            Arab Emirates registered process manufacturing
                                            and engineering company. It manufacturescustom 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 January18, 2023, to acquirea 52%interestin Quality
                                            InternationalCo Ltd FCZ.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | r) | Petro
                                            LineFZ LLC is is a United
                                            Arab Emirates registered a company that operates
                                            an oil refinery providing oil refining services. Quality Industrial Corp.signed the
                                            definitiveShare Purchase Agreement on January27, 2023, to acquire a 51%interestin Petro
                                            Line FZ-LLC.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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





F-6


Table of Contents




NOTE
2. SUMMARY OF SIGNIFICANT POLICIES



Basis
of Presentation and Principles of consolidation

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



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



| | 1. | ILUS
                                            International UK
| | -- | -----------------------------------------------------------------

| | 2. | Firebug
                                            Mechanical Equipment LLC
| | -- | ----------------------------------------------------------------------------

| | 3. | Bull
                                            Head products Inc
| | -- | ------------------------------------------------------------------

| | 4. | Georgia
                                            Fire & Rescue supply LLC
| | -- | ----------------------------------------------------------------------------

| | 5. | Bright
                                            Concept and protection System LLC
| | -- | ------------------------------------------------------------------------------------

| | 6. | Quality
                                            Industrial Corp.
| | -- | --------------------------------------------------------------------

| | 7. | AL
                                            Shola Al Modea Safety and Security LLC
| | -- | -------------------------------------------------------------------------------------



Use
of estimates



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



Fair
value of financial instruments



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



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



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



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



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





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Table of Contents




Revenue
Recognition

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



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



Accounts
Receivable







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







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 ata level management believesis 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
paymentsto employees in accordance
with ASC 718, “Stock Compensation” (“ASC 718”). Stock-based
paymentsto employees include grants of stocks,
grants of stock options and issuance of warrants that
are recognized in the consolidated statement of operations based on their fair values at
the date of grant.



In accordance with ASC 718, the company will
generally apply the same guidance to both employee and nonemployee share-based awards. However, the company will also follow specific
guidance for share-based awards to nonemployees related to the attribution of compensation cost and the inputs to the option-pricing model
for expected term. Nonemployee share-based payment equity awards are measured at the grant-date fair value of the equity instruments,
similar to employee share-based payment equity awards.









The
Company calculate the fair value of option grants and warrant issuances utilizing the Binomial
pricing model. The amount of stock-based compensation recognized during a periodis 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 periodsif actual forfeitures differ from those estimates. The term “forfeiture”is distinct from “cancellations” or “expirations” and represents
only the unvested portion of the surrenderedstock 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 awardsis generally recognized on a straight-linebasis over the period in which the Company
expects to receive the benefit, which is generally the vesting period.



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Table of Contents






Earnings
(Loss) per Share





The Company
reports earnings (loss) per share in accordance with ASC Topic 260-10, “Earnings
per Share.” Basic earnings (loss) per share is computedby dividing income (loss) available to shareholdersby 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 outstandingif the
potential shares had been issued andif the
additional shares were dilutive.





Organizationand Offering
Cost



The
Companyhas a policy to expense organization and offering
costs as incurred.



Cashand Cash
Equivalents



For
purpose of the statements of cash flows, the Company considers cash and cash equivalents to include all stable, highly
liquid investments with maturities of three months or less.





Concentration
ofCreditRisk



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.





Business
segment





ASC 280, “Segment
Reporting” requires use ofthe “management
approach” model for segments reporting.The management
approach model is based on the way a
company’s management organizes segmentswithin the company
for making operating decisions and assessing
performance. A Division overview presented in the Management Discussion and analysis filed with this form 10-Q.









Leases





The Company
accounts for leases with escalation clauses and rent holidays on a straight-linebasis
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. The Company has Lease arrangement for which the liability
has been recorded separately. Such Lease arrangements corresponds to the operating subsidiary QIND.





F-9


Table of Contents






Recent
Accounting Pronouncements



The
Company continually assesses any new accounting pronouncements to determine their applicability
to the Company. Where it is determinedthat 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 Companycurrently does not have any recent accounting pronouncement that they are studying, and
feel may be applicable.





Off-Balance
Sheet Arrangements



We
have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources
that are material to stockholders.





RoundingOff



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



NOTE
3. GOING CONCERN



The
accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and
commitments in the normal course of business.



Management
evaluated all relevant conditions and events that are reasonably known or reasonably knowable, in the aggregate, as of the date the consolidated
financial statements are issued and determined. The Company’s ability to continue as a going concern is dependent on the Company’s
ability to continue to generate sufficient revenues and raise capital within one year from the date of filing.



Over
the next twelve months management plans to use borrowings and security sales to mitigate the effects of cash flow deficits; however,
no assurance can be given that debt or equity financing, if and when required, will be available.



NOTE
4. CASH AND CASH EQUIVALENTS



For
purposes of the statements of cash flows, in accordance with ASC 230-10-20 the Company considers all highly liquid investments and short-term
debt instruments with original maturities of three months or less to be cash equivalents. There was $1,436,346in cash and cash equivalents as of March
31, 2023, and $479,129 as
of December 31, 2022, respectively.





NOTE
5. ACCOUNTS RECEIVABLES





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



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





F-10


Table of Contents








NOTE
6. INVENTORY - WORK IN PROGRESS



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







NOTE
7. OTHER CURRENT ASSETS

|Particulars                       |  | March
    31, 2023 |            | December
    31, 2022
|--------------------------------- |  | ------------------ | ---------- | ---------------------
|Staff
    Advances                |  |                    | 7,280      |                      
|Retention
    Receivable          |  |                    | 2,800,611  |                      
|Loans
    Advanced                |  |                    | 1,750,722  |                      
|Amount
    due from Related Party |  |                    | 1,794,218  |                      
|Advance
    given to Suppliers    |  |                    | 7,539,940  |                      
|Statutory
    Dues Receivables    |  |                    | 46,826     |                      
|Deposits                          |  |                    | 1,775,441  |                      
|Accrual
    of discounts on Notes |  |                    | 46,666     |                      
|Prepayments/
    Prepaid Assets   |  |                    | 114,280    |                      
|Other
    Misc. Current Assets    |  |                    | 1,280,654  |                      
|TOTAL                             |  |                    | 17,156,638 |                      



Other
Misc. Current Assets:



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



Related
party Advances:



As
of March 31, 2023, and March 31, 2022, the Company had amounts due to Quality Industrial Corp. its subsidiary of the Company, of $797,504
and $0, respectively.





NOTE
8. LONG TERM INVESTMENTS





|Particulars                                 |  | March
    31, 2023 |            | December
    31, 2022
|------------------------------------------- |  | ------------------ | ---------- | ---------------------
|Investments:                                |  |                    |            |                      
|Investment
    in FB Fire Technology Ltd.   |  |                    | 1,678,955  |                      
|Investment
    in TVC                       |  |                    | 20,500     |                      
|Other
    Long term Investments             |  |                    | 4,657,982  |                      
|Investment
    in Dear Cashmere Holding Co. |  |                    | 12,000,000 |                      
|TOTAL                                       |  |                    | 18,357,437 |                      



NOTE
9. RIGHT OF USE ASSETS



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





F-11


Table of Contents






NOTE
10. GOODWILL

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



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



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



NOTE
11. TANGIBLE ASSETS

|Particulars                          |  | March
    31, 2023 |            | December
    31, 2022
|------------------------------------ |  | ------------------ | ---------- | ---------------------
|Tangible Assets:                     |  |                    |            |                      
|Land
    and Building                |  |                    | 17,390,196 |                      
|Plant
    and machinery              |  |                    | 1,711,483  |                      
|Furniture,
    Fixtures and Fittings |  |                    | 213,189    |                      
|Vehicles                             |  |                    | 64,375     |                      
|Computer
    and computer Equipment  |  |                    | 27,269     |                      
|Office
    Equipment                 |  |                    | 907        |                      
|Capital
    WIP                      |  |                    | 2,292,846  |                      
|TOTAL                                |  |                    | 21,700,264 |                      



Property,
Plant and Equipment



Property,
Plant and Equipment is recorded at cost, except when acquired in a business combination where property, plant and equipment are
recorded at fair value. Depreciation of property, plant and equipment is recognized over the estimated useful lifespan of the
respective assets using the straight-line method.



The
estimated useful lifespans are as follows:





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



Expenditure
that extends the useful lifespan of existing property, plant and equipment are capitalized and depreciated over the remaining useful
lifespan of the related asset. Expenditure for repairs and maintenance are expensed as incurred. When property, plant and equipment are
retired or sold, the cost and related accumulated depreciation is removed from the Company’s balance sheet, with any gain or loss
reflected in operations.



F-12


Table of Contents




NOTE
12. INTANGIBLE ASSETS



|Particulars             |  | March
    31, 2023 |         | December
    31, 2022
|----------------------- |  | ------------------ | ------- | ---------------------
|Intellectual
    Rights |  |                    | 693,338 |                      
|Website                 |  |                    | 6,112   |                      
|Trademarks              |  |                    | 240     |                      
|TOTAL                   |  |                    | 699,690 |                      





NOTE
13. CURRENT LIABILITIES



Other
Current Liabilities



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





|Particulars                                |  | March
    31, 2023 |             | December
    31, 2022
|------------------------------------------ |  | ------------------ | ----------- | ---------------------
|Credit
    Cards                           |  |                    | 25,150      |                      
|Payable
    to subsidiaries                |  |                    | 82,145,676  |                      
|Short
    Term Bank Borrowings             |  |                    | 19,716,635  |                      
|Tax
    Payable                            |  |                    | 17,361      |                      
|Provision
    for Audit Fees               |  |                    | 76,500      |                      
|Provision
    for Expenses                 |  |                    | 80,000      |                      
|Accrued
    Interest for Convertible Notes |  |                    | 51,378      |                      
|Other
    short-term loan                  |  |                    | 855,433     |                      
|Payroll
    Liability                      |  |                    | 353,883     |                      
|Misc.
    liabilities                      |  |                    | 1,262,345   |                      
|TOTAL                                      |  |                    | 104,584,361 |                      



NOTE
14. NON – CURRENT LIABILITIES

|Particulars                                |  | March
    31, 2023 |            | December
    31, 2022
|------------------------------------------ |  | ------------------ | ---------- | ---------------------
|Provision
    for Convertible Notes        |  |                    | 1,155,338  |                      
|Borrowings
    from Financial Institutions |  |                    | 12,371,221 |                      
|Interest
    On Convertible Notes          |  |                    | 556,483    |                      
|Employees’
    End of Service Benefits     |  |                    | 31,808     |                      
|Defined
    Benefit Obligation (Gratuity)  |  |                    | 71,736     |                      
|TOTAL                                      |  |                    | 14,186,586 |                      





F-13


Table of Contents








NOTE
15. COMMON STOCK AND PREFERRED STOCK





In
August 2019 the Company’s Amended its Articles of Incorporation to authorize it to issue up to two billion (2,000,000,000)
shares, of which all shares are common stock, with a par value of one-tenth of one cent ($0.001)
per share. The Company also created the following 30,000,000
preferred shares with a par value of $0.001 to be designated Class A, B and C.



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



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



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



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



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, 2022, there was 1,355,230,699 shares of the Company’s common stock issued and outstanding.



As
of March 31, 2023, the number of shares outstanding of our Common Stock was 1,379,080,699.



EARNING PER SHARE

|                                                          |                    |                      
|--------------------------------------------------------- | ------------------ | ---------------------
|Particulars                                               | March
    31, 2023 | December
    31, 2022
|Basic
    EPS                                             |                    |                      
|Numerator                                                 |                    |                      
|Net
    income / (loss)                                   | 914,662            | 4,559,375            
|Net
    Income attributable to common stockholders        | $ 914,662          | $ 4,559,375          
|Denominator                                               |                    |                      
|Weighted
    average shares outstanding                   | 1,379,080,699      | 1,355,230,699        
|Number
    of shares used for basic EPS computation       | 1,379,080,699      | 1,355,230,699        
|Basic
    EPS                                             | $
    0.00         | $
    0.00           
|Diluted
    EPS                                           |                    |                      
|Numerator                                                 |                    |                      
|Net
    income / (loss)                                   | 914,662            | 4,559,375            
|Net
    Income attributable to common stockholders        | $ 914,662          | $ 4,559,375          
|Denominator                                               |                    |                      
|Number
    of shares used for basic EPS computation       | 1,379,080,699      | 1,355,230,699        
|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 | 166,825,000        | 158,602,740          
|Number
    of shares used for diluted EPS computation     | 32,011,994,740     | 31,979,922,480       
|Diluted
    EPS                                           | $
    0.00         | $  0.00              



NOTE 16. OTHER COMPREHENSIVE INCOME



|Statement of Comprehensive Income Statement    |  | Q1 2023
|---------------------------------------------- |  | -------
|Net Income                                     |  |        
|Other comprehensive Income /(loss), net of tax |  |        
|Foreign currency translation adjustments       |  |        
|Comprehensive Income                           |  |        





F-14


Table of Contents




NOTE
17. NON-CONTROLLING INTEREST





The
Company acquired 52% of Quality International for $82,000,000, now owning 52% of net assets of Quality
International. Net Assets of Quality International was $49,255,718 on December 31, 2022. The remaining $56,387,027 of
the purchase price is a part of the Company’s Goodwill (see financial footnote). Furthermore, current quarter earnings of the subsidiaries
where the company doesn’t hold 100% ownership has been transferred to Non-Controlling Interest in the respective shareholding ratio.







NOTE
18. NOTES PAYABLE



The
following is the list of Notes payable as of March 31, 202. Convertible Notes issued during the reported period are accounted in the
books as liability, accrued Interest and discount on notes is also accounted accordingly as per general accounting principles.





| | • | On
                                            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.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | 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.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-15


Table of Contents






| | • | 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.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | 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.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE
19. SUBSEQUENT EVENTS



In
accordance with ASC 855-10-50 the company list events which are deemed to have a determinable significant effect on the balance
sheet at the time of occurrence or on the future operations, and without disclosure of it, the financial statements would be misleading.



| | • | On
                                            April 11, 2023, ILUS entered into a note payable of $136,500 with 1800 Diagonal Lending LLC.
                                            Repayable any time after 180 days following the date of note till maturity date and shall bears
                                            9% interest rate per annum. The note is convertible into common stock at the rate equal to
                                            variable conversion price as defined, shall mean 65% of lowest trading price during previous
                                            ten days. The note matures on April 11, 2024.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | On
                                            April 11, 2023, ILUS entered into a note payable of $144,200 with 1800 Diagonal Lending LLC.
                                            Repayable in 9 monthly payments and shall bear 13% interest as one time charge on the issuance
                                            date. In case of event of default, note is convertible into common stock at 65% of lowest
                                            trading price during previous ten days. The note matures on March 11, 2024.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | On
                                            April 12, 2023, 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 April 12, 2025.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | On
                                            May 2, 2023, the company entered into a convertible note with RB Capital Partners Inc., for
                                            the amount of 250,000. The note is convertible into common stock at the rate of $0.50 and
                                            bears 5% interest per annum. The note matures on May 2, 2025.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | On
                                            May 12, 2023, we issued 2,000,000 shares of common stock as commitment shares to AJB Capital
                                            Investment LLC with a fair market value of $84,000.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-16


Table of Contents




Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations



Forward-Looking
Statements



Certain
statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives,
and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,”
“project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,”
“plan,” “may,” “will,” “would,” “will be,” “will continue,” “will
likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions
for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for
purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions
that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements.
Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a
material adverse effect on our operations and future prospects on a consolidated basis include but are not limited to: changes in economic
conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles.
These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed
on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new
information, future events or otherwise. Further information concerning our business, including additional factors that could materially
affect our financial results, is included herein and in our other filings with the SEC.



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  specializes 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
and Mineral Processing industries. The international end-users include companies such as, but not limited to Chevron, BP, Shell, Total,
Sasol and Gasco. The division has extensive capabilities including the undertaking of 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 funding by QIND itself as are the ongoing obligations for future acquisitions by the subsidiary.





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Table of Contents






Mining
& Renewable Energy division:



This division is engaged in the Mining and Renewable
Energy industry currently through its subsidiary Replay Solutions, which recovers and recycles precious metals from electronic waste.
Replay Solutions incorporates a ‘Closed loop’ concept where it uses 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. The company recycles cleanly, safely, and sustainably
on items such as, but not limited to Printed Circuit Boards (PCB) and precious metals, Cables, wire, and car radiators. Replay Solution’s
machines 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.







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
advantagein 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.



5


Table of Contents






Plan
of Operations



First
Half of 2023





ILUS’ majority owned Industrial subsidiary, Quality
Industrial Corp. (QIND), 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 exceeding $180M in various stages of the manufacturing
process and an additional $250M in expected orders. ILUS 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.
ILUS incorporated Hyperion Defence Solutions in the United Kingdom on February 13, 2023, in order to roll its Defense Subsidiary business
plan. 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 Hyperion Defence Solutions 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.



Results of Operation
for the Three Months Ended March 31, 2023, and 2022





Revenues





We earned $19,810,011 in revenues for the three months
ended March 31, 2023, as compared with $3,013,522 in revenues for the three months ended March 31, 2022. The increase in revenue is a
result of revenue from our acquisition of Quality Industrial Corp. and other subsidiaries.



We expect increased revenue
in future quarters through organic growth and acquisitions across within our operating subsidiaries.

Operating Expenses



Operating expenses increased from $1,222,445
for the three months ended March 31, 2023, to $3,118,674 for the three months ended March 31, 2023.

Our operating expenses in Q1 2023 were mainly as a result of consolidation
from our majority owned subsidiary Quality Industrial Corp. Our operating expenses in Q1 2022 were mainly the result of general administrative
expenses.



We anticipate that our operating expenses will increase
as we undertake our expansion plan associated with our acquisitions. The increase will be attributable to administrative and operating
costs associated with our business activities and the professional fees associated with our reporting obligations.





6


Table of Contents






Other
Expenses





We had other expenses of $1,247,385 for the three months
ended March 31, 2023, as compared $0 in other expenses for the same period ended 2022. Our other expenses in Q1 2023 were mainly Finance
Cost.



Net Income/Net Loss



We incurred a
Net Income of$914,662 for the three months ended March 31, 2023, compared to a netincome of $636,636 for the three months ended
March 31, 2022.



Liquidity and Capital Resources



As of March 31, 2023, we had total current assets of
$137,396,140 and total current liabilities of $153,575,159 which include the QIND’s payable amount of $81,000,000 as part of purchase
consideration for acquisition of its operating company, Quality International. We had a working capital deficit of $16,179,019 as of March
31, 2023. This compares with a working capital deficit of $33,084,200 as of December 31, 2022.



Operating activities provided $2,435,559 in cash for
the three months ended March 31, 2023, as compared with $271,902 provided in cash for the three months ended March 31, 2022. Our positive
operating cash flow for Q1 2023 was mainly the result of growth in core business activities delivering higher operating profit.



Investing activities used $1,273,753 in cash for the
three months ended March 31, 2023, as compared with $164,186 used in cash for the three months ended March 31, 2022. Our negative investing
cash flow for Q1 2023 was mainly the result of investing in long term assets for the company’s growth.



Financing activities provided $289,500 in cash for the three months
ended March 31, 2023, as compared with $194,745 cash provided for the same period ended 2022 and was mainly the result of financing costs
and issuance of convertible notes.









Going
Concern

The
accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business.

Management
evaluated all relevant conditions and events that are reasonably known or reasonably knowable, in the aggregate, as of the date the consolidated
financial statements are issued and determined. The Company’s ability to continue as a going concern is dependent on the Company’s
ability to continue to generate sufficient revenues and raise capital within one year from the date of filing.

Over
the next twelve months management plans to use borrowings and security sales to mitigate the effects of cash flow deficits; however,
no assurance can be given that debt or equity financing, if and when required, will be available.

7


Table of Contents




Impact
of Acquisitions

Historically
a significant component of our growth has been through the acquisition of businesses in our targeted sectors. We typically incur upfront
costs as we incorporate and integrate acquired businesses into our operating philosophy and operational excellence. This includes consolidation
of supplies and raw materials, optimized logistics and production processes, and other restructuring and improvements initiatives. The
benefits of these integration efforts and upcoming planned acquisitions may not positively impact our financial results instantly but
has historically been the case in future periods.

Critical
Accounting Policies

In
December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion
and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a
company’s financial condition and results, and requires management’s most difficult, subjective, or complex judgments, often
as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies
are disclosed Note 2 of our unaudited financial statements included in this Quarterly Report on Form 10-Q.

Goodwill

The
Company continues to review its goodwill for possible impairment or loss of value at least annually or more frequently upon the occurrence
of an event or when circumstances indicate that a reporting unit’s carrying amount is greater than its fair value. On December
31, 2022, we performed a goodwill impairment evaluation. We performed a qualitative assessment of factors to determine whether it was
necessary to perform the goodwill impairment test. Based on the results of the work performed, the Company has concluded that no impairment
loss was warranted at December 31, 2022. Factors including non-renewal of a major contract or other substantial changes in business conditions
could have a material adverse effect on the valuation of goodwill in future periods and the resulting charge could be material to future
periods’ results of operations.

Off-Balance
Sheet Arrangements

We
have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources
that are material to stockholders.

Recently
Issued Accounting Pronouncements

In
January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the accounting for goodwill
impairments by eliminating step two from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its
fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated
to that reporting unit. ASU 2017-04 also clarifies that an entity should consider income tax effects from any tax-deductible goodwill
on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The new standard is effective
for fiscal years beginning after December 15, 2019, for both interim and annual reporting periods. The Company is currently assessing
the potential impact of the adoption of ASU 2017-04 on its consolidated financial statements.

The
Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on
the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements
that have been issued that might have a material impact on its financial position or results of operations.



8


Table of Contents






Item
3. Quantitative and Qualitative Disclosures About Market Risk



A
smaller reporting company is not required to provide the information required by this Item.





Item
4. Controls and Procedures



We
maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the SEC rules
and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and
principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.



In
designing and evaluating our disclosure controls and procedures, management recognized that any controls and procedures, no matter how
well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.



As
required by SEC Rule 15d-15, our management carried out an evaluation, under the supervision and with the participation of our principal
executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures as of the end of the
period covered by this Quarterly Report on Form 10-Q.



Based
on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures
were effective at a reasonable assurance level as of the end of the period covered by this report.



Changes
in Internal Control over Financial Reporting



There
has been no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d)
of the Exchange Act that occurred during the year ended March 31, 2023, that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.



Critical
Accounting Policies.



In
December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion
and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a
company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often
as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies
are disclosed Note 2 of our unaudited financial statements included in this Quarterly Report on Form 10-Q.



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PART
II – OTHER INFORMATION



Item
1. Legal Proceedings



We
may from time to time be involved in various claims and legal proceedings of a nature we believe are normal and incidental to our business.
These matters may include product liability, intellectual property, employment, personal injury cause by our employees, and other general
claims. Aside from the following, we are not presently a party to any legal proceedings that, in the opinion of our management, are likely
to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense
and settlement costs, diversion of management resources and other factors.



Ilustrato
Pictures International Inc. had 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 was 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). The 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, arising out of improper action and lack of disclosures. The company has disputed the claim and argue that Larson Elmore has
mislead 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 having obtained an
extension of time to respond. We have a court hearing on June 6, 2023.



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. The company has
obtained a mediation deadline for June 9, 2023.while the court process is ongoing.



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. 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
1A: Risk Factors



See
risk factors included in our Annual Report on Form 10-K/A for the year ended December 31, 2022, filed on April 13, 2023.



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Item
2. Unregistered Sales of Equity Securities and Use of Proceeds



The
information set forth below relates to our issuances of securities without registration under the Securities Act of 1933.



List
of Notes and Stock issued during the first Quarter of 2023:



| | 1. | 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.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 2. | 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 $421,000.                                                                                                                                                                                                                                                                              



| | 3. | 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.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
sales and issuances of the securities described above 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
3. Defaults upon Senior Securities



None



Item
4. Mine Safety Disclosures



None



Item
5. Other Information



None





Item 6. Exhibits



|Exhibit Number                                                                                                                                                                                                  |  | Description of Exhibit                                                                                                                                                       
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                |  |                                                                                                                                                                              
|4.1*                                                                                                                                                                                                            |  | Convertible Stock Purchase Warrant, dated January 26, 2023 with Jefferson Street Capital LLC                                                                                 
|4.2*                                                                                                                                                                                                            |  | Amended Convertible Stock Purchase Warrant, dated March 8, 2023,  with AJB Capital Investments, LLC                                                                          
|4.3**                                                                                                                                                                                                           |  | AmendedConvertible Stock Purchase Warrant, dated May 12, 2023,  with AJB Capital Investments, LLC                                                                            
|10.1*                                                                                                                                                                                                           |  | Convertible Promissory Note, dated January 26, 2023 with Jefferson Street Capital LLC                                                                                        
|10.2*                                                                                                                                                                                                           |  | Amended Convertible Promissory Note, dated March 8, 2023, with AJB Capital Investments, LLC                                                                                  
|10.3**                                                                                                                                                                                                          |  | Amended Convertible Promissory Note, dated May 12, 2023, with AJB Capital Investments, LLC                                                                                   
|10.4**                                                                                                                                                                                                          |  | Convertible Promissory Note, dated April 11, 2023 with 1800 Diagonal Lending LLC                                                                                             
|10.5**                                                                                                                                                                                                          |  | Convertible Promissory Note, dated April 11, 2023 with 1800 Diagonal Lending LLC                                                                                             
|10.6**                                                                                                                                                                                                          |  | Convertible Promissory Note, dated April 12, 2023 with RB Capital Partners Inc.                                                                                              
|10.7**                                                                                                                                                                                                          |  | Convertible Promissory Note, dated May 2, 2023 with RB Capital Partners Inc.                                                                                                 
|10.8**                                                                                                                                                                                                          |  | Amended  Convertible Promissory Note, dated May 2, 2023 with RB Capital Partners Inc.                                                                                        
|31.1**                                                                                                                                                                                                          |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                            
|31.2**                                                                                                                                                                                                          |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                            
|32.1**                                                                                                                                                                                                          |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|101**                                                                                                                                                                                                           |  | The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter
    ended March 31, 2023 formatted in Extensible Business Reporting Language (XBRL).
|                                                                                                                                                                                                                |  |                                                                                                                                                                              
|* Incorporated by reference to the Registration Statement on Form 10-K filed with the Securities and Exchange Commission on April 10, 2023
                                               

**Provided herewith





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SIGNATURES



Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|Ilustrato Pictures International Inc. |                                              
|------------------------------------- | ---------------------------------------------
|                                      |                                              
|Date:                                 | May 22, 2023                                 
|                                      |                                              
|By:                                   | /s/ Nicolas Link                             
|                                      | Nicolas Link                                 
|Title:                                | Chief Executive Officer (principal executive)



|By:    | /s/ Krishnan Krishnamoorthy                                          
|------ | ---------------------------------------------------------------------
|       | Krishnan Krishnamoorthy                                              
|Title: | Chief Financial Officer (principal accounting, and financial officer)



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