Legal Proceedings
From time to time, we may become party to various lawsuits,
claims and other legal proceedings that arise in the ordinary course of our business. Aside from the below, we are not currently a party,
as plaintiff or defendant, to any legal proceedings that we believe to be material or which, individually or in the aggregate, would be
expected to have a material effect on our business, financial condition or results of operation if determined adversely to us.
Ilustrato Pictures International Inc has applied to
the District Court, Clark County, Nevada to have 40,000,000 shares with Ambrose & Keith cancelled as they were issued in error in
2018 as the deal never completed. The case has been won on September 15, 2022, in favor of the company and the court order was received
on January 23, 2023. The transfer agent cancelled the 40,000,000 shares on February 17, 2023.
We have been named as a defendant in an action commenced
by our former CEO, Larson Elmore. A case has been filed in the Eight Judicial District Court of the State of Nevada (Case No. A-22-858343-C).
Plaintiff alleges that we breached a stock purchase agreement dated May 10, 2020, and promissory notes and is therefore entitled to damages.
We have potential counterclaims being prepared against the former CEO, arising due to improper action and lack of disclosures. The
company has disputed the claim and argue that Larson Elmore has been misleading the company and its shareholders on various matters including
but not limited to liabilities, company commitments and due diligence items presented by Larson Elmore during the takeover process. We
are in the process of a settlement discussion and have obtained an extension of time to respond while this process occurs.
We have been named as a defendant in an action commenced
by Steve Nicol, who claims that he loaned $12,000 to a subsidiary of ILUS under a promissory note, but that ILUS agreed to assume the
note. He further claims that he elected to convert the note and that ILUS failed to convert the note into shares of ILUS common stock.
He has alleged breach of contract, declaratory relief, and specific performance to require the company to issue 75,000,000 shares of common
stock in ILUS.
We cannot predict whether this action involving our former CEO
or Mr. Nicol is likely to result in any material recovery by or expense to our company. Where it is reasonably possible to do so, the
Company accrues estimates of the probable costs for the resolution of these matters. These estimates based upon an analysis of potential
results and settlement strategies. It is possible, however, that future operating results for any particular quarter or annual period
could be affected by changes in assumption.
We may continue to incur legal fees in responding to
this and other lawsuits. The expense of defending such litigation may be significant and any sizeable verdict may adversely affect the
company. The amount of time to resolve this and any additional lawsuits is unpredictable, and these actions may divert management’s
attention from the day-to-day operations of our business, all of which could adversely affect our business, results of operations and
cash flows.
Smaller Reporting Company
The Company is a “smaller reporting company”
as defined in Rule 12b-2 under the Exchange Act. There are certain exemptions available to us as a smaller reporting company, including:
(1) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act; (2) scaled executive
compensation disclosures; and (3) the requirement to provide only two years of audited financial statements, instead of three years. As
long as we maintain our status as a “smaller reporting company”, these exemptions will continue to be available to us.
Corporate History
We were incorporated as Superior Venture Corp. on April
27, 2010, in the State of Nevada for the purpose of selling wine varietals. On November 9, 2012, we entered into an Exchange Agreement
with Ilustrato Pictures Ltd., a British Columbia corporation (“Ilustrato BC”), whereby we acquired all of the issued and outstanding
common stock of Ilustrato BC and the shareholders of Ilustrato BC received 1,200,000 shares of our common stock, which represented approximately
15% of our outstanding common stock following the acquisition. On November 30, 2012, Ilustrato BC transferred all of its assets and liabilities
to Ilustrato Pictures Limited, our wholly owned subsidiary in Hong Kong (“Ilustrato HK”).
Ilustrato BC was in the business of developing, for
international release, feature theatrical films to be financed and distributed domestically by Chinese production companies.
On February 11, 2016, Barton Hollow, LLC, a Nevada
limited liability company, and stockholder of the Company, filed an Application for Appointment of Custodian pursuant to Section 78.347
of the Nevada Revised Statutes in the District Court for Clark County, Nevada. Barton Hollow was subsequently appointed custodian of the
Company by Order of the Court on Apri1 5, 2016. In accordance with the provisions of the Order, Barton Hollow thereafter moved to reinstate
the Company with the State of Nevada, provide for the election of interim officers and directors, and call and hold a stockholder meeting.
On April 1, 2016, Barton Hollow, together with the
newly elected director of the Company, caused the Company to enter into a Letter of Intent to merge with Cache Cabinetry, LLC, an Arizona
limited liability company. Cache Cabinetry was a cabinet and design company headquartered in Scottsdale, Arizona that focused on the design
and supply of kitchen furnishings to residential clients. Pursuant to the Letter of intent, the parties thereto would endeavor to arrive
at, and enter a definitive merger agreement providing for the Merger. As an inducement to the members of Cache Cabinetry, LLC. to enter
into the Letter of Intent and thereafter transact, the Company caused 360,000,000 shares of its common stock to be issued to the members.
Subsequently, on Apri1 6, 2016, the Company and Cache
Cabinetry, LLC entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”). As a result, the stockholders
of the Company elected Derrick McWilliams the President and Chief Executive Officer of Cache Cabinetry, LLC, who, along with Barton Hollow,
ratified and approved the Merger Agreement and Merger
The Merger closed on June 3, 2016. Upon closing, Cache
Cabinetry, LLC. merged into a newly created subsidiary of the Company with the members of Cache Cabinetry, LLC receiving shares of common
stock of the Company as consideration. Therefore upon closing of the Merger, Cache Cabinetry, LLC. was the surviving corporation in the
merger and wholly owned subsidiary of the Company.
In August 2019 the Company amended its Articles of
Incorporation to authorize it to issue up to two billion (2,000,000,000) shares, of which all shares are common stock, with a par value
of one-tenth of one cent ($0.001) per share. The Company also created the following 30,000,000 preferred shares with a par value of $0.001
to be designated Class A, B and C.
Class A – 10,000,000 preferred shares that convert
at 3 common shares for every 1 preferred class A share and voting rights of 500 common shares for every 1 preferred class A share. All
10,000,000 preferred class A shares have been issued to the Company’s CEO.
Class B – 10,000,000 preferred shares that convert
at 3 common shares for every 1 preferred class B common share.
Class C – 10,000,000 preferred shares that convert
at 2 common shares for every 1 preferred class C common share with voting rights of 100 common shares for every 1 preferred class C share.
On February 14, 2020, the Company designated preferred
Class D shares – 60,741,000 preferred shares; par value $0.001 that convert at 500 common shares for every 1 preferred class D common
share with voting rights of 500 common shares for every 1 preferred class D share.
On May 28, 2020, the Company designated preferred Class
E shares - 5,000,000 preferred shares; par value $0.001; non-cumulative. Dividends are 6% a year commencing a year after issuance. Dividends
to be paid annually. Redeemable at $1.00 per share, 2.25% must be redeemed per quarter, commencing one year after issuance, and shall
be redeemed at 130% premium to the redemption value. These shares do not have voting rights.
On June 10, 2020, the Company entered into a definitive
agreement with FB Fire Technologies Ltd. for the conversion of debt. The shareholders were issued 2,500,000 shares of Class E Preferred
Stock and BrohF Holdings Ltd., a creditor of the company was issued 672,175 shares. A final tranche of shares for debt conversion will
be issued to the shareholders following the audited financials for 2022.
On May 29, 2020, the 10,000,000 preferred A and preferred
60,741,000 D shares were transferred to FB Technologies Global, Inc.
On August 26, 2021, the company
amended Class B Shares to 100,000,000 shares with par value $0.001 that convert at 100 common shares for every 1 preferred Class B Share
with voting rights of 100 common shares for every 1 preferred class B share. Dividends to be paid according to the company’s dividend
policy agreed by the board from time to time.
On July 20, 2021, the Company
designed preferred Class F shares – 50,000,000 preferred shares; par value $0.001 that convert at 100 common shares for every 1
preferred class F share with no voting rights and no dividends.
The company’s subsidiaries
were acquired on the following dates:
January 26, 2021, acquired Firebug Group
March 25, 2021, acquired The Vehicle Converters LLC
April 13, 2021, acquired Bright Concept Detection and
Protection System LLC
February 11, 2022, acquired Bull Head Products Inc.
March 31, 2022, acquired Georgia Fire & Rescue
Supply LLC
May 28, 2022, acquired Wikisoft
Corporation (now Quality Industrial Corp.)
December
13, 2022, acquired Al Shola Al Modea Safety and Security LLC
January 18, 2023, acquired Quality
International Co Ltd FCZ (binding LOI signed on June 30, 2022)
January 27, 2023, acquired Petro
Line FZ LLC
February 13, 2023, incorporation
of Hyperion Defence Solutions
Additional Information
The public may read and copy any materials the Company
files with the SEC in the SEC’s Public Reference Section, Room 1580, 100 F Street N.E., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Section by calling the SEC at 1-800-SEC-0330. Additionally, the SEC maintains an
Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically
with the SEC, which can be found at http://www.sec.gov.
An investment in our securities involves a high degree
of risk. In addition to the other information contained in this Annual Report on Form 10-K, prospective investors should carefully consider
the following risks before investing in our securities. If any of the following risks actually occur, as well as other risks not currently
known to us or that we currently consider immaterial, our business, operating results and financial condition could be materially adversely
affected. As a result, the trading price of our common stock could decline, and investors may lose all or part of their investment in
our common stock.
Risk Related to Covid 19
Our business and future operations may be adversely
affected by epidemics and pandemics, such as the COVID-19 outbreak.
We may face risks related to health epidemics
and pandemics or other outbreaks of communicable diseases, which could result in a widespread health crisis that could adversely affect
general commercial activity and the economies and financial markets of the world as a whole. For example, the outbreak of COVID-19, which
originated in China, was declared by the World Health Organization to be a “pandemic,” and spread across the globe. A health
epidemic or pandemic or other outbreak of communicable diseases, such as the COVID-19 pandemic, poses the risk that we, or our
current and potential business partners may be disrupted or prevented from conducting business activities for certain periods of time,
the durations of which are uncertain, and may otherwise experience significant impairments of business activities, including due to operational
shutdowns or suspensions that may be requested or mandated by national or local governmental authorities or self-imposed by us, our users
or other business partners. While it is not possible at this time to estimate the full impact that COVID-19 could have on our business,
potential users, or other potential business partners, the continued spread of COVID-19, the measures taken by the local and federal government,
actions taken to protect employees, and the impact of the pandemic on various business activities could adversely affect our results of
operations and financial condition. COVID-19 has not recently had any material impact on our operations, supply chain, liquidity
or capital resources. During the lockdowns we however saw significant shipping delays, consumer orders on hold due to budgetary restrictions
as well as a slow-down in our planned acquisitions due to flight restrictions limiting on site due diligence. The
company has as a mitigant to future COVID-19 outbreaks increased its number of suppliers of raw materials to reduce the risk of production
capabilities and order back-logs.
Risks Relating to Macro Conditions and
Our Financial Condition
Our ability to generate the significant amount of cash needed to
service our debt obligations and our ability to refinance all or a portion of our indebtedness or obtain additional financing depends
on many factors, many of which may be beyond our control.
Our ability to make scheduled payments on, or to refinance
our obligations under, our debt, will depend on our financial and operating performance, which, in turn, will be subject to prevailing
economic and competitive conditions and to the financial and business factors, many of which may be beyond our control. We cannot assure
you that our business will generate sufficient cash flow from operations, that currently anticipated business opportunities will be realized
on schedule or at all, or that future borrowings will be available to us in amounts sufficient to enable us to service our indebtedness
and any amounts borrowed under future credit facilities, or to fund our other liquidity needs.
We will use cash to pay the principal and interest
on our debt. These payments limit funds otherwise available for working capital, capital expenditures, acquisitions, collaborations and
other purposes. As a result of these obligations, our current liabilities may exceed our current assets. We may need to take on additional
debt as we expand in our industry, which could increase our ratio of debt to equity. The need to service our debt may limit funds available
for other purposes and our inability to service debt in the future could lead to acceleration of our debt and foreclosure on assets.
Although this is presently not the case, nor do we
currently foresee it, we cannot assure that we will be able to refinance any of our indebtedness or obtain additional financing as well
as prevailing market conditions. As a result, we could face liquidity problems and might be required to dispose of material assets or
operations to meet our indebtedness service and other obligations.
The lending documents restrict, and any agreements
governing future indebtedness may restrict, our ability to dispose of assets and use the proceeds from any such dispositions. We cannot
assure we will be able to consummate any asset sales, or if we do, what the timing of the sales will be or whether the proceeds that we
realize will be adequate to meet indebtedness service obligations when due.
If we are unable to successfully identify, complete and integrate
acquisitions, our results of operations could be adversely affected.
Acquisitions have been and will continue to be a significant
component of our growth strategy. We seek to identify and complete acquisitions and may continue to make strategic acquisitions. Our previous
or future acquisitions may not be successful or may not generate the financial benefits that we expected to achieve at the time of acquisition.
In addition, there can be no assurance that we will be able to locate suitable acquisition candidates in the future or acquire them on
acceptable terms or, because of competition in the marketplace and limitations imposed by the agreements governing our indebtedness or
the availability of capital, that we will be able to finance future acquisitions. Acquisitions involve special risks, including, without
limitation, the potential assumption of unanticipated liabilities and contingencies, difficulty in assimilating the operations and personnel
of the acquired businesses, disruption of our existing business, dissipation of our limited management resources and impairment of relationships
with employees and customers of the acquired business as a result of changes in ownership. While we believe that strategic acquisitions
can improve our competitiveness and profitability, these activities could have a material adverse effect on our business, financial condition,
and operating results. We may incur significant costs such as transaction fees, professional service fees and other costs related to future
acquisitions. We may also incur integration costs following the completion of any such acquisitions as we integrate the acquired business
with the rest of our Company. Although we expect that the realization of efficiencies related to the integration of any acquired businesses
will offset the incremental transaction and acquisition-related costs over time, this net financial benefit may not be achieved in the
near term, or at all.
Inability to Continue Developing New Products.
Our ability to continue to grow organically is tied
in large part to our ability to continue to develop new products. A failure to continue to develop and deliver new, innovative, and competitive
products to the market could limit sales growth and negatively impact our Company and our financial condition, results of operations and
cash flow.
Risks associated with climate change and other environmental impacts,
and increased focus and evolving views of our customers, shareholders, and other stakeholders on climate change issues, could negatively
affect our business and operations.
The effects of climate change create short and long-term
financial risks to our business, both in the U.S. and globally. We have significant operations located in regions that have been, and
may in the future be, exposed to significant weather events and other natural disasters. Climate related changes can increase variability
in or otherwise impact natural disasters, including weather patterns, with the potential for increased frequency and severity of significant
weather events (e.g., flooding, hurricanes, and tropical storms), natural hazards (e.g., increased wildfire risk), rising mean temperature
and sea levels, and long-term changes in precipitation patterns (e.g., drought, desertification, and/or poor water quality). We expect
climate change could affect our facilities, operations, employees, and communities in the future, particularly at facilities in coastal
areas and areas prone to extreme weather events and water scarcity. Our suppliers are also subject to natural disasters that could affect
their ability to deliver or perform under our contracts, including as a result of disruptions to their workforce and critical infrastructure.
Disruptions also impact the availability and cost of materials needed for manufacturing and could increase insurance and other operating
costs.
Increased worldwide focus on climate change has led
to legislative and regulatory efforts to combat both potential causes and adverse impacts of climate change, including regulation of greenhouse
gas emissions. New or more stringent laws and regulations related to greenhouse gas emissions and other climate change related concerns
may adversely affect us, our suppliers, and our customers. Some of our facilities are, for example, engaged in manufacturing processes
that produce greenhouse gas emissions, including carbon dioxide, or rely on products from others that do so. We have worked for years
to reduce our reliance on fossil-based energy sources, to decrease our greenhouse gas emissions, to reduce our consumption of water and
production of waste, and to ensure our compliance with environmental regulations where we operate, enhancing our record of environmental
sustainability. However, new, and evolving laws and regulations could mandate different or more restrictive standards, could require capital
investments to transition to low carbon technologies, could adversely impact our ongoing operations, and could require changes on a more
accelerated time frame. Our suppliers may face similar challenges and incur additional compliance costs that are passed on to us. These
direct and indirect costs may adversely impact our results
We may be adversely affected by the effects
of inflation.
Inflation in wages, materials, parts, equipment, and
other costs has the potential to adversely affect our results of operations, cash flows and financial position by increasing our overall
cost structure, particularly if we are unable to achieve commensurate increases in the prices, we charge our customers for our products
and services. In addition, the existence of inflation in the economy has the potential to result in higher interest rates, which could
result in higher borrowing costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects. The
Company has currently experienced inflationary pressures on its supply chain due to increased shipping
costs, increased energy prices for manufacture of our commercial products as well as increased prices from suppliers
of raw materials. We have so far been able to offset inflationary pressure to consumers, but it cannot be guaranteed that that
our results of operations will not be adversely affected by inflation in the future and could reduce sales and/or operating margins, and
overall financial performance.
We are Dependent on the Availability of Raw Materials, Parts and
Components Used in our Products.
While the Company manufactures certain parts and components
used in its products, the Company also requires substantial amounts of raw materials and purchases certain parts and components from suppliers.
The availability of and prices for raw materials, parts and components may be subject to curtailment or change due to, among other things,
suppliers’ allocations to other purchasers, interruptions in production by suppliers, including due to geopolitical or civil unrest,
unfavorable economic or industry conditions, labor disruptions, supply chain disruptions, catastrophic weather events, natural disasters,
the occurrence of a contagious disease or illness, changes in exchange rates and prevailing price levels. Any change in the supply of,
or price for, these raw materials or parts and components could materially affect the Company and its financial condition, results of
operations and cash flow.
Using the recent example of our acquisition, Bull Head
Products Inc., the demand for new trucks has not declined during Covid-19, but instead there was a delay in the delivery of new Pickup
trucks due to a shortage of electronic chips. Historically, 68% of the truck beds built by Bull Head Products are for installation of
a truck bed on a new pickup truck. There has not been a significant shift to installation on older trucks, but instead, the customers
wait for confirmation of the delivery of new trucks before ordering a new truck bed. Bull Head Products Inc. also has order backlogs of
over 9 months due to customers waiting for their new trucks to be delivered. One-third of our current enquiries are impacted by a delay
in delivery of new pick-up trucks, which presents a risk to Bull Head Products Inc.
Increases in the price of commodities could impact the cost or price
of our products, which could impact our ability to sustain and grow earnings.
Our manufacturing processes consume significant amounts
of raw materials, the costs of which are subject to worldwide supply and demand factors, as well as other factors beyond our control.
Raw material price fluctuations may adversely affect our results. We purchase, directly and indirectly through component purchases, significant
amounts of plastic, aluminum, steel, and other raw materials. In the past raw material prices have experienced volatility which has been
unforeseen and unexpected. Commodity pricing has fluctuated over the past few years and may continue to do so in the future. Such fluctuations
could have a material effect on our results of operations, balance sheets and cash flows and impact the comparability of our results between
financial periods.
We May be Subject to Loss in Market Share and Market Acceptance as
a Result of Performance Failures, Manufacturing Errors, Delays or Shortages.
There is a risk that for unforeseen reasons we may
be required to repair or replace products in use or to reimburse customers for products that fail to work or meet strict performance criteria.
To date, we have experienced some product failures related to electronic and mechanical components within equipment and vehicles. These
are either repaired under warranty or at cost to the customer or under a maintenance agreement.
Other disruptions in the supply
chain process or product sales and fulfilment systems for any reason, including equipment malfunction, failure to follow specific protocols
and procedures, supplier facility shut-downs, defective raw materials, wars and conflict, natural disasters such as hurricanes, tornadoes
or wildfires, property damage from riots, and other environmental factors and the impact of epidemics or pandemics, such as Covid-19,
and actions by businesses, communities and governments in response, could lead to launch delays, product shortage, unanticipated costs,
lost revenues and damage to our reputation.
We have taken steps to limit remedies for product failure
to the repair or replacement of malfunctioning or non-compliant products or services, and also attempt to exclude or minimize exposure
to product and related liabilities by including in our standard agreements warranty disclaimers and disclaimers for consequential and
related damages as well as limitations on our aggregate liability. From time to time, in certain sales transactions, we may negotiate
liability provisions that vary from such standard forms. There is a risk that our contractual provisions may not adequately minimize our
product and related liabilities or that such provisions may be unenforceable. We intend to carry product liability insurance, but coverage
we secure may not be adequate to cover potential claims. Moreover, to the extent we have to repair, reimburse, or expend funds to cover
customer service issues, our results of operations will be negatively affected.
We Will Rely in Part Upon Sales Reps, Retailers and Distribution
Partners to Distribute our Products, and We May Be Adversely Affected if Those Parties do not Actively Promote our Products or Pursue
Customers Who Would Have a Potential Demand for our Products.
We estimate that a significant portion of our revenue
will come from sales to partners through sales reps, retailers, distributors, and resellers. Some of these relationships have not been
formalized in detailed contracts and may be subject to termination at any time. Even where these relationships are formalized in a detailed
contract, the agreements are often terminable with little or no notice and subject to periodic amendment. We cannot control the amount
and timing of resources that our partners devote to activities on our behalf.
We intend to continue to seek strategic relationships
to distribute, license and sell certain of our products. We, however, may not be able to negotiate acceptable relationships in the future
and cannot predict whether current or future relationships will be successful.
The Markets the Company operates in are Highly Competitive which
Could Reduce Sales and Operating Margins.
Most of the Company’s products are sold in competitive
markets. Maintaining and improving a competitive position will require continued investment in manufacturing, engineering, quality standards,
marketing, customer service and support and distribution networks. The Company may not be successful in maintaining its competitive position.
The Company’s competitors may develop products and methods that are more efficient or may adapt quicker to new technologies or evolving
customer requirements. The Company may not be able to compete successfully with existing competitors or with new competitors. Pricing
pressures may require the Company to adjust the prices of products to stay competitive. Failure to continue competing successfully could
reduce sales, operating margins, and overall financial performance.
The Company’s Business Operations May Be Adversely Affected
by Information Systems Interruptions or Cybersecurity Intrusions.
The Company depends on various information technologies
to administer, store, and support multiple business activities. If these systems are damaged, cease to function properly or are subject
to cyber-security attacks, such as those involving unauthorized access, malicious software and/or other intrusions, the Company could
experience production downtimes, operational delays, other detrimental impacts on operations or the ability to provide products and services
to its customers, the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches,
other manipulation or improper use of the Company’s systems or networks, financial losses from remedial actions, loss of business
or potential liability, penalties, fines and/or damage to the Company’s reputation. While the Company attempts to mitigate these
risks by employing a number of measures, including having hired an IT manager with cyber security expertise, who reports directly to our
management team, employee training, technical security controls and maintenance of backup and protective systems, the Company’s
systems, networks, products, and services remain potentially vulnerable to known or unknown threats, any of which could have a material
adverse effect on the Company and its financial condition or results of operations. Further, given the unpredictability, nature, and scope
of cyber-security attacks, it is possible that potential vulnerabilities could go undetected for an extended period. We have currently
not been subject to material cybersecurity breaches in our supply chain, software, or services used in our products, services, or business.
A severe future cybersecurity incident in our supply chain could however reduce sales, operating margins, and overall financial performance.
With the strategy establishing and expanding
our defense subsidiary, which may become involved in defense contracting, we may face increased cyber and security threats that can range
from attacks common to most industries, but could have even greater financial or reputational impact, to advanced persistent threats on
our defense programs, which could involve information that is considered a matter of national security.
Our long-term success depends, in part, on our ability to operate
and expand internationally, and our business is susceptible to risks associated with international operations.
Currently, we maintain operations in the United States,
the United Kingdom, the Republic of Serbia and the United Arab Emirates, and plan to continue our efforts to expand globally, in jurisdictions
where we do not currently operate including, but not limited to, Spain, Uruguay and South Africa. The Company expects international operations
and export sales to continue to constitute the majority of our sales and assets in the foreseeable future. For the year ended December
31, 2022, the international operations constituted 84.4% of our total sales of which part of the international operation include international
sales to US costumers. Managing a global organization is difficult, time consuming and expensive, and any international expansion efforts
that we undertake may not be profitable in the near or long term. Although we have operating experience in many foreign jurisdictions,
we must still continue to make significant investments to build our international operations. The Company’s sales from international
operations and sales from export are both subject in varying degrees to risks inherent in doing business outside the U.S. These risks
include the following:
|
• |
Costs, risks and uncertainties associated with tailoring our services in international jurisdictions as needed to better address both the needs of customers, and the threats of local competitors; |
|
• |
Risks of economic instability, including due to inflation; |
|
• |
Uncertainties in forecasting revenues and expenses in markets where we have not previously operated; |
|
• |
Costs and risks associated with local and national laws and regulations governing the industries in which we operate, health and safety, climate change and sustainability, and labor and employment; |
|
• |
Operational and compliance challenges caused by distance, language, and cultural differences; |
|
• |
Costs and risks associated with compliance with international tax laws and regulations; |
|
• |
Costs and risks associated with compliance with the U.S. Foreign Corrupt Practices Act and other laws in the United States related to conducting business outside the United States, as well as the laws and regulations of non-U.S. jurisdictions governing bribery and other corrupt business activities; |
|
• |
Costs and risks associated with human trafficking, modern slavery and forced labor reporting, training and due diligence laws and regulations in various jurisdictions; |
|
• |
Being subject to other laws and regulations, including laws governing online advertising and other Internet activities, email and other messaging, collection and use of personal information, ownership of intellectual property, taxation and other activities important to our online business practices; |
|
• |
Currency exchange rate fluctuations and restrictions on currency repatriation; |
|
• |
Competition with companies that understand the local market better than we do or that have preexisting relationships with regulators and customers in those markets; |
|
• |
Adverse effects resulting from the U.K.’s exit from the European Union (commonly known as “Brexit”) |
|
• |
Reduced or varied protection for intellectual property rights in some countries; |
|
• |
Disruption of operations from labor and political disturbances; |
|
• |
Withdrawal from or renegotiation of international trade agreements and other restrictions on the trade between the United States and other countries; |
|
• |
Changes in tariff and trade barriers; and |
|
• |
geopolitical events, including natural disasters, climate change, public health issues, political instability (such as war between Ukraine and Russia), terrorism, insurrection, or war. |
Entry into certain transactions with foreign entities
now or in the future may be subject to government regulations, including review related to foreign direct investment by U.S. or foreign
government entities. If a transaction with a foreign entity is subject to regulatory review, such regulatory review might limit our ability
to enter into the desired strategic alliance and thus our ability to carry out our long-term business strategy.
Operating in international markets also requires significant
management attention and financial resources. The investment and additional resources required to establish operations and manage growth
in other countries may not produce desired levels of revenue or profitability and could instead result in increased costs without a corresponding
benefit. We cannot guarantee that our international operations or expansion efforts will be successful.
Any of these events as well as related events not aforementioned,
could have a materially adverse impact on the Company and its operations.
Uncertainty Related to Environmental Regulation and Industry Standards,
as well as Physical Risks of Climate Change, Could Impact the Company’s Results of Operations and Financial Position.
Increased public awareness and concern regarding environmental
risks, including global climate change, may result in more international, regional and/or federal requirements or industry standards to
reduce or mitigate global warming and other environmental risks. New climate change laws and regulations could require the Company to
change its manufacturing processes or obtain substitute materials that may cost more or be less available for its manufacturing operations.
Various jurisdictions in which the Company does business have implemented, or in the future could implement or amend, restrictions on
emissions of carbon dioxide or other greenhouse gases, limitations or restrictions on water use, the production of single use plastics,
regulations on energy management and waste management and other climate change-based rules and regulations, which may increase the Company’s
expenses and adversely affect its operating results. In addition, the physical risks of climate change may impact the availability and
cost of materials, sources and supply of energy, product demand and manufacturing and could increase insurance and other operating costs.
The expected future increased worldwide regulatory activity relating to climate change could expand the nature, scope, and complexity
of matters that the Company is required to control, assess, and report. If environmental laws or regulations or industry standards are
either changed or adopted and impose significant operational restrictions and compliance requirements upon the Company, its suppliers,
its customers or its products, or the Company's operations are disrupted due to physical impacts of climate change on the Company, its
customers or its suppliers, the Company's business, results of operations and financial condition could be adversely impacted.
Significant Movements in Foreign Currency Exchange Rates May Harm
the Company’s Financial Results.
The Company is exposed to fluctuations in foreign currency
exchange rates, particularly with respect to the Euro, British Pound, Indian Rupee, UAE Dirham and Serbian Dinar. Any significant change
in the value of the currencies of the countries in which the Company does business against the U.S. Dollar could affect the Company’s
ability to sell products competitively and control its cost structure, which could have a material adverse effect on results of operations.
A Significant or Sustained Decline in Commodity Prices Including
Oil Could Negatively Impact the Levels of Expenditures by Certain of the Company’s Customers.
Demand for the Company’s products depends, in
part, on the level of new and planned expenditures by certain of its customers. The level of expenditures by the Company’s customers
is dependent on, among other factors, general economic conditions, availability of credit, economic conditions within their respective
industries and expectations of future market behavior. The Company’s profitability may be adversely affected during any periods
of unexpected or rapid increases in interest rates and volatility in commodity prices, including
oil, can negatively affect the level of these activities and especially impact our Industrial
& Manufacturing division and can result in postponement of capital spending decisions or the delay or cancellation of existing
orders. The ability of the Company’s customers to finance capital investment and maintenance may also be affected by the conditions
in their industries. Reduced demand for the Company’s products could result in the delay or cancellation of existing orders or lead
to excess manufacturing capacity, which unfavorably impacts the absorption of fixed manufacturing costs. This reduced demand could have
a material adverse effect on the Company and its financial condition and results of operations.
We are dependent on financing for the continuation
of our operations.
It can at times be difficult to predict our capital
needs on a monthly, quarterly, or annual basis. Our future is dependent upon our ability to obtain profitable operations or financing.
We reserve the right to seek additional funds through private placements of our common stock and/or through debt financing. We do not
have financing in place at this time for all future planned acquisitions. We may not have access to financing or on terms that are acceptable
to us. Any lack of funds from operations or fundraisings for any shortage could be detrimental to our ability to continue operations and
negatively impact us and our financial condition, results of operations and cash flow.
Risks Related to Legal, Accounting and Regulatory
Matters
An Unfavorable Outcome of Any Pending Contingencies or Litigation
Could Adversely Affect the Company.
We have been named as a defendant in a lawsuit, and
we may be named in additional litigation, all of which will require significant management time and attention and result in significant
legal expenses and may result in an unfavorable outcome, which could have a material adverse effect on our business, financial condition,
results of operations and cash flows.
We have been named as a defendant in an action commenced
by our former CEO, Larson Elmore. A case also has been filed in the Eight Judicial District Court of the State of Nevada (Case No. A-22-858343-C).
Plaintiff alleges that we breached a stock purchase agreement dated May 10, 2020, and promissory notes and is therefore entitled to damages.
We have potential counterclaims against the former CEO which are being prepared due to improper action and lack of disclosures. The
company has disputed the claim and argue that Larson Elmore has been misleading the company and its shareholders on various matters including
but not limited to liabilities, company commitments and due diligence items presented by Larson Elmore during the takeover process. We
are in the process of a settlement discussion and have obtained an extension of time to respond while this process occurs.
We have been named as a defendant in an action commenced
by Steve Nicol, who claims that he loaned $12,000 on or about May 23, 2017, to Cache Cabinetry, LLC a subsidiary of ILUS under a promissory
note, but that ILUS agreed to assume the note. He further claims that he elected to convert the note and that ILUS failed to convert the
note into shares of ILUS common stock. He has alleged breach of contract, declaratory relief, and specific performance to require the
company to issue 75,000,000 shares of common stock in ILUS.
We cannot predict whether the action against involving
our former CEO or Mr. Nicol is likely to result in any material recovery by or expense to our company. In general, we lack much information
and evidence to support the assertions of financial statements prior to the current management taking over and there are chances that
preceding management of the company might have missed compliances for which we are not aware. Thus, the company may have to bear consequences
for that from authorities. We cannot reasonably ascertain an amount for those contingencies.
Where it is reasonably possible to do so, the Company
accrues estimates of the probable costs for the resolution of these matters. These estimates are based upon an analysis of potential results
and settlement strategies. It is possible, however, that future operating results for any particular quarter or annual period could be
affected by changes in assumption.
We may continue to incur legal fees in responding to
these and other lawsuits. The expense of defending such litigation may be significant and any sizeable verdict may adversely affect the
company. The amount of time to resolve this and any additional lawsuits is unpredictable, and these actions may divert management’s
attention from the day-to-day operations of our business, all of which could adversely affect our business, results of operations and
cash flows. For additional detail related to this risk, see Item 8, “Legal Proceedings”.
The Sale of our Products Involves Potential Product Liability and Related Risks that Could Expose us to Significant Insurance and Loss
Expenses.
We face an inherent risk of exposure to product liability
claims if the use of our products results in, or is believed to have resulted in, illness or injury. Any product liability claim may increase
our costs and adversely affect our revenue and operating income. Moreover, liability claims arising from a serious adverse event may increase
our costs through higher insurance premiums and deductibles for our insurances we have with Firebug Group, Georgia Fire and Bull Head
Products and may make it more difficult to secure adequate insurance coverage in the future. In addition, our product liability insurance
may fail to cover future product liability claims, which, if adversely determined, could subject us to substantial monetary damages. Georgia
Fire, Bull Head Products and Firebug all have General Liability Cover.
Failure by us to Maintain the Proprietary Nature of our Technology,
Intellectual Property and Manufacturing Processes Could Have a Material Adverse Effect on our Business, Operating Results, Financial Condition,
Stock Price, and on our Ability to Compete Effectively.
We principally rely upon patent, trademark, copyright,
trade secret and contract law to establish and protect our proprietary rights. There is a risk that claims allowed on any patent licenses
or trademarks we hold may not be broad enough to protect our technology. In addition, our patent licenses or trademarks may be challenged,
invalidated, or circumvented and we cannot be certain that the rights granted thereunder will provide competitive advantages to us. Moreover,
any current or future issued or licensed patents, or trademarks, or currently existing or future developed trade secrets or know-how may
not afford sufficient protection against competitors with similar technologies or processes, and the possibility exists that certain of
our already issued patents or trademarks may infringe upon third party patents or trademarks or be designed around by others. In addition,
there is a risk that others may independently develop proprietary technologies and processes, which are the same as, substantially equivalent,
or superior to ours, or become available in the market at a lower price.
In addition, foreign laws treat the protection of proprietary
rights differently from laws in the United States and may not protect our proprietary rights to the same extent as U.S. laws. The failure
of foreign laws or judicial systems to adequately protect our proprietary rights or intellectual property, including intellectual property
developed on our behalf by foreign contractors or subcontractors may have a material adverse effect on our business, operations, financial
results, and stock price.
There is a risk that we have infringed or in the future
will infringe patents or trademarks owned by others, that we will need to acquire licenses under patents or trademarks belonging to others
for technology potentially useful or necessary to us, and that licenses will not be available to us on acceptable terms, if at all.
We may have to litigate to enforce our patents or trademarks
or to determine the scope and validity of other parties’ proprietary rights. Litigation could be very costly and divert management’s
attention. An adverse outcome in any litigation may have a severe negative effect on our financial results and stock price. To determine
the priority of inventions, we may have to participate in interference proceedings declared by the United States Patent and Trademark
Office or oppositions in foreign patent and trademark offices, which could result in substantial cost and limitations on the scope or
validity of our patents or trademarks.
We also rely on trade secrets and proprietary know-how,
which we seek to protect by confidentiality agreements with our employees, consultants, service providers and third parties. There is
a risk that these agreements may be breached, and that the remedies available to us may not be adequate. In addition, our trade secrets
and proprietary know-how may otherwise become known to or be independently discovered by others.
Compliance with Changing Regulation of Corporate Governance and Public
Disclosure May Result in Additional Expenses.
Changing laws, regulations and standards relating to
corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and new SEC regulations, are creating uncertainty
for companies such as ours. These new or changed laws, regulations and standards are subject to varying interpretations in many cases
due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory
and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing
revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure.
As a result, we intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in
increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance
activities. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory
or governing bodies due to ambiguities related to practice, our reputation may be harmed.
If we Fail to Comply with the Rules under the Sarbanes-Oxley Act
Related to Accounting Controls and Procedures, or if Material Weaknesses or Other Deficiencies are Discovered in our Internal Accounting
Procedures, our Stock Price Could Decline Significantly.
Section 404 of the Sarbanes-Oxley Act requires annual
management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent auditors
addressing these assessments. We are in the process of documenting and testing our internal control procedures, and we may identify material
weaknesses in our internal control over financial reporting and other deficiencies. If material weaknesses and deficiencies are detected,
it could cause investors to lose confidence in our Company and result in a decline in our stock price and consequently affect our financial
condition. In addition, if we fail to achieve and maintain the adequacy of our internal controls, we may not be able to ensure that we
can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to
produce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports
or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information,
and the trading price of our Common Stock could drop significantly. In addition, we cannot be certain that additional material weaknesses
or significant deficiencies in our internal controls will not be discovered in the future.
Failure To Comply with the U.S. Foreign Corrupt Practices Act, the
U.K. Bribery Act or Other Applicable Anti-bribery Laws Could Have an Adverse Effect on the Company.
The U.S. Foreign Corrupt Practices Act, the U.K. Bribery
Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments
for the purpose of obtaining or retaining business. Recent years have seen a substantial increase in anti-bribery law enforcement activity
with more frequent and aggressive investigations and enforcement proceedings by both the Department of Justice and the SEC, increased
enforcement activity by non-U.S. regulators and increases in criminal and civil proceedings brought against companies and individuals.
The Company’s policies mandate compliance with all anti-bribery laws. However, the Company operates in certain countries that are
recognized as having governmental and commercial corruption. The Company’s internal control policies and procedures may not always
protect it from reckless or criminal acts committed by employees or third-party intermediaries. Violations of these anti-bribery laws
may result in criminal or civil sanctions, which could have a material adverse effect on the Company and its financial condition and results
of operations.
Changes in Tax laws or Exposure to Additional Income Tax Liabilities
Could have a Material Impact on our Company, the Results of Operations, Financial Conditions and Cash Flows.
We are subject to income taxes, as well as non-income-based
taxes in the jurisdictions in which we operate, as well as jurisdictions such as the United States, in which we intend to have operations.
The tax laws in these could change on a prospective or retroactive basis, and any such changes could adversely affect us and our effective
tax rate.
Taxation regulation in territories around the world
can also change very quickly, which may mean that all the implications for businesses may not have been fully thought through by the regulating
authorities before final guidelines and laws are issued. Furthermore, any changes made by tax authorities, together with other legislative
changes, to the mandatory sharing of company information (financial and operational) with tax authorities on both a local and global basis,
could lead to disagreements between jurisdictions with respect to the proper allocation of profits between such jurisdictions. We therefore
continuously monitor changes to tax regulation and double tax treaties between the territories in which we operate. We also maintain a
comprehensive transfer pricing policy to govern the flow of funds between various tax territories.
We are further subject to ongoing tax audits in the
various jurisdictions in which we operate. We regularly assess the likely outcomes of these audits in order to determine the appropriateness
of our tax provisions. However, there can be no assurance that we will accurately predict the outcomes of these audits, which could have
a material impact on the business, financial condition, results of operations, and cash flows.
While we have recorded reserves for potential payments
to various tax authorities related to uncertain tax positions, the calculation of such tax liabilities involves the application of complex
tax regulations in many jurisdictions. Therefore, any dispute with a tax authority may result in payment that is significantly different
from our estimates. If the payment proves to be less than the recorded reserves, the reversal of the liabilities would generally result
in tax benefits being recognized in the period when we determine the liabilities to be no longer necessary. Conversely, if the payment
proves to be more than the reserves, we could incur additional charges, and these could have a materially adverse effect on the business,
financial condition, results of operations, and cash flows.
Laws and Regulations Governing International Business Operations
Could Adversely Impact Our Company.
The US Department of the Treasury’s Office of
Foreign Assets Control (“OFAC”), and the Bureau of Industry and Security at the US Department of Commerce (“BIS”)
administer certain laws and regulations that restrict US persons and, in some instances, non-US persons, in conducting activities, transacting
business with, or making investments in certain countries, governments, entities and individuals subject to US economic sanctions.
Our international operations subject us to these laws
and regulations, which are complex, restrict business dealings with certain countries, governments, entities, and individuals, and are
constantly changing. Further restrictions may be enacted, amended, enforced, or interpreted in a manner that materially impacts our operations.
From time to time, certain subsidiaries have limited business dealings in countries subject to comprehensive sanctions.
Certain of our subsidiaries sell products, and may
provide related services, to distributors and other purchasing bodies in such countries. These business dealings represent an insignificant
amount of our consolidated revenues and income but expose us to a heightened risk of violating applicable sanctions regulations. Violations
of these regulations are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment
from government contracts and revocations or restrictions of licenses, as well as criminal fines and imprisonment.
We have established policies and procedures
designed to assist with compliance with such laws and regulations. However, there can be no assurance that these will prevent us from
violating these regulations in every transaction in which we may engage. As such a violation could adversely affect our reputation, business,
financial condition, results of operations and cash flows.
We are subject to changes in contract
estimates in our Defense and Industrial & Manufacturing Divisions
We account for substantially all long-term
contracts in the Defense and Industrial & Manufacturing Divisions utilizing the cost-to-cost method of percentage-of-completion accounting.
This accounting requires judgment relative to assessing risks, estimating revenues and costs, and making assumptions regarding the timing
of receipt of delivery orders from our customer and technical issues. Due to the size and nature of these contracts, the estimation of
total revenues and costs is complicated and subject to many variables. We must make assumptions regarding for example expected increases
in material costs, wages and employee benefits, engineering hours, productivity and availability of labor and allocated fixed costs. Changes
to production costs, overhead rates, learning curves and/or supplier performance can also impact these estimates. Furthermore, under the
revenue recognition accounting rules, we can only include units in our estimates of overall contract profitability after we have received
a firm delivery order for those units. Because new orders have the potential to significantly change the overall profitability of cumulative
orders received to date, particularly early in the contract when fewer overall units are on order, the period in which we receive those
orders will impact the estimated life-to-date contract profitability. Changes in underlying assumptions, circumstances or estimates could
have a material adverse effect on our net sales, financial condition and/or profitability.
General Risk Factors
The Company’s Success Depends on Its Executive Management and
Other Key Personnel.
The Company’s future success depends to a significant
degree on the skills, experience and efforts of its executive management and other key personnel and their ability to provide the Company
with uninterrupted leadership and direction. The loss of the services of any of the executive officers or a failure to provide adequate
succession plans for key personnel could have an adverse impact on the Company. The availability of highly qualified talent is limited
and the competition for talent is robust. However, the Company provides long-term equity awards and certain other benefits for its executive
officers which provides incentives for them to make a commitment to the Company. The Company’s future success will depend on its
ability to have adequate succession plans in place and to attract, retain and develop qualified personnel. A failure to efficiently replace
executive management members and other key personnel and to attract, retain and develop new qualified personnel could have an adverse
effect on the Company’s operations and implementation of its strategic plan.
Challenges with Respect to Labor Availability Could Negatively Impact
the Company’s Ability to Operate or Grow the Business.
The Company’s success depends in part on the
ability of its businesses to proactively attract, motivate, and retain a qualified and highly skilled workforce in an intensely competitive
labor market. A failure to attract, motivate and retain highly skilled personnel could adversely affect the Company’s operating
results or its ability to operate or grow the business. Additionally, any labor stoppages or labor disruptions, including due to geopolitical
unrest, unfavorable economic or industry conditions, catastrophic weather events, natural disasters or the occurrence of a contagious
disease or illness could adversely affect the Company’s operating results or its ability to operate or grow the business.
Risks Related to our Management and Control Persons
Our largest shareholder, officer, director,
Nicolas Link holds substantial control over the company and is able to influence all corporate matters, which could be deemed by shareholders
as not always being in their best interests.
Nicolas Link, our Chief Executive
Officer (Principal Executive Officer & Chairman of the Board of Directors) with his company, FB Technologies Global, Inc. Dubai, U.A.E
, owns approximately 2% of the outstanding shares of common stock, owns all of the outstanding shares of Class A Preferred Stock, Class
B Preferred Stock and Class D Preferred Stock and owns 15% of the outstanding shares of Class F Preferred Stock.
Our common stock is entitled to
one vote per share on all matters submitted to a vote of the stockholders, including the election of directors. Each share of Class A
Preferred Stock is entitled to vote together with the holders of our common stock on all matters submitted to shareholders at a rate of
500 votes, including the election of directors. Each share of Class D Preferred Stock is entitled to vote together with the holders of
our common stock on all matters submitted to shareholders at a rate of 500 votes, including the election of directors.
There are 1,379,080,699 shares
of common stock outstanding, which amounts to 1,379,080,699 votes on matters requiring a shareholder vote. While Mr. Link owns only 2%
of the outstanding common shares, with the Series A Preferred Stock that Mr. Link owns, he has the power over 5,000,000,000 votes and
with the Series D Preferred Stock, he has the power to over 30,370,500,000 additional votes on matters requiring a shareholder vote, including
the election of directors. He will have voting power over every aspect of our business.
By virtue of his ownership of
common stock and preferred stock, Mr. Link is able to exercise significant influence over all matters requiring approval by our stockholders,
including the election of directors, the approval of significant corporate transactions, and any change of control of our company.
Our officers and directors are located outside
of the U.S., so it will be difficult to effect service of process and enforcement of legal judgments upon our officers and directors.
Our officers and directors are
located outside of the United States and reside in the U.A.E, U.K., and Denmark. As a result, it may be difficult to effect service of
process within the United States and enforce judgments of the US courts obtained against our executive officers and directors. Particularly,
our shareholders may not be able to:
• Effect service of process
in the U.S. on any of our officers and directors;
• Enforce judgments obtained
in U.S. courts against our officers and directors based upon the civil liability provisions of the U.S. federal securities laws;
• Enforce, in a court
outside of the U.S., judgments of U.S. courts based on the civil liability provisions of the U.S. federal securities laws; and
• Bring an original action in a court in the U.A.E, U.K., or Denmark
to enforce liabilities against any of our officers and directors based upon the U.S. federal securities laws.
We are dependent on the continued services of
our Director and Chairman and if we fail to keep them or fail to attract and retain qualified senior executives and key technical personnel,
our business may not be able to expand.
We are dependent on the continued
availability of Chairman, Nicolas Link and Director, John-Paul Backwell, and the availability of new executives to implement our business
plans. The market for skilled employees is highly competitive, especially for employees in our industry. Although we expect that our planned
compensation programs will be intended to attract and retain the employees required for us to be successful, there can be no assurance
that we will be able to retain all our key employees or a sufficient number to execute our plans, nor can there be any assurance we will
be able to continue to attract new employees as required.
Our lack of adequate D&O insurance may also
make it difficult for us to retain and attract talented and skilled directors and officers.
In the future we may be subject to litigation, including
potential class action and stockholder derivative actions. Risks associated with legal liability are difficult to assess and quantify,
and their existence and magnitude can remain unknown for significant periods of time. To date, we have not obtained directors and officers
liability (“D&O”) insurance, but the company is currently investigating and plans to obtain one. Without adequate D&O
insurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service
to the Company could have a material adverse effect on our financial condition, results of operations and liquidity. Furthermore, our
lack of adequate D&O insurance may make it difficult for us to retain and attract talented and skilled directors and officers, which
could adversely affect our business.
Our Officers and Key Personnel may voluntarily
terminate their relationship with us at any time, and competition for qualified personnel is lengthy, costly, and disruptive.
If we lose the services of our
officers and key personnel and fail to replace them if they depart, we could experience a negative effect on our financial results and
stock price. The loss and our failure to attract, integrate, motivate, and retain additional key employees could have a material adverse
effect on our business, operating and financial results and stock price.
Risks Relating to our Common Stock
We may conduct offerings of our equity securities
in the future, in which case your proportionate interest may become diluted.
We may be required to conduct
equity offerings in the future to finance our current projects or to finance subsequent projects that we decide to undertake. If our common
stock shares are issued in return for additional funds, the price per share could be lower than that paid by our current shareholders
but with the aim to increase overall value for all shareholders. We anticipate continuing to rely on equity sales of our common stock
shares in order to fund our business operations. If we issue additional common stock shares or securities convertible into shares of our
common stock, your percentage interest in us could become diluted.
Our common stock price may be volatile and could
fluctuate, which could result in substantial losses for investors.
Our common stock is quoted on
the OTC Pink Market under the symbol, “ILUS.” The market price of our common stock is likely to be volatile and could fluctuate
in price in response to various factors, many of which are beyond our control, including:
|
• |
government regulation of our Company and operations. |
|
• |
the establishment of partnerships. |
|
• |
intellectual property disputes. |
|
• |
additions or departures of key personnel. |
|
• |
sales of our common stock. |
|
• |
our ability to integrate operations, technology, products, and services. |
|
• |
our ability to execute our business plan. |
|
• |
operating results below expectations. |
|
• |
loss of any strategic relationship. |
|
• |
economic and other external factors; and |
|
• |
period-to-period fluctuations in our financial results. |
In addition, the securities markets
have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular
companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
Sales of a substantial number of shares of our
common stock in the public market, or the perception that such sales could occur, could cause our stock price to fall.
The market price of our common stock could decline
significantly as a result of sales of a large number of shares of our common stock. If our existing stockholders sell, or indicate an
intention to sell, substantial amounts of our common stock in the public market after the contractual and securities law restrictions
on resale of such common stock lapse, or after those shares become registered for resale pursuant to an effective registration statement,
the trading price of our common stock could decline. As of March 31, 2023, a total of 1,379,080,699 shares of our common stock were outstanding.
Of those shares, 1,190,797,366 are currently without restriction, in the public market. Upon
the effectiveness of any registration statement, we could elect to file with respect to any outstanding shares of common stock, any sales
of those shares or any perception in the market that such sales may occur could cause the trading price of our common stock to decline.
The issuance of shares of our common stock upon conversion or exercise
of preferred stock, warrants and convertible notes, will dilute ownership to existing shareholders and may cause our stock price to fall.
Any issuance of additional common stock by us in the
future as a result of the conversion or exercise of warrants, convertible notes, preferred stock, or debt settlements would result in
dilution to our existing shareholders. Such issuances could be made at a price that reflects a discount or a premium to the then-current
trading price of our common stock. Moreover, the perception in the public market that shareholders might sell shares of our stock or that
we could make a significant issuance of additional common stock in the future could depress the market for our shares. These sales, or
the perception that these sales might occur, could depress the market price of our common stock, or make it more difficult for us to sell
equity securities in the future at a time and at a price that we deem appropriate.
We have issued shares of our common stock, as well
as other securities such as warrants, convertible notes, preferred stock, or debt settlements, which are convertible into shares of our
common stock, in financing transactions that are deemed to be “restricted securities,” as that term is defined in Rule 144
promulgated under the Securities Act. From time to time, certain of our shareholders or derivative security holders may be eligible to
sell all or some of their restricted shares of common stock by means of ordinary brokerage transactions in the open market pursuant to
Rule 144, subject to certain limitations. The resale pursuant to Rule 144 of shares acquired from us in private transactions could cause
our stock price to decline significantly.
We have never declared or paid any cash dividends
or distributions on our capital stock.
We have never declared or paid
any cash dividends or distributions on our capital stock. While we may not anticipate paying a dividend in the short-term and we currently
intend to retain short-term earnings for growth, we may do so in the medium to long-term future.
The declaration, payment and amount
of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results
of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors
considers relevant. There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect
to the amount of any such dividend.
We may become involved in securities class action
litigation that could divert management’s attention and harm our business.
The stock market in general, have experienced extreme
price and volume fluctuations. These fluctuations have often been unrelated or disproportionate to the operating performance of the companies
involved. If these fluctuations occur in the future, the market price of our shares could fall regardless of our operating performance.
In the past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation
has often been brought against that company. If the market price or volume of our shares suffers extreme fluctuations, then we may become
involved in this type of litigation, which would be expensive and divert management’s attention and resources from managing our
business.
As a public company, we may also from time to time
make forward-looking statements about future operating results and provide some financial guidance to the public markets. Projections
may not be timely made and set at expected performance levels and could affect the price of our shares.
Our common stock is currently deemed a “penny stock,”
which makes it more difficult for our investors to sell their shares.
Our common stock is currently deemed a “penny
stock,” which makes it more difficult for our investors to sell their shares. The SEC has adopted rule 3a51-1 which establishes
the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less
than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving
a penny stock, unless exempt, Rule 15g-9 requires:
|
• |
that a broker or dealer approve a person’s account for transactions in penny stocks, and |
|
• |
the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. |
In order to approve a person’s account for transactions
in penny stocks, the broker or dealer must:
|
• |
obtain financial information and investment experience objectives of the person, and |
|
• |
make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. |
The broker or dealer must also deliver, prior to any
transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:
|
• |
sets forth the basis on which the broker or dealer made the suitability determination and |
|
• |
that the broker or dealer received a signed, written agreement from the investor prior to the transaction. |
Generally, brokers may be less willing to execute transactions
in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock
and cause a decline in the market value of our stock.
Risks Relating to Our Company and Industry
The success of our business depends on our ability to maintain and
enhance our reputation and brand.
We believe that our reputation in our industry is of
significant importance to the success of our business. A well-recognized brand is critical to increasing our customer base and, in turn,
increasing our revenue. Since the industry is highly competitive, our ability to remain competitive depends to a large extent on our ability
to maintain and enhance our reputation and brand, which could be difficult and expensive. To maintain and enhance our reputation and brand,
we need to successfully manage many aspects of our business, such as cost-effective marketing campaigns to increase brand recognition
and awareness in a highly competitive market. We cannot assure you, however, that these activities will be successful and achieve the
brand promotion goals we expect. If we fail to maintain and enhance our reputation and brand, or if we incur excessive expenses in our
efforts to do so, our business, financial conditions and results of operations could be adversely affected.
In the event that we are unable to successfully compete in our industry,
we may not see lower profit margins
We face substantial competition in our industry. Due
to our smaller size, it can be assumed that some of our competitors have greater financial, technical, and other competitive resources.
Accordingly, these competitors may have already begun to establish superior technologies in our industry. We will attempt to compete against
these competitors by developing technology that exceed what is offered by our competitors. However, we cannot assure you that our technology
will outperform competing technology, or that our competitors will not develop new products or services that exceed what we provide. In
addition, we may face competition based on price. If our competitors lower the prices on their products, then it may not be possible for
us to market our products at prices that are economically viable. Increased competition could result in:
|
• |
Lower than projected revenues; |
|
• |
Price reductions and lower profit margins. |
Any one of these results could adversely affect our business,
financial condition, and results of operations.
In addition, our competitors may develop competing products that
achieve greater market acceptance. It is also possible that new competitors may emerge and acquire significant market share. Our inability
to achieve sales and revenue due to competition will have an adverse effect on our business, financial condition, and results of operations.
If we are unable to successfully manage growth, our operations could
be adversely affected.
Our progress is expected to require the full utilization
of our management, financial and other resources. Our ability to manage growth effectively will depend on our ability to improve and expand
operations, including our financial and management information systems, and to recruit, train and manage personnel. There can be no absolute
assurance that management will be able to manage growth effectively.
If we do not properly manage the growth of our business,
we may experience significant strains on our management and operations and disruptions in our business. Various risks arise when companies
and industries grow quickly. If our business or industry grows too quickly, our ability to meet customer demand in a timely and efficient
manner could be challenged. We may also experience development delays as we seek to meet increased demand for our services and platform.
Our failure to properly manage the growth that we or our industry might experience could negatively impact our ability to execute on our
operating plan and, accordingly, could have an adverse impact on our business, our cash flow and results of operations, and our reputation
with our current or potential customers.
We may fail to successfully integrate acquisitions or otherwise be
unable to benefit from pursuing acquisitions.
We believe there are meaningful opportunities to grow
through acquisitions and joint ventures across all service categories and we expect to continue a strategy of selectively identifying
and acquiring businesses with complementary services. We may be unable to identify, negotiate, and complete suitable acquisition opportunities
on reasonable terms. There can be no assurance that any business acquired by us will be successfully integrated with our operations or
prove to be profitable to us. We may incur future liabilities related to acquisitions. Should any of the following problems, or others,
occur as a result of our acquisition strategy, the impact could be material:
|
• |
difficulties integrating personnel from acquired entities and other corporate cultures into our business; difficulties integrating information systems; |
|
• |
the potential loss of key employees of acquired companies; |
|
• |
the assumption of liabilities and exposure to undisclosed or unknown liabilities of acquired companies; or the diversion of management attention from existing operations. |
The elimination of monetary liability against our directors, officers
and employees under our Articles of Incorporation and the existence of indemnification rights to our directors, officers and employees
may result in substantial expenditures by our Company and may discourage lawsuits against our directors, officers, and employees.
Our Articles of Incorporation contain provisions that
eliminate the liability of our directors for monetary damages to our Company and shareholders. Our bylaws also require us to indemnify
our officers and directors. We may also have contractual indemnification obligations under our agreements with our directors, officers,
and employees. The foregoing indemnification obligations could result in our company incurring substantial expenditures to cover the cost
of settlement or damage awards against directors, officers, and employees that we may be unable to recoup. These provisions and resulting
costs may also discourage our company from bringing a lawsuit against directors, officers, and employees for breaches of their fiduciary
duties, and may similarly discourage the filing of derivative litigation by our shareholders against our directors, officers, and employees
even though such actions, if successful, might otherwise benefit our Company and shareholders.