Business Context and Reporting Period
This Form 8-K Current Report for iQSTEL Inc. covers events occurring primarily between March 2, 2020, and March 30, 2020, with a report date of March 30, 2020. The filing details material definitive agreements regarding debt forbearance, a change in corporate control involving the CEO, and changes to the Board of Directors.
Key Financial Metrics and Obligations
The filing does not provide standard financial statements (revenue, profit, cash flow, or margins). Instead, it outlines specific direct financial obligations and debt amendments:
- Crown Capital Note: Principal amount of $120,000. Under Amendment #2, the company agreed to pay $36,000 by March 6, 2020 (paid) and $30,000 by April 6, 2020. 1,000,000 shares were reserved for potential conversion.
- Auctus Fund Note: Principal amount of $112,750. Under Amendment #2, the company agreed to pay $100,000 by March 3, 2020 (paid) and $100,000 by April 6, 2020. 5,000,000 shares were reserved for potential conversion.
- Director Compensation: New plan adopted on March 16, 2020, providing $3,000 monthly cash compensation or equivalent stock (at a 10% discount) to directors.
- Advisor Compensation: Former director Oscar Brito appointed as advisor with a $5,000 monthly fee.
Material Changes and Corporate Governance
Significant changes in corporate control and governance occurred during the reporting period:
- Change in Control: On March 6, 2020, CEO Leandro Iglesias and affiliate Metrospaces, Inc. executed a Memorandum of Understanding. Metrospaces returned 5,144,123 shares (11.54% of outstanding common stock) to Mr. Iglesias. Mr. Iglesias granted Metrospaces an option to repurchase up to 1,250,000 shares at $2.00 per share.
- Board Resignation: Oscar Brito resigned from the Board of Directors on March 3, 2020, with no stated disagreement regarding operations.
- Debt Cures: The company entered into forbearance agreements to cure outstanding defaults on notes held by Crown Capital and Auctus Fund, preventing immediate conversion or default declarations.
Outlook, Risks, and Contingencies
The filing highlights significant liquidity and solvency risks:
- Debt Default Risk: The company has a history of defaults on convertible notes, requiring multiple amendments and forbearance agreements to avoid immediate enforcement actions.
- Liquidity Pressure: The company is obligated to make substantial payments ($30,000 to Crown Capital and $100,000 to Auctus Fund) by April 6, 2020, to maintain the current forbearance status.
- Dilution Risk: Up to 6,000,000 shares are currently reserved for the two note holders, contingent on payment performance, which could significantly dilute existing shareholders if converted.
Investor Verification Checklist
- Verify the status of the $130,000 in payments due to Crown Capital and Auctus Fund by April 6, 2020.
- Confirm whether the 6,000,000 reserved shares have been released or if the notes remain in default.
- Review the full text of the Memorandum of Understanding between the CEO and Metrospaces, Inc. to understand the long-term implications of the share transfer and repurchase option.
- Check subsequent filings for any further amendments to the debt instruments or additional defaults.