Item 1.01 Entry Into A Material Definitive Agreement
As previously reported, on June 30, 2022, our majority shareholder, Ilustrato
Pictures International Inc., entered into a binding letter of intent (the “Agreement”) for our company to purchase 51% of
the outstanding shares of Quality International Co Ltd FZC, a United Arab Emirates headquartered company (“Quality International”),
from the shareholders of Quality International. Quality International is a revenue generating company that manufactures custom solutions
for the Oil and Gas, Energy, Water Desalination, Wastewater, Offshore and Public Safety sectors.
The Agreement contemplated a period of due diligence and revaluation followed
by entry into a definitive Stock Purchase Agreement. On January 18, 2023, we entered into a definitive Stock Purchase Agreement (the “Purchase
Agreement”) with the shareholders of Quality International, which agreement provided for our purchase of 52% (increased by 1% over
the Agreement) of the shares of Quality International Co Ltd FZC (the “Shares”).
The purchase price for the Shares shall be up to $137,000,000 in cash,
paid in six tranches, subject to the achievement of financial milestones presented in a schedule of payments which are set forth in the
Purchase Agreement.
We have paid the first tranche of $1 million with $81 million
to be paid under the second and third tranches over the next 210 calendar days. The remaining $55 million under the Purchase Agreement
will be paid out in three further tranches conditional upon Quality International meeting minimum audited EBITDA targets for 2023 and
2024. The final tranche payment is scheduled to be made following the provision of audited financials for the year ended 2024.
We will occupy two non-paid board seats of Quality International and there
shall be two other non-paid board seats for existing Quality International shareholders. A final board seat will be independent and chosen
by us and Quality International’s shareholders.
The Purchase Agreement also contains certain restrictive covenants whereby,
among other things, the shareholders selling the Shares are prohibited from (a) competing with the business of the Quality Industrial,
(b) soliciting employees of Quality International and (c) intentionally interfering with Quality International’s business relationships,
in each case during the two-year period immediately following the final payment required under the Purchase Agreement.
The Purchase Agreement contains customary representations and warranties
of the parties, including, among others, with respect to corporate organization, capitalization, corporate authority, financial statements,
and compliance with applicable laws. The representations and warranties of each party set forth in the Purchase Agreement were made solely
for the benefit of the other parties to the Purchase Agreement, and investors are not third-party beneficiaries of the Purchase Agreement.
In addition, such representations and warranties (a) are subject to materiality and other qualifications contained in the Purchase Agreement,
which may differ from what may be viewed as material by investors, (b) were made only as of the date of the Purchase Agreement or such
other date as is specified in the Purchase Agreement and (c) may have been included in the Purchase Agreement for the purpose of allocating
risk between the parties rather than establishing matters as facts. Accordingly, the Purchase Agreement is included with this filing only
to provide investors with information regarding the terms of the Purchase Agreement, and not to provide investors with any other factual
information regarding any of the parties or their respective businesses.
The foregoing description of the Purchase Agreement is not complete and
is qualified in its entirety by reference to the text of such document, which is filed as Exhibit 2.1 hereto and which is incorporated
herein by reference.