Item 8. Financial Statements and
Supplementary Data
Index to Financial Statements Required by Article 8 of Regulation S-X:
Audited Financial Statements:
|
F-1 |
Report of Independent Registered Public Accounting Firm Audited Financial Statement for the Year ended December 31, 2021 (PCIOB ID 1013) ; |
F-2 |
Consolidated Balance Sheets as of December 31, 2021 and 2020; |
F-3 |
Consolidated Statements of Operations for the years ended December 31, 2021 and 2020; |
F-4 |
Consolidated Statement of Stockholders’ Equity for the years ended December 31, 2021 and 2020; |
F-5 |
Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020; and |
F-6 |
Notes to Consolidated Financial Statements. |
Report of Independent Registered Public
Accounting Firm
To the Stockholders and Board of Directors iQSTEL,
Inc.
Coral Gables, FL
Opinion on the Consolidated Financial
Statements
We have audited the accompanying consolidated
balance sheets of iQSTEL, Inc. (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations,
stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years then
ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Uncertainty –
See Also Critical Audit Matters Section Below
The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial
statements, the Company has suffered recurring losses from operations and does not have an established source of revenues sufficient to
cover its operating costs, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in
regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance
with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated
below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to
be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the
critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they
relate.
Revenue Recognition
Critical Audit Matter Description
The Company recognizes revenue upon
transfer of control of promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange
for those services.
Significant judgment is exercised by
the Company in determining revenue recognition for customer agreements, and include the pattern of delivery (i.e., timing of when revenue
is recognized) for each distinct performance obligation.
The related audit effort in evaluating
management’s judgments in determining revenue recognition for customer agreements required a high degree of auditor judgment.
How the Critical Audit Matter was Addressed
in the Audit
Our principal audit procedures related
to the Company’s revenue recognition for customer agreements included the following:
| · | We gained an understanding of internal controls related to revenue recognition. |
| · | We evaluated management’s significant accounting policies for reasonableness. |
| · | We selected a sample of revenues recognized and performed the following procedures: |
| o | Obtained and read contract source documents for
each selection and other documents that were part of the agreement, if applicable. |
| o | Assessed the terms in the customer agreement and
evaluated the appropriateness of management’s application of their accounting policies, along with their use of estimates, in the
determination of revenue recognition conclusions. |
| o | We tested the mathematical accuracy of management’s
calculations of revenue and the associated timing of revenue recognized in the financial statements. |
Going Concern
Critical Audit Matter Description
As described further in Note 3 to the
consolidated financial statements, the Company has suffered recurring losses from operations and does not have an established source of
revenues sufficient to cover its operating costs. The ability of the Company to continue as a going concern is dependent on executing
its business plan and ultimately to attain profitable operations. Accordingly, the Company has determined that these factors raise substantial
doubt as to the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.
Management intends to continue to fund its business by way of public or private offerings of the Company’s stock or through loans
from private investors, in order satisfy the Company’s obligations as they come due for at least one year from the financial statement
issuance date. However, the Company has not concluded that these plans alleviate the substantial doubt related to its ability to continue
as a going concern.
How the Critical Audit Matter was Addressed
in the Audit
We determined the Company’s ability
to continue as a going concern is a critical audit matter due to the estimation and uncertainty regarding the Company’s available
capital and the risk of bias in management’s judgments and assumptions in their determination. Our audit procedures related to the
Company’s assertion on its ability to continue as a going concern included the following, among others:
| · | We performed testing procedures such as analytical
procedures to identify conditions and events that indicate that there could be substantial doubt about the Company’s ability to
continue as a going concern for a reasonable period of time. |
| · | We reviewed and evaluated management's plans for
dealing with adverse effects of these conditions and events. |
| · | We inquired of Company management and reviewed
company records to assess whether there are additional factors that contribute to the uncertainties disclosed. |
| · | We assessed whether the Company’s determination
that there is substantial doubt about its ability to continue as a going concern was adequately disclosed. |
/s/ Urish Popeck & Co., LLC
We have served as the Company's auditor since 2020.
Pittsburgh, PA
April 15, 2022
iQSTEL INC
Consolidated Balance Sheets
| |
December 31, | |
December 31, |
| |
2021 | |
2020 |
ASSETS | |
| |
|
Current Assets | |
| | | |
| | |
Cash | |
$ | 3,334,813 | | |
$ | 753,316 | |
Accounts receivable, net | |
| 2,540,515 | | |
| 2,528,321 | |
Due from related parties | |
| 424,086 | | |
| 221,790 | |
Prepaid and other current assets | |
| 267,110 | | |
| 78,157 | |
Total Current Assets | |
| 6,566,524 | | |
| 3,581,584 | |
| |
| | | |
| | |
Property and equipment, net | |
| 409,382 | | |
| 350,530 | |
Intangible asset | |
| 99,592 | | |
| 21,875 | |
Goodwill | |
| 1,537,742 | | |
| 1,537,742 | |
Deferred tax assets | |
| 446,402 | | |
| 460,036 | |
TOTAL ASSETS | |
$ | 9,059,642 | | |
$ | 5,951,767 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Accounts payable | |
| 1,474,595 | | |
| 2,737,411 | |
Due to related parties | |
| 26,613 | | |
| 94,616 | |
Loans payable - net of discount of $7,406 and $19,221 | |
| 315,450 | | |
| 1,332,612 | |
Loans payable - related parties | |
| 239,308 | | |
| 2,054,379 | |
Current portion of convertible notes - net of discount of $0 and $370,106 | |
| — | | |
| 253,554 | |
Other current liabilities | |
| 307,049 | | |
| 413,676 | |
Derivative liabilities | |
| — | | |
| 1,025,691 | |
Total Current Liabilities | |
| 2,363,015 | | |
| 7,911,939 | |
| |
| | | |
| | |
Convertible notes - net of discount of $0 and $2,184 | |
| — | | |
| 2,816 | |
Loans payable, non-current | |
| 119,295 | | |
| 270,836 | |
Employee benefits, non-current | |
| 156,434 | | |
| 161,212 | |
TOTAL LIABILITIES | |
| 2,638,744 | | |
| 8,346,803 | |
| |
| | | |
| | |
Stockholders' Equity (Deficit) | |
| | | |
| | |
Preferred stock: 1,200,000 authorized; $0.001 par value | |
| | | |
| | |
Series A Preferred stock: 10,000 designated;
$0.001 par value, 10,000 shares issued and outstanding, respectively | |
| 10 | | |
| 10 | |
Series B Preferred stock: 200,000 designated;
$0.001 par value, 21,000 and 0 shares issued and outstanding | |
| 21 | | |
| — | |
Series C Preferred stock: 200,000 designated; $0.001 par value, No shares issued and outstanding | |
| — | | |
| — | |
Common stock: 300,000,000 authorized; $0.001 par value 147,477,358
and 118,133,432 shares issued and outstanding, respectively | |
| 147,477 | | |
| 118,133 | |
Additional paid in capital | |
| 25,842,982 | | |
| 13,267,261 | |
Accumulated deficit | |
| (18,536,921 | ) | |
| (14,699,148 | ) |
Accumulated other comprehensive loss | |
| (36,658 | ) | |
| (74,831 | ) |
Equity (Deficit) attributed to stockholders of iQSTEL Inc. | |
| 7,416,911 | | |
| (1,388,575 | ) |
Deficit attributable to noncontrolling interests | |
| (996,013 | ) | |
| (1,006,461 | ) |
Total stockholders' Equity (Deficit) | |
| 6,420,898 | | |
| (2,395,036 | ) |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |
$ | 9,059,642 | | |
$ | 5,951,767 | |
The accompanying notes are an integral part of these
consolidated financial statements.
iQSTEL INC
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
| |
Years Ended |
| |
December 31, |
| |
2021 | |
2020 |
| |
| |
|
Revenues | |
$ | 64,702,018 | | |
$ | 44,910,006 | |
Cost of revenue | |
| 63,168,303 | | |
| 43,947,654 | |
Gross profit | |
| 1,533,715 | | |
| 962,352 | |
| |
| | | |
| | |
Operating expenses | |
| | | |
| | |
General and administration | |
| 4,517,631 | | |
| 4,174,367 | |
Total operating expenses | |
| 4,517,631 | | |
| 4,174,367 | |
| |
| | | |
| | |
Operating loss | |
| (2,983,916 | ) | |
| (3,212,015 | ) |
| |
| | | |
| | |
Other income (expense) | |
| | | |
| | |
Other income | |
| 4,426 | | |
| 38,585 | |
Other expenses | |
| 2,684 | | |
| (117,562 | ) |
Interest expense | |
| (675,481 | ) | |
| (3,509,323 | ) |
Change in fair value of derivative liabilities | |
| 317,080 | | |
| 255,614 | |
Gain (loss) on settlement of debt | |
| (528,794 | ) | |
| (154,629 | ) |
Total other income (expense) | |
| (880,085 | ) | |
| (3,487,315 | ) |
| |
| | | |
| | |
Income taxes | |
| — | | |
| (152 | ) |
Net income (loss) | |
| (3,864,001 | ) | |
| (6,699,482 | ) |
Less: Net income (loss) attributable to noncontrolling interests | |
| (26,228 | ) | |
| (125,591 | ) |
Net income (loss) attributed to stockholders of iQSTEL Inc. | |
$ | (3,837,773 | ) | |
$ | (6,573,891 | ) |
| |
| | | |
| | |
Comprehensive income (loss) | |
| | | |
| | |
Net income (loss) | |
$ | (3,864,001 | ) | |
$ | (6,699,482 | ) |
Foreign currency adjustment | |
| 74,849 | | |
| (146,373 | ) |
Total comprehensive income (loss) | |
$ | (3,789,152 | ) | |
$ | (6,845,855 | ) |
Less: Comprehensive income attributable to noncontrolling interests | |
| 10,448 | | |
| (197,314 | ) |
Net comprehensive income (loss) attributed to stockholders of iQSTEL Inc. | |
$ | (3,799,600 | ) | |
$ | (6,648,541 | ) |
| |
| | | |
| | |
Basic and diluted loss per common share | |
$ | (0.03 | ) | |
$ | (0.10 | ) |
| |
| | | |
| | |
Weighted average number of common shares outstanding - Basic and diluted | |
| 135,383,893 | | |
| 63,941,222 | |
The accompanying notes are an integral part of these
consolidated financial statements.
iQSTEL INC
Consolidated Statements of Changes in Stockholders’
Equity (Deficit)
For the years ended December 31, 2021 and 2020
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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|
|
|
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|
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|
Series A Preferred Stock |
|
|
|
Series B Preferred Stock |
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| |
| Shares
| | |
| Amount
| | |
| Shares
| | |
| Amount
| | |
| Shares
| | |
| Amount
| | |
| Additional
Paid in Capital | | |
| Accumulated Deficit
| | |
| Accumulated
Other Comprehensive Loss | | |
| Total
| | |
| Non
Controlling Interest | | |
Total
Shareholders' Deficit |
Balance - December 31, 2019 | |
| — | | |
$ | — | | |
| — | | |
$ | — | | |
| 18,008,591 | | |
$ | 18,008 | | |
$ | 3,240,528 | | |
$ | (8,125,257 | ) | |
$ | (181 | ) | |
$ | (4,866,902 | ) | |
$ | (903,513 | ) | |
$(5,770,415) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Preferred stock issued for conversion of common stock | |
| 10,000 | | |
| 10 | | |
| — | | |
| — | | |
| (100,000 | ) | |
| (100 | ) | |
| 90 | | |
| — | | |
| — | | |
| — | | |
| — | | |
— |
Common stock issued for cash | |
| — | | |
| — | | |
| — | | |
| — | | |
| 23,937,500 | | |
| 23,938 | | |
| 1,891,067 | | |
| — | | |
| — | | |
| 1,915,005 | | |
| — | | |
1,915,005 |
Common stock issued for settlement of debt | |
| — | | |
| — | | |
| — | | |
| — | | |
| 12,818,145 | | |
| 12,818 | | |
| 876,275 | | |
| — | | |
| — | | |
| 889,093 | | |
| — | | |
889,093 |
Common stock issued for services | |
| — | | |
| — | | |
| — | | |
| — | | |
| 6,267,600 | | |
| 6,268 | | |
| 641,590 | | |
| — | | |
| — | | |
| 647,858 | | |
| — | | |
647,858 |
Common stock issued for forbearance of debt | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,150,000 | | |
| 1,150 | | |
| 91,100 | | |
| — | | |
| — | | |
| 92,250 | | |
| — | | |
92,250 |
Common stock issued for conversion of debt | |
| — | | |
| — | | |
| — | | |
| — | | |
| 46,575,378 | | |
| 46,575 | | |
| 1,349,865 | | |
| — | | |
| — | | |
| 1,396,440 | | |
| — | | |
1,396,440 |
Common stock issued for exercised cashless warrant | |
| — | | |
| — | | |
| — | | |
| — | | |
| 9,476,218 | | |
| 9,476 | | |
| (9,476 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
— |
Common stock issued for acquisition of Itsbchain LLC | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 50,000 | | |
| — | | |
| — | | |
| 50,000 | | |
| — | | |
50,000 |
Acquisition of IoT Lab | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 94,366 | | |
94,366 |
Resolution of derivative liabilities | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 5,136,222 | | |
| — | | |
| — | | |
| 5,136,222 | | |
| — | | |
5,136,222 |
Foreign currency translation adjustments | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (74,650 | ) | |
| (74,650 | ) | |
| (71,723 | ) | |
(146,373) |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (6,573,891 | ) | |
| — | | |
| (6,573,891 | ) | |
| (125,591 | ) | |
(6,699,482) |
Balance - December 31, 2020 | |
| 10,000 | | |
$ | 10 | | |
| — | | |
$ | — | | |
| 118,133,432 | | |
$ | 118,133 | | |
$ | 13,267,261 | | |
$ | (14,699,148 | ) | |
$ | (74,831 | ) | |
$ | (1,388,575 | ) | |
$ | (1,006,461 | ) | |
$(2,395,036) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Preferred stock issued for conversion of common stock | |
| — | | |
| — | | |
| 21,000 | | |
| 21 | | |
| (21,000,000 | ) | |
| (21,000 | ) | |
| 20,979 | | |
| — | | |
| — | | |
| — | | |
| — | | |
— |
Common stock issued for cash and subscription receivable | |
| — | | |
| — | | |
| — | | |
| — | | |
| 41,562,500 | | |
| 41,563 | | |
| 6,394,687 | | |
| — | | |
| — | | |
| 6,436,250 | | |
| — | | |
6,436,250 |
Common stock issued for settlement of debt | |
| — | | |
| — | | |
| — | | |
| — | | |
| 2,230,394 | | |
| 2,230 | | |
| 2,054,300 | | |
| — | | |
| — | | |
| 2,056,530 | | |
| — | | |
2,056,530 |
Common stock issued for service | |
| — | | |
| — | | |
| — | | |
| — | | |
| 195,000 | | |
| 195 | | |
| 284,505 | | |
| — | | |
| — | | |
| 284,700 | | |
| — | | |
284,700 |
Common stock issued for compensation | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,320,000 | | |
| 1,320 | | |
| 1,036,248 | | |
| — | | |
| — | | |
| 1,037,568 | | |
| — | | |
1,037,568 |
Common stock issued for forbearance of debt | |
| — | | |
| — | | |
| — | | |
| — | | |
| 250,000 | | |
| 250 | | |
| 49,675 | | |
| — | | |
| — | | |
| 49,925 | | |
| — | | |
49,925 |
Common stock issued for conversion of debt | |
| — | | |
| — | | |
| — | | |
| — | | |
| 6,080,632 | | |
| 6,081 | | |
| 416,214 | | |
| — | | |
| — | | |
| 422,295 | | |
| — | | |
422,295 |
Common stock payable | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 52,161 | | |
| — | | |
| — | | |
| 52,161 | | |
| — | | |
52,161 |
Related party debt to equity swap | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,647,150 | | |
| — | | |
| — | | |
| 1,647,150 | | |
| — | | |
1,647,150 |
Cancellation of common stock | |
| — | | |
| — | | |
| — | | |
| — | | |
| (1,294,600 | ) | |
| (1,295 | ) | |
| (88,809 | ) | |
| — | | |
| — | | |
| (90,104 | ) | |
| — | | |
(90,104) |
Resolution of derivative liabilities | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 708,611 | | |
| — | | |
| — | | |
| 708,611 | | |
| — | | |
708,611 |
Foreign currency translation adjustments | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 38,173 | | |
| 38,173 | | |
| 36,676 | | |
74,849 |
Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (3,837,773 | ) | |
| — | | |
| (3,837,773 | ) | |
| (26,228 | ) | |
(3,864,001) |
Balance - December 31, 2021 | |
| 10,000 | | |
$ | 10 | | |
| 21,000 | | |
$ | 21 | | |
| 147,477,358 | | |
$ | 147,477 | | |
$ | 25,842,982 | | |
$ | (18,536,921 | ) | |
$ | (36,658 | ) | |
$ | 7,416,911 | | |
$ | (996,013 | ) | |
$6,420,898 |
The accompanying notes are an integral part of these
consolidated financial statements.
iQSTEL INC
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
| |
December 31, |
| |
2021 | |
2020 |
| |
| |
|
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
Net loss | |
$ | (3,864,001 | ) | |
$ | (6,699,482 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Stock based compensation and cancellation | |
| 1,284,325 | | |
| 697,858 | |
Bad debt | |
| — | | |
| 137,749 | |
Write-off of due from related party | |
| 10,148 | | |
| 43,375 | |
Depreciation and amortization | |
| 91,474 | | |
| 68,602 | |
Amortization of debt discount | |
| 450,771 | | |
| 2,221,506 | |
Change in fair value of derivative liabilities | |
| (317,080 | ) | |
| (255,614 | ) |
Loss on settlement of debt | |
| 528,794 | | |
| 154,629 | |
Prepayment and default penalty | |
| 122,020 | | |
| 358,046 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (39,862 | ) | |
| 167,077 | |
Prepaid and other current assets | |
| (91,066 | ) | |
| 21,629 | |
Accounts payable | |
| (1,231,946 | ) | |
| 432,872 | |
Other current liabilities | |
| (95,758 | ) | |
| 535,579 | |
Net cash used in operating activities | |
| (3,152,181 | ) | |
| (2,116,174 | ) |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
Acquisition of subsidiary, net of cash acquired | |
| (60,000 | ) | |
| 15,781 | |
Purchase of property and equipment | |
| (153,183 | ) | |
| (90,192 | ) |
Purchase of intangible assets | |
| (77,717 | ) | |
| — | |
Payment of loan receivable - related party | |
| (220,674 | ) | |
| (18,888 | ) |
Collection of due from related parties | |
| 226 | | |
| 2,088 | |
Net cash used in investing activities | |
| (511,348 | ) | |
| (91,211 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
Proceeds from loans payable | |
| 600,000 | | |
| 1,239,620 | |
Repayments of loans payable | |
| (344,483 | ) | |
| (969,664 | ) |
Proceeds from loans payable - related parties | |
| — | | |
| 20,182 | |
Repayment of loans payable - related parties | |
| (90,787 | ) | |
| (20,197 | ) |
Common stock issued | |
| 6,336,250 | | |
| 1,915,005 | |
Proceeds from convertible notes | |
| — | | |
| 1,420,000 | |
Repayment of convertible notes | |
| (250,000 | ) | |
| (942,190 | ) |
Net cash provided by financing activities | |
| 6,250,980 | | |
| 2,662,756 | |
| |
| | | |
| | |
Effect of exchange rate changes on cash | |
| (5,954 | ) | |
| 27,442 | |
| |
| | | |
| | |
Net change in cash | |
| 2,581,497 | | |
| 482,813 | |
Cash, beginning of period | |
| 753,316 | | |
| 270,503 | |
Cash, end of period | |
$ | 3,334,813 | | |
$ | 753,316 | |
| |
| | | |
| | |
Supplemental cash flow information | |
| | | |
| | |
Cash paid for interest | |
$ | 126,818 | | |
$ | 976,234 | |
Cash paid for taxes | |
$ | — | | |
$ | — | |
| |
| | | |
| | |
Non-cash transactions: | |
| | | |
| | |
Derivative liabilities recognized as debt discount | |
$ | — | | |
$ | 1,673,393 | |
Common stock payable | |
$ | 52,161 | | |
$ | — | |
Common stock issued for conversion of debt | |
$ | 422,295 | | |
$ | 1,396,440 | |
Cashless warrant exercised | |
$ | — | | |
$ | 9,476 | |
Resolution of derivative liabilities | |
$ | 708,611 | | |
$ | 5,136,222 | |
Related party debt to equity swap | |
$ | 1,647,150 | | |
$ | — | |
Common stock issued for settlement of debt | |
$ | 2,056,530 | | |
$ | 889,093 | |
Amount owing for acquisition of IOT | |
$ | — | | |
$ | 60,000 | |
Common stock issued for forbearance of debt | |
$ | 49,925 | | |
$ | 92,250 | |
Replacement of convertible notes to note payable | |
$ | — | | |
$ | 1,000,000 | |
Preferred stock issued for conversion of common stock | |
$ | 21 | | |
$ | 10 | |
Subscription receivable | |
$ | 100,000 | | |
$ | — | |
The accompanying notes are an integral part of these
consolidated financial statements.
iQSTEL INC
Notes to the Consolidated Financial Statements
December 31, 2021
NOTE 1 -ORGANIZATION AND DESCRIPTION OF BUSINESS
Organization and Operations
iQSTEL Inc. (“iQSTEL”, “we”,
“us”, or the “Company”) was incorporated under the laws of the State of Nevada on June 24, 2011 under the name
of B-Maven Inc. The Company changed its name to PureSnax International, Inc. on September 18, 2015; and more recently it changed its name
to iQSTEL Inc. on August 7, 2018.
The Company
has been engaged in the business of telecommunication services as a wholesale carrier of voice, SMS and data for other telecom companies
around the World with more than 150 active interconnection agreements with mobile companies, fixed line companies and other wholesale
carriers.
The Company
incorporated a 75% owned subsidiary, Global Money One Inc. under the laws of the state of Delaware, on November 16, 2020.
COVID-19
A novel strain of coronavirus (COVID-19) was first
identified in December 2019, and subsequently declared a global pandemic by the World Health Organization on March 11, 2020. As a result
of the outbreak, many companies have experienced disruptions in their operations and in markets served. The Company has instituted some
and may take additional temporary precautionary measures intended to help ensure the well-being of its employees and minimize business
disruption. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material
adverse impacts on the Company’s results of operations and financial position at December 31, 2021. The full extent of the future
impacts of COVID-19 on the Company’s operations is uncertain. A prolonged outbreak could have a material adverse impact on financial
results and business operations of the Company, including the timing and ability of the Company to collect accounts receivable and the
ability of the Company to continue to provide high quality services to its clients. The Company is not aware of any specific event or
circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities
as of April 15, 2022, the date of issuance of this Annual Report on Form 10-K. These estimates may change, as new events occur and additional
information is obtained.
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements and related
disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The
financial statements have been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United
States of America. The Company’s fiscal year end is December 31.
Consolidation Policy
The consolidated financial statements of the Company
include the accounts of the Company and its owned subsidiaries, Etelix.com USA, LLC (“Etelix”), SwissLink Carrier AG (“Swisslink”),
ITSBCHAIN, LLC (“ItsBchain”), QGLOBAL SMS, LLC (“QGlobal”), IoT Labs, LLC (“IoT Labs”) and Global
Money One Inc (“Global Money One”). All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements
in conformity with GAAP in the United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates
and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could
differ from these good faith estimates and judgments.
Business Combinations
In accordance with ASC 805-10, “Business
Combinations”, the Company accounts for all business combinations using the acquisition method of accounting. Under this method,
assets and liabilities, including any remaining non-controlling interests, are recognized at fair value at the date of acquisition. The
excess of the purchase price over the fair value of assets acquired, net of liabilities assumed, and non-controlling interests is recognized
as goodwill. Certain adjustments to the assessed fair values of the assets, liabilities, or non-controlling interests made subsequent
to the acquisition date, but within the measurement period, which is up to one year, are recorded as adjustments to goodwill. Any adjustments
subsequent to the measurement period are recorded in income. Any cost or equity method interest that the Company holds in the acquired
company prior to the acquisition is re-measured to fair value at acquisition with a resulting gain or loss recognized in income for the
difference between fair value and the existing book value. Results of operations of the acquired entity are included in the Company’s
results from the date of the acquisition onward and include amortization expense arising from acquired tangible and intangible assets.
Foreign Currency Translation and Re-measurement
The Company translates its foreign operations to U.S.
dollar in accordance with ASC 830, “Foreign Currency Matters”.
The functional currency and reporting currency of
Etelix, QGlobal, ItsBchain, IoT Labs and Global Money One is the U.S. dollar, while SwissLink’s functional currency is the Swiss
Franc (“CHF”).
The Company’s subsidiaries, whose functional
currency is not the U.S. dollar, translate their records into U.S. dollar as follows:
| · | Assets and liabilities at the rate of exchange in effect at the balance
sheet date |
| · | Equities at historical rate |
| · | Revenue and expense items at the average rate of exchange prevailing during
the period |
Adjustments arising from such translations are included
in accumulated other comprehensive income in stockholders’ equity.
| |
December 31, | |
December 31, |
| |
2021 | |
2020 |
Spot CHF: USD exchange rate | |
$ | 1.0974 | | |
$ | 1.1304 | |
Average CHF: USD exchange rate | |
$ | 1.0969 | | |
$ | 1.0662 | |
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks, money
market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible
to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company had
no cash equivalents at December 31, 2021 and 2020.
Accounts Receivable and Allowance for Uncollectible
Accounts
Substantially all of the Company’s accounts
receivable balance is related to trade receivables. Trade accounts receivable are recorded at the invoiced amount and do not bear interest.
The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts
receivable. The Company reviews its allowance for doubtful accounts daily and past due balances over 60 days and a specified amount are
reviewed individually for collectability. Account balances are charged off after all means of collection have been exhausted and the potential
for recovery is considered remote. During the years ended December 31, 2021 and 2020, the Company had bad debt expense of $0 and $137,749,
respectively.
Long-Lived Assets
Long-lived assets are evaluated for impairment whenever
events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful
lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted future cash flows to
the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value.
Fixed Assets
Fixed assets, consisting of telecommunications equipment
and software, is recorded at cost reduced by accumulated depreciation and amortization. Depreciation and amortization expense is recognized
over the assets’ estimated useful lives of 3 years for computers and laptops, 5 years for telecommunications equipment and switches;
and 5 years for software using the straight-line method. Major additions and improvements are capitalized as additions to the property
and equipment accounts, while replacements, maintenance and repairs that do not improve or extend the life of the respective assets, are
expensed as incurred. Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain
events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability
of the carrying amounts.
Impairment of tangible and intangible assets
Tangible and intangible assets (excluding goodwill)
are assessed at each reporting date for indications that an asset may be impaired. If any such indication exists, or when annual impairment
testing for an asset is required, the Company makes an estimate of the asset's recoverable amount. The asset's recoverable amount is the
higher of an asset's or cash-generating unit's fair value less costs of disposal and its value in use and is determined for an individual
asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where
the carrying amount of an asset or a group of assets exceeds its recoverable amount, the asset is considered impaired and is written down
to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or the group of
assets.
Goodwill
We allocate goodwill to reporting units based on the
reporting unit expected to benefit from the business combination. We evaluate our reporting units on an annual basis and, if necessary,
reassign goodwill using a relative fair value allocation approach. Goodwill is tested for impairment at the reporting unit level (operating
segment or one level below an operating segment) on an annual basis and between annual tests if an event occurs or circumstances change
that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could
include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition
of a significant portion of a reporting unit.
Application of the goodwill impairment test requires
judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill
to reporting units, and determination of the fair value of each reporting unit. The fair value of each reporting unit is estimated primarily
through the use of a discounted cash flow methodology. This analysis requires significant judgments, including estimation of future cash
flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful
life over which cash flows will occur, and determination of our weighted average cost of capital.
The estimates used to calculate the fair value of
a reporting unit change from year to year based on operating results, market conditions, and other factors. Changes in these estimates
and assumptions could materially affect the determination of fair value and goodwill impairment for each reporting unit.
Retirement Benefit Costs
Payments to defined contribution retirement benefit
schemes are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes are dealt with as payments
to defined contribution schemes where the Company’s obligations under the schemes are equivalent to those arising in a defined contribution
retirement benefit scheme.
For defined benefit schemes, the cost of providing
benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date.
Actuarial gains and losses are recognized in full in the period in which they occur. They are recognized outside the income statement
and are presented in other comprehensive income. Past service cost is recognized immediately in the income statement in the period in
which it occurs.
The retirement benefit obligation recognized in the
balance sheet represents the present value of the defined obligation as adjusted for unrecognized past service cost, and as reduced by
the fair value of the scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value
of available refunds and reductions in future contributions to the scheme.
Net Income (Loss) Per Share of Common Stock
The Company has adopted ASC 260, ”Earnings
per Share” which requires presentation of basic earnings per share on the face of the statements of operations for all
entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic earnings per share
computation. In the accompanying financial statements, basic loss per share is computed by dividing net loss by the weighted average number
of shares of common stock outstanding during the year. Diluted earnings per share is computed by dividing net income by the weighted average
number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential
dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants unless the result
would be antidilutive. Dilutive potential common shares include outstanding Series B Preferred stock, and it was excluded from the computation
of diluted net loss per share as the result was anti-dilutive for the year ended December 31, 2021. There were no potentially dilutive
shares of common stock outstanding for the year ended December 31, 2021.
Concentrations of Credit Risk
The Company’s financial instruments that are
exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables that it will likely
incur in the near future. The Company places its cash and cash equivalents with financial institutions of high creditworthiness. At times,
its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits.
During the year ended December 31, 2021 and 2020,
7 and 6 customers represented 88% and 70% of our revenues, respectively. For the year ended December 31, 2021 68% of the revenue comes
from customers under prepayment conditions which means there is no credit or bad debt risk on that portion of the customers portfolio.
Financial Instruments
The Company follows ASC 820, “Fair Value
Measurements and Disclosures,” which defines fair value as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market
participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s
own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable
inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the
fair value hierarchy are described below:
Level 1
Level 1 applies to assets or liabilities for which
there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which
there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities
in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less
active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated
by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which
there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or
liabilities.
The carrying values of our financial instruments,
including, cash and cash equivalents; accounts receivable; prepaid and other current assets; accounts payable; other current liabilities;
and due from/to related parties approximate their fair values due to the short-term maturities of these financial instruments.
Transactions involving related parties cannot be presumed
to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations
about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent
to those that prevail in arm’s-length transactions unless such representations can be substantiated. It is not, however, practical
to determine the fair value of amounts due to related party’s due to their related party nature.
Derivative Financial Instruments
The Company does not use derivative instruments to
hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments to determine if such instruments
are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for
as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes
in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company used a Black
Scholes valuation model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative
instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting
period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement
or conversion of the instrument could be required within 12 months of the balance sheet date.
Income Taxes
The Company uses the liability method of accounting
for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on differences between financial
reporting and the tax basis of assets, liabilities, the carry forward of operating losses and tax credits, and are measured using the
enacted tax rates and laws that will be in effect when the differences are expected to reverse. An allowance against deferred tax assets
is recorded when it is more likely than not that such tax benefits will not be realized.
Related Parties
The Company follows ASC 850, “Related
Party Disclosures,” for the identification of related parties and disclosure of related party transactions (see Note 13).
Revenue Recognition
The Company recognizes revenue from telecommunication
services in accordance with ASC 606, “Revenue from Contracts with Customers.”
The Company recognizes revenue related to monthly
usage charges and other recurring charges during the period in which the telecommunication services are rendered, provided that persuasive
evidence of a sales arrangement exists, and collection is reasonably assured. Management considers persuasive evidence of a sales arrangement
to be a written interconnection agreement. The Company’s payment terms vary by client.
Cost of revenue
Costs of revenue represent direct charges from vendors
that the Company incurs to deliver services to its customers. These costs primarily consist of usage charges for calls terminated in vendor’s
network.
Lease
The Company leases office space for corporate and
network monitoring activities and to house telecommunications equipment.
In accordance with ASC 842, “Leases”, we
determine if an arrangement is a lease at inception.
The office lease meets the definition of a short-term
lease because the lease term is 12 months or less. Consequently, consistent with Company’s accounting policy election, the Company
does not recognize the right-of-use asset and the lease liability arising from this lease.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, ASC Subtopic
470-20 “Debt—Debt with “Conversion and Other Options” and ASC subtopic 815-40 “Hedging—Contracts
in Entity’s Own Equity”. The standard reduced the number of accounting models for convertible debt instruments and convertible
preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features
that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a
scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums
are recorded as paid-in capital. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including
interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15,
2020, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this standard
on its consolidated financial statements.
NOTE 3 - GOING CONCERN
The Company's consolidated financial statements have
been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and liquidation
of liabilities in the normal course of business. The Company has suffered recurring losses from operations and does not have an established
source of revenues sufficient to cover its operating costs. These conditions raise substantial doubt about the Company’s ability
to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome
of this uncertainty.
The ability of the Company to continue as a going
concern is dependent upon its ability to successfully accomplish its business plan and eventually attain profitable operations.
During the next year, the Company's foreseeable cash
requirements will relate to continual development of the operations of its business, maintaining its good standing in the industry and
continuing its marketing efforts. The Company may experience a cash shortfall and be required to raise additional capital.
Historically, the Company has relied upon funds from
its stockholders. Management may raise additional capital through future public or private offerings of the Company's stock or through
loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company's failure
to do so could have a material and adverse effect upon its operations and its stockholders.
NOTE 4 - ACQUISITION
IoT Labs
On April 15, 2020, we entered into a Company Acquisition
Agreement (the “Agreement”) with Francisco Bunt regarding the acquisition of 51% of the shares in IoT Labs, whose principal
business activity is the sale of Short Messages (SMS) between USA and Mexico, for $180,000.
The following table summarizes the identifiable assets
acquired and liabilities assumed upon acquisition of IoT Labs and the calculation of goodwill:
|
|
|
|
|
Total purchase price | |
$ | 180,000 | |
Cash | |
| 135,781 | |
Other current assets | |
| 953 | |
Property and equipment | |
| 34,075 | |
Intangible asset | |
| 21,875 | |
Total identifiable assets | |
| 192,684 | |
Accounts payable | |
| (100 | ) |
Total liabilities assumed | |
| (100 | ) |
Net assets | |
| 192,584 | |
Non-controlling interest | |
| 94,366 | |
Total net assets | |
| 98,218 | |
Goodwill | |
$ | 81,782 | |
Unaudited combined proforma results of operations
for the year ended December 31, 2020 as though the Company acquired IoT Labs on January 1, 2020, are set forth below:
|
|
|
|
|
| |
December 31, |
| |
2020 |
Revenues | |
$ | 55,784,168 | |
Cost of revenues | |
| 54,631,017 | |
Gross profit | |
| 1,153,151 | |
| |
| | |
Operating expenses | |
| 4,224,903 | |
Operating loss | |
| (3,071,752 | ) |
| |
| | |
Other expense | |
| (3,487,315 | ) |
Net Loss | |
$ | (6,559,067 | ) |
NOTE 5 – PREPAID AND OTHER CURRENT ASSETS
Prepaid and other current assets at December 31, 2021
and 2020 consisted of the following:
|
|
|
|
|
|
|
|
|
| |
December 31, | |
December 31, |
| |
2021 | |
2020 |
Subscription receivable | |
$ | 100,000 | | |
$ | — | |
Other receivable | |
| 143,187 | | |
| 77,557 | |
Prepaid expenses | |
| 23,320 | | |
| — | |
Tax receivable | |
| 603 | | |
| 600 | |
Total prepaid and other
current assets | |
$ | 267,110 | |
$ | 78,157 |
NOTE 6 – PROPERTY AND EQUIPMENT
Property and equipment at December 31, 2021 and 2020
consisted of the following:
|
|
|
|
|
|
|
|
|
| |
December 31, | |
December 31, |
| |
2021 | |
2020 |
Telecommunication equipment | |
$ | 258,871 | | |
$ | 259,000 | |
Telecommunication software | |
| 618,125 | | |
| 530,514 | |
Other equipment | |
| 108,805 | | |
| 47,206 | |
Total property and equipment | |
| 985,801 | | |
| 836,720 | |
Accumulated depreciation and amortization | |
| (576,419 | ) | |
| (486,190 | ) |
Total property and equipment | |
$ | 409,382 | | |
$ | 350,530 | |
Depreciation expense for the year ended December 31,
2021 and 2020 amounted to $91,474 and $68,602, respectively.
NOTE 7 –LOANS PAYABLE
Loans payable at December 31, 2021 and 2020 consisted
of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| December
31, | | |
| December
31, | | |
| |
| Interest |
| |
| 2021 | | |
| 2020 | | |
Term | |
| Rate |
Unique Funding Solutions_2 | |
$ | — | | |
$ | 2,000 | | |
Note was issued on October 12, 2018 and due on January 17, 2019 | |
| 28.6% |
YES LENDER LLC 3 | |
| — | | |
| 5,403 | | |
Note was issued on August 3, 2020 and due on January 12, 2021 | |
| 26.0% |
Advance Service Group LLC | |
| — | | |
| 12,143 | | |
Note was issued on October 20, 2020, and due on February 19, 2021 | |
| 29.0% |
Apollo Management Group, Inc | |
| — | | |
| 63,158 | | |
Note was issued on March 18, 2020 and due on December 15, 2020 | |
| 12.0% |
Apollo Management Group, Inc 2 | |
| — | | |
| 68,421 | | |
Note was issued on March 25, 2020 and due on December 15, 2020 | |
| 12.0% |
Apollo Management Group, Inc 3 | |
| — | | |
| 66,316 | | |
Note was issued on April 1, 2020 and due on October 1, 2021 | |
| 12.0% |
Apollo Management Group, Inc 4 | |
| — | | |
| 73,684 | | |
Note was issued on April 2, 2020 and due on October 2, 2021 | |
| 12.0% |
Apollo Management Group, Inc 5 | |
| — | | |
| 36,842 | | |
Note was issued on April 7, 2020 and due on October 7, 2021 | |
| 12.0% |
Apollo Management Group, Inc 6 | |
| — | | |
| 84,211 | | |
Note was issued on April 15, 2020 and due on October 15, 2021 | |
| 12.0% |
Apollo Management Group, Inc 7 | |
| — | | |
| 55,000 | | |
Note was issued on April 20, 2020 and due on December 15, 2020 | |
| 12.0% |
Apollo Management Group, Inc 14 | |
| — | | |
| 32,432 | | |
Note was issued on December 4, 2020 and due on January 4, 2021 | |
| 12.0% |
Labrys Fund | |
| — | | |
| 280,000 | | |
Note was issued on June 26, 2020 and due on April 1, 2021 | |
| 12.0% |
M2B Funding Corp | |
| — | | |
| 300,000 | | |
Note was issued on September 1, 2020 and due on September 1, 2021 | |
| 12.0% |
M2B Funding Corp 1 | |
| — | | |
| 77,778 | | |
Note was issued on December 10, 2020 and due on January 9, 2021 | |
| 22.0% |
M2B Funding Corp 2 | |
| — | | |
| 27,778 | | |
Note was issued on December 18, 2020 and due on January 17, 2021 | |
| 22.0% |
M2B Funding Corp 3 | |
| — | | |
| 55,556 | | |
Note was issued on December 24, 2020 and due on January 23, 2021 | |
| 22.0% |
M2B Funding Corp 4 | |
| — | | |
| 111,111 | | |
Note was issued on December 30, 2020 and due on January 29, 2021 | |
| 22.0% |
Bridge Loan | |
| 222,222 | | |
| — | | |
Note was issued on November 1, 2021 and due on January 30, 2022 | |
| 18.0% |
Martus | |
| 100,634 | | |
| 108,609 | | |
Note was issued on October 23, 2018 and due on January 3, 2022 | |
| 5.0% |
Swisspeers AG | |
| 9,605 | | |
| 49,187 | | |
Note was issued on April 8, 2019 and due on October 4, 2022 | |
| 7.0% |
Darlene Covid19 | |
| 109,690 | | |
| 113,040 | | |
Note was issued on April 1, 2020 and due on March 31, 2025 | |
| 0.0% |
Total | |
| 442,151 | | |
| 1,622,669 | | |
| |
| |
Less: Unamortized debt discount | |
| (7,406 | ) | |
| (19,221 | ) | |
| |
| |
Total loans payable | |
| 434,745 | | |
| 1,603,448 | | |
| |
| |
Less: Current portion of loans payable | |
| 315,450 | | |
| 1,332,612 | | |
| |
| |
Long-term loans payable | |
$ | 119,295 | | |
$ | 270,836 | | |
| |
| |
Loans payable - related parties at December 31, 2021
and 2020 consisted of the following:
|
|
|
|
|
|
|
|
|
| |
December 31, | |
December 31, |
| |
2021 | |
2020 |
Alonso Van Der Biest | |
$ | — | | |
$ | 80,200 | |
Alvaro Quintana | |
| — | | |
| 10,587 | |
49% of Shareholder of SwissLink | |
| 19,929 | | |
| 1,737,512 | |
49% of Shareholder of SwissLink | |
| 219,379 | | |
| 226,080 | |
Total | |
| 239,308 | | |
| 2,054,379 | |
Less: Current portion of loans payable | |
| 239,308 | | |
| 2,054,379 | |
Long-term loans payable | |
$ | — | | |
$ | — | |
During the years ended December 31, 2021 and 2020,
the Company borrowed from third parties totaling $600,000 and $1,239,620, which includes original issue discount and financing costs of
$66,666 and $63,970 and repaid the principal amount of $344,483 and $969,664, respectively.
During the years ended December 31, 2021 and 2020,
the Company recorded interest expense of $191,281 and $77,101 and recognized amortization of discount, included in interest expense, of
$78,481 and $44,749, respectively.
During the year ended December 31, 2021, the related
party loan of $1,647,150 (CHF 1,518,909) was swapped into capital and the Company recorded it as additional paid in capital.
During the year ended December 31, 2021, the Company
settled loans payable of $1,516,667 by issuing 2,230,394 shares of common stock valued at $2,056,530. As a result, the Company recorded
loss on settlement of debt of $539,863.
NOTE 8 – OTHER CURRENT LIABILITIES
Other current liabilities at December 31, 2021 and
2020 consisted of the following:
| |
December 31, | |
December 31, |
| |
2021 | |
2020 |
Accrued liabilities | |
$ | 61,153 | | |
$ | 6,789 | |
Accrued interest | |
| 8,173 | | |
| 170,960 | |
Salary payable - management | |
| 92,229 | | |
| 28,300 | |
Employee benefits | |
| 105,221 | | |
| 181,231 | |
Other current liabilities | |
| 40,273 | | |
| 26,396 | |
Total Other Current Liabilities | |
$ | 307,049 | | |
$ | 413,676 | |
NOTE 9 - CONVERTIBLE LOANS
At December 31, 2021 and 2020, convertible loans consisted
of the following:
|
|
|
|
|
|
|
|
|
| |
December 31, | |
December 31, |
| |
2021 | |
2020 |
Promissory notes – Issued in fiscal year 2019, with variable conversion features | |
$ | — | | |
$ | 5,000 | |
Promissory notes – Issued in fiscal year 2020, with variable conversion features | |
| — | | |
| 623,660 | |
Total convertible notes payable | |
| — | | |
| 628,660 | |
Less: Unamortized debt discount | |
| — | | |
| (372,290 | ) |
Total convertible notes | |
| — | | |
| 256,370 | |
| |
| | | |
| | |
Less: current portion of convertible notes | |
| — | | |
| 253,554 | |
Long-term convertible notes | |
$ | — | | |
$ | 2,816 | |
During the years ended December 31, 2021 and 2020,
the Company recorded interest expense of $33,429 and $487,012 and recognized amortization of discount, included in interest expense, of
$372,290 and $2,176,757, respectively.
During the years ended December 31, 2021 and 2020,
the Company repaid notes of $250,000 and $942,190 and accrued interest including prepayment penalty of $6,027 and $675,771, respectively.
Conversion
During the year
ended December 31, 2021, the Company converted notes with principal amounts and accrued interest
of $422,295 into 6,080,632 shares of common stock. The corresponding derivative liability at the date of conversion
of $708,611 was settled through additional paid in capital.
During the year ended December 31, 2020, the Company
converted notes with principal amounts of $1,302,785 and accrued interest of $93,656 into 46,575,378 shares of common stock. The corresponding
derivative liability at the date of conversion of $4,275,728 was settled through additional paid in capital.
Settlement
During the year ended December 31, 2021, the Company
recorded gain on settlement of debt of $11,069.
On June 10, 2020, the Company settled a convertible
note with accrued interest of $64,230
with a total of 650,000 share issuances. The Company issued 200,000 shares in June, 225,000 shares in July and 503,571 shares
in August, which included 278,571 true-up shares. As a result, the Company recognized a loss on settlement of debt of $24,699.
On June 26, 2020, the Company issued a loan payable
of $700,000 to Labrys Fund to settle the previously-outstanding convertible notes with accrued interest of $986,340. As a result, the
Company recognized a gain on settlement of debt of $286,340 (Note 7).
On July 22, 2020, the Company settled a convertible
note with accrued interest of $64,363 and an original common stock purchase warrant to purchase 20,000 shares of common stock with a
total of 650,000 share issuances. During the period ended September 30, 2020, the Company issued 1,038,375 shares which included 388,375
true-up shares. As a result, the Company recognized a loss on settlement of debt of $9,886.
On September 1, 2020, the Company entered into a
Multipurpose agreement and issued a new note which a principal balance of $1,045,327 to replace the 15 notes issued from January 2020
to May 2020 which an aggregate principal amount was $985,556 and an aggregate accrued interest was $59,771. The Company also issued another
promissory note of $300,000 (Note 7). As a result, the Company recognized a loss on settlement of debt of $300,000.
Promissory Notes - Issued in fiscal year 2019
During the year ended December 31, 2019, the Company
issued a total of $2,544,250 in notes with the following terms:
|
• |
Terms ranging from 6 months to 3 years. |
|
• |
Annual interest rates ranging from of 8% to 12%. |
|
• |
Convertible at the option of the holders at issuance or 180 days from issuance. |
|
• |
Conversion prices are typically based on the discounted (39% or 0% discount) lowest trading prices of the Company’s shares during various periods prior to conversion. |
The convertible notes were also provided with a total
of 661,216 common shares and warrant to purchase up to 92,000 shares of common stock at exercise price of $2.5 per share for 3 years.
Certain notes allow the Company to redeem the notes
at rates ranging from 110% to 150% depending on the redemption date provided that no redemption is allowed after the 180th day. Likewise,
the notes include original issue discount and financing costs totaling $278,000 and the Company received cash of $2,266,250.
Promissory Notes - Issued in fiscal year 2020
During the year ended December 31, 2020, the Company
issued a total of $2,708,771 in notes with the following terms:
|
• |
Terms 12 months. |
|
• |
Annual interest rates 5% or 12%. |
|
• |
Convertible at the option of the holders 90 or 180 days from issuance. |
|
• |
Conversion prices are typically based on the discounted (25% or 60% discount) lowest trading prices of the Company’s shares during 30 trading day periods prior to conversion. Certain note has a capped conversion price of $0.025. |
Notes allow the Company to redeem the notes at a
range from 120% to 125% provided that no redemption is allowed after the 180th or 185th day. Likewise, the notes include original
issue discount and financing costs totaling $229,444 and the Company received cash of $1,420,000. Certain convertible notes were also
provided with a total of 6,500,000 warrants with exercise price ranging from $0.02 to $0.03.
Derivative liabilities
The Company valued the conversion features of convertible
notes and warrants using the Black Scholes valuation model. The fair value of the derivative liability for all the note and warrants that
became convertible for the year ended December 31, 2020, amounted to $2,714,029. $1,673,393 of the value assigned to the derivative liability
was recognized as a debt discount to the notes while the balance of $1,040,636 was recognized as a “day 1” derivative loss.
Warrants
A summary of activity during the year ended December
31, 2020 follows. There was no 2021 activity.
| |
| Warrants Outstanding | |
| |
| Shares | | |
| Weighted
Average Exercise Price | | |
| Weighted
Average Remaining Contractual life (in years) | |
Outstanding, December 31, 2019 | |
| 367,343 | | |
$ | 0.480 | | |
| 4.05 | |
Granted | |
| 6,500,000 | | |
| 0.024 | | |
| 6.00 | |
Reset | |
| 10,813,001 | | |
| 0.014 | | |
| 1.92 | |
Cashless Exercised | |
| (10,597,010 | ) | |
| 0.023 | | |
| 4.24 | |
Settled | |
| (7,083,334 | ) | |
| 0.012 | | |
| 1.64 | |
Outstanding, December 31, 2020 | |
| — | | |
$ | — | | |
| — | |
The reset feature of warrants associated with the
convertible notes was effective at the time that a separate convertible note with lower exercise price was issued. As a result of the
reset features for warrants, the warrants increased by 10,813,001 at $0.0014 per share. We accounted for the issuance of the warrants
as a liability and recognized the derivative liability.
NOTE 10 – DERIVATIVE LIABILITY
The Company analyzed the conversion option for derivative
accounting consideration under ASC 815, “Derivatives and Hedging” and determined that the instrument should be classified
as a liability since the conversion option becomes effective at issuance resulting in there being no explicit limit to the number of shares
to be delivered upon settlement of the above conversion options.
Fair Value Assumptions Used in Accounting for Derivative
Liabilities
ASC 815 requires we assess the fair market value of
derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense
item.
The Company determined our derivative liabilities
to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of December 31, 2020. The
Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk free interest rate, the
current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce
a significantly higher or lower fair value measurement. The fair value of each convertible note is estimated using the Black-Scholes valuation
model.
For the year ended December 31, 2021 and 2020, the
estimated fair values of the liabilities measured on a recurring basis are as follows:
|
|
|
|
|
|
|
|
| |
Year ended |
| |
December 31, |
| |
| 2021 | | |
| 2020 |
Expected term | |
| 0.16 - 1.18 years | | |
| 0.02 - 6.00 years |
Expected average volatility | |
| 145% - 241% | | |
| 74% - 550% |
Expected dividend yield | |
| — | | |
| — |
Risk-free interest rate | |
| 0.07% - 0.09% | | |
| 0.05% - 2.56% |
The following table summarizes the changes in the
derivative liabilities during the year ended December 31, 2021 and 2020:
Fair Value
Measurements Using Significant Observable Inputs (Level 3) | |
| |
| | |
Balance - December 31, 2019 | |
$ | 4,744,134 | |
| |
| | |
Addition of new derivatives recognized as debt discounts | |
| 1,673,393 | |
Addition of new derivatives recognized as loss on derivatives | |
| 1,040,636 | |
Settled on issuance of common stock | |
| (5,136,222 | ) |
Change in fair value of the derivative | |
| (1,296,250 | ) |
Balance - December 31, 2020 | |
$ | 1,025,691 | |
| |
| | |
Settled on issuance of common stock | |
| (708,611 | ) |
Change in fair value of the derivative | |
| (317,080 | ) |
Balance - December 31, 2021 | |
$ | — | |
The following table summarizes the change in fair
value of derivative liability included in the income statement for the year ended December 31, 2021 and 2020, respectively.
| |
Years Ended |
| |
December 31, |
| |
2021 | |
2020 |
Addition of new derivatives recognized as loss on derivatives | |
$ | — | | |
$ | 1,040,636 | |
Revaluation of derivative liabilities | |
| (317,080 | ) | |
| (1,296,250 | ) |
(Gain) on change in fair value of the derivative | |
$ | (317,080 | ) | |
$ | (255,614 | ) |
NOTE 11 – STOCKHOLDERS’ EQUITY
The Company’s authorized capital consists of
300,000,000 shares of common stock with a par value of $0.001 per share.
Series A Preferred Stock
On November 3, 2020, pursuant to Article III of our
Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock entitled Series A Preferred Stock, consisting
of up 10,000 shares, par value $0.001. Under the Certificate of Designation, holders of Series A Preferred Stock will participate on an
equal basis per-share with holders of our common stock in any distribution upon winding up, dissolution, or liquidation. Holders of Series
A Preferred Stock are entitled to vote together with the holders of our common stock on all matters submitted to stockholders at a rate
of 51% of the total vote of stockholders.
The rights of the holders of Series A Preferred Stock
are defined in the relevant Certificate of Designation filed with the Nevada Secretary of State on November 3, 2020
During the year ended December 31, 2020, 100,000 shares
of common stock were converted into 10,000 shares of Series A Preferred Stock by our management.
As of December 31, 2021 and 2020, 10,000 shares of
Series A Preferred Stock were issued and outstanding.
Series B Preferred Stock
On November 11, 2020, pursuant to Article III of our
Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock entitled Series B Preferred Stock, consisting
of up 200,000 shares, par value $0.001. Under the Certificate of Designation, holders of Series B Preferred Stock will receive a liquidation
preference of $81 per share in any distribution upon winding up, dissolution, or liquidation of the Company before junior security holders,
as provided in the designation. Holders of Series B Preferred Stock are entitled to receive as, when, and if declared by the Board of
Directors, dividends in kind at an annual rate equal to twenty four percent (24%) of $81 per share for each of the then outstanding shares
of Series B Preferred Stock, calculated on the basis of a 360-day year consisting of twelve 30-day months. Holders of Series B Preferred
Stock do not have voting rights but may convert into common stock after twelve months from the issuance date, at a conversion rate of
one thousand (1,000) shares of Common Stock for every one (1) share of Series B Preferred Stock. Upon conversion, the shares are subject
to a one-year restriction on sales into the market of no more than 5% previous month’s stock liquidity.
During the year
ended December 31, 2021, 21,000,000 shares of common stock were converted into 21,000 shares of Series B Preferred
Stock by our management.
As of December
31, 2021 and 2020, 21,000 and 0 shares of Series B Preferred Stock were issued and outstanding, respectively.
Series C Preferred Stock
On January 7, 2021, pursuant to Article III of our
Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock entitled Series C Preferred Stock, consisting
of up 200,000 shares, par value $0.001. Under the Certificate of Designation, holders of Series C Preferred Stock will rank junior to
the Series B Preferred Stock, but on par with common stock and Series A Preferred Stock in any distribution upon winding up, dissolution,
or liquidation of the company, as provided in the designation. The holders of shares of Series C Preferred Stock have no dividend rights
except as may be declared by the Board in its sole and absolute discretion, out of funds legally available for that purpose. Holders
of Series C Preferred Stock do not have voting rights but may convert into common stock after twenty four months from the issuance date,
at a conversion rate of one thousand (1,000) shares of Common Stock for every one (1) share of Series C Preferred Stock. Upon conversion,
the shares are subject to a one-year restriction on sales into the market of no more than 5% previous month’s stock liquidity.
The rights of the holders of Series C Preferred Stock
are defined in the relevant Certificate of Designation filed with the Nevada Secretary of State on January 7, 2021.
As of December 31, 2021 and 2020, no Series C Preferred
Stock was issued or outstanding.
Common Stock
During the year ended December 31, 2021, the Company
issued 51,638,526 shares of common stock, valued at fair market value on issuance as follows;
| · | 41,562,500 shares issued for cash of $6,536,250, of which $100,000 was recorded
as subscription receivable as of December 31, 2021. The Company received the $100,000 on January 3, 2022. |
| · | 2,230,394 shares, valued at $2,056,530, issued for settlement of debt of
$1,516,667 |
| · | 195,000 shares for services valued at $284,700 |
| · | 1,320,000 shares issued to our management for compensation valued at $1,037,568 |
| · | 250,000 shares for forbearance of debt valued at $49,925 |
| · | 6,080,632 shares issued for conversion of debt of $422,295 |
During the year ended December 31, 2021, the Company
terminated a placement agent and advisory services agreement with a FINRA member dated September 22, 2020, and cancelled 1,294,600 shares
of common stock, which was issued for those services. The termination agreement allowed the FINRA member to retain 400,000 shares
of the Company’s common stock in connection with the services.
During the year ended December 31, 2020, the Company
issued 100,224,841 shares of common stock, valued at fair market value on issuance as follows;
- 23,937,500 shares issued for cash of $1,915,005
- 12,818,145 shares issued for settlement of debt of $889,093
- 6,267,600 shares issued for services valued at $647,858
- 1,150,000 shares issued for forbearance of debt of $92,250
- 46,575,378 shares issued for conversion of debt of $1,396,440
- 9,476,218 shares issued for cashless exercised warrant
As of December 31, 2021 and 2020, 147,477,358 and
118,133,432 shares of common stock were issued and outstanding, respectively.
NOTE 12 – PROVISION FOR INCOME TAXES
The Company provides for income taxes under ASC 740,
“Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recorded
based on the differences between the financial statement and tax basis of assets and liabilities and the tax rates in effect when these
differences are expected to reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that
the Company will not realize tax assets through future operations.
The components of the Company’s deferred tax
asset and reconciliation of income taxes computed at the statutory rate to the income tax amount recorded as of December 31, 2021 and
2020, are as follows:
|
|
|
|
|
|
|
|
|
| |
December 31, | |
December 31, |
| |
2021 | |
2020 |
Net Operating loss carryforward | |
$ | 12,332,310 | | |
$ | 8,601,999 | |
Effective tax rate | |
| 21 | % | |
| 21 | % |
Deferred tax asset | |
| 2,589,785 | | |
| 1,806,420 | |
Foreign taxes | |
| (7,242 | ) | |
| (5,112 | ) |
Less: valuation allowance | |
| (2,136,141 | ) | |
| (1,341,272 | ) |
Net deferred tax asset | |
$ | 446,402 | | |
$ | 460,036 | |
As of December 31, 2021, the Company has approximately
$12,332,000 of net operating losses (“NOL”) generated to December 31, 2021 carried forward to offset taxable income in future
years which expire commencing in fiscal 2037. NOLs generated in tax years prior to December 31, 2017, can be carryforward for twenty years,
whereas NOLs generated after December 31, 2017 can be carryforward indefinitely. In assessing the realization of deferred tax assets,
management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income
and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance
against all of the deferred tax assets relating to NOLs for every period because it is more likely than not that all of the deferred tax
assets will not be realized other than those recorded at SwissLink, because the Company anticipates utilizing the NOLs prior to their
expiration.
Utilization of the NOL carry forwards may be subject
to an annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section
382 of the Internal Revenue Code of 1986, as amended (the “Code”). These ownership changes may limit the amount of the NOL
carry forwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an “ownership change”
as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership
change of more than 50 percentage points of the outstanding stock of a company by certain stockholders.
Tax returns for the years ended 2016 through 2021
are subject to review by the tax authorities.
NOTE 13 - RELATED PARTY TRANSACTIONS
Due from related party
During the year
ended December 31, 2021, the Company loaned $220,674 to our CEO and applied to due to CEO of $8,004.
During the year
ended December 31, 2021, the Company wrote off due from related party of $10,148.
During the year ended December 31, 2020, the Company
loaned $20,182 to related parties who are a stockholder and a former director, collected $20,197 and wrote off amounts totaling $43,375.
During the years ended December 31, 2021 and 2020,
the Company loaned $220,674 and $18,888 to a related party and collected $226 and $2,088, respectively.
As of December 31, 2021 and 2020, the Company had
due from related parties of $424,086 and $221,790, respectively. The loans are unsecured, non-interest bearing and due on demand.
Due to related parties
During the years ended December 31, 2021 and 2020,
the Company borrowed $0 and $20,182 from CEO and CFO of the Company, and repaid $90,787 and $20,197 to the CEO and CFO, respectively.
During the year ended December 31, 2020, the Company
borrowed $20,000 from Francisco Bunt who owns 49% of loT Labs and repaid $20,000.
As of December 31, 2021 and 2020, the Company had
amounts due to related parties of $26,613 and $94,616, respectively, which included $0 and $60,000 to Francisco Bunt (Note 4), respectively.
The amounts are unsecured, non-interest bearing and due on demand.
Debt to Equity Swap
During the year ended December 31, 2021 the Company
recorded a debt to equity swap of $1,647,150 as additional paid in capital.
Employment agreements
On July 1, 2021, the Company appointed three independent
directors. Effective on July 1, 2021 and thereafter, all directors shall be compensated monthly up to 4,000 shares of common stock and
cash of $1,000 for their service as directors.
On May 2, 2019, the Company entered into Employment
Agreements with the following persons: (i) Leandro Iglesias as President, CEO and Chairperson of the Company’s Board of Directors
with an annual salary of $168,000 with an annual bonus of 3% of our net income; (ii) Juan Carlos Lopez Silva as Chief Commercial Officer
with an annual salary of $120,000 with an annual bonus of 3% of our net income; and Alvaro Quintana Cardona as Chief Operating Officer
and Chief Financial Officer with an annual salary of $144,000 with an annual bonus of 3% of our net income. The Employment Agreements
have a term of 36 months, are renewable automatically for 24-month periods, unless the Company gives written notice at least 90 days prior
to termination of the initial 36-month term. The Company shall have the right to terminate any of the employment agreements at any time
without prior notice, but in that event, the Company shall pay these persons salaries and other benefits they are entitled to receive
under their respective agreements for three years. The above executive officers agreed to two year non-compete and non-solicit restrictive
covenants with the Company. If any of the executive officers are terminated for cause they shall forfeit any rights to severance.
On November 1, 2020, our board of directors approved
amended employments in favor of our Chief Executive Officer, Leandro Iglesias, our Chief Financial Officer, Alvaro Quintana, and our Chief
Commercial Officer, Juan Carlos Lopez Silva.
The amended employment agreement in favor of Mr. Iglesias
extended the term of employment from 36 months to 60 months. The now five year employment agreement with Mr. Iglesias provides that we
will compensate him with a salary of $17,000 monthly and he is eligible for quarterly bonus of 250,000 shares of our common stock. If
we do not have the cash available, the agreement provides that Mr. Iglesias may convert his accrued salary/bonus into shares of our common
stock or newly created Series A Preferred Stock. For common shares, the amount of accrued salary to be converted into shares must be determined
by considering the average price per share of the Company’s common stock on the OTC Markets during the last 10 days and applying
a discount of 25%.” For Series A Preferred Shares, the amount of accrued salary to be converted into shares is the per share conversion
price for common shares multiplied by ten US Dollars ($10). Mr. Iglesias has a further right to convert any common shares under his control
into Series A Preferred shares at any time at a rate of ten (10) common shares for each Series A Preferred share.
The amended employment agreement in favor of Mr. Quintana
extended the term of employment from 36 months to 60 months. The now five year employment agreement with Mr. Quintana provides that he
is eligible for quarterly bonus of 200,000 shares of our common stock. If we do not have the cash available, the agreement provides that
Mr. Quintana may convert his accrued salary/bonus into shares of our common stock or newly created Series A Preferred Stock. For common
shares, the amount of accrued salary to be converted into shares must be determined by considering the average price per share of the
Company’s common stock on the OTC Markets during the last 10 days and applying a discount of 25%.” For Series A Preferred
Shares, the amount of accrued salary to be converted into shares is the per share conversion price for common shares multiplied by ten
US Dollars ($10). Mr. Quintana has a further right to convert any common shares under his control into Series A Preferred shares at any
time at a rate of ten (10) common shares for each Series A Preferred share.
The amended employment agreement in favor of Mr. Silva
extended the term of employment from 36 months to 60 months. Mr. Silva is eligible for quarterly bonuses of 150,000 shares of our common
stock. If we do not have the cash available, the agreement provides that Mr. Iglesias may convert his accrued salary/bonus into shares
of our common stock at the average price of our common stock during the last 10 days after applying a discount of 25%.
On March 3, 2020, Oscar Brito resigned as a member
of our Board of Directors. There was no known disagreement with Mr. Brito on any matter relating to our operations, policies or practices.
The Company provided the severance package as follows;
|
• |
2,000,000 shares of common stock valued at $300,000 |
|
|
|
|
• |
Additional 173,000 shares in order to apply the anti-dilution protection, valued at $10,034 |
|
|
|
|
• |
Forgiveness of amounts due to the Company totaling $43,375 |
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• |
Cash payment of $15,000. |
On March 16, 2020, our Board of Directors adopted
a Director Compensation Plan that applies to members of our Board of Directors. Below are the features of the plan:
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• |
All Directors shall receive reimbursement for reasonable travel expenses incurred to attend Board and committee meetings. |
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• |
All Directors shall be compensated $3,000 monthly for their service as Directors. |
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• |
In lieu of the cash compensation set forth above, each Director may elect to receive shares of the Corporation's Common Stock equal to the total cash compensation divided by the average market value of the Company's Common Stock during the last 10 trading days and applying a discount of 10%. |
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• |
Directors Alvaro Cardona and Leandro Iglesias shall each receive 1,000,000 shares of the Company’s Common Stock, valued at $70,000 each, for their service as members of the Board of Directors for the period from June 2018 to December 2019. |
During the years ended December 31, 2021 and 2020,
the Company recorded management salaries of $558,000 and $510,000 and bonuses of $976,200 and $0, respectively, of which $1,037,568 and
$0 were stock based compensation.
During the year ended December 31, 2020, the Company
settled accrued salary – management of $619,531 and issued 10,851,199 shares. As at December 31, 2021 and 2020, the Company
recorded and accrued management salaries of $92,229 and $22,300, respectively.
NOTE 14 – COMMITMENTS AND CONTINGENCIES
Leases and Long-term Contracts
The Company has not entered into any long-term leases,
contracts or commitments. The Company leases facilities which the term is 12 months. For the years ended December 31, 2021 and 2020, the
Company incurred $37,823 and $18,400, respectively.
Advisory
service
On March 3,
2020, we appointed Oscar Brito as an advisor to our Board of Directors and agreed to pay him $5,000 per month for such services.
Mr. Brito acted as an advisor to our Board of Directors. On February 11, 2021, the Company paid $12,600 and the service was
terminated.
On January 4,
2021, the Company terminated a placement agent and advisory services agreement with a FINRA member dated September 22, 2020, and cancelled 1,294,600 shares
of common stock, which was issued for those services. The termination agreement allowed the FINRA member to retain 400,000 shares
of the Company’s common stock in connection with the services.
NOTE 15 - SEGMENT
At December 31, 2021 and 2020, the Company operates
in one industry segment, telecommunication services, and two geographic segments, USA and Switzerland, where current assets and equipment
are located.
Operating Activities
The following table shows operating activities information
by geographic segment for the years ended December 31, 2021 and 2020:
Year ended December 31, 2021
NOTE 15 - SEGMENT - Schedule of Operating Activities
by Geographic Segment
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| |
USA | |
Switzerland | |
Elimination | |
Total |
Revenues | |
$ | 60,112,852 | | |
| 4,681,978 | | |
$ | (92,812 | ) | |
$ | 64,702,018 | |
Cost of revenue | |
| 59,274,781 | | |
| 3,986,334 | | |
| (92,812 | ) | |
| 63,168,303 | |
Gross profit | |
| 838,071 | | |
| 695,644 | | |
| — | | |
| 1,533,715 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
General and administration | |
| 3,733,579 | | |
| 784,052 | | |
| — | | |
| 4,517,631 | |
| |
| | | |
| | | |
| | | |
| | |
Operating income (loss) | |
| (2,895,508 | ) | |
| (88,408 | ) | |
| — | | |
| (2,983,916 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense) | |
| (897,507 | ) | |
| 17,422 | | |
| — | | |
| (880,085 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
$ | (3,793,015 | ) | |
$ | (70,986 | ) | |
$ | — | | |
$ | (3,864,001 | ) |
Year ended December 31, 2020
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| |
USA | |
Switzerland | |
Elimination | |
Total |
Revenues | |
$ | 39,495,542 | | |
$ | 5,432,022 | | |
$ | (17,558 | ) | |
$ | 44,910,006 | |
Cost of revenue | |
| 39,308,347 | | |
| 4,656,865 | | |
| (17,558 | ) | |
| 43,947,654 | |
Gross profit | |
| 187,195 | | |
| 775,157 | | |
| — | | |
| 962,352 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
General and administration | |
| 3,359,237 | | |
| 815,130 | | |
| — | | |
| 4,174,367 | |
| |
| | | |
| | | |
| | | |
| | |
Operating loss | |
| (3,172,042 | ) | |
| (39,973 | ) | |
| — | | |
| (3,212,015 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other expense | |
| (3,356,881 | ) | |
| (130,434 | ) | |
| — | | |
| (3,487,315 | ) |
Net loss | |
$ | (6,528,923 | ) | |
$ | (170,407 | ) | |
$ | — | | |
$ | (6,699,330 | ) |
Asset Information
The following table shows asset information by geographic
segment as of December 31, 2021 and 2020:
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December 31, 2021 | |
USA | |
Switzerland | |
Elimination | |
Total |
Assets | |
| | | |
| | | |
| | | |
| | |
Current assets | |
$ | 5,783,859 | | |
$ | 997,216 | | |
$ | (214,551 | ) | |
$ | 6,566,524 | |
Non-current assets | |
$ | 4,468,491 | | |
$ | 609,189 | | |
$ | (2,584,562 | ) | |
$ | 2,493,118 | |
Liabilities | |
| | | |
| | | |
| | | |
| | |
Current liabilities | |
$ | 1,070,972 | | |
$ | 1,506,594 | | |
$ | (214,551 | ) | |
$ | 2,363,015 | |
Non-current liabilities | |
$ | — | | |
$ | 275,729 | | |
$ | — | | |
$ | 275,729 | |
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December 31, 2020 | |
USA | |
Switzerland | |
Elimination | |
Total |
Assets | |
| | | |
| | | |
| | | |
| | |
Current assets | |
$ | 3,245,725 | | |
$ | 1,225,399 | | |
$ | (889,540 | ) | |
$ | 3,581,584 | |
Non-current assets | |
$ | 3,478,147 | | |
$ | 561,551 | | |
$ | (1,669,515 | ) | |
$ | 2,370,183 | |
Liabilities | |
| | | |
| | | |
| | | |
| | |
Current liabilities | |
$ | 5,630,060 | | |
$ | 3,171,419 | | |
$ | (889,540 | ) | |
$ | 7,911,939 | |
Non-current liabilities | |
$ | 2,816 | | |
$ | 432,048 | | |
$ | — | | |
$ | 434,864 | |
NOTE 16 – SUBSEQUENT EVENTS.
Subsequent
to December 31, 2020 and through the date that these financials were made available, the Company had the following subsequent events:
On
March 31, 2022 the Company sold 2,000,000 common shares under a subscription agreement of our Regulation A offering statement for an
aggregated amount of $1,000,000. The shares were issued on April, 6, 2022.