General

The following is a discussion by management of its view of the Company's business, financial condition, and corporate performance for the past year. The purpose of this information is to give management's recap of the past year, and to give an understanding of management's current outlook for the near future. This section is meant to be read in conjunction with the Financial Statements of this Annual Report on Form 10-K.





Overview

QIND is a Nevada Corporation majority owned by Ilustrato Pictures International Inc. (ILUS). ILUS functions as a Mergers and Acquisitions company, which concentrates on providing strategic management oversight that includes financial, administration, marketing, and human resources support to its operating companies. QIND functions as ILUS's Industrial & Manufacturing subsidiary.

QIND's operating companies specialize in the manufacturing and assembling of process equipment, piping, and modules for the oil, gas, and energy sectors with key end-users in the fields of Oil & Gas, Off-shore, Refineries & Petrochemical, Waste-water, Chemical, Fertilizer, Metals and Mineral Processing.

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. The Industrial and Manufacturing sectors are 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 Tenders can be withdrawn and lead times for the manufacturing can be affected which can result in cancellation of orders if not delivered on time.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

A significant component of our growth is through the acquisition and consolidation of operating companies 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 sales synergies within the operating businesses with the aim to expand globally. The benefits of these integration efforts may not positively impact our financial results instantly but is expected to do so in the medium to long-term future.





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Plan of Operations



First Half of 2023

QIND acquired 52% of Quality International Co Ltd FCZ (QI) 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 $150M in various stages of the manufacturing process and an additional $220M in expected orders.

The company forecasts revenue upwards of $150M for the FY 2023 and will file an 8-K for its acquisition of Quality International with Pro Forma Financial Information within 71 days of closing dated March 6, 2023. The Company will allocate resources to our recently acquired subsidiaries with the aim to increase efficiency, drive increased sales and positively impact their financial results. Allocated personnel will primarily focus on optimizing margins of supplies and raw materials, logistics and production processes.

On April 19, 2023, QIND engaged with Exchange Listings LLC as strategic advisors to pursue the company's goal of completing a successful uplisting to a major stock exchange in conjunction with a simultaneous debt financing and/or registration statement.





Second Half of 2023

In the second half of 2022, QIND anticipates acquiring additional companies in the industrial and manufacturing sectors and will continue with the integration and optimization of its current operating companies. With the group's expansion and growth, we also anticipate hiring executives and personnel with significant industry experience to streamline financial reporting, compliance, Investor Relations and to improve our corporate governance in line with the anticipated uplist to a major stock exchange.





Results of Operations



Revenues

We earned $65,603,673 in revenue for the year ended December 31, 2022, as compared with revenue of $0 for the year ended December 31, 2021. The increase in revenue is a result of revenue from our acquisition of Quality International and consolidation in 2022. Quarter on Quarter (QoQ), we saw a 47.8% increase in Revenues of $9,134,073 from $19,126,800 in Q3 to $28,260,873 in Q4.





Operating Expenses

Operating expenses increased from $5,175,042 for the year ended December 31, 2021, to $11,471,128 for the year ended December 31, 2022. Our operating expenses in 2022 were mainly as a result of the acquisition of Quality International. Our operating expenses in 2021 were mainly the result of shares issued to our CEO and Chairman at that time in the amount of $4,720,214, resulting in the majority of increased operating 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.





Other Income/Expenses

We had other expenses of $4,147,739 for the year ended December 31, 2022, as compared with insignificant other expenses consisting of interest expenses for the same period ended 2021. Our other expenses in 2022 were mainly the result of interest expenses on the bank loans and depreciation for Quality International.





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Net Income/Net Loss

We incurred net income of $6,773,268 for the year ended December 31, 2022, compared to a net loss of $5,179,500 for the same period ended December 31, 2021. Quarter on Quarter (QoQ) we saw a 5.5% increase in Net Income of $134,585 from $2,431,115 in Q3 to $2,565,700 in Q4. The increase in Net Profit for the quarter resulted in a Net Profit per common share (Earnings Per Share - EPS) for the twelve months ended December 31, 2022, of $0.07 with an annualized EPS value of $0.10 per common share, with a P/E ratio (Price Earnings) of 4.71 and a trailing P/E ratio of 3.11 based upon a share price of $0.31 as of December 31, 2022.

Liquidity and Capital Resources

As of December 31, 2022, we had total current assets of $111,601,921 and total current liabilities of $144,686,121 which include the payable of $81,000,000 as part of purchase consideration for acquisition of our subsidiary Quality International. We had working capital deficit of $33,084,200 as of December 31, 2022. This compares with a working capital deficit of $579,300 as of December 31, 2021.

Financing activities provided $45,729,636 in cash for the year ended December 31, 2022, as compared with $405,299 in cash provided for the same period ended 2021.



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.





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 audited financial statements included in this Annual Report on Form 10-K.

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.





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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.

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