Business Context and Reporting Period
Company: iQSTEL Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: November 18, 2021
Event: Entry into a Material Definitive Agreement (Memorandum of Understanding).
iQSTEL Inc. entered into a Memorandum of Understanding (MOU) on November 18, 2021, to acquire a 51% membership interest in Smartbiz Telecom LLC, a Florida corporation providing VoIP telecommunication services for wholesale and retail markets.
Key Financial Metrics
This filing is a current report regarding a specific corporate event and does not contain periodic financial statements. Consequently, the filing text does not provide clear values for revenue, profit, cash flow, margins, debt, or liquidity for the reporting period.
Transaction Consideration: The proposed acquisition consideration is valued at $1,000,000, to be paid in iQSTEL common stock.
Material Changes and Transaction Details
- Acquisition Target: 51% of Smartbiz Telecom LLC from sellers Jose Ramon Olivar and Eduardo Borrero.
- Valuation Mechanism: Sellers may elect to price shares at execution (average of last 5 trading days less 10%) or at issuance (average of last 5 trading days less 10%).
- True-Up Provision: If the stock value received by the Seller is less than $1,000,000 upon sale, the Seller may request cash or additional stock to cover the difference. This provision is valid for one year from issuance.
- Next Steps: The parties plan to execute a final Purchase Agreement. An interim agreement with Smartbiz management will be signed to ensure operational continuity.
- Validity: The MOU is valid for 6 months from execution.
Guidance, Outlook, and Risks
Management Commentary: The company intends to complete the transaction via a final Purchase Agreement and has prioritized operational continuity for the target company during the interim period.
Risks and Contingencies:
- The transaction is subject to the execution of a final Purchase Agreement.
- The MOU expires in 6 months if the final agreement is not reached.
- The "true-up" provision creates a potential future cash or equity obligation if the stock price declines significantly within one year of issuance.
Investor Verification Checklist
- Verify the final terms of the Purchase Agreement once executed, as the MOU is non-binding regarding the final deal structure.
- Monitor the company's stock price volatility, as it directly impacts the number of shares to be issued and potential cash "true-up" obligations.
- Review the operational continuity agreement with Smartbiz Telecom management to assess interim risks.
- Confirm the exact number of shares to be issued once the pricing election is made by the Seller.