Iqstel Inc current report, 19 January 2024

Vollständiges Dokument

Business Context and Reporting Period

This Form 8-K was filed by iQSTEL Inc. on January 25, 2024, reporting events occurring on January 19, 2024, and January 24, 2024. The filing details two material definitive agreements: the acquisition of a controlling interest in a telecommunications company and a new secured convertible debt financing.

Key Financial Metrics and Agreements

Acquisition of QXTEL LIMITED

  • Target: 51% of ordinary shares in QXTEL LIMITED, a UK-based telecommunications provider with over 20 years of experience.
  • Total Purchase Price: $5,000,000.
  • Initial Deposit: $1,500,000 paid into escrow (non-refundable if the deal does not close by April 30, 2024).
  • Closing Payment Structure:
    • $1,500,000 in cash.
    • $2,000,000 payable via a Promissory Note or iQSTEL common stock (Seller's option).
  • Promissory Note Terms (if chosen): 0% interest, payable in 7 monthly installments of $200,000 and a final payment of $600,000. Secured by a pledge of 40% of the acquired shares.
  • Earn-out Provision: Potential additional payment based on Net Income for the period Jan 1, 2024, to Dec 31, 2024:
    • Net Income > $1,000,000: Earn-out equals the full Net Income amount.
    • $750,000 ≤ Net Income < $1,000,000: Earn-out equals the Net Income amount.
    • Net Income < $750,000: No earn-out payment.

Secured Convertible Promissory Notes

  • Investor: M2B Funding Corp.
  • Total Principal Amount: Up to $3,888,888.89.
  • Aggregate Purchase Price: $3,500,000 (reflecting an Original Issue Discount).
  • Interest Rate: 18% per annum.
  • Term: One year.
  • Conversion Terms: Convertible to common stock at $0.11 per share. Includes "Kicker Shares" equal to 10% of the principal amount divided by $0.11.
  • Security: Secured by all of iQSTEL's assets.
  • Prepayment: Allowed at 110% of outstanding principal plus accrued interest.

Material Changes and Contingencies

The filing does not provide comparative financial data (revenue, profit, cash flow) for prior periods as this is a Current Report regarding specific transactions rather than a periodic financial statement. However, the following material changes and conditions are noted:

  • Financing Contingency: The obligation to close the QXTEL acquisition is contingent upon iQSTEL securing additional debt or equity financing of up to $1,500,000 on satisfactory terms.
  • Accounting Compliance: Closing is subject to QXTEL preparing accounting information in accordance with SEC standards.
  • Asset Encumbrance: The new debt facility is secured by all of iQSTEL's assets, significantly impacting the company's liquidity and ability to incur further indebtedness.
  • Dilution Risk: The transaction involves potential issuance of shares for the acquisition payment, conversion of notes, and kicker shares, which may dilute existing shareholders.

Guidance, Outlook, and Risks

The filing does not contain forward-looking guidance on revenue or earnings projections. Management commentary is limited to the terms of the agreements. Key risks and contingencies include:

  • Deal Failure Risk: If the QXTEL acquisition does not close by April 30, 2024, the $1,500,000 escrow deposit is non-refundable.
  • High Cost of Capital: The new debt carries an 18% interest rate and a 10% prepayment penalty, alongside significant equity dilution via conversion and kicker shares.
  • Operational Integration: Success depends on the integration of QXTEL, a company with operations in the UK, USA, Argentina, UAE, Serbia, and Turkey.
  • Legal and Regulatory: The agreements contain customary representations and warranties, but investors are not third-party beneficiaries. The filing explicitly states that the description of the agreements is not complete and is qualified by the full text of the exhibits.

Investor Verification Checklist

  • Verify the status of the additional $1,500,000 financing required to close the QXTEL acquisition.
  • Confirm the exact number of shares reserved for the acquisition payment and the conversion/kicker shares to assess dilution impact.
  • Review the full text of the Purchase Agreement (Exhibit 2.1) and Securities Purchase Agreement (Exhibit 10.1) for specific covenants and default provisions.
  • Assess the financial health of QXTEL LIMITED to validate the earn-out potential and the value of the 51% stake.
  • Monitor the April 30, 2024, deadline for the QXTEL deal to determine if the $1.5M deposit is at risk.