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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-K
☒ |
ANNUAL REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
|
|
For the fiscal year ended
December 31, 2021 |
|
|
☐ |
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 |
|
|
|
For the transition period from
_________ to ________ |
|
|
|
Commission file number:
000-55984 |
IQSTEL Inc. |
(Exact name of registrant as
specified in its charter)
|
Nevada |
45-2808620 |
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification
No.) |
300
Aragon Avenue,
Suite 375
Coral Gables,
FL
|
33134
|
(Address of principal executive
offices) |
(Zip Code) |
Registrant’s telephone number: (954)
951-8191
|
|
Securities registered under Section 12(b) of the
Exchange Act: |
|
|
|
Title of each class |
Name of each exchange on which
registered |
none |
not applicable |
Securities registered under
Section 12(g) of the Exchange Act:
|
Title of each class |
Common Stock, par value of
$0.001 |
Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405
of the Securities Act.
Yes [ ]
No [X]
Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13
or Section 15(d) of the Act. Yes [ ]
No [X]
Indicate by checkmark whether
the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
Yes [X] No [ ]
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, a smaller reporting company, or
emerging growth company.
☐ Large accelerated
filer |
☐ Accelerated
filer |
☒
Non-accelerated
Filer |
☒ Smaller reporting
company |
|
☐ Emerging growth
company |
If an emerging growth
company, indicate by check mark if the registrant has elected not
to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act.
[ ]
Indicate by check mark
whether the registrant has filed a report on and attestation to its
management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the
Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. [
]
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).
Yes [ ]
No [X]
State the aggregate market
value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked price of
such common equity, as of the last business day of the registrant’s
most recently completed second fiscal quarter
$90,434,452.
Indicate the number of shares
outstanding of each of the registrant’s classes of common stock, as
of the latest practicable date.
149,357,358 common shares as of April 8,
2022.
TABLE OF
CONTENTS
PART I
Forward-Looking
Statements
This
Annual Report on Form 10-K contains forward-looking statements,
within the meaning of the Private Securities Litigation Reform Act
of 1995. Certain statements, other than purely historical
information, including estimates, projections, statements relating
to our business plans, objectives, and expected operating results,
and the assumptions upon which those statements are based, are
“forward-looking statements.” These forward-looking statements
generally are identified by the words “believes,” “project,”
“expects,” “anticipates,” “estimates,” “intends,” “strategy,”
“plan,” “may,” “will,” “would,” “will be,” “will continue,” “will
likely result,” and similar expressions. Forward-looking statements
are based on current expectations and assumptions that are subject
to risks and uncertainties which may cause actual results to differ
materially from the forward-looking statements. Our ability to
predict results or the actual effect of future plans or strategies
is inherently uncertain. Factors which could have a material
adverse effect on our operations and future prospects on a
consolidated basis include but are not limited to: changes in
economic conditions, legislative/regulatory changes, availability
of capital, interest rates, competition, and generally accepted
accounting principles. These risks and uncertainties should also be
considered in evaluating forward-looking statements and undue
reliance should not be placed on such statements.
Item 1. Business
Company Description
iQSTEL Inc. (the “Company”) (OTC Pink: IQST) (www.iqstel.com) is a
technology company offering a wide array of services to global
telecommunications and technology industries with presence in 13
countries.
The
Company has an extensive portfolio of products and services for its
clients such as: SMS, VoIP, 4G & 5G international
infrastructure connectivity, Cloud-PBX, OmniChannel Marketing, IoT
services, blockchain and payment solutions. These services are
grouped within three business divisions: Telecom, Technology and
Fintech.
The
company operates its business through its wholly-owned subsidiary
Etelix.com USA, LLC (“Etelix”) (www.etelix.com); and its majority-owned
subsidiaries SwissLink Carrier AG (www.swisslink-carrier.com),
QGlobal SMA (https://www.qglobalsms.com/), Smart Gas
(http://iotsmartgas.com/) and ItsBChain
(http://itsbchain.com/). The information contained on our
websites is not incorporated by reference into this Annual Report,
and such information should not be considered to be part of this
Annual Report.
History
iQSTEL, formerly known as PureSnax International, Inc., was
incorporated under the laws of the State of Nevada on June 24,
2011. PureSnax was previously a wellness brand focused on bringing
healthy snacks and foods to consumers. On March 8, 2017, PureSnax
exited a previous License Agreement with a Canadian snack food
Licensor. From March of 2017 until its acquisition of Etelix.com
USA, LLC, PureSnax was working to develop its own brand and its own
products for manufacture, distribution, sales and marketing of
various products within the health foods and snacks industry and to
pursue related business opportunities. PureSnax acquired Etelix.com
USA, LLC on June 25, 2018. The company left the healthy snacks and
foods business to focus on the Telecommunications Business.
In
August 30, 2018, PureSnax changed its name to “iQSTEL Inc.” and
received a new CUSIP number: 46265G107, as well as a new trading
symbol “IQST” in order to better resemble its new name. iQSTEL also
changed the Standard Industrial Classification (SIC Code) to 4813,
Telephone Communications, Except Radiotelephone.
The
transformative process is an ongoing effort. However, in the last
year the Company achieved the restructuring of its revenue from a
100% VoIP business to one where currently VoIP represents half of
overall Company revenue, while SMS and value-added SMS services
account for the other half. SMS and value-added SMS is a much
higher gross profit business; thus the Company’s bottom line has
increased in tandem.
Operating Subsidiaries
Based on our current business infrastructure, the Company has
expanded from its original VoIP services into new business areas:
Short Message Service (SMS) for Applications to Person (A2P) and
Person to Person (P2P); Internet of Things (IoT) solutions and
Blockchain-based platforms.
Etelix.com USA LLC, a wholly owned subsidiary of iQSTEL Inc., is a
Miami, Florida-based international telecom carrier founded in 2008
that provides telecom and technology solutions worldwide, with
commercial presence in North America, Latin America, and Europe.
Etelix provides International Long-Distance voice services for
Telecommunications Operators (ILD Wholesale), and Submarine Fiber
Optic Network capacity for internet (4G and 5G).
Etelix is interconnected to the most important players in the
industry, with a very strong focus on Asian markets, among which it
is worth mentioning: China Telecom, PCCW, Hutchinson Telecom,
Vodafone India, KDDI, Airtel, Reliance, Viettel, TATA
Communications, Flow Jamaica (Cable and Wireless Caribbean), Cable
and Wireless Panama, Millicom (TIGO), Telefonica de España
(Movistar), Telecom Italia (TIM), Portugal Telecom (MEU), Optimus
(NOS), Belgacom (BICS), Deutsche Telekom, iBasis, Orbitel and
Entel.
An
important milestone in the evolution of Etelix was in 2013, when
the company become part of a consortium of major carriers for the
upgrade of the Maya-1 submarine cable systems that runs from
Hollywood, Florida to the city of Tolu in Colombia. This consortium
is led by Orange Telecom and Orbitel, where Etelix participates
with 10 Gbps of capacity. The bulk of this contract was sold to
Millicom (Tigo Costa Rica). This capacity considerably enhanced
Tigo’s ability to deploy world-class 4G services to its customers
in Costa Rica.
SwissLink Carrier AG is a 51% owned subsidiary of iQSTEL Inc.
SwissLink Carrier AG is a Switzerland based international
Telecommunications Carrier founded in 2015 providing international
VoIP connectivity worldwide, with commercial presence in Europe,
CIS and Latin America. SwissLink Carrier AG is a Swiss licensed
Operator.
One
of Company’s strategic line of actions is to expand the
participation in Asian and African traffic. Africa is currently the
market with the higher contribution to margin and Asia concentrate
one third of the termination traffic in the industry. Estimations
show that 56% (International Telecommunication Union) of the
traffic terminating in Africa is originated from customers in
Europe; while the corresponding percentage of traffic terminated in
Asia is 37% (International Telecommunication Union). Based on these
numbers the goal to expand the participation in the Asian and
African traffic goes through establishing a strong presence in
Europe.
The
acquisition of Swisslink strengthened the Company’s presence in
Europe putting us in a very competitive position to capture traffic
to Asian and African countries; however, it will also give us the
opportunity to compete in the European traffic, where we currently
have a low participation.
QGlobal SMS LLC is a 100% owned subsidiary of iQSTEL Inc. QGlobal
SMS is a USA based company founded in 2020 specialized in
international and domestic SMS termination.
IoT
Labs LLC is a 51% owned subsidiary of iQSTEL Inc. IoT Labs is a SMS
service provider based in Austin, TX.
The
Company has entered into the SMS business in 2020 through the
acquisition of QGlobal and IoT Labs. Both companies specialize in
international and domestic SMS termination, with emphasis on the
Applications to Person (A2P), Person to Person (P2P) and
OmniChannel Marketing Services for several markets: Wholesale
Carrier, Government, Corporate, Enterprise, Small and Medium
Companies.
QGlobal SMS has commercial presence in Europe, USA and Latin
America, with robust international interconnection with Tier-1 SMS
Aggregators, guarantying to its customers’ high quality and low
termination rates, in over more than 100 countries, while IoT Labs
is specialized in the SMS traffic exchange between US and
Mexico.
With
the acquisition of these two SMS providers, we quickly began to
cross-sell services to our existing client base.
The
Global A2P SMS Market is expected to grow at a CAGR of 4.1% during
the forecast period 2018 – 2030, to account for US$ 101
billion in 2030, according to Transparency Market Research. This
market has experienced significant growth and adoption rate in the
past few years and is expected to experience notable growth and
adoption in years to come
ItsBchain LLC is a 75% owned subsidiary of iQSTEL Inc.
ItsBchain is a blockchain technology developer and solution
provider, with a strong focus on the telecom sector. The company is
in the final stage of development of a series of blockchain
solutions aimed at using the blockchain ledger and smart
contract solutions to enable more efficiency, quickness in
execution and fraud-prevention in the telco industry. Specifically,
the company is developing a solution that will enable users and
carriers to transfer mobile phone numbers with just a few clicks,
allowing users and carriers the ability to transfer
retail users from one mobile carrier to another instantly.
Regulations
Telecommunications services are subject to extensive government
regulation in the United States of America. Any violations of the
regulations may subject us to enforcement actions, including
interest and penalties. The FCC has jurisdiction over all
telecommunications common carriers to the extent they provide
interstate or international communications services, including the
use of local networks to originate or terminate such services
Regulation of Telecom by the Federal Communications
Commission
Telecommunication
License
Anyone seeking to conduct telecommunications business where the
telecommunication services will transpire between the United States
of America and an international destination must obtain a license
from the Federal Communications Commission (FCC). This particular
license is named a Section 214 license, after the section in the
Communications Act of 1934.
Etelix.com USA, LLC was authorized by the Federal Communications
Commission to provide facility-based services in accordance with
section 63.18(e)(1) of the Commission’s rules; and also to provide
resale services in accordance with section 63.18(e)(2) under
license number ITC-214-20090625-00303.
Since Etelix has no other network infrastructure outside the United
States of America, no other licenses are required for us to operate
as an international carrier service provider.
Universal Service and
Other Regulatory Fees and Charges
In
1997, the FCC issued an order, referred to as the Universal Service
Order, which requires all telecommunications carriers providing
interstate telecommunications services to contribute to universal
service support programs administered by the FCC (known as the
Universal Service Fund). These periodic contributions are currently
assessed based on a percentage of each contributor’s interstate and
international end user telecommunications revenues reported to the
FCC. Etelix also contributed to several other regulatory funds and
programs, most notably Telecommunications Relay Service and FCC
Regulatory Fees (collectively, the Other Funds). Due to the manner
in which these contributions are calculated, we cannot be assured
that we fully recover from our customers all of our
contributions.
In
addition, based on the nature of our current business, we receive
certain exemptions from federal Universal Service Fund
contributions. Changes in our business could eliminate our ability
to qualify for some or all of these exemptions. Changes in
regulation may also have an impact on the availability of some or
all of these exemptions. If even some of these exemptions become
unavailable, they could materially increase our federal Universal
Service Fund or Other Funds’ contributions and have a material
adverse effect on the cost of our operations and, therefore, on our
ability to continue to operate profitably, and to develop and grow
our business. We cannot be certain of the stability of the
contribution factors for the Other Funds. Significant increases in
the contribution factor for the Other Funds in general and the
Telecommunications Relay Service Fund in particular can impact our
profitability. Whether these contribution factors will be stable in
the future is unknown, but it is possible that we will be subject
to significant increases.
Employees
iQSTEL, including all subsidiaries, has 49 employees as of December
31, 2021.
Item 1A. Risk
Factors
Risks Relating to Business and Financial Condition
Our business, operating results or financial condition could be
materially adversely affected by any of the following risks.
Risk Factors Related to the Business of the Company
Because our auditor has issued a going concern opinion
regarding our company, there is a risk associated with an
investment in our company.
We
have continually operated at a loss with an accumulated deficit of
$18,536,922 as of December 31, 2021. We have not attained
profitable operations and even though the company maintains a cash
position very close to one year's operating expenses, we dependent
upon obtaining financing or generating revenue from operations to
continue operations for the next twelve months. Our future is
dependent upon our ability to obtain financing or upon future
profitable operations. We reserve the right to seek additional
funds through private placements of our common stock and/or through
debt financing. Our ability to raise additional financing is
unknown. We do not have any formal commitments or arrangements for
the advancement or loan of funds. The Company has been qualified
for a public offering of 80,000,000 shares of our common stock
under the Regulation A. This offering is being conducted on a “best
efforts” basis, which means that there is no guarantee that any
minimum amount will be sold. For these reasons, our auditors stated
in their report that they have substantial doubt we will be able to
continue as a going concern. As a result, there is a risk that you
could lose the entire amount of your investment in our company.
Our telecommunications line of business is highly sensitive
to declining prices, which may adversely affect our revenues and
margins.
The
telecommunications industry is characterized by intense price
competition, which has resulted in declines in both our average
per-minute price realizations and our average per-minute
termination costs.
A
reduction of our prices to compete with any other offers in the
market will not always guarantee an increase in the traffic, which
may result in a reduction of revenue. If these trends in pricing
continue or accelerate, it could have a material adverse effect on
the revenues generated by our telecommunications businesses and/or
our gross margins. The continued growth of Over-The-Top calling and
messaging services, such as WhatsApp, Skype and Viber has adversely
affected the use of traditional phone communications. We expect
this IP-based services which offer voice communications for free to
continue to increase, which may result in increased substitution on
our service offerings.
The termination of our carrier agreements or our inability to
enter into new carrier agreements in the future could materially
and adversely affect our ability to compete, which could reduce our
revenues and profits.
We
rely upon our carrier agreements in order to provide our
telecommunications services to our customers. These carrier
agreements are in most cases for finite terms and, therefore, there
can be no guarantee that these agreements will be renewed at all or
on favorable terms to us. Our ability to compete would be adversely
affected if our carrier agreements were terminated or we were
unable to enter into carrier agreements in the future to provide
our telecommunications services to our customers, which could
result in a reduction of our revenues and profits.
Our customers could experience financial difficulties, which
could adversely affect our revenues and profitability if we
experience difficulties in collecting our receivables.
As a
provider of international long-distance services, we depend upon
sales of transmission and termination of traffic to other
long-distance providers and the collection of receivables from
these customers. The wholesale telecommunications market continues
to feature many smaller, less financially stable companies. If
weakness in the telecommunications industry or the global economy
reduces our ability to collect our accounts receivable from our
major customers our profitability may be substantially reduced.
While our most significant customers, from a revenue perspective,
vary from quarter to quarter, our seven largest customers (2.5% of
our total customer base) collectively accounted for 88% of total
consolidated revenues in fiscal year 2021. However, this
concentration of revenues does not increase our exposure to
non-payment by our larger customers, since 68% of our revenue is
prepaid.
Natural disasters, terrorist acts, acts of war, pandemics,
cyber-attacks or other breaches of network or information
technology security may cause equipment failures or disrupt our
operations.
Our
inability to operate our telecommunications networks because of the
events listed above, even for a limited period, may result in loss
of revenue, significant expenses, which could have a material
adverse effect on our results of operations and financial
condition.
We
could be harmed by network disruptions, security breaches, or other
significant disruptions or failures of our IT infrastructure and
related systems. To be successful, we need to continue to have
available a high capacity, reliable and secure network for our and
our customers’ use. As any other company, we face the risk of a
security breach, whether through cyber-attacks, malware, computer
viruses, sabotage, or other significant disruption of our IT
infrastructure and related systems. There is a risk of a security
breach or disruption of the systems we operate, including possible
unauthorized access to our proprietary or classified information.
We are also subject to breaches of our network resulting in
unauthorized utilization of our services, which subject us to the
costs of providing those services, which are likely not
recoverable. The secure maintenance and transmission of our
information is a critical element of our operations. Our
information technology and other systems that maintain and transmit
customer information may be compromised by a malicious third-party
penetration of our network security, or impacted by advertent or
inadvertent actions or inactions by our employees, or those of a
third-party service provider or business partner. As a result, our
or our customers’ information may be lost, disclosed, accessed or
taken without the customers’ consent, or our services may be used
without payment.
Although we make significant efforts to maintain the security and
integrity of these types of information and systems, there can be
no assurance that our security efforts and measures will be
effective or that attempted security breaches or disruptions would
not be successful or damaging, especially in light of the growing
sophistication of cyber-attacks and intrusions. We may be unable to
anticipate all potential types of attacks or intrusions or to
implement adequate security barriers or other preventative
measures. Certain of our business units have been the subject of
attempted and successful cyber-attacks in the past. We have
researched the situations and do not believe any material internal
or customer information has been compromised.
We operate a global business that exposes us to currency,
economic and regulatory.
Our
revenue comes primarily from sales outside the U.S. and our growth
strategy is largely focused on emerging markets. Our success
delivering solutions and competing in international markets is
subject to our ability to manage various risks and difficulties,
including, but not limited to:
·our ability to
effectively staff, provide technical support and manage operations
in multiple countries;
·fluctuations in currency
exchange rates;
·timely collecting of
accounts receivable from customers located outside of the
U.S.;
·trade restrictions,
political instability, disruptions in financial markets, and
deterioration of economic conditions;
·compliance with the U.S.
Foreign Corrupt Practices Act, and other anti-bribery laws and
regulations;
·variations and changes in
laws applicable to our operations in different jurisdictions,
including enforceability of intellectual property and contract
rights; and
·compliance with export
regulations, tariffs and other regulatory barriers.
Tax Risks
We
are subject to tax and regulatory audits which could result in the
imposition of liabilities that may or may not have been reserved.
We are subject to audits by taxing and regulatory authorities with
respect to certain of our income and operations. These audits can
cover periods for several years prior to the date the audit is
undertaken and could result in the imposition of liabilities,
interest and penalties if our positions are not accepted by the
auditing entity.
We may be unable to achieve some, all or any of the benefits
that we expect to achieve from our plan to expand our
operations.
In
the future we may require additional financing for capital
requirements and growth initiatives. Accordingly, we will depend on
our ability to generate cash flows from operations and to borrow
funds and issue securities in the capital markets to maintain and
expand our business. We may need to incur debt on terms and at
interest rates that may not be as favorable. If additional
financing is not available when required or is not available on
acceptable terms, we may be unable to operate our business as
planned or at all, fund our expansion, successfully promote our
business, develop or enhance our products and services, take
advantage of business opportunities or respond to competitive
pressures, any of which could have a material adverse effect on our
business, financial condition and results of operations
Risks Relating to Our Securities
If a market for our common stock does not develop,
stockholders may be unable to sell their shares.
Our
common stock is quoted under the symbol “IQST” on the OTCQX
operated by OTC Markets Group, Inc., an electronic inter-dealer
quotation medium for equity securities. Even though we currently
have an active trading market, there can be no assurance that it
will be sustained.
The market price of our common stock is likely to be highly
volatile and could fluctuate widely in price in response to various
factors, many of which are beyond our control.
Our
stock price is subject to a number of factors, including:
·Technological innovations
or new products and services by us or our competitors;
·Government regulation of
our products and services;
·The establishment of
partnerships with other telecom companies;
·Intellectual property
disputes;
·Additions or departures
of key personnel;
·Sales of our common
stock;
·Our ability to integrate
operations, technology, products and services;
·Our ability to execute
our business plan;
·Operating results below
or exceeding expectations;
·Whether we achieve
profits or not;
·Loss or addition of any
strategic relationship;
·Industry
developments;
·Economic and other
external factors; and
·Period-to-period
fluctuations in our financial results.
Our
stock price may fluctuate widely as a result of any of the above.
In addition, the securities markets have from time to time
experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular companies.
These market fluctuations may also materially and adversely affect
the market price of our common stock.
Because we are subject to the “Penny Stock” rules, the level
of trading activity in our stock may be reduced.
The
Securities and Exchange Commission has adopted regulations which
generally define "penny stock" to be any listed, trading equity
security that has a market price less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to certain
exemptions. The penny stock rules require a broker-dealer, prior to
a transaction in a penny stock not otherwise exempt from the rules,
to deliver a standardized risk disclosure document that provides
information about penny stocks and the risks in the penny stock
market. The broker-dealer must also provide the customer with
current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the
transaction, and monthly account statements showing the market
value of each penny stock held in the customer’s account. In
addition, the penny stock rules generally require that prior to a
transaction in a penny stock, the broker-dealer make a special
written determination that the penny stock is a suitable investment
for the purchaser and receive the purchaser’s written agreement to
the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market
for a stock that becomes subject to the penny stock rules which may
increase the difficulty Purchasers may experience in attempting to
liquidate such securities.
We do not expect to pay dividends in the foreseeable future.
Any return on investment may be limited to the value of our common
stock.
We
do not anticipate paying cash dividends on our common stock in the
foreseeable future. The payment of dividends on our common stock
will depend on earnings, financial condition and other business and
economic factors affecting it at such time as the board of
directors may consider relevant. If we do not pay dividends, our
common stock may be less valuable because a return on your
investment will occur only if our stock price appreciates.
Provisions in the Nevada Revised Statutes and our Bylaws
could make it very difficult for an investor to bring any legal
actions against our directors or officers for violations of their
fiduciary duties or could require us to pay any amounts incurred by
our directors or officers in any such actions.
Members of our board of directors and our officers will have no
liability for breaches of their fiduciary duty of care as a
director or officer, except in limited circumstances, pursuant to
provisions in the Nevada Revised Statutes and our Bylaws as
authorized by the Nevada Revised Statutes. Specifically, Section
78.138 of the Nevada Revised Statutes provides that a director or
officer is not individually liable to the company or its
stockholders or creditors for any damages as a result of any act or
failure to act in his or her capacity as a director or officer
unless it is proven that (1) the director’s or officer’s act or
failure to act constituted a breach of his or her fiduciary duties
as a director or officer and (2) his or her breach of those duties
involved intentional misconduct, fraud or a knowing violation of
law. This provision is intended to afford directors and officers
protection against and to limit their potential liability for
monetary damages resulting from suits alleging a breach of the duty
of care by a director or officer. Accordingly, you may be unable to
prevail in a legal action against our directors or officers even if
they have breached their fiduciary duty of care. In addition, our
Bylaws allow us to indemnify our directors and officers from and
against any and all costs, charges and expenses resulting from
their acting in such capacities with us. This means that if you
were able to enforce an action against our directors or officers,
in all likelihood, we would be required to pay any expenses they
incurred in defending the lawsuit and any judgment or settlement
they otherwise would be required to pay. Accordingly, our
indemnification obligations could divert needed financial resources
and may adversely affect our business, financial condition, results
of operations and cash flows, and adversely affect prevailing
market prices for our common stock.
The extent to which the coronavirus ("COVID-19") outbreak
impacts our business, results of operations and financial condition
will depend on future developments, which cannot be
predicted.
The
COVID-19 pandemic has caused us to modify our business practices
(including employee travel, employee work locations, and
cancellation of physical participation in meetings, events and
conferences), and we may take further actions as may be required by
government authorities or that we determine are in the best
interests of our employees, customers and business partners. There
is no certainty that such measures will be sufficient to mitigate
the risks posed by the virus or otherwise be satisfactory to
government authorities.
The
extent to which COVID-19 impacts our business, results of
operations and financial condition will depend on future
developments, which are uncertain and cannot be predicted,
including, but not limited to, the duration and spread of the
outbreak, its severity, the actions to contain the virus or treat
its impact, and how quickly and to what extent normal economic and
operating conditions can resume. Even after the coronavirus
outbreak has subsided, we may continue to experience materially
adverse impacts to our business as a result of its global economic
impact, including any recession that has occurred or may occur in
the future.
Item 2. Properties
The
disclosures concerning our properties are contained in Item 1
Business above and incorporated herein by reference.
Item 3. Legal
Proceedings
We
have no current legal proceedings.
Item 4. Mine Safety
Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common
Equity and Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information
Our
common stock is quoted under the symbol “IQST” on the OTCQX
operated by OTC Markets Group, Inc. Only a limited market
exists for our securities. There is no assurance that a regular
trading market will develop, or if developed, that it will be
sustained. Therefore, a stockholder may be unable to resell his
securities in our company.
The
following tables set forth the range of high and low bid
information for our common stock for the each of the periods
indicated as reported by the OTCQX. These quotations reflect
inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual
transactions.
Fiscal Year
Ending December 31, 2021 |
|
|
|
|
|
Quarter
Ended |
|
High $ |
|
Low $ |
|
December 31, 2021 |
|
|
|
1.05 |
|
|
|
0.39 |
|
|
September 30, 2021 |
|
|
|
0.7299 |
|
|
|
0.3530 |
|
|
June 30,
2021 |
|
|
|
1.07 |
|
|
|
0.44 |
|
|
March
31, 2021 |
|
|
|
2.00 |
|
|
|
0.15 |
|
Fiscal
Year Ending December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
|
|
High $ |
|
|
|
Low $ |
|
|
December
31, 2020 |
|
|
|
0.20 |
|
|
|
0.0592 |
|
|
September 30, 2020 |
|
|
|
0.099 |
|
|
|
0.0599 |
|
|
June 30,
2020 |
|
|
|
0.142 |
|
|
|
0.0510 |
|
|
March
31, 2020 |
|
|
|
0.5174 |
|
|
|
0.03 |
|
On
April 7, 2022, the last sales price per share of our common stock
was $0.6623.
Penny Stock
The
SEC has adopted rules that regulate broker-dealer practices in
connection with transactions in penny stocks. Penny stocks are
generally equity securities with a market price of less than $5.00,
other than securities registered on certain national securities
exchanges or quoted on the NASDAQ system, provided that current
price and volume information with respect to transactions in such
securities is provided by the exchange or system. The penny stock
rules require a broker-dealer, prior to a transaction in a penny
stock, to deliver a standardized risk disclosure document prepared
by the SEC, that: (a) contains a description of the nature and
level of risk in the market for penny stocks in both public
offerings and secondary trading; (b) contains a description of the
broker's or dealer's duties to the customer and of the rights and
remedies available to the customer with respect to a violation of
such duties or other requirements of the securities laws; (c)
contains a brief, clear, narrative description of a dealer market,
including bid and ask prices for penny stocks and the significance
of the spread between the bid and ask price; (d) contains a
toll-free telephone number for inquiries on disciplinary actions;
(e) defines significant terms in the disclosure document or in the
conduct of trading in penny stocks; and (f) contains such other
information and is in such form, including language, type size and
format, as the SEC shall require by rule or regulation.
The
broker-dealer also must provide, prior to effecting any transaction
in a penny stock, the customer with (a) bid and offer quotations
for the penny stock; (b) the compensation of the broker-dealer and
its salesperson in the transaction; (c) the number of shares to
which such bid and ask prices apply, or other comparable
information relating to the depth and liquidity of the market for
such stock; and (d) a monthly account statement showing the market
value of each penny stock held in the customer's account.
In
addition, the penny stock rules require that prior to a transaction
in a penny stock not otherwise exempt from those rules, the
broker-dealer must make a special written determination that the
penny stock is a suitable investment for the purchaser and receive
the purchaser's written acknowledgment of the receipt of a risk
disclosure statement, a written agreement as to transactions
involving penny stocks, and a signed and dated copy of a written
suitability statement.
These disclosure requirements may have the effect of reducing the
trading activity for our common stock. Therefore, stockholders may
have difficulty selling our securities.
Holders of Our Common Stock
As
of April 8, 2022, we had 149,357,358 shares of our
common stock issued and outstanding, held by approximately 65
stockholders of record at our transfer agent, with additional
stockholders holding our shares in street name.
Dividends
We
currently intend to retain future earnings for the operation of our
business. We have never declared or paid cash dividends on our
common stock, and we do not anticipate paying any cash dividends in
the foreseeable future.
In
the event that a dividend is declared, common stockholders on the
record date are entitled to share ratably in any dividends that may
be declared from time to time on the common stock by our board of
directors from funds legally available.
There are no restrictions in
our articles of incorporation or bylaws that restrict us from
declaring dividends. The Nevada Revised Statutes, however, do
prohibit us from declaring dividends where, after giving effect to
the distribution of the dividend:
|
1. |
We would not be able to pay our
debts as they become due in the usual course of business;
or |
|
2. |
Our total assets would be less
than the sum of our total liabilities, plus the amount that would
be needed to satisfy the rights of stockholders who have
preferential rights superior to those receiving the
distribution. |
Securities Authorized for Issuance under Equity Compensation
Plans
We
do not have an equity compensation plan.
Recent Sales of Unregistered Securities
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 |
These securities were issued pursuant to Section 4(2) of the
Securities Act and/or Rule 506 promulgated thereunder. The holders
represented their intention to acquire the securities for
investment only and not with a view towards distribution. The
investors were given adequate information about us to make an
informed investment decision. We did not engage in any general
solicitation or advertising. We directed our transfer agent to
issue the stock certificates with the appropriate restrictive
legend affixed to the restricted stock.
Item 6. Selected Financial
Data
Not
required under Regulation S-K for “smaller reporting
companies.”
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations for
the Years Ended December 31, 2021 and 2020
Net Revenue
Our net revenue for the year ended December 31, 2021 was
$64,702,018 as compared with $44,910,006 for the year ended
December 31, 2020. These numbers reflect an increase of 44% year
over year on our consolidated Revenues.
When looking at the numbers by subsidiary, we have the following
breakout for the years ended December 31, 2021 and 2020:
Subsidiary |
|
Revenue
Year Ended
December 31, 2021
|
|
Revenue
Year Ended
December 31, 2020
|
Etelix.com USA,
LLC |
|
|
15,445,161 |
|
|
|
14,033,528 |
|
SwissLink Carrier AG |
|
|
4,681,978 |
|
|
|
5,432,022 |
|
QGlobal LLC |
|
|
666,887 |
|
|
|
421,619 |
|
IoT Labs
LLC |
|
|
43,907,992 |
|
|
|
25,022,837 |
|
|
|
|
64,702,018 |
|
|
|
44,910,006 |
|
The continued growth of our revenue is the result of the
development of our business strategy, which includes the
strengthening of our commercial and operating activities and new
acquisitions.
If net revenues continue growing at a similar rate for the next
twelve months, we believe that the company will reach a total
consolidated revenue of approximately $90 million by December 31,
2022.
Cost of Revenue
Our total cost of sales for the year ended December 31, 2021 was
$63,168,303 as compared with $43,947,654 for the year ended
December 31, 2020.
When looking at the numbers by subsidiary, we have the following
breakout for the years ended December 31, 2021 and 2020:
Subsidiary |
|
Cost of revenue
Year Ended
December 31, 2021
|
|
Cost of revenue
Year Ended
December 31, 2020
|
Etelix.com USA,
LLC |
|
|
15,080,687 |
|
|
|
14,062,553 |
|
SwissLink Carrier AG |
|
|
3,986,334 |
|
|
|
4,656,865 |
|
QGlobal LLC |
|
|
563,528 |
|
|
|
311,409 |
|
IoT Labs
LLC |
|
|
43,537,754 |
|
|
|
24,916,827 |
|
|
|
|
63,168,303 |
|
|
|
43,947,654 |
|
Our cost of revenues consists of direct charges from vendors that
the Company incurs to deliver services to its customers. These
costs primarily consist of usage charges for calls and SMS
terminated in vendor’s network.
The
behavior in the costs shows a logical correlation with the behavior
of the revenue commented above. We have reached a higher volume of
sales and every additional unit sold (minutes and SMS) has its
corresponding termination cost.
Gross Margin
Our gross margin, which is simply the difference between our
revenues and our cost of sales, discussed above, increased from
$962,352 in 2020 to $1,533,715 in 2021.
We
expect an increase in the gross margin for the next twelve months
as a result of having better termination costs.
Operating Expenses
Operating expenses for the year ended December 31, 2021 were
$4,517,632, as compared with $4,174,367 for the year ended December
31, 2020. The detail by major category is reflected in the table
below.
|
|
Years Ended December 31 |
|
|
2021 |
|
2020 |
|
|
|
|
|
Salaries,
Wages and Benefits |
|
$ |
1,160,021 |
|
|
$ |
1,208,709 |
|
Technology |
|
|
218,053 |
|
|
|
133,400 |
|
Professional
Fees |
|
|
441,490 |
|
|
|
374,821 |
|
Legal and
Regulatory |
|
|
106,001 |
|
|
|
121,229 |
|
Travel &
Events |
|
|
23,117 |
|
|
|
8,596 |
|
Public Cost |
|
|
42,674 |
|
|
|
87,234 |
|
Allowance for
doubtful accounts |
|
|
— |
|
|
|
183,414 |
|
Depreciation and
Amortization |
|
|
91,474 |
|
|
|
68,602 |
|
Advertising |
|
|
977,334 |
|
|
|
942,950 |
|
Bank Services and
Fees |
|
|
117,886 |
|
|
|
137,598 |
|
Office, Facility and Other |
|
|
392,117 |
|
|
|
209,956 |
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
3,570,167 |
|
|
|
3,476,509 |
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
947,464 |
|
|
|
697,858 |
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses |
|
$ |
4,517,631 |
|
|
$ |
4,174,367 |
|
Operating Expenses by subsidiary are as follow:
|
|
Years Ended December 31, |
|
|
2021 |
|
2020 |
|
Difference |
iQSTEL |
|
$ |
2,906,114 |
|
|
$ |
2,623,555 |
|
|
$ |
282,560 |
|
Etelix |
|
|
339,354 |
|
|
|
407,937 |
|
|
|
-68,583 |
|
SwissLink |
|
|
784,052 |
|
|
|
815,130 |
|
|
|
-31,078 |
|
ItsBchain |
|
|
2,396 |
|
|
|
52,684 |
|
|
|
-50,288 |
|
QGlobal |
|
|
106,803 |
|
|
|
83,304 |
|
|
|
23,499 |
|
Global Money One |
|
|
175,324 |
|
|
|
— |
|
|
|
175,324 |
|
IoT Labs |
|
|
203,588 |
|
|
|
191,757 |
|
|
|
11,831 |
|
|
|
$ |
4,517,631 |
|
|
$ |
4,174,367 |
|
|
$ |
343,265 |
|
The
most significant difference is generated by iQSTEL which is
basically due to the Stock-based compensation. This item includes
compensation to Management, Directors and other professional
service providers.
No allowance for doubtful accounts were established due to
additional controls already implemented within the commercial area
and collection team.
Advertising corresponds to the third-party consultancy for the
design and implementation of a Social Media communication strategy
oriented to build and enhance our companies and brand image and a
marketing program for the Regulation A offering.
All
other items were stable from one year to the other, which allows us
to affirm that the cost structure of the company is under
control.
Other Expenses
We
had other expenses of $880,085 for the year ended December 31,
2021, as compared with other expenses of $3,487,315 for the year
ended December 31, 2020. The reduction in Other Expenses in 2021
compared to 2020 is due to the significant reduction in the
interest expense of $3,509,323 for the year ended December 31, 2020
to $675,481 for the year ended December 31, 2021.
Net Loss
We
finished the year ended December 31, 2021 with a loss of $3,864,001
as compared to a loss of $6,699,482 during the year ended December
31, 2020. This represents an improvement in our financial results
year over year, due to an increment in the Gross Revenue and a
significant reduction of the Interest Expenses.
Liquidity and Capital
Resources
As
of December 31, 2021 we had total current assets of $6,566,524,
compared with current liabilities of $2,363,015, resulting in a
positive working capital of $4,203,509 and a current ratio of
approximately 2.78 to 1. This compares with the working capital
deficiency of $4,330,355 and the current ratio of 0.45 to 1 at
December 31, 2020.
Following is a table with summary data from the consolidated
statement of cash flows for the year ended December 31, 2021 and
2020, as presented.
|
|
2021 |
|
2020 |
Net cash used in
operating activities |
|
$ |
(3,152,181 |
) |
|
$ |
(2,116,174 |
) |
Net cash used in investing
activities |
|
|
(511,348 |
) |
|
|
(91,211 |
) |
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 and cash equivalents |
|
$ |
2,581,497 |
|
|
$ |
482,813 |
|
Our operating activities used $3,152,181 in the year ended December
31, 2021, as compared with $2,116,174 used in operating activities
in the year ended December 31, 2020. Our cash flow from operations
varies depending on our operating results and the timing of
operating cash receipts and payments, specifically trade accounts
receivable and trade accounts payable. Our negative operating cash
flows in 2021 and 2020 is largely the result of our net loss for
the years.
Investing activities used $511,348 for the year ended December 31,
2021, as compared with $91,211 used in investing activities for the
year ended December 31, 2020. Our negative investing cash flow for
2021 is largely due to the acquisition of property, equipment, and
intangible assets of $230,900 and an increase of loans to related
parties of $220,674.
Financing activities provided $6,250,980 for the year ended
December 31, 2021, as compared with $2,662,756 provided for the
year ended December 31, 2020. Our positive financing cash flow in
2021 was largely the result of the $6,336,250 net proceeds from the
subscription of new common stock under our Regulation A
offering.
Based upon our current financial condition, we do not have
sufficient cash to operate our business at the current level for
the next twelve months. We intend to fund operations through
increased sales and debt and/or equity financing arrangements,
which may be insufficient to fund expenditures or other cash
requirements. The Company has received the qualification of an
Offering Statement under Regulation A for the sale of up to
80,000,000 common stocks. This offering is being conducted on a
“best efforts” basis, which means that there is no guarantee that
any minimum amount will be sold. We also plan to seek additional
financing in a private equity offering to secure funding for
operations. There can be no assurance that we will be successful in
raising additional funding. If we are not able to secure additional
funding, the implementation of our business plan will be impaired.
There can be no assurance that such additional financing will be
available to us on acceptable terms or at all.
Inflation
Although our operations are influenced by general economic
conditions, we do not believe that inflation had a material effect
on our results of operations during the twelve-month period ended
December 31, 2021.
Critical Accounting
Policies
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 accounting policies are
discussed in detail in the footnotes to our financial statements
included in this Annual Report on Form 10-K for the year ended
December 31, 2021; however, we consider our critical accounting
policies to be those related to allowance for doubtful accounts,
valuation of assets, significant estimates in the valuation of
convertible debt and income taxes. Management bases its estimates
and judgments on historical experience and other factors that are
believed to be reasonable under the circumstances. Actual results
may differ from these estimates under different assumptions or
conditions. See the Consolidated Financial Statements in this
Annual Report for a complete discussion of our significant
accounting policies.
Off Balance Sheet
Arrangements
As of December 31, 2021, there
were no off-balance sheet arrangements.
Recently Issued Accounting
Pronouncements
We do not expect the adoption
of these or other recently issued accounting pronouncements to have
a significant impact on our results of operation, financial
position or cash flow.
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A Preferred
Stock |
|
|
|
Series B Preferred
Stock |
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
• |
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:
|
• |
All Directors shall receive
reimbursement for reasonable travel expenses incurred to attend
Board and committee meetings. |
|
|
|
|
• |
All Directors shall be compensated
$3,000 monthly for their service as Directors. |
|
|
|
|
• |
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%.
|
|
|
|
|
• |
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
Item 9. Changes In and Disagreements
with Accountants on Accounting and Financial
Disclosure
There were no changes or disagreements with our accountants on
accounting and financial disclosure.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15
under the Securities Exchange Act of 1934, we have carried out an
evaluation of the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this annual
report, being December 31, 2021. This evaluation was carried out
under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial
Officer.
Disclosure controls and
procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports
filed or submitted under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission’s rules
and forms. Disclosure controls and procedures include controls and
procedures designed to ensure that information required to be
disclosed in our company’s reports filed under the Securities
Exchange Act of 1934 is accumulated and communicated to management,
including our Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosure.
Based upon that evaluation,
including our Chief Executive Officer and Chief Financial Officer,
we have concluded that our disclosure controls and procedures were
ineffective as of the end of the period covered by this annual
report.
Management’s Annual Report
on Internal Control over Financing Reporting
Our management is responsible
for establishing and maintaining adequate internal control over
financial reporting (as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934). Management has assessed the
effectiveness of our internal control over financial reporting as
of December 31, 2021 based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. As a result of this
assessment, management concluded that, as of December 31, 2021, our
internal control over financial reporting was not effective. Our
management identified the following material weaknesses in our
internal control over financial reporting, which are indicative of
many small companies with small staff: (i) inadequate segregation
of duties and effective risk assessment; and (ii) insufficient
written policies and procedures for accounting and financial
reporting with respect to the requirements and application of both
US GAAP and SEC guidelines.
We plan to take steps to
enhance and improve the design of our internal control over
financial reporting. During the period covered by this annual
report on Form 10-K, we have not been able to remediate the
material weaknesses identified above. To remediate such weaknesses,
we hope to implement the following changes during our fiscal year
ending December 31, 2022: (i) appoint additional qualified
personnel to address inadequate segregation of duties and
ineffective risk management; and (ii) adopt sufficient written
policies and procedures for accounting and financial reporting. The
remediation efforts set out in (i) and (ii) are largely dependent
upon our securing additional financing to cover the costs of
implementing the changes required. If we are unsuccessful in
securing such funds, remediation efforts may be adversely affected
in a material manner.
This annual report does not
include an attestation report of our registered public accounting
firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our
independent registered public accounting firm pursuant to an
exemption for non-accelerated filers set forth in Section 989G of
the Dodd-Frank Wall Street Reform and Consumer Protection
Act.
Inherent Limitations
Our
management, including our Chief Executive Officer and Chief
Financial Officer, do not expect that our disclosure controls and
procedures will prevent all error and all fraud. A control system,
no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the
control system are met. The design of any system of controls is
based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future
conditions. Further, the design of a control system must reflect
the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and
instances of fraud, if any, within our company have been detected.
These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdown can occur because
of simple error or mistake. In particular, many of our current
processes rely upon manual reviews and processes to ensure that
neither human error nor system weakness has resulted in erroneous
reporting of financial data.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial
reporting during the three month period ended December 31, 2021,
which were identified in conjunction with management’s evaluation
required by paragraph (d) of Rules 13a-15 and 15d-15 under the
Exchange Act, that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting..
Item 9B. Other
Information
None
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections
None
PART III
Item 10. Directors,
Executive Officers and Corporate Governance
The
following information sets forth the names, ages, and positions of
our current directors and executive officers.
Name |
|
Age |
|
Positions and Offices Held |
Leandro Iglesias |
|
|
56 |
|
|
President, Chairman, Chief
Executive Officer and Director |
Alvaro Quintana Cardona |
|
|
50 |
|
|
Chief Operating Officer, Chief
Financial Officer and Director |
Juan Carlos Lopez Silva |
|
|
53 |
|
|
Chief Commercial Officer |
Raul Perez |
|
|
69 |
|
|
Director |
Jose Antonio Barreto |
|
|
62 |
|
|
Director |
Italo Segnini |
|
|
55 |
|
|
Director |
Set
forth below is a brief description of the background and business
experience of each of our current executive officers and
directors.
Leandro Iglesias
Before founding Etelix in year 2008, where he has acted as
President and CEO, Mr. Iglesias was the International Business
Manager at CANTV/Movilnet (the Venezuelan biggest
telecommunications services provider). He held this position
between January 2003 and July 2008, while the company was under the
control of Verizon. Previous to his position in Cantv/Movilnet Mr.
Iglesias was Executive Vice President and responsible of the Latin
America marketing division of American Internet Communications
(August 1998 – December 2002). Leandro Iglesias has developed a
career for more than 20 years in the telecommunications industry
with a particular emphasis in the international long-distance
traffic business, submarine cables, satellite communications and
international roaming services. He is Electronic Engineer graduate
from Universidad Simon Bolivar and graduated from the Management
Program at IESA Business School. He also holds an MBA from
Universidad Nororiental Gran Mariscal de Ayacucho.
Aside from that provided above, Mr. Iglesias does not hold and has
not held over the past five years any other directorships in any
company with a class of securities registered pursuant to Section
12 of the Exchange Act or subject to the requirements of Section
15(d) of the Exchange Act or any company registered as an
investment company under the Investment Company Act of 1940.
We
believe that Mr. Iglesias is qualified to serve on our Board of
Directors because of his wealth of experience in the telecom
industry.
Alvaro Quintana Cardona
Alvaro Quintana has developed a career of more than twenty years of
experience in the telecommunication industry with particular focus
on regulatory affairs, strategic planning, value added services and
international interconnection agreements. Before joining Etelix in
year 2013 as Chief Operation Officer and Chief Financial Officer,
Mr. Quintana acted between June 2004 and May 2013 as
Interconnection and Value-Added Services Manager at Digitel (a
mobile service provider in Venezuela, formerly a Telecom Italia
Mobile subsidiary). He holds a Bachelor Degree in Business
Administration and a Specialist Degree in Economics, both from the
Universidad Catolica Andres Bello. He also holds a Master in
Telecommunications from the EOI Business School in Spain.
Aside from that provided above, Mr. Cardona does not hold and has
not held over the past five years any other directorships in any
company with a class of securities registered pursuant to Section
12 of the Exchange Act or subject to the requirements of Section
15(d) of the Exchange Act or any company registered as an
investment company under the Investment Company Act of 1940.
We
believe that Mr. Quintana is qualified to serve on our Board of
Directors because of his wealth of experience in the telecom
industry.
Juan Carlos Lopez Silva
Juan
Carlos Lopez Silva is an Engineer graduated from Universidad de Los
Andes, with a Master degree in Project Management from the
Pontificia Universidad Javeriana; and MBA from EADA Business
School; with more than 20 years of experience in project
management, negotiation, business development and management on
international companies. Previous to joining Etelix in August 2011
as Chief Commercial Officer, Juan Carlos was International Carrier
Relations Manager at Colombia Telecomunicaciones S.A. Esp. a
subsidiary of Telefonica of Spain, between September 2003 and June
2011.
Aside from that provided above, Mr. Silva does not hold and has not
held over the past five years any other directorships in any
company with a class of securities registered pursuant to Section
12 of the Exchange Act or subject to the requirements of Section
15(d) of the Exchange Act or any company registered as an
investment company under the Investment Company Act of 1940.
Raul A Perez
From
December 1, 2014 to present, Mr. Perez serves as CFO of Deerbrook
Family Dentistry, PC, Dental Practice in Humble, Texas. From
November 1, 2017 to January 31, 2019, he served as Senior
Accountant to Principrin School, PC, Day Care in Houston,
Texas.
Mr.
Perez has been in finance for more than 40 years, starting in 1970
as analyst in treasury and finance departments and progressively
assuming different positions up to corporate treasurer for large
corporations. He served for Sudamtex of Venezuela, C.A for 5 years
and Polar Brewery in Caracas, Venezuela for 10 year. Beginning in
2000, he accepted a position as a Director of the Security and
Exchange Commission of Venezuela to have the surveillance of
Venezuelan stock market participants. Also, in 2004 he completed
the requirements and received his certification as a Venezuelan
Investment Advisor. Later, as an independent contractor for three
years, he was selected as the Corporate Compliance Officer for an
especially important stock market broker dealer in Venezuela,
Activalores Casa de Bolsa, in which he developed the Compliance
Unit and manuals required by local and international anti money
laundering laws. He also taught Advanced Institute of Finance (IAF)
in Caracas being a professor of Corporate Finance and Managerial
Accounting for 5 years.
Mr.
Perez has a Bachelor’s degree in accounting (1976), and MBA Finance
(1982), gave me the overall knowledge of finance and how to plan,
start up, run, and control a business.
We
have selected Mr. Perez to serve as an independent director because
of his education, skills and experience in finance and his
regulatory history.
Jose Antonio Barreto
From 2006 to the present, Mr. Barreto has been Chief Business
Development Officer of Xpectra Remote Management / Mexico. There he
was in charge of directing all aspects of account development and
sales effort to close specific private and government opportunities
and developing strategic accounts in Mexico and the LATAM region.
From 2020 to present, he has been an advisor to our Board of
Directors.
Mr. Barreto has more than 30 years of experience working in
telecommunications and technology companies. He has been directly
responsible of leading the business development and operational in
several telecommunication and technology companies’ acquisition
activity, with the responsibility of leading the technical,
operation and financial analysis. Over the last 14 years, Jose
Antonio has been the North and Central American leader, spanning
from Mexico to Panama, in the development of commercial processes
in the technology security field, artificial intelligence, Internet
of Things (IoT) platforms, as well as cutting edge technology
solutions and software systems.
He studied Electronic Engineering at the Universidad Simón Bolivar
followed by a Master of Science Degree in Electrical and Computer
Engineering at Rice University. He also completed the Master in
Telecommunications Management offered by Universidad Simon Bolivar
and the Telecom SudParis Institute.
We
have selected Mr. Barreto to serve as an independent director
because of his education, skills and experience in technology
companies.
Italo R. Segnini (age 55)
From March 2020 to the present, Mr. Segnini has been serving as
Global Carrier Partnership Director of Sierra Wireless. From June
2019 to February 2020, he served as an Independent Telecom
Consultant. From 2017 to 2019, he served as Director of
International Carrier Business for Televisa Telecom. From 2012 to
2019, he served as Director International Carrier Business for
Millicom.
Mr.
Segnini is a long time Telecommunicaction industry professional who
has had high level positions at Global Tier Ones for more than 20
years, Telefonica, Millicon and Televisa, Sierra Wireless to
mention a few. Mr. Segnini has extensive executive experience in
the Telecom areas like Voice, A2P, SMS, Data, Roaming, Mobility
Services, B2B, MNO, MVNO, IoT, Interconnection, etc., and a solid
business performance record spanning multiple functions including
International commercial negotiations, management, sales, business
development, sales, regulatory and operations. Italo R. Segnini
holds a Juris Doctor degree from the Andres Bello Catholic
University, a Telecommunication Masters Degree from Madrid
Pontificia Comillas University and an MBA from IESA Business
School
Term of Office
Our
Directors are appointed for a one-year term to hold office until
the next annual general meeting of our stockholders or until
removed from office in accordance with our bylaws. Our officers are
appointed by our board of directors and hold office until removed
by the board, subject to their respective employment
agreements.
Significant Employees
We
have no significant employees other than our officers and
directors.
Family Relationships
There are no family relationships between or among the directors,
executive officers or persons nominated or chosen by us to become
directors or executive officers.
Involvement in Certain Legal Proceedings
During the past 10 years, none of our current directors, nominees
for directors or current executive officers has been involved in
any legal proceeding identified in Item 401(f) of Regulation S-K,
including:
1. Any petition under the Federal bankruptcy laws or any state
insolvency law filed by or against, or a receiver, fiscal agent or
similar officer was appointed by a court for the business or
property of such person, or any partnership in which he or she was
a general partner at or within two years before the time of such
filing, or any corporation or business association of which he or
she was an executive officer at or within two years before the time
of such filing;
2. Any conviction in a criminal proceeding or being named a subject
of a pending criminal proceeding (excluding traffic violations and
other minor offenses);
3. Being subject to any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him or
her from, or otherwise limiting, the following activities:
i. Acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the
Commodity Futures Trading Commission, or an associated person of
any of the foregoing, or as an investment adviser, underwriter,
broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and
loan association or insurance company, or engaging in or continuing
any conduct or practice in connection with such activity;
ii. Engaging in any type of business practice; or
iii. Engaging in any activity in connection with the purchase or
sale of any security or commodity or in connection with any
violation of Federal or State securities laws or Federal
commodities laws;
4. Being subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any Federal or State authority
barring, suspending or otherwise limiting for more than 60 days the
right of such person to engage in any type of business regulated by
the Commodity Futures Trading Commission, securities, investment,
insurance or banking activities, or to be associated with persons
engaged in any such activity;
5. Being found by a court of competent jurisdiction in a civil
action or by the SEC to have violated any Federal or State
securities law, and the judgment in such civil action or finding by
the Commission has not been subsequently reversed, suspended, or
vacated;
6. Being found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have
violated any Federal commodities law, and the judgment in such
civil action or finding by the Commodity Futures Trading Commission
has not been subsequently reversed, suspended or vacated;
7. Being subject to, or a party to, any Federal or State judicial
or administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged
violation of:
i. Any Federal or State securities or commodities law or
regulation; or
ii. Any law or regulation respecting financial institutions or
insurance companies including, but not limited to, a temporary or
permanent injunction, order of disgorgement or restitution, civil
money penalty or temporary or permanent cease-and-desist order, or
removal or prohibition order; or
iii. Any law or regulation prohibiting mail or wire fraud or fraud
in connection with any business entity; or
8. Being subject to, or a party to, any sanction or order, not
subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act
(15 U.S.C. 78c(a)(26))), any registered entity (as defined in
Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C.
1(a)(29))), or any equivalent exchange, association, entity or
organization that has disciplinary authority over its members or
persons associated with a member.
Director Independence
The Board of Directors reviews the independence of our directors on
the basis of standards adopted by the NASDAQ Stock Market
(“NASDAQ”). As a part of this review, the Board of Directors
considers transactions and relationships between our company, on
the one hand, and each director, members of the director’s
immediate family, and other entities with which the director is
affiliated, on the other hand. The purpose of such a review is to
determine which, if any, of such transactions or relationships were
inconsistent with a determination that the director is independent
under NASDAQ rules. As a result of this review, the Board of
Directors has determined that none of our directors is an
“independent director” within the meaning of applicable NASDAQ
listing standards.
Committees of the Board
Our
full board serves the functions that would normally be served by a
separately-designated Nominating Committee, and Compensation
Committee.
Company has an Audit Committee with a financial expert on the
Board.
Section 16(a) Beneficial
Ownership Reporting Compliance
Section 16(a) of the Exchange
Act requires our directors and executive officers and persons who
beneficially own more than ten percent of a registered class of the
Company’s equity securities to file with the SEC initial reports of
ownership and reports of changes in ownership of common stock and
other equity securities of the Company. Officers, directors and
greater than ten percent beneficial stockholders are required by
SEC regulations to furnish us with copies of all Section 16(a)
forms they file. To the best of our knowledge based solely on a
review of Forms 3, 4, and 5 (and any amendments thereof) received
by us, no persons have failed to file, on a timely basis, the
identified reports required by Section 16(a) of the Exchange Act
during fiscal year ended December 31, 2021. Following the year end,
all of the Form 3s were filed late for incoming management of
Etelix.com USA LLC.
Code of Ethics
We
do not have a code of ethics but we plan to adopt one this fiscal
year.
Item 11. Executive
Compensation
The
table below summarizes all compensation awarded to, earned by, or
paid to our former or current executive officers for the fiscal
years ended December 31, 2020 and 2020.
Name and principal
Position
|
Year |
Salary ($) |
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
All Other
Compensation
($) (1)(2)
|
Total
($)
|
Leandro Iglesias
President, CEO and Director
|
2020
2021
|
76,800
174,000
|
-
419,024
|
-
-
|
-
-
|
-
-
|
76,800
593,024
|
Alvaro Quintana
Treasury, Secretary and Director
|
2020
2021
|
25,100
159,088
|
-
337,674
|
-
-
|
-
-
|
-
-
|
25,100
496,762
|
Juan
Carlos López
Chief Commercial Officer
|
2020
2021
|
28,500
80,000
|
-
244,050
|
-
-
|
-
-
|
-
-
|
28,500
324,050
|
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%.
Option Grants
We
have not granted any options or stock appreciation rights to our
named executive officers or directors since inception. We do not
have any stock option plans.
Compensation of Directors
All
Directors shall receive reimbursement for reasonable travel
expenses incurred to attend Board and committee meetings.
Effective on July 1, 2021 and thereafter, all Directors shall be
compensated monthly up to 4,000 shares of common stock cash of
$1,000 for their service as Directors. The Chairman and Secretary
of the Board shall receive an additional $2,000 per month in
addition to the Director compensation.
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 25%.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension,
retirement or similar benefits to our directors or executive
officers. We have no material bonus or profit sharing plans
pursuant to which cash or non-cash compensation is or may be paid
to our directors or executive officers, except that stock options
may be granted at the discretion of the board of directors or a
committee thereof.
Compensation Committee
We
do not currently have a compensation committee of the board of
directors or a committee performing similar functions. The board of
directors as a whole participates in the consideration of executive
officer and director compensation.
Indebtedness of Directors, Senior Officers, Executive Officers
and Other Management
None
of our directors or executive officers or any associate or
affiliate of our company during the last two fiscal years is or has
been indebted to our company by way of guarantee, support
agreement, letter of credit or other similar agreement or
understanding currently outstanding.
Item 12. Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder
Matters.
The
following table sets forth, as of March 8, 2022, certain
information as to shares of our voting stock owned by (i) each
person known by us to beneficially own more than 5% of our
outstanding voting stock, (ii) each of our directors, and (iii) all
of our executive officers and directors as a group.
Unless
otherwise indicated below, to our knowledge, all persons listed
below have sole voting and investment power with respect to their
shares of voting stock, except to the extent authority is shared by
spouses under applicable law. Unless otherwise indicated below,
each entity or person listed below maintains an address of
300 Aragon Avenue, Suite 375,
Coral Gables, FL 33134.
The
number of shares beneficially owned by each stockholder is
determined under rules promulgated by the SEC. The information is
not necessarily indicative of beneficial ownership for any other
purpose. Under these rules, beneficial ownership includes any
shares as to which the individual or entity has sole or shared
voting or investment power and any shares as to which the
individual or entity has the right to acquire beneficial ownership
within 60 days through the exercise of any stock option,
warrant or other right. The inclusion in the following table of
those shares, however, does not constitute an admission that the
named stockholder is a direct or indirect beneficial owner.
|
|
Common Stock |
Name
of Beneficial Owner |
|
Number
of Shares Owned
(1)
|
|
Percent
of Class
(2)
|
Leandro Iglesias |
|
|
542,932 |
|
|
|
0.368 |
% |
Alvaro Quintana Cardona |
|
|
1,121,842 |
|
|
|
0.761 |
% |
Juan Carlos Lopez Silva |
|
|
925,497 |
|
|
|
0.628 |
% |
Raul Perez |
|
|
8,000 |
|
|
|
0.005 |
% |
Jose Antonio Barreto |
|
|
8,000 |
|
|
|
0.005 |
% |
Italo Segnini |
|
|
8,000 |
|
|
|
0.005 |
% |
All
Directors and Executive Officers as a Group (6 persons) |
|
|
2,614,271 |
|
|
|
1.774 |
% |
|
|
|
Series A Preferred
Stock |
|
Name of Beneficial
Owner |
|
|
Number of Shares
Owned
(1)
|
|
|
|
Percent of
Class
(3)
|
|
Leandro Iglesias |
|
|
7,000 |
|
|
|
70.00 |
% |
Alvaro Quintana Cardona |
|
|
3,000 |
|
|
|
30.00 |
% |
Juan Carlos Lopez Silva |
|
|
— |
|
|
|
— |
|
Raul Perez |
|
|
— |
|
|
|
— |
|
Jose Antonio Barreto |
|
|
— |
|
|
|
— |
|
Italo Segnini |
|
|
— |
|
|
|
— |
|
All
Directors and Executive Officers as a Group (6 persons) |
|
|
10,000 |
|
|
|
100.00 |
% |
(1)
Unless otherwise indicated, each person or entity named in the
table has sole voting power and investment power (or shares that
power with that person’s spouse) with respect to all shares of
voting stock listed as owned by that person or entity.
(2)
Pursuant to Rules 13d-3 and 13d-5 of the Exchange Act, beneficial
ownership includes any shares as to which a shareholder has sole or
shared voting power or investment power, and also any shares which
the shareholder has the right to acquire within 60 days, including
upon exercise of common shares purchase options or warrants. The
percent of class is based on 147,357,358 voting shares as of March
8, 2022.
(3)
Pursuant to Rules 13d-3 and 13d-5 of the Exchange Act, beneficial
ownership includes any shares as to which a shareholder has sole or
shared voting power or investment power, and also any shares which
the shareholder has the right to acquire within 60 days, including
upon exercise of common shares purchase options or warrants. The
percent of class is based on 10,000 voting shares as of March 8,
2022.
Item 13. Certain Relationships and
Related Transactions, and Director Independence
Other than described below or the transactions described under the
heading “Executive Compensation” (or with respect to which such
information is omitted in accordance with SEC regulations), there
have not been, and there is not currently proposed, any transaction
or series of similar transactions to which we were or will be a
participant in which the amount involved exceeded or will exceed
the lesser of $120,000 or one percent of the average of our total
assets at year-end for the last two completed fiscal years, and in
which any director, executive officer, holder of 5% or more of any
class of our capital stock or any member of the immediate family of
any of the foregoing persons had or will have a direct or indirect
material interest.
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.
Dept to Equity Swap
During the year ended December 31, 2021 the Company recorded a
debt-to-equity swap to a related party of $1,647,150 as additional
paid in capital.
Item 14. Principal
Accounting Fees and Services
Below are tables of Audit Fees (amounts in US$) billed by our
auditors in connection with the audits of the Company’s annual
financial statements for the years ended:
Financial Statements for the
Year Ended December 31 |
|
Audit Services |
|
Audit Related Fees |
|
Tax Fees |
|
Other Fees |
2020 |
|
|
$ |
39,000 |
|
|
$ |
4,650 |
|
|
$ |
0 |
|
|
$ |
0 |
|
2021 |
|
|
$ |
136,297 |
|
|
$ |
29,500 |
|
|
$ |
0 |
|
|
$ |
0 |
|
PART IV
Item 15. Exhibits, Financial
Statements Schedules
|
|
(a)
Financial Statements and Schedules |
The following financial statements and schedules listed below are
included in this Form 10-K.
Financial Statements (See Item 8)
Exhibit No. |
|
Description of
Exhibit |
Exhibit 2.1 |
|
Membership Interest Purchase
Agreement(1) |
Exhibit 2.2 |
|
Memorandum of Understanding and Shareholders
Agreement dated February 21, 2020(5) |
Exhibit 2.3 |
|
Memorandum of Understanding and Shareholders
Agreement dated February 12, 2020(6) |
Exhibit 2.4 |
|
Company
Purchase Agreement, dated April 1, 2019(11) |
Exhibit 3.1 |
|
Articles of Incorporation of the Registrant
(2) |
Exhibit 3.2 |
|
Bylaws
of the Registrant (2) |
Exhibit 3.3 |
|
Certificate of Amendment(3) |
Exhibit 4.1 |
|
Amendment #2 to the Crown Capital Note dated
March 2, 2020(4) |
Exhibit 4.2 |
|
Amendment #2 to the Auctus Fund Note dated March
2, 2020(4) |
Exhibit 4.2 |
|
Amendment #1 to the Labrys Fund Note dated
February 11, 2020(7) |
Exhibit 4.3 |
|
Amendment #1 to the Apollo Note dated December
23, 2019(8) |
Exhibit 4.4 |
|
Amendment #1 to the Apollo Note dated December
24, 2019(8) |
Exhibit 4.5 |
|
Amendment #1 to the Apollo Note dated December
24, 2019(8) |
Exhibit 4.6 |
|
Amendment #1 to the Apollo Note dated December
24, 2019(8) |
Exhibit 4.7 |
|
Amendment #1 to the Apollo Note dated December
24, 2019(8) |
Exhibit 4.8 |
|
Amendment #1 to the Apollo Note dated December
24, 2019(8) |
Exhibit 4.9 |
|
Amendment #1 to the Apollo Note dated December
24, 2019(8) |
Exhibit 4.10 |
|
Amendment #1 to the Crown Capital Note dated
December 23, 2019(8) |
Exhibit 4.11 |
|
Amendment #1 to the Auctus Fund Note dated
January 1, 2020(8) |
Exhibit 4.12 |
|
Senior
Secured Convertible Promissory Note to Labrys Fund dated December
3, 2019(9) |
Exhibit 10.1 |
|
Conversion Agreement with Carmen
Cabell(1) |
Exhibit 10.2 |
|
Conversion Agreement with Patrick
Gosselin(1) |
Exhibit 10.3 |
|
Conversion Agreement with Mark
Engler(1) |
Exhibit 10.4 |
|
Employment Agreement with Leandro
Iglesias(1) |
Exhibit 10.5 |
|
Employment Agreement with Alvaro Quintana
Cardona(1) |
Exhibit 10.6 |
|
Employment Agreement with Juan Carlos Lopez
Silva(1) |
Exhibit 10.7 |
|
Forbearance Agreement dated December 12,
2019(8) |
Exhibit 10.8 |
|
Temporary Forbearance Agreement dated December
18, 2019(8) |
Exhibit 10.9 |
|
Securities Purchase Agreement, dated December 3,
2019(9) |
Exhibit 10.10 |
|
Employment and Indemnification Agreements with
Leandro Iglesias, dated May 2, 2019(10) |
Exhibit 10.11 |
|
Employment and Indemnification Agreements with
Alvaro Quintana, dated May 2, 2019(10) |
Exhibit 10.12 |
|
Employment and Indemnification Agreements with
Juan Carlos Lopez Silva, dated May 2, 2019(10) |
Exhibit 31.1** |
|
Certification of Chief Executive Officer pursuant
to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 |
Exhibit 31.2** |
|
Certification of Chief Financial Officer pursuant
to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 |
Exhibit 32.1** |
|
Certification of Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 |
Exhibit 101** |
|
The following materials from the
Company’s Annual Report on Form 10-K for the year ended December
31, 2021 formatted in Extensible Business Reporting Language
(XBRL). |
Filed herewith**
|
1. |
Incorporated by reference
to the Company’s Form 8-K filed with the US Securities and Exchange
Commission on June 28, 2018. |
|
2. |
Incorporated by reference to the
Company’s Registration Statement on Form S-1 filed with the US
Securities and Exchange Commission on August 18, 2011. |
|
3. |
Incorporated by reference to the
Company’s Form 8-K filed with the US Securities and Exchange
Commission on August 31, 2018. |
|
4. |
Incorporated by reference to the
Company’s Form 8-K filed with the US Securities and Exchange
Commission on March 30, 2020. |
|
5. |
Incorporated by reference to the
Company’s Form 8-K filed with the US Securities and Exchange
Commission on February 25, 2020. |
|
6. |
Incorporated by reference to the
Company’s Form 8-K filed with the US Securities and Exchange
Commission on February 19, 2020. |
|
7. |
Incorporated by reference to the
Company’s Form 8-K filed with the US Securities and Exchange
Commission on February 13, 2020. |
|
8. |
Incorporated by reference to the
Company’s Form 8-K filed with the US Securities and Exchange
Commission on January 6, 2020. |
|
9. |
Incorporated by reference to the
Company’s Form 8-K filed with the US Securities and Exchange
Commission on December 11, 2019. |
|
10. |
Incorporated by reference to the
Company’s Form 8-K filed with the US Securities and Exchange
Commission on May 6, 2019. |
|
11. |
Incorporated by reference to the
Company’s Form 8-K filed with the US Securities and Exchange
Commission on April 4, 2019. |
Item 16. Form 10-K Summary
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
|
IQSTEL
Inc. |
|
|
By: |
/s/ Leandro
Iglesias |
|
Leandro Iglesias
Chief Executive Officer, Principal Executive Officer
|
|
April 15, 2022 |
By: |
/s/ Alvaro Quintana
Cardona |
|
Alvaro Quintana
Cardona |
Title: |
Chief Operating Officer, Chief
Financial Officer, Principal Financial Officer and Principal
Accounting Officer |
Date: |
April 15, 2022 |
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
By: |
/s/ Leandro
Iglesias |
|
Leandro Iglesias
Chief Executive Officer, Principal Executive Officer
|
|
April 15, 2022 |
By: |
/s/ Alvaro Quintana
Cardona |
|
Alvaro Quintana
Cardona |
Title: |
Chief Operating Officer, Chief
Financial Officer, Principal Financial Officer and Principal
Accounting Officer |
Date: |
April 15, 2022 |
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