Business Context and Reporting Period
Company: iQSTEL Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: June 27, 2024
Event: Entry into a Material Definitive Agreement (Second Amendment to Share Purchase Agreement).
iQSTEL Inc. entered into a Second Amendment to a Share Purchase Agreement originally dated January 19, 2024, with Yukon River Holdings, Ltd. The agreement concerns the acquisition of 51% of the ordinary shares of QXTEL LIMITED.
Key Financial Metrics and Transaction Details
This filing details the restructuring of debt and earnout obligations related to the QXTEL acquisition rather than reporting standard operating financials (revenue, profit, cash flow) for the period.
- Total Purchase Price: $5,000,000
- Payment Structure at Closing:
- $1,500,000 paid via escrow deposit (credited at closing).
- $1,500,000 paid in cash at closing.
- $2,000,000 issued via promissory note.
- Amended Promissory Note Principal: $1,800,000 (after a $200,000 paydown).
- Revised Note Payment Schedule:
- 2024: Monthly installments of $75,000 plus interest.
- First 6 months of 2025: Monthly installments of $212,500 plus interest.
- Earnout Payment Trigger: $721,034.50 net income to be achieved in Q2, Q3, and Q4 of 2024.
- Earnout Payment Amount: $1,000,000 (payable in monthly installments during the first half of 2025 upon achievement).
Material Changes Versus Prior Period
The filing reports significant changes to the terms of the original promissory note and earnout agreement:
- Debt Restructuring: The original note required $200,000 monthly installments from May through November 2024 with a $600,000 balloon payment. The amendment reduces the 2024 monthly obligation to $75,000 but increases the obligation for the first half of 2025 to $212,500.
- Earnout Redefinition: The earnout criteria were revised to a specific net income target of $721,034.50 across three quarters (Q2-Q4 2024), with the payout timing shifted to the first half of 2025.
Guidance, Outlook, and Risks
Management Commentary: The filing focuses on the execution of the amendment to facilitate the acquisition financing. No forward-looking revenue or earnings guidance for iQSTEL Inc. as a whole is provided in this text.
Risks and Contingencies:
- Performance Risk: The $1,000,000 earnout payment is contingent upon QXTEL LIMITED achieving specific net income targets in the second half of 2024.
- Liquidity Obligation: The company faces increased monthly debt service obligations starting in early 2025 ($212,500 plus interest).
Important Facts for Investor Verification
- Verify the current cash position of iQSTEL Inc. to ensure it can meet the revised monthly debt service of $75,000 in 2024 and $212,500 in 2025.
- Monitor QXTEL LIMITED's quarterly net income reports for Q2, Q3, and Q4 2024 to assess the likelihood of the $1,000,000 earnout payment becoming due.
- Review the full text of the "Second Amendment to Share Purchase Agreement" (Exhibit 2.1) for interest rate details and default provisions not explicitly stated in the summary.
- Confirm the status of the $200,000 principal paydown mentioned in the filing.