UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year endedJune 30, 2017
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission file number:333-183870
| 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. | |
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Nevada | 45-2808620 | |
(State or other jurisdiction of incorporation or organization) |
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Registrant’s telephone number: (954) 951-8191
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Securities registered pursuant to Section 12(b) of the Act:
Securities registered under Section 12(b) of the Exchange Act: | ||
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| none | not applicable | |
Securities registered under Section 12(g) of the Exchange | ||
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Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
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
Act. Yes [X] No [ ]No [X]
Indicate by check markcheckmark whether the registrant: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 lastpast 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-KS-T (§229.405 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or emerging growth company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
| ☐ 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.[ ]
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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]
TheState the aggregate market value of Common Stockthe voting and non-voting common equity held by non-affiliates ofcomputed by reference to the Registrant on June 30, 2017price at which the common equity was $308,937.10 based on a $0.0007last 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.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:
628,420,498date. common shares as of October 11, 2017.April 8, 2022.
TABLE OF CONTENTS
DOCUMENTS INCORPORATED BY REFERENCE
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| Item 16. | Form 10-K Summary | 26 |
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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
This annual report contains forward-looking statements.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 statements relate to future events orservices 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 future financial performance. In some cases, you can identify forward-looking statementswebsites is not incorporated by terminologyreference into this Annual Report, and such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our performance or achievementsinformation should not be considered to be materially different from any future results, levelspart of activity, performance or achievements expressed or implied by these forward-looking statements.this Annual Report.
Although we believe thatHistory
iQSTEL, formerly known as PureSnax International, Inc., was incorporated under the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intendState of Nevada on June 24, 2011. PureSnax was previously a wellness brand focused on bringing healthy snacks and foods to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.
As used in this annual report, the terms “PSI”, “we”, “us”, “our” and “our company”, mean Pure Snax International, Inc.
Our Current Business
consumers. On March 8, 2017, the Company hasPureSnax exited theira previous License Agreement with thea Canadian Licensor and will no longer represent that brand. The Company intendssnack food Licensor. From March of 2017 until its acquisition of Etelix.com USA, LLC, PureSnax was working to develop its own brand and develop its own products for manufacture, distribution, sales and marketing of various products within the health foods and snacks industry.
industry and to pursue related business opportunities. PureSnax International is a wellness brand focusedacquired Etelix.com USA, LLC on bringingJune 25, 2018. The company left the healthy snacks and foods business to consumers. PSI offersfocus on the Telecommunications Business.
In August 30, 2018, PureSnax changed its name to “iQSTEL Inc.” and received a wide assortment of sugar free, vegan, peanut free, Kosher, low fat, low sodium and Non GMO certified products. With new nutritional standards being rolled out through schools in the United States, we believe we are poised to capitalize on these regulations by offering good for you, functional foods and snacks that meet these new regulatory standards. Product categories include marshmallow squares (made without Gelatin and that are vegan), protein bars, mints, gum and various condimentsCUSIP number: 46265G107, as well as offering Xylitol, a natural, diabetic friendly, sweetener.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.
We intend distribute delicious tasting, very healthy snack foods meetingThe transformative process is an ongoing effort. However, in the highestlast year the Company achieved the restructuring of standardsits revenue from a 100% VoIP business to one where currently VoIP represents half of overall Company revenue, while SMS and compliancevalue-added SMS services account for the US consumersother half. SMS and value-added SMS is a much higher gross profit business; thus the Company’s bottom line has increased in tandem.
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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 planscommercial 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 evolve into an international audience. With a socially responsible mandate supported by education and driven by integrity and sincerity, PSI will provide people with healthier snack and food choices by utilizing wholesome, natural, high quality ingredients that promote healthier lifestyles. We have chosen to specializethe most important players in the development, sourcing, brandingindustry, 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 distributionWireless 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 high quality, healthy food and snack products. It is our vision to brand PureSnax International as oneEtelix was in 2013, when the company become part of a consortium of major carriers for the upgrade of the trusted namesMaya-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 healthy foodindustry. 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 snack industry.African traffic goes through establishing a strong presence in Europe.
With major illnesses, such as diabetes, obesity, cancer,The acquisition of Swisslink strengthened the Company’s presence in Europe putting us in a very competitive position to capture traffic to Asian and heart disease onAfrican countries; however, it will also give us the rise, people are looking for waysopportunity to minimize the risks in developing these diseases. People are starting to read and understand labels looking for healthier choices. We believe that the demand for healthier products is driving a fundamental changecompete in the food and snack markets. This demand will provide enormous opportunities for PureSnax International to position itself in the healthy food and snack industry.European traffic, where we currently have a low participation.
Our goalQGlobal SMS LLC is to utilize education, integrity and honesty to earn the public’s trust and become that trusted brand that provides healthy food and snack products to the growing percentagea 100% owned subsidiary of the population wanting to make healthier life choices.
We intend to become pioneersiQSTEL Inc. QGlobal SMS is a USA based company founded in a dynamic and growing segment of the industry where future demand will be and it means addressing the new public awareness of healthier food and snack products. The snack products developed must not only meet healthy product guidelines but also taste good. Our Marshmallow Squares are sugar-free, Gluten-free, vegan, contains very little salt, Gelatin Free, kosher, nut free and taste great! We have developed and are constantly continuing to work on other recipes for healthier products that meet the highest standards of quality.
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Government Regulation
Our business operations are subject to several2020 specialized in international and domestic laws including labor and employment laws, laws governing advertising and promotions, privacy laws, safety regulations, import/export restrictions, consumer protection regulations that govern product standards and labeling, and several other regulations. We believe that we are currently in material compliance with all such applicable laws.SMS termination.
We believe that the current products portfolio and any potential products will fall under the U.S. Food and Drug Administration (FDA) regulatory umbrella. The FDA is charged with protecting consumers against impure, unsafe, and fraudulently labeled products. FDA, through its Center for Food Safety and Applied Nutrition (CFSAN), regulates foods other than the meat, poultry, and egg products regulated by FSIS. FDA is also responsible for the safety of drugs, medical devices, biologics, animal feed and drugs, cosmetics, and radiation emitting devices.
We are currently not aware of any new legislation or regulation that may or may not apply to current and future products within our brand portfolio. However, in a constantly evolving global business environment we will rely on its management teams experience and advise from legal counsel.
Our e-commerce website and online content are subject to government regulation of the Internet in many areas, including user privacy, telecommunications, data protection, and commerce. The application of these laws and regulations to our business is often unclear and sometimes may conflict. It may take years to determine whether and how existing laws such as those governing intellectual property, privacy, advertising, etc. apply to the Internet. Nonetheless, laws and regulations directly applicable to Internet communications, commerce and advertising are becoming more prevalent. Due to the increasing popularity and use of the Internet, it is possible that laws and regulations may be adopted covering issues such as user privacy, content, quality of products and much more. Further, the growth and development of the market for e-commerce may prompt calls for more stringent consumer protection laws, which may impose additional burdens on companies conducting business online. Compliance with these regulations may involve significant costs or require changes in business practices that result in reduced revenue. Noncompliance could result in penalties being imposed on us or orders that we stop the alleged noncompliant activity. We believe that we are currently in material compliance with all such applicable laws.
Products and Services
We intend to sell a number of products an initial focus on the following.
Xylitol
100% All Natural Xylitol Sweetener. XylitolIoT Labs LLC is a natural pentitol sugar alcohol. It does not contain the glucose based carbohydrate sweetener found in sucrose, corn sugars, fructose, etc. More correctly, Xylitol is classified as a polyalcohol, which can be converted into a natural sugar. Due to the basic chemistry51% owned subsidiary of Xylitol one perceives a pleasant and fresh sensation rather than the traditional burn of sugar. Xylan is the raw material source of Xylitol, which is found in some tree bark and in the hulls of several nuts and grains. Many fruits and vegetables are another source of Xylan making it a natural sweetener that works well with the body.
Xylitol Mints
Freshen your mouth with a burst of peppermint or watermelon! Contains approximately 75 pieces per container.
Marshmallow Squares
These squares are a healthy snack, which is also considered to be a functional food due to the ingredients contained in our product. They are sugar free, vegan, nut and peanut free, gluten free, gelatin free and kosher.
Xylitol Jams
We take fresh juicy fruits and add just the right amount of fresh ingredients to produce one of the healthiest and very good tasting jams sweetened with Xylitol.
Xylitol Ketchup and Sauces
Our ketchup is low carb and healthy. It is made with the great tasting healthy natural sweetener, Xylitol, and organic tomato paste. Our unique barbeque sauces add a hearty flavour to red meats, chicken and fish. Unlike most barbeque sauces that are filled with corn syrups and sugars, ours are sugar-free and gluten-free.
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Consumer Direct Segment
This will be carried out primarily via online Internet marketing that will include a combination of Websites (an e-commerce site: www.puresnaxworldwide.com, numerous targeted landing page sites, and “squeeze page” sites), email campaigns, banner advertising, affiliate programs, search engine optimization, blogs, forums, newsletters / e-zines, resource information areas, pay per click campaigns, and follow up / thank you message add-on sales offers. We also intend to explore several additional marketing venues such as direct mail, catalogue sales, consumer expos (home shows, health shows, food shows, fitness, anti-aging, etc.), print media / advertorials, infomercials (TV and radio), and at various festivals, product placements, talk shows, etc.
Our target markets include the general public, obese/weight conscious persons, diabetics and those with insulin resistance, kids (especially those who are overweight/obese, diabetic, insulin resistant, challenged by tooth decay, and all kids with health-conscious parents), health and/or fitness conscious people, the elderly, especially those with weight and/or blood sugar problems.
Market Overview
We believe thereiQSTEL Inc. IoT Labs is a convergence of factors that make the Health Snack food industry one of the best investments over the coming decades.
Aging of the Baby Boomers population
Major advancesSMS service provider based in nutrition-related health research and understanding
A dramatic rise in the incidence of obesity (overweight), and a better understanding of the associated health risks and ramifications
Dramatically rising health care costs
A growing realisation of the limitations of modern - high-tech medical approaches when dealing with chronic, unhealthy, “Life-Style Induced” diseases
The general population’s willingness to spend more on quality foods & nutrients that provide functional health benefits
Worldwide
Our co-packers currently ship worldwide under various Private Label Programs. Part of our plan is to work in concert with our co-packers and introduce our product lines into those Private Label programs and expand upon their existing distribution channel.
Size of Market – Marshmallow Squares
The marshmallow square market is estimated to be a £39 million brand eaten by 3.5 million UK households. In Canada it is a $70 million market, represented by Kellogg’s for $48 million, $10 million in Private Label, $5 million for Vachon and Saputo and $2 million for Little Debbie and regional players. The US market is approximately $1 Billion.
Wholesale Segment
The Company’s objective is to build an ongoing revenue stream through the distribution of our brands and Private Label programs such as various store brands. Our strategy is to generate strong profit growth in mass retail including the drug store channels as well as vending, school, health food, boutique and mass markets.
Core Services Segment
The Core Services segment will provide product design, distribution, marketing, e-commerce and other overhead resources to the Wholesale and Consumer Direct segments.
Design and Product Development
Mr. Gosselin (CEO), is our principal designer and leads the vision of the Company. Products are currently in conceptualization phase, and the company intends to begin research and development at a later date. The development of our products from concept through manufacturing is engineered to be healthy also provide a great taste profile.
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Sources and Availability of Raw Materials
We outsource all of our production and fulfillment in order to maintain management’s focus on new product and market development. However, we believe our commitment to the quality and consistency of our products is reflected in the selection of all aspects of production. All our products are processed by manufacturers with which we have long standing relationships. To our knowledge, each follows the strictest Good Manufacturing Practices (GMPs) and quality controls to ensure purity in all of our products. We use facilities that meet or exceed our standards and we source some of our raw materials directly from a variety of sources.
Quality Control
Our quality control program is designed to ensure that products meet our high quality standards. Random inspections of our products occur when our products are received in our distribution center. We believe that our quality control policy is integral in maintaining the quality, consistency and reputation of our products.
Distribution
We intend to expand globally through new and established distribution channels including wholesale, retail, e-commerce, and licensing agreements to further expand global brand exposure and new opportunities to increase sales revenue.
Marketing
This will be carried out via a combination of conventional and innovative approaches ranging from trade show attendance and exhibition to aggressive online affiliate marketing to extensive networking, with follow up direct contact via our sales and marketing team.
Our target markets for Business to Business include health care providers (including massage therapists, personal trainers, dieticians, aestheticians), physicians (including MD/DO’s, DC’s, DDS’s, OMD/Acupuncturists), restaurants, school (also sports teams and religious groups) fundraising programs, hotels, casinos, cruise ships, health food and nutritional stores, specialty retailers who carry related products, beauty salons, spas (day and medical), health clubs, nursing homes, and Internet sites that sell related products.
PureSnax International intends to leverage its relationships in the industry to develop in store promotional displays strategically located in retail stores to raise awareness about the availability of our products as well as perform on-site demos to educate the public on the benefits of eating healthier snack options.
Our marketing will consist of a variety of channels including: national and international print advertising, strategic outdoor advertising, in-store advertising, digital advertising, guerilla marketing, involvement in the community and social media. This mix of media and channels is designed to support the brand's growth across diverse consumer groups and markets.
Business Strategy
The strategy is to gain adoption in markets and venues where traditionally unhealthy food and snack companies are unable to access. Through education and awareness via participation in diabetes events, health trade shows, food shows, sweet and snacks shows, and specialized hospitals we are gaining acceptance and enlightening many people to the fact that healthy eating and snacking exists, without having to sacrifice taste.
We anticipate that a majority of our resources will be positioned towards marketing and promotions up to the first year of roll out into the United States and after that time, the fruits of our efforts will convert into profitable sales. The process is to work in concert with strategic distributors, wholesalers and retailers along with essential store visits and demo programs to initiate purchase orders. In the example of Xylitol, the lack of after taste along with it being a functional food, the conversion is relatively easy even with a premium price.
We have also identified strategic acquisitions in the area of manufacturing and product development, which could compliment our product line to supplement and support our plans for explosive revenue.
Over the next five years, we anticipate that our growth strategy will focus on the following five key areas:
Increase Global Wholesale Sales
Strong support for our products has been identified in many countries overseas. We believe this represents an expanded opportunity based on the Current Exchange rates between the U.S. Dollar against the Sterling Pound and the Euro. We believe there is a greater opportunity to achieve larger profits. PureSnax International, Inc., has recognized that the lowest hanging fruit is mass retail with a “under the radar” approach.
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Invest in Online Development and E-commerce Activity
We currently offer a globally accessible transactional website, www.puresnax.com, which allows anyone with Internet access to purchase our products online. We are currently working with a website developer to make key operational advances to our website such as development of user-friendly operations and layout improvements. Further, we intend to present a greater number of products on our website and expand into further marketing techniques such as affiliate marketing and advertisement opportunities.
Vending Machines and Schools
We believe PureSnax International, Inc is able to compete with the bigger snack companies by participating in markets they have difficulty quickly accessing. They have a limited number of products that are able to meet the healthy guidelines established in the United States. According to kidsfoodtrends.com, we believe there are some interesting trends that point to the enormous opportunities for marketers of Healthy Snack Foods:
Health is a top-of-mind parental concern and is even gaining consciousness among kids
Consumers of parenting age are trying to eat healthier and this has a trickle down effect to their kids
Parents will increasingly opt for natural and fresh food variants for their kids
Parents are increasingly scrutinizing product packaging to check for health information
Kids’ confectionery, ice cream and savoury snacks consumption exceeds the population average
U.S. children consumed notably more confectionery per capita than the population average in 2005
Diversify and Expand our Product Portfolio
We will continue to expand and strengthen our current product portfolio while exploring opportunities to diversify into new product categories within the health foods and snacks segment. We believe that diversification engages new consumer interest and enables the brand to benefit from a proactive and developing brand image while stimulating revenue from increased buyer interest and awareness of the brand. Furthermore, we anticipate that expansion of our product line will enable wholesale activity to flourish as well as increase online sales.
Intellectual PropertyAustin, TX.
The Company has exited their License Agreemententered 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 Canadian Licensor asApplications 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 March 8, 2017these two SMS providers, we quickly began to cross-sell services to our existing client base.
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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 will no longer represent that brand.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 Companycompany 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 its own intellectual propertya solution that will enable users and file trademark applications.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.
CompetitionRegulations
The major playersTelecommunications services are subject to extensive government regulation in the snack food industryUnited 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 manufactureoperate profitably, and to develop products contain sugar or artificial sweeteners as well as being high in fat.and grow our business. We believe we are pioneerscannot be certain of the stability of the contribution factors for the Other Funds. Significant increases in the snack industrycontribution factor for the Other Funds in general and intend to strengthenthe Telecommunications Relay Service Fund in particular can impact our position through integrity and creating a high barrier to entryprofitability. Whether these contribution factors will be stable in terms of product design. PureSnax International will continue to expand and build product lines through different brands and private label agreements as well as continue to develop proprietary products. We do not have patents on our proprietary technology (our recipes, nor our processes) and we choose to protect this methodology by using trade secrets sothe future is unknown, but it is possible that they are not easily discovered.
However, there can be no assurance that even if we do these things we will be ablesubject to compete effectively with the other companies in our industry.significant increases.
Our competitive strength will depend on our ability to:
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• anticipate and respond to changing consumer demands in a timely manner;
• maintain and increase favorable brand recognition;
• develop and produce high quality products that appeal to consumers;
• appropriately price our products;
• maintain the high quality of our products;
• ensure product availability;
• expand our product portfolio;
• add members to our team who possess the skills, know-how and desire to help us succeed;
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Reports to Security Holders
We are required to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission and our filings are available to the public over the internet at the Securities and Exchange Commission’s website at http://www.sec.gov. The public may read and copy any materials filed by us with the Securities and Exchange Commission at the Securities and Exchange Commission’s Public Reference Room at 100 F Street N.E. Washington D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-732-0330. The Securities and Exchange Commission also maintains an Internet site that contains reports, proxy and formation statements, and other information regarding issuers that file electronically with the Securities and Exchange Commission, at http://www.sec.gov.
Employees
As of June 30, 2017, we did not have any full-time or part-time employees. Our two directors and officers work as part-time consultants and devote approximately 20 hours per week to our business. We also retain consultants for the design and construction of our planned website. In the next 12 months, we intend to retain marketing and advertising consultants on a commissioned basis to assist with growing the membership of our planned website. If our financial position permits, as the business needs dictates, we may enlist certain individuals on a full or part-time salaried basis to assist with marketing, advertising, administration and data management for our business. The functions of our website will be primarily automated, and we intend to structure our operations to function with as few full-timeiQSTEL, including all subsidiaries, has 49 employees as possible by outsourcing most job functions. We do not expect our staffing requirements to exceed 24 people within the first three years of operations.December 31, 2021.
Our team will rely on industry specialists with varied skills and backgrounds who engage in overlapping roles and responsibilities for different segments of our business. In the next five years, we aim to increase the number of direct in-house employees to five people. Further, we intend to allocate a specific area(s) of our business strategy to a specific employee or employees and will focus on developing that employee’s skills in that area of responsibility. Such areas of responsibility will include sales, website and social media, design and production, marketing, public relations, administration, finance and product development. The expansion of our team will allow for focused development of all areas of our business.
As a “smaller reporting company”, we are not requiredRisks Relating to provide the information required by this Item.Business and Financial Condition
Item 1B. Unresolved Staff CommentsOur business, operating results or financial condition could be materially adversely affected by any of the following risks.
None.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.
| 6 |
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.
| 7 |
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.
| 8 |
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
We have maintained executive offices at 1000 Woodbridge Center Drive, Suite 213, Woodbridge, NJ 07095. ThereThe disclosures concerning our properties are no expenses currently associated with this space.We believe that our office space is adequate for our current needs, but growth potential may require a facility due to anticipated addition of personnel. We do not have any policies regarding investmentscontained in real estate, securities or other forms of property. We do not own any real property.Item 1 Business above and incorporated herein by reference.
Item 3. Legal Proceedings
We know ofhave no material, existing or pendingcurrent legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.proceedings.
Item 4. Mine Safety Disclosures
Not applicable.
7
| 9 |
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 currentlyquoted 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 OTC Bulletin Board. Our commonNASDAQ 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 has been quotedrules 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 OTC Bulletin Board since September 23, 2015 underdisclosure document or in the symbol “PSNX”.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.
OTC Bulletin Board securities areThe 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.
| 10 |
In addition, the penny stock rules require that prior to a transaction in a penny stock not listedotherwise 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 traded onreceive the floorpurchaser's written acknowledgment of an organized national or regional stock exchange. Instead, OTC Bulletin Board securities transactions are conducted through a telephone and computer network connecting dealers. OTC Bulletin Board issuers are traditionally smaller companies that do not meet the financial and other listing requirementsreceipt of a national or regional stock exchange.risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
Our common shares are issued in registered form. Pacific Stock Transfer, 6725 Via Austi Pkwy, Suite 300, Las Vegas, NV 89119, Phone: (702) 361-3033, isThese disclosure requirements may have the registrar and transfer agenteffect of reducing the trading activity for our common shares.stock. Therefore, stockholders may have difficulty selling our securities.
Holders of Our Common Stock
As of June 30, 2017, there were 20 holders of record of our common stock. As of such date, 441,338,708 April 8, 2022, we had 149,357,358 shares of our common stock were issued and outstanding.outstanding, held by approximately 65 stockholders of record at our transfer agent, with additional stockholders holding our shares in street name.
Dividends
Dividend Policy
To date, weWe currently intend to retain future earnings for the operation of our business. We have notnever declared or paid cash dividends on shares of our common stock, and we do not expect to declare or payanticipate paying any cash dividends on shares of our common stock in the foreseeable future. The payment of
In the event that a dividend is declared, common stockholders on the record date are entitled to share ratably in any dividends will depend upon our future earnings, if any, our financial condition, and other factors deemed relevantthat may be declared from time to time on the common stock by our board of directors.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 Plan InformationPlans
We do not have anyan equity compensation plans.plan.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
We did not sell any equity securities which were not registered under the Securities Act duringDuring the year ended June 30, 2017.
Purchase of Equity Securities byDecember 31, 2021, the Issuer and Affiliated Purchasers
We did not purchase any of ourCompany 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 otherRule 506 promulgated thereunder. The holders represented their intention to acquire the securities duringfor 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 fiscal year ended June 30, 2017.transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.
| 11 |
Item 6. Selected Financial Data
We are a smallerNot required under Regulation S-K for “smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.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 following discussion should be read in conjunction withcontinued growth of our audited financial statements andrevenue is the related notes that appear elsewhere in this annual report. The discussionsresult of results, causes and trends should not be construed to imply any conclusion that these results or trends will necessarily continue into the future.
Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
As of June 30, 2017, we had limited assets which consisted of cash and cash equivalents of $15,701. In order to fund the development of our business strategy, which includes the strengthening of our commercial and working capital needsoperating activities and new acquisitions.
If net revenues continue growing at a similar rate for the next 12twelve months, we intend to secure additional funding throughbelieve that the salecompany will reach a total consolidated revenue of common stock, related and non-related party loans, or funding providedapproximately $90 million by strategic partners. To further implement our plan of operations, we anticipate the costs to develop our products on a commercial scale could very well be in excess of $100,000. We will need at least an additional $50,000 to $100,000 to purchase raw material for commercial production, professional labeling and packaging, and introductory marketing and advertising programs that will educate as well as connect with our targeted customers who seek healthy snacks and food alternatives. If we are not successful in raising additional financing, we will not be able to further our business plan towards commercial production.
8
Results of Operations for our Years Ended June 30, 2017 and 2016December 31, 2022.
Cost of Revenue
Our net losstotal 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 June 30, 2017December 31, 2021 and 2016 are summarized as follows: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 | |||||||
|
| For the Year ended June 30, 2017 |
| For the Year Ended June 30, 2016 |
Revenue | $ | - | $ | - |
Cost of goods sold |
| - |
| - |
Gross margin |
| - |
| - |
|
|
|
|
|
Expenses: |
|
|
|
|
Professional fees and consulting expenses |
| 86,253 |
| 106,444 |
Marketing expenses |
| 190 |
| 23,322 |
Website and hosting |
| 586 |
| 5,079 |
Loss on inventory obsolescence |
| 12,187 |
| - |
Other expenses |
| 15,098 |
| 40,028 |
Total expenses |
| 114,314 |
| 174,873 |
|
|
|
|
|
Other Income/(Expense): |
|
|
|
|
Interest expense |
| (120,346) |
| (25,993) |
Derivative expense |
| (43,234) |
| (13,401) |
Change in derivative liability |
| 14,203 |
| (30,780) |
Total other income/(expense) |
| (149,377) |
| (70,174) |
|
|
|
|
|
Net loss before income tax |
| (263,691) |
| (245,047) |
Provision for income tax |
| - |
| - |
Net loss | $ | (263,691) | $ | (245,047) |
|
|
|
|
|
Basic and diluted income/(loss) per share | $ | - | $ | - |
|
|
|
|
|
Weighted average common shares |
| 379,104,082 |
| 150,733,517 |
| 12 |
“See accompanying notes
Our cost of revenues consists of direct charges from vendors that the Company incurs to the financial statements.”
Revenuedeliver services to its customers. These costs primarily consist of usage charges for calls and SMS terminated in vendor’s network.
The Companybehavior 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 not earned any revenue during fiscal years ended June 30, 2017its corresponding termination cost.
Gross Margin
Our gross margin, which is simply the difference between our revenues and 2016.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
Consulting and other expense
Consulting and otherOperating expenses were $101,351 and 146,472, respectively, for the fiscal years ended June 30, 2017 and June 30, 2016. For the year ended June 30, 2017, this consisted primarily of consulting expense of $2,187, audit, legal and accounting,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 | |||||||
| 13 |
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 costs associated with beingprofessional 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 publicly reportingSocial 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 of $63,800, andis under control.
Other Expenses
We had other expenses of $35,364, compared to$880,085 for the year ended June 30, 2016 where we incurred $2,500 in consulting expenses, audit and accounting, and other costs associatedDecember 31, 2021, as compared with being a publicly reporting company of $103,944, and other expenses of $40,028.
Sample/marketing expense
Sample and marketing related expenses were $190 and $23,322, respectively,$3,487,315 for the fiscal years ended June 30, 2017 and June 30, 2016. Sample and marketing expenses are costs incurred in producing sample products and the placement of samples with potential marketing partners, customers, distributors and retail establishments. Sample product is recorded at cost and removed from inventory.
9
Interest Expense
During the fiscal year ended June 30, 2017, we recognizedDecember 31, 2020. The reduction in Other Expenses in 2021 compared to 2020 is due to the significant reduction in the interest expense of $120,346,which consisted of $7,435 from convertible notes payable and $112,911 from amortization of debt discount. Interest expense$3,509,323 for the fiscal year ended June 30, 2016 was $25,993. which consisted of $3,008 from convertible notes payable and $22,985 from amortization of debt discount
Derivative expenses were $43,234 and $13,401, respectively,December 31, 2020 to $675,481 for the fiscal yearsyear ended June 30, 2017 and 2016. In 2017, these expenses consisted of OID expenses included in the three convertible notes agreement signed by the Company.
Other income/(expense)
Not applicableDecember 31, 2021.
Net Loss
We recognizedfinished the year ended December 31, 2021 with a net loss of $263,691 for the fiscal year ended June 30, 2017$3,864,001 as compared to neta loss of $245,047$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 fiscal year ended June 30, 2016. Net incomeDecember 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 | ||||
| 14 |
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 fiscal years ended June 30, 2017 and June 30, 2016, respectively, included various costs associated with product development which are not capitalized. The company has been preparing for production, which required investment in packaging and raw materials. The company also incurred increased accounting, auditing and legal expenses through the period.years.
Liquidity and Financial Condition
As of June 30, 2017, and 2016, we had $15,701 and $23,790 in cash and cash equivalents, respectively. As of June 30, 2017, we had a working capital deficit of $208,979 and an accumulated deficit of $573,368. Our cash position is not significant enough to support our daily operations. Management believes that the actions presently being taken to further refine its business plan and produce inventory to generate revenues provide the opportunityInvesting activities used $511,348 for the Company to continue as a going concern. While we believe in the viability of our strategy to generate sufficient revenues and in our ability to raise additional funds, there can be no assurances that we will accomplish either. Our ability to continue as a going concern is dependent upon our ability to achieve profitable operations or obtain adequate financing.
Cash Flows
Operating Activities
Net cash used in operating activities for the fiscal year ended June 30, 2017 was $69,944December 31, 2021, as compared to net cash used in operating activities of $145,476 for the fiscal year ended June 30, 2016.
Investing Activities
Net cashwith $91,211 used in investing activities for the fiscal yearsyear ended June 30, 2017December 31, 2020. Our negative investing cash flow for 2021 is largely due to the acquisition of property, equipment, and 2016 was $0.intangible assets of $230,900 and an increase of loans to related parties of $220,674.
Financing Activities
Net cashactivities provided by financing activities for the fiscal year ended June 30, 2017 was $61,855. Cash provided by financing activities for the fiscal year ended June 30, 2016 was $169,266. The company came out of shell status during the period and started trading on OTCPINK under the symbol PSNX which allowed the company generate investments into the company.
Plan of Operation
Contractual Obligations
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Going Concern
The accompanying financial statements have been prepared assuming that our company will continue as a going concern. As shown in the accompanying financial statements, our company incurred losses of $263,691$6,250,980 for the year ended June 30, 2017 and has produced no revenuesDecember 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 operations. These factors raise substantial doubt aboutthe subscription of new common stock under our company’s ability to continue as a going concern.Regulation A offering.
10
TheBased upon our current financial statementscondition, we do not includehave 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 adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that our company cannot continue as a going concern. Management anticipates that itminimum amount will be ablesold. We also plan to raiseseek additional working capital through the issuance of stock and through additional loans from investors.
The ability of our companyfinancing in a private equity offering to continue as a going concern is dependent upon our company’s ability to attain a satisfactory level of profitability and obtain suitable and adequate financing.secure funding for operations. There can be no assurance that management’swe will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be successful.impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.
Off-Balance Sheet ArrangementsInflation
We have no significant off-balance sheet arrangementsAlthough our operations are influenced by general economic conditions, we do not believe that have or are reasonably likely to haveinflation had a current or futurematerial effect on our financial condition, changes in financial condition, revenues or expenses, results of operations liquidity, capital expenditures or capital resources that are material to stockholders.during the twelve-month period ended December 31, 2021.
Critical Accounting Policies
The discussion and analysisA “critical accounting policy” is one which is both important to the portrayal of oura company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of operations is based upon the accompanying financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America and are expressed in United States Dollars. Preparing financial statements requires managementneed to make estimates and assumptionsabout the effect of matters that affectare inherently uncertain.
Our accounting policies are discussed in detail in the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects offootnotes to our financial statements isincluded in this Annual Report on Form 10-K for the year ended December 31, 2021; however, we consider our critical accounting policies to an understandingbe those related to allowance for doubtful accounts, valuation of our financial statements.
Basis of Presentation
These financial statements of our company have been prepared in accordance with generally accepted accounting principlesassets, significant estimates in the United Statesvaluation of convertible debt and are expressed in United States dollars. Our company’s fiscal year end is June 30.
Use of Estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to makeincome taxes. Management bases its 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 and the reported amounts of revenues and expenses during the reporting period. Our company regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances. Our company bases our estimates and assumptionsjudgments on current facts, historical experience and various other factors that it believesare believed to be reasonable under the circumstances, thecircumstances. Actual results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by our company may differ materially and adversely from our company’s estimates. Tothese estimates under different assumptions or conditions. See the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Cash and Cash Equivalents
Our Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.
Consolidated Financial Instruments
Our Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, and related party payables, notes payable. The fair valueStatements in this Annual Report for a complete discussion of our company’s cash equivalents is determined based on “Level 1” inputs, which consistsignificant accounting policies.
Off Balance Sheet Arrangements
As of quoted prices in active markets for identical assets. The carrying value of accounts payable and accrued liabilities and related party payables approximates their fair value because of the short maturity of these instruments. Unless otherwise noted, it is management’s opinion our company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
11
The company evaluates all of its agreements to determine if such instruments have 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 consolidated statements of operations. For stock-base derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option pricing model to value the derivative instrument at inception and on subsequent valuation dates. The classification of derivative instrument, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. ThereDecember 31, 2021, there were no derivative instruments as of June 30, 2016. As of June 30, 2017, the Company’s derivative financial instruments were three convertible debt notes and one of then includes convertible warrant that are derivative due to the “reset” and “dilutive issuance” clause in the note relating to the conversion price from dilute share issuance. See Note 7.off-balance sheet arrangements.
Earnings (Loss) Per Share
Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At June 30, 2017, all of our potentially dilutive securities outstanding are anti-dilutive and accordingly, basic loss and diluted loss per share are the same.
Income Taxes
Our Company accounts for income taxes using the asset and liability method which provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. Our company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
RecentRecently Issued Accounting Pronouncements
Jumpstart Our Business Startups Act (“JOBS Act”) Transition Accounting: pursuant to Section 107(b) of the JOBS Act, we have elected to use the extended transition period for complying with new or revised accounting standards for an “emerging growth company”. This election will permit us to delayWe do not expect the adoption of newthese or revised accounting standards that will have difference effective dates for public and private companies until such time as those standards apply to private companies. Consequently, our financial statements may not be comparable to companies that comply with public company effective dates.
Our Company has implemented all newother recently issued accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that mightto have a materialsignificant impact on itsour results of operation, financial position or results of operations.cash flow.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
| 15 |
Item 8. Financial Statements and Supplementary Data
PureSnax International, Inc.Index to Financial Statements Required by Article 8 of Regulation S-X:
June 30, 2017
Audited Financial Statements: |
| |
F-1 | Report of Independent Registered Public Accounting Firm |
|
| F-2 | Consolidated Balance Sheets as of December 31, 2021 and 2020; | |
|
| |
Consolidated Statements of Operations |
| |
| F-4 | Consolidated Statement of Stockholders’ Equity for the years ended December 31, 2021 and 2020; | |
|
| |
Consolidated Statements of Cash Flows |
| |
| F-6 | ||
Notes to |
| |
12
Boyle CPA, LLC
Certified
| 16 |
Report of Independent Registered Public Accountant & ConsultantAccounting Firm
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TheTo the Stockholders and Board of Directors andiQSTEL, Inc.
Stockholders of PureSnax International, Inc.Coral Gables, FL
IOpinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of PureSnax International,iQSTEL, Inc. (the “Company”) as of June 30, 2017December 31, 2021 and 2016, and2020, the related consolidated statements of operations, stockholders’ deficit,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 two-year period ended June 30, 2017. 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. MyOur responsibility is to express an opinion on thesethe Company’s consolidated financial statements based on myour audits.
I conducted my audits in accordance We are a public accounting firm registered with standards of 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 Iwe plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not requiredmisstatement, whether due to have, nor was I engaged to perform, an audit of its internal control over financial reporting. Myerror or fraud.
Our audits included considerationperforming procedures to assess the risks of internal control overmaterial misstatement of the consolidated financial reporting as a basis for designing auditstatements, whether due to error or fraud, and performing procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, I express no such opinion. An audit includesrespond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statement presentation. Istatements. We believe that myour audits provide a reasonable basis for myour opinion.
In my opinion,
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements referredthat were communicated or required to above present fairly,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 all material respects,any way our opinion on the consolidated financial positionstatements, 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 PureSnax International, Inc. ascontrol of June 30, 2017promised 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 2016, andinclude the resultspattern of its operations and its cash flowsdelivery (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 yearsCritical Audit Matter was Addressed in the two-year period ended June 30, 2017 in conformity with accounting principles generally accepted inAudit
Our principal audit procedures related to the United States of America.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 discusseddescribed further in Note 23 to the consolidated financial statements, the Company’s continuingCompany has suffered recurring losses from operations and does not have an established source of revenues sufficient to cover its operating lossescosts. 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 aboutas 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. Management’s plans are also described in Note 2. The financial statements do not include adjustments that might result from the outcome of this uncertainty.
/s/ Boyle CPA, LLC
Boyle CPA, LLC
October 12, 2017
Bayville, NJ
F-1
PureSnax International, Inc.
Balance Sheets
(Expressed in US Dollars)
|
| June 30, 2017 |
| June 30, 2016 |
ASSETS |
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
Cash or cash equivalents | $ | 15,701 | $ | 23,790 |
Refund Receivable |
| 20,237 |
| - |
Allowance for doubtful accounts |
| (20,237) |
| - |
Accounts Receivable, net of allowance for doubtful accounts |
| - |
| - |
Prepaid Expenses |
| - |
| 3,834 |
Inventory |
| - |
| 9,197 |
Total Current Assets |
| 15,701 |
| 36,821 |
|
|
|
|
|
TOTAL ASSETS | $ | 15,701 | $ | 36,821 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
Accrued expenses | $ | 65,144 | $ | 46,579 |
Loans – related party |
| 25,921 |
| 19,066 |
Convertible notes payable, net |
| 35,574 |
| 32,490 |
Derivative liability |
| 98,041 |
| 112,243 |
TOTAL LIABILITIES |
| 224,680 |
| 210,378 |
|
|
|
|
|
STOCKHOLDERS’ DEFICIT: |
|
|
|
|
Preferred stock, $0.001 par value; 1,000,000 shares authorized; 3,187,500 and 1,000,000 shares issued and outstanding at June 30, 2017 and June 30, 2016, respectively |
| 3,188 |
| 1,000 |
Common stock, $0.001 par value; 1,000,000,000 shares authorized; 441,338,708 and 100,235,384 shares issued and outstanding at June 30, 2017 and June 30, 2016, respectively |
| 441,339 |
| 100,235 |
Additional paid in capital |
| (80,138) |
| 34,885 |
Accumulated deficit |
| (573,368) |
| (309,677) |
TOTAL STOCKHOLDERS’ DEFICIT |
| (208,979) |
| (173,557) |
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 15,701 | $ | 36,821 |
“See accompanying notes toHow the financial statements.”
F-2
PureSnax International, Inc.
Statements of Operations
(Expressed in US Dollars)
|
| For the Year ended June 30, 2017 |
| For the Year Ended June 30, 2016 |
|
|
|
|
|
Revenue | $ | - | $ | - |
Cost of goods sold |
| - |
| - |
Gross margin |
| - |
| - |
|
|
|
|
|
Expenses: |
|
|
|
|
Professional fees and consulting expenses |
| 86,253 |
| 106,444 |
Marketing expenses |
| 190 |
| 23,322 |
Website and hosting |
| 586 |
| 5,079 |
Loss on Inventory Obsolescence |
| 12,187 |
| - |
Other expenses |
| 15,098 |
| 40,028 |
Total expenses |
| 114,314 |
| 174,873 |
|
|
|
|
|
Other Income/(Expense): |
|
|
|
|
Interest expense |
| (120,346) |
| (25,993) |
Derivative expense |
| (43,234) |
| (13,401) |
Change in derivative liability |
| 14,203 |
| (30,780) |
Total other income/(expense) |
| (149,377) |
| (70,174) |
|
|
|
|
|
Net loss before income tax |
| (263,691) |
| (245,047) |
Provision for income tax |
| - |
| - |
Net loss | $ | (263,691) | $ | (245,047) |
|
|
|
|
|
Basic and diluted income/(loss) per share | $ | - | $ | - |
|
|
|
|
|
Weighted average common shares outstanding - basic and diluted |
| 379,104,082 |
| 150,733,517 |
“See accompanying notes to the financial statements.”
F-3
PureSnax International, Inc.
Statement of Changes in Stockholders’ Deficit
For the Years Ended June 30, 2017 and 2016
(Expressed in US Dollars)
|
|
|
|
| Additional Paid-in Capital Amount |
|
|
| Common Stock Shares | Preferred Stock Shares | Common Stock Amount | Preferred Stock Amount | Accumulated Deficit Amount |
| |
| Total | ||||||
|
|
|
|
|
|
|
|
Balance – June 30, 2015 | 400,000,000 | - | 400,000 | - | (345,313) | (64,630) | (9,943) |
|
|
|
|
|
|
|
|
Exchange of common stock for preferred shares | (300,000,000) | 1,000,000 | (300,000) | 1,000 | 299,000 | - | - |
Issuance of common stock for cash | 161,766 | - | 161 | - | 54,839 | - | 55,000 |
Cashless exercise of warrant | 73,798 | - | 74 | - | 26,359 | - | 26,433 |
Net loss for the year | - | - | - | - | - | (245,047) | (245,047) |
|
|
|
|
|
|
|
|
Balance – June 30, 2016 | 100,235,564 | 1,000,000 | 100,235 | 1,000 | 34,885 | (309,677) | (173,557) |
|
|
|
|
|
|
|
|
Issuance of preferred stock for services | - | 2,187,500 | - | 2,188 | - | - | 2,188 |
Cashless exercise of warrant | 171,987,000 | - | 171,988 | - | (125,043) | - | 46,945 |
Conversion of convertible debt | 169,116,144 | - | 169,116 | - | 10,020 | - | 179,136 |
Net loss for the year | - | - | - | - | - | (263,691) | (263,691) |
|
|
|
|
|
|
|
|
Balance – June 30, 2017 | 441,338,708 | 3,187,500 | 441,339 | 3,188 | (80,138) | (573,368) | (208,979) |
“See accompanying notes to the financial statements.”
F-4
PureSnax International, Inc.
Statements of Cash Flows
(Expressed in US Dollars)
|
| For the Year ended June 30, 2017 |
| For the Year ended June 30, 2016 |
CASH FLOW FROM OPERATING ACTIVITIES: |
|
|
|
|
Net (loss) | $ | (263,691) | $ | (245,047) |
Adjustments to reconcile net loss to cash (used in) operating activities: |
|
|
|
|
Amortization of debt discount |
| 112,911 |
| 22,985 |
Derivative expense |
| 43,234 |
| 44,181 |
Change in derivative liability |
| (14,203) |
| - |
Shares issued for services |
| 2,188 |
| - |
Changes in assets and liabilities |
|
|
|
|
(Increase)/decrease in accounts receivables, net |
| - |
| - |
(Increase)/decrease in prepaid |
| 3,834 |
| (3,834) |
(Increase)/decrease in inventory |
| 9,197 |
| (9,197) |
Increase/(decrease) in accrued expenses and accounts payable |
| 36,586 |
| 45,436 |
Net cash used in operating activities |
| (69,944) |
| (145,476) |
|
|
|
|
|
CASH FLOW FROM FINANCING ACTIVITIES: |
|
|
|
|
Proceed from issuance of common stock |
| - |
| 55,000 |
Repayment of short term borrowings |
| - |
| (7,000) |
Proceeds from loan – related parties |
| 6,855 |
| 17,266 |
Proceeds from loan – third party |
| 55,000 |
| 104,000 |
Net cash provided by financing activities |
| 61,855 |
| 169,266 |
|
|
|
|
|
CHANGE IN CASH |
| (8,089) |
| 23,790 |
CASH AT BEGINNING OF PERIOD |
| 23,790 |
| - |
CASH AT END OF PERIOD | $ | 15,701 | $ | 23,790 |
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW |
|
|
|
|
Cash paid for: |
|
|
|
|
Interest | $ | - | $ | - |
Income taxes | $ | - | $ | - |
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
Issuance(Cancellation) of Common Stock 20M and (300M) | $ | 20,000 | $ | (300,000) |
|
|
|
|
|
Issuance of Preferred Stock (2.1M) and (1M) | $ | 3,188 | $ | 1,000 |
F-5
PureSnax International, Inc.
Notes to Financial Statements
(Expressed in US Dollars)
1.Nature of Business and Continuance of Operations
PureSnax International, Inc. (the “Company”)Critical Audit Matter was incorporatedAddressed in the State of Nevada on June 24, 2011. The Company was initially in the business of developing, manufacturing, marketing and selling the E-Scentual Skin Care Collection, a skin care line combining science with nature to form what we believed to be an advanced beauty treatment using all natural ingredients. The Company has limited revenue to date and consequently its operations are subject to all risks inherent in the establishment of a new business enterprise. The Company has changed its name with the State of Nevada from B-Maven, Inc to PureSnax International, Inc., on July 29th, 2015. The Company has changed its business direction to focus on the manufacturing, distribution, sales and marketing of healthy snacks and foods products by developing their own brand and Intellectual property.Audit
2.Going Concern
These financial statements have been prepared on a going concern basis, which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. For the period from inception on June 24, 2011 through June 30, 2017, the Company has incurred accumulated losses totalling $573,368. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. These factors raise substantial doubt regardingWe determined the Company’s ability to continue as a going concern. These financial statements do not include any adjustmentsconcern is a critical audit matter due to the recoverabilityestimation and classificationuncertainty regarding the Company’s available capital and the risk of recorded asset amountsbias in management’s judgments and classification of liabilities that might be necessary shouldassumptions in their determination. Our audit procedures related to the Company be unableCompany’s assertion on its ability to continue as a going concern.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
| F-1 |
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: authorized; par value | ||||||||
| Series A Preferred stock: designated; par value, shares issued and outstanding, respectively | 10 | 10 | ||||||
| Series B Preferred stock: designated; par value, and shares issued and outstanding | 21 | — | ||||||
| Series C Preferred stock: designated; par value, shares issued and outstanding | — | — | ||||||
| Common stock: authorized; par value and 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.
| F-2 |
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 | ) | ||||
| Net loss before provision for income taxes | (3,864,001 | ) | (6,699,330 | ) | ||||
| 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.
| F-3 |
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.
| F-4 |
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 | 0 | 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.
| F-5 |
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 June 30, 2017, we had limited assets which consistedthe 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 cashits employees and cash equivalentsminimize business disruption. The Company considered the impact of $15,701. In order to fundCOVID-19 on the development of our businessassumptions and working capital needs forestimates used and determined that there were no material adverse impacts on the next 12 months, we intend to secure additional funding through the sale of common stock, related and non-related party loans, or funding provided by strategic partners. To further implement our planCompany’s results of operations we anticipateand financial position at December 31, 2021. The full extent of the costsfuture 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 develop our productscollect 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 a commercial scale could very well be in excess of $100,000. We will need at least anForm 10-K. These estimates may change, as new events occur and additional $50,000 to $100,000 to purchase raw material for commercial production, professional labeling and packaging, and introductory marketing and advertising programs that will educate as well as connect with our targeted customers who seek healthy snacks and food alternatives. If we are not successful in raising additional financing, we will not be able to further our business plan towards commercial productioninformation is obtained.
3.Summary of Significant Accounting Policies NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a)Basis of Presentation
TheseThe consolidated financial statements and related disclosures have been prepared pursuant to the rules and regulations of the CompanySecurities and Exchange Commission (“SEC”). The financial statements have been prepared in accordance with generally accepted accounting principlesGenerally 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 and are expressed in US dollars. The Company’s fiscal year end is June 30.
b)Use of Estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles 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 statementsstatements. The estimates and judgments will also affect the reported amounts offor certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.
| F-6 |
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 regularly evaluates estimatestranslates its foreign operations to U.S. dollar in accordance with ASC 830, “Foreign Currency Matters”.
The functional currency and assumptionsreporting 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 income taxes.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 basesreviews its estimatesallowance for doubtful accounts daily and assumptions on current facts, historical experiencepast due balances over 60 days and various other factorsa 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.
| F-7 |
Long-Lived Assets
Long-lived assets are evaluated for impairment whenever events or changes in business circumstances indicate that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying valuesamount 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 accrualfair value of costseach 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 expenses thatdetermination 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.
| F-8 |
Retirement Benefit Costs
Payments to defined contribution retirement benefit schemes are not readily apparent fromcharged 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 sources. comprehensive income. Past service cost is recognized immediately in the income statement in the period in which it occurs.
The actual results experiencedretirement 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 Company may differ materiallyfair 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 adversely fromreductions in future contributions to the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.scheme.
The Company considershas adopted ASC 260, ”Earnings per Share” which requires presentation of basic earnings per share on the face of the statements of operations for all highly liquid instrumentsentities with maturitycomplex capital structures and requires a reconciliation of three months or less at the timenumerator and denominator of issuancethe 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 cash equivalents. The company hasantidilutive. 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 cash equivalentspotentially dilutive shares of common stock outstanding for the year ended December 31, 2021.
F-6
d)Derivative Financial Instruments Concentrations of Credit Risk
The company evaluatesCompany’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.
| F-9 |
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 its agreementsof our financial instruments to determine if such instruments haveare 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 consolidated statements of operations. For stock-basestock-based derivative financial instruments, the Company usesused a weighted average Black-Scholes-Merton option pricingBlack Scholes valuation model to value the derivative instrumentinstruments at inception and on subsequent valuation dates. The classification of derivative instrument,instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of June 30, 2017 and 2016 the Company’s derivative financial instruments were three convertible debt notes and one of then includes convertible warrant that are derivative due to the “reset” and “dilutive issuance” clause in the note relating to the conversion price from dilute share issuance. See Note 7.
e)Fair Value Measurements
ASC Topic 820, “Fair Value Measurements and Disclosures”, requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments”, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows:
Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in the active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurements.
The Company’s derivative instruments were reported at fair value using Level 2 inputs as discussed in Note 7.
The Company uses level 2 inputs for its valuation methodology for the warrant derivative liabilities as their fair values were determined by using a probability weighted average Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liability is adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in result of operations as adjustments to fair value of derivatives.
At June 30, 2017 and 2016, the Company identified the following liabilities that are required to be presented on the balance sheet at fair value:
Description |
| Fair Value as of June 30, 2017 |
|
|
| Fair Value Measurements at June 30, 2017 Using Fair Value Hierarchy |
|
|
|
|
|
| Level 1 |
| Level 2 |
| Level 3 |
Derivative liability | $ | 98,041 | $ | - | $ | - | $ | 98,041 |
Contingent consideration for business combination |
| - |
| - |
| - |
| - |
Total | $ | 98,041 | $ | - | $ | - | $ | 98,041 |
|
|
|
|
|
|
|
|
|
Description |
| Fair Value as of June 30, 2016 |
|
|
| Fair Value Measurements at June 30, 2016 Using Fair Value Hierarchy |
|
|
|
|
|
| Level 1 |
| Level 2 |
| Level 3 |
Derivative liability | $ | 112,243 | $ | - | $ | - | $ | 112,243 |
Contingent consideration for business combination |
| - |
| - |
| - |
| - |
Total | $ | 112,243 | $ | - | $ | - | $ | 112,243 |
F-7
f)Inventory
Inventory for the fiscal years ended June 30, 2017 and 2016 were $0 and $9,197, respectively. As of June 30, 2017, the company didn’t have any inventory. As of June 30, 2016, the inventory consisted of finish goods inventory of $9,197. The Company uses FIFO method to account for its inventory. The Company’s policy for obsolete inventory isbased on periodical reviews of the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions.
g)Earnings (Loss) Per Share
Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
Net loss per share is calculated using the weighted average number of shares of common stock outstanding during the applicable period. Basic weighted average common shares outstanding do not include shares of restricted stock that have not yet vested, although such shares are included as outstanding shares in the Company's Consolidated Balance Sheet. Diluted net loss per share is computed using the weighted average number of common shares outstanding and if dilutive; potential common shares outstanding during the period. Potential common shares consist of the additional common shares issuable in respect of convertible debt and warrants.
The following table presents the computation of basic and diluted net loss per share:
|
| For the Years Ended June 30, | ||
|
| 2017 |
| 2016 |
|
|
|
|
|
Net loss attributable to PureSnax | $ | (263,691) | $ | (245,047) |
Less: preferred stock dividends |
| - |
| - |
Net loss applicable to common stock | $ | (263,691) | $ | (245,047) |
|
|
|
|
|
Weighted average common shares outstanding - basic and diluted |
| 379,104,082 |
| 150,733,517 |
|
|
|
|
|
Loss per share - basic and diluted | $ | (0.0007) | $ | (0.0016) |
h)Foreign Currency Translation
The Company’s initial operations will be in the United States however global expansion is anticipated which results in exposure to market risks from changes in foreign currency exchange rates. The financial risk is the risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk. The Company's functional currency for all operations worldwide is the U.S. dollar. Nonmonetary assets and liabilities are translated into their U.S. dollar equivalents at historical rates and monetary assets and liabilities are translated at exchange rates in effect at the end of the year. Revenues and expenses are translated at average rates for the year. Gains and losses from translation of foreign currency financial statements into U.S. dollars are included in current results of operations.
i)Recent Accounting Pronouncements
Jumpstart Our Business Startups Act (“JOBS Act”) Transition Accounting: pursuant to Section 107(b) of the JOBS Act, we have elected to use the extended transition period for complying with new or revised accounting standards for an “emerging growth company”. This election will permit us to delay the adoption of new or revised accounting standards that will have difference effective dates for public and private companies until such time as those standards apply to private companies. Consequently, our financial statements may not be comparable to companies that comply with public company effective dates.
In April 2016, the FASB issued Accounting Standards Update (ASU) 2016-10, Revenue from Contracts with Customers (Topic 606) Identifying Performance Obligations and Licensing (ASU 2016-10). ASU 2016-10 was issued by the Board to improve Topic 606 by reducing:
1)The potential for diversity in practice at initial application
2)The cost and complexity of applying Topic 606 both at transition and on an ongoing basis.
F-8
The core principle of the guidance in Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
To achieve that core principle, an entity should apply the following steps:
1)Identify the contract(s) with a customer
2)Identify the performance obligations in the contract
3)Determine the transaction price.
4)Allocate the transaction price to the performance obligations in the contract.
5)Recognize revenue when (or as) the entity satisfies a performance obligation.
The amendments in ASU 2016-10 clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guide, while retaining the related principles for those areas. The effective date and transition requirements for the amendments in ASU 2016-10 are for annual reporting periods beginning after December 31, 2016, including interim periods within that reporting period. FASB ASU 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of Update 2014-09 by one year. The Company is currently assessing this guidance for future implementation.
In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 was issued as part of the Board’s Simplification Initiative. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, Accounting for Income Taxes, Classification of Excess Tax Benefits on the Statement of Cash Flows, Forfeitures, Minimum Statutory Tax Withholding Requirements, Classification of Employee Taxes Paid on the Statement of Cash Flows When an Employer Withholds Shares for Tax-Withholding Purposes, Practical Expedient- Expected Term, and Intrinsic Value. The amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently assessing this guidance for future implementation.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires entities to recognize lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Similarly, optional payments to purchase the underlying asset should be included in the measurement of lease assets and lease liabilities only if the lessee is reasonably certain to exercise that purchase option. In addition, also consistent with the previous leases guidance, a lessee (and a lessor) should exclude most variable lease payments in measuring lease assets and lease liabilities, other than those that depend on an index or a rate or are in substance fixed payments.
For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term.
The accounting applied by a lessor is largely unchanged from that applied under previous GAAP.
In January 2015, FASB issued Accounting Standards Update (ASU) No. 201501 Income Statement – Extraordinary and Unusual Items, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. Eliminating the concept of extraordinary items will save time and reduce costs for preparers because they will not have to assess whether a particular event or transaction event is extraordinary (even if they ultimately would conclude it is not). This also alleviates uncertainty for preparers, auditors, and regulators because auditors and regulators no longer will need to evaluate whether a preparer treated an unusual and/or infrequent item appropriately. This update is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2015. Early application is permitted.
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
F-9
4.Related Party Transactions
a)At June 30, 2017, Mr. Patrick Gosselin loaned the Company $21,041, and Gosselin Consulting Group, Inc. loaned the Company $4,880. Gosselin Consulting Group, Inc., is a private Canadian company that is owned by Mr. Patrick Gosselin. The amounts owed are unsecured, non-interest bearing with interest imputed at 2.47% per annum, and have no specified repayment terms. The loan to related parties is $25,921 as of June 30, 2017.
5.Stockholders’ Equity
The Company’s authorized capital consists of 500,000,000 shares of common stock with a par value of $0.001 per share and 1,000,000 shares of preferred stock with a par value of $0.001 per share.
On June 1, 2015, the board of directors approved a forward split of the issued and outstanding common shares on the basis of 40 new common shares for each 1 existing common share. Upon effectiveness of the forward split, the issued and outstanding shares of common stock increased from 10,000,000 to 400,000,000. All share and per share amounts have been retroactively adjusted to reflect the forward stock split. On June 11, 2015, the Company’s Articles of Incorporation were amended reflect these changes.
On September 21, 2015, Patrick Gosselin executed an agreement whereby an aggregate of 300,000,000 common stock shares would be cancelled in exchange for the issuance of 1,000,000 shares of Series A Convertible Preferred stock.
On September 29, 2015 the Company filed an amendment to its certificate of designation whereby its Series A Convertible Preferred Stock authorized was increased to 1,000,000 shares with a par value of $0.001 per share, Senior liquidation preference to all junior shares, Convertible into common shares at a ratio of one Series A Preferred to 120 common shares, Right to vote for each share of common stock into which a convertible share could be converted, No redemption rights, Certain protective provisions, and No pre-emptive rights.
On February 24, 2016, the Company issued to Typenex Co-Investment, LLC,85,662 common stock purchase warrants, with a term of three years, at an exercise price of $0.271 per share. This was in connection with the Promissory convertible note the Company issued to Typenex Co-Investment, LLC.
On April 1, 2016, the Company executed a subscription agreement with Nick Mastoris for the purchase of 44,118 restricted shares of Common Stock for a purchase price of $15,000.
On April 5, 2016, the Company executed a subscription agreement with Gary Kamen for the purchase of 73,530 restricted shares of Common Stock for a purchase price of $25,000.
On April 1, 2016, the Company executed a subscription agreement with Principe Asset Partners LLC for the purchase of 44,118 restricted shares of Common Stock for a purchase price of $15,000.
On May 13, 2016, Typenex Co-Investment, LLC elected to convert warrant # 1 with a fair market value of $26,433 into 73,798 shares of the Company’s common stock, at an exercise price of $0.35789 per share.
On June 7, 2016, the Company issued to Typenex Co-Investment, LLC,31,852 common stock purchase warrants, with a term of three years, at an exercise price of $0.69 per share.
On August 25, 2016, EMA Financial, LLC, elected to convert $7,000 of its convertible promissory note in the principal amount of $30,000 into 500,000 shares of the company common stock at a conversion price of $0.035. The principal remaining after conversion was $23,000.
On September 9, 2016, Typenex Co-Investment, LLC, elected to convert $20,000 of its convertible promissory note in the principal amount of $115,000 into 332,779 shares of the company’s common stock at a conversion price of $0.0601. The principal remaining after conversion was $100,962.
On September 16, 2016, EMA Financial, LLC, elected to convert $4,392 of its convertible promissory note in the principal amount of $30,000 into 200,000 shares of the company’s common stock at a conversion price of $0.008785. The principal remaining after conversion was $18,607.
On September 20, 2016, Typenex Co-Investment, LLC, elected to convert $15,019.14 of its convertible promissory note in the principal amount of $115,000 into 999,943 shares of the company’s common stock at a conversion price of $0.01502. The principal remaining after conversion was $86,846.84.
F-10
On September 21, 2016, Pinz Capital International, LP, elected to convert $10,000 of its convertible promissory note in the principal amount of $30,556 into 664,010 shares of the company’s common stock at a conversion price of $0.01506. The principal remaining after conversion was $20,556.
On September 29, 2016, Pinz Capital International, LP, elected to convert $7,500 of its convertible promissory note in the principal amount of $30,556 into 1,785,714 shares of the company’s common stock at a conversion price of $0.0042. The principal remaining after conversion was $13,056.
On September 30, 2016, EMA Financial, LLC, elected to convert $1,617 of its convertible promissory note in the principal amount of $30,000, plus an additional principal on account of conversion of $33 into 1,650,000 shares of the company’s common stock at a conversion price of $0.001. The principal remaining after conversion was $16,990.
On October 13, 2016, Typenex Co-Investment, LLC, elected to submit a True Up notice from a previous conversion of $20,000 (September 9, 2016) of its convertible promissory note in the principal amount of $115,000. The True Up notice called for an additional conversion of 7,242,979 shares of the company’s common stock at a conversion price of $0.002640. The principal remaining after conversion was $100,962.
On October 14, 2016, Pinz Capital International, LP, elected to convert $5,000 of its convertible promissory note in the principal amount of $30,556 into 2,976,190 shares of the company’s common stock at a conversion price of $0.001680. The principal remaining after conversion was $8,056.
On October 17, 2016, EMA Financial, LLC, elected to convert $5,370.40 of its convertible promissory note in the principal amount of $30,000, plus an additional principal on account of conversion of $109.60 into 5,480,000 shares of the company’s common stock at a conversion price of $0.001. The principal remaining after conversion was $11,620.10.
On October 25, 2016, EMA Financial, LLC, elected to convert $4,402.30 of its convertible promissory note in the principal amount of $30,000, plus an additional principal on account of conversion of $1,886.70 into 6,289,000 shares of the company’s common stock at a conversion price of $0.001. The principal remaining after conversion was $7,217.80.
On October 25, 2016, Pinz Capital International, LP, elected to convert $9,656 of its convertible promissory note in the principal amount of $30,556 into 8,046,488 shares of the company’s common stock at a conversion price of $0.0012. The principal remaining after conversion was $0.
On November 2, 2016, Typenex Co-Investment, LLC, elected to submit a True Up notice from a previous conversion of $15,019.14 (September 20, 2016) of its convertible promissory note in the principal amount of $115,000. The True Up notice called for an additional conversion of 7,834,845 shares of the company’s common stock at a conversion price of $0.00170. The principal remaining after conversion was $86,846.84.
On December 9, 2016, Typenex Co-Investment, LLC, elected to convert $18,000 of its convertible promissory note in the principal amount of $115,000 into 16,981,132 shares of the company’s common stock at a conversion price of $0.00106. The principal remaining after conversion was $70,894.42.
On November 14, 2016, EMA Financial, LLC, elected to convert $5,201.70 of its convertible promissory note in the principal amount of $30,000, plus an additional principal on account of conversion of $2,229.30 into 7,431,000 shares of the company’s common stock at a conversion price of $0.001. The principal remaining after conversion was $2,016.10.
On December 6, 2016, $5,000 of a convertible promissory note in the principal amount of $10,000 was converted into 20,000,000 shares of the company at a conversion rate of $0.00025. The note was issued to Stacey Y. Jenkins, Esq. in consideration for outstanding fees for services rendered to the company prior to March 21, 2016.
On December 14, 2016 the Company filed an amendment to its certificate of designation whereby its Series A Convertible Preferred Stock was increased to 4,250,000 shares with a par value of $0.001 per share, Senior liquidation preference to all junior shares, Convertible into common shares at a ratio of one Series A Preferred to 120 common shares, Right to vote for each share of common stock into which a convertible share could be converted, No redemption rights, Certain protective provisions, and No pre-emptive rights.
On December 14, 2016 the Company filed an amendment to its certificate of designation whereby its Authorized Common Stock was increased to 1,000,000,000 shares with a par value of $0.001 per share.
On December 21, 2016, EMA Financial, LLC, elected to convert $5,103.00 of its convertible promissory note in the principal amount of $30,000, plus an additional principal on account of conversion of $4,617.00 into 9,720,000 shares of the company’s common stock at a conversion price of $0.001. The principal remaining after conversion was $4,948.15.
F-11
On January 17, 2017, EMA Financial, LLC, elected to convert $4,650.10 of its convertible promissory note in the principal amount of $30,000, plus an additional principal on account of conversion of $5,569.90 into 10,220,000 shares of the company’s common stock at a conversion price of $0.001. The principal remaining after conversion was $2,478.38.
On January 20, 2017, Typenex elected to convert $10,601.53 of its convertible promissory note in the principal amount of $115,000 into 12,620,869 shares of the company’s common stock at a conversion price of $0.001. The principal remaining after conversion was $60,985.4.
On February 1, 2017, Typenex elected to fund Tranche #3 of $25,000 of the convertible promissory note in the principal amount of $115,000.
On February 2, 2017, $5,000 of a convertible promissory note in the principal amount of $10,000 was converted into 20,000,000 shares of the company at a conversion rate of $0.00025. The note was issued to Stacey Y. Jenkins, Esq. in consideration for outstanding fees for services rendered to the company prior to March 21, 2016.
On February 2, 2017 Typenex Co-Investment, LLC, elected to submit a True Up notice from a previous conversion of $18,000 on (December 9, 2016) of its convertible promissory note in the principal amount of $115,000. The True Up notice called for an additional conversion of 4,447,439 shares of the company’s common stock at a conversion price of $0.00084.
On February 2, 2017, EMA Financial, LLC, elected to convert $3,498.10 of its convertible promissory note in the principal amount of $30,000, plus an additional principal on account of conversion of $3,640.88 into 7,138,979 shares of the company’s common stock at a conversion price of $0.001. The principal remaining after conversion was $0.
On February 16, 2017, $6,250 of a convertible promissory note in the principal amount of $8,020 was converted into 25,000,000 shares of the company at a conversion rate of $0.00025. The note was issued to Stacey Y. Jenkins, Esq. in consideration for outstanding fees for services rendered to the company prior to July 31, 2016.
On January 20, 2017, Typenex elected to convert $19,642.89 of its convertible promissory note in the principal amount of $115,000 into 23,311,777 shares of the company’s common stock at a conversion price of $0.001.
On January 20, 2017, Typenex elected to convert $5,255 of its convertible promissory note in the principal amount of $115,000 into 21,000,000 shares of the company’s common stock at a conversion price of $0.001.
On March 22, 2017, $1,770 of a convertible promissory note in the principal amount of $5,000 was converted into 7,080,000 shares of the company at a conversion rate of $0.00025. The note was issued to Stacey Y. Jenkins, Esq. in consideration for outstanding fees for services rendered to the company prior to March 21, 2016.
On April 12, 2017, Typenex elected to convert $6,256 of its convertible promissory note in the principal amount of $115,000 into 25,000,000 shares of the company’s common stock at a conversion price of $0.001.
On May 2, 2017, Typenex elected to convert $5,380 of its convertible promissory note in the principal amount of $115,000 into 21,500,000 shares of the company’s common stock at a conversion price of $0.001.
On May 25, 2017, Typenex elected to convert $8,208 of its convertible promissory note in the principal amount of $115,000 into 32,800,000 shares of the company’s common stock at a conversion price of $0.001.
On June 13, 2017, Typenex elected to convert $8,220 of its convertible promissory note in the principal amount of $115,000 into 32,850,000 shares of the company’s common stock at a conversion price of $0.001.
F-12
Warrants
The Company issued several Notes in prior periods and converted them in the issuance of warrants. The following table summarizes information about the Company’s warrants at June 30, 2017:
|
| Number of Units |
| Weighted Average Exercise Price |
| Weighted Average Remaining Contractual Term (in years) |
| Intrinsic Value |
Outstanding at June 30, 2015 |
| - | $ | - |
| - | $ | - |
Granted - Warrant 1 |
| 73,798 |
| 0.36 |
| 3.01 |
|
|
Exercised - Warrant 1 |
| (73,798) |
| (0.36) |
|
|
|
|
Granted - Warrant 2 |
| 76,501 |
| 0.18 |
| 2.67 |
|
|
Outstanding at June 30, 2016 |
| 76,501 |
| 0.18 |
| 2.67 |
|
|
|
|
|
|
|
|
|
|
|
Exercised-Portion of W2 |
| (54,485) |
| 0.00025 |
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
Outstanding at June 30, 2017 |
| 22,016 | $ | 0.00126 |
| 1.67 | $ |
|
Exercisable at June 30, 2017 |
| 22,016 | $ | 0.00126 |
| 1.67 | $ |
|
All of the above warrants were issued in connection to conversion of convertible notes from Typenex Co-Investment, LLC. When the debt is converted and warrants are issued, the Company determines the fair value of the warrants using the Black-Scholes model and takes a charge to interest expense at the date of issuance.
The exercise price for warrants outstanding and exercisable at June 30, 2017 is as follows:
Outstanding |
| Exercisable | ||||
Number of Warrants |
| Exercise Price |
| Number of Warrants |
| Exercise Price |
22,016 | $ | 0.00126 |
| 22,016 | $ | 0.00126 |
6.Convertible Notes Payable
The Company issued convertible notes payable in 2017 and 2016. The outstanding balance and any accrued interest is due on maturity date. Under the agreement, the notes can be convertible at holder’s discretion into common shares of the Company stock.
The Company’s convertible notes payable are as follows:
Convertible Note |
| Issuance Date |
| Maturity Date |
| Interest Rate |
| Original Borrowing |
| Balance at June 30, 2017 |
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
Note 1 EMA |
| February 5, 2016 |
| February 6, 2017 |
| 10% |
| 30,000 | $ | - |
Note 3 Pinz |
| March 1, 2016 |
| March 1, 2017 |
| 10% |
| 30,556 |
| - |
Note 4 Typenex |
| June 7, 2016 |
| February 28, 2019 |
| 8% | $ | 27,500 |
| - |
Note 5 Typenex |
| February 1, 2017 |
| March 2, 2019 |
| 8% |
| 25,000 |
| 25,000 |
Note 6 Adar |
| February 8, 2017 |
| February 8, 2018 |
| 8% |
| 30,000 |
| 30,000 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
| 55,000 |
|
|
|
|
|
|
|
|
|
|
|
Debt Discount |
|
|
|
|
|
|
|
|
| (19,426) |
|
|
|
|
|
|
|
|
|
|
|
Net balance |
|
|
|
|
|
|
|
| $ | 35,574 |
As of June 30, 2017, convertible notes payables had a balance of $35,574 and convertible notes 1, 2, 3, and 4 were converted into common shares of the Company’s stock
The company adopted the provision of FASB ASC Topic, “Derivatives and Hedging” (“ASC 815”) (previously EITF 07-5, “Determining Whether an Instrument (or an Embedded Feature) is Indexed to an Entity’s Own Stock”), as the convertible note agreement contained certain provision that the convertible note failed to pass the “fixed for fixed” criteria of the ASC 815, the conversion feature of the convertible debt should have to be bifurcated and recorded separately until the conversion date.
F-13
Based on ASC 815, the Company determined that the convertible debt contained embedded derivatives and full ratchet provision which the Company valued the embedded derivative using the Black-Scholes method. The following table represent fair value of embedded derivative movement from the date of issuance to June 30, 2017.
Embedded Derivative Liabilities |
| Fair Value at Date of Issuance |
| Fair Value at June 30, 2016 |
| Changes In Fair Value 2016-17 |
| Fair Value at June 30, 2017 |
|
|
|
|
|
|
|
|
|
Note 1 - Issued in 2016 | $ | - | $ | 50,990 | $ | (50,990) | $ | - |
Note 3 - Issued in 2016 |
| - |
| 41,230 |
| (41,230) |
| - |
Note 4 - Issued in 2016 |
| - |
| 20,023 |
| (12,953) |
| 7,070 |
Note 5 - Issued in 2017 |
| 44,642 |
|
|
| (3,446) |
| 41,196 |
Note 6 - Issued In 2017 |
| 53,592 |
|
|
| (3,817) |
| 49,775 |
|
|
|
|
|
|
|
|
|
Total |
|
|
|
| $ | (112,436) | $ | 98,041 |
EMA Convertible Note Transaction
a)On February 5, 2016, the Company issued a one year convertible note to an otherwise unaffiliated, non-institutional third party in the principal amount of $30,000. The note (i) is unsecured, (ii) bears interest at rate of ten (10) percent per annum, and (iii) was issued with an original issue discount of $3,500.
The principal is convertible into shares of the Company’s common stock at any time and from time-to-time at the instance of either the Company or the holder. The per-share conversion price is an amount equal to fifty percent (50%) of the lowest (20)-day volume weighted average closing bid price for the Company’s common stock, as reported in the Stock Market, for the twenty (20- trading days immediately preceding the date of the notice of conversion, subject to downward adjustment in the event that the Company issues any securities at a price per share lower than the then-current conversion price, provided, however, that in no event shall the conversion price per share be less than $.00001. The Company provided the holder with certain negative covenants and events of default, each standard for transactions of this nature.
Due to the "reset" and "dilutive issuance" clause in this note relating to the conversion price from dilutive share issuance, the Company has determined that the conversion feature is considered a derivative liability for the Company, which is detailed in Note 7.
The Company determined an initial derivative liability of $45,072, which is recorded as a derivative liability as of the date of issuance while also recording an $30,000 debt discount on its balance sheet and $15,072 derivative expense on its profit and loss in relation to the bifurcation of the embedded conversion options of the note. The debt discount is being amortized over the one-year term.
On February 7, 2017, EMA completed the final conversion and hereby surrendered the Note to the Company.
Typenex Convertible Note Transaction
b)On February 24, 2016, the Company issued a one year convertible note to an otherwise unaffiliated, non-institutional third party in the principal amount of $32,500. The note (i) is unsecured, (ii) bears interest at rate of ten (10) percent per annum, and (iii) was issued with an original issue discount of $7,500. In connection to the issuance of the Promissory Note, the Company also issued 85,662 common stock purchase warrants, with a term of three years, at an exercise price of $0.271 per share.
The principal is convertible into shares of the Company’s common stock at any time and from time-to-time at the instance of either the Company or the holder. The per-share conversion price is an amount equal to fifty cents ($0.50) and the holder of the note may convert any or all of the principal outstanding into shares of the Company’s common stock. However, in the event that Market Capitalization Falls below $15,000,000 at any time, then in such event (a) the Lender Conversion Price for all lender conversion occurring after the first date of such occurrence shall equal the lower of the lender conversion price and the market price as of any applicable date of Conversion, and (b) the true-up provision shall apply to all lender conversions that occur after the first date the market capitalization falls below $15,000,000. The Company provided the holder with certain negative covenants and events of default, each standard for transactions of this nature.
Due to the "reset" and "dilutive issuance" clause in this note relating to the conversion price from dilutive share issuance, the Company has determined that the conversion feature is considered a derivative liability for the Company, which is detailed in Note 7.
The Company determined an initial derivative liability of $16,773, which is recorded as a derivative liability as of the date of issuance while also recording an $16,773 debt discount on its balance sheet in relation to the bifurcation of the embedded conversion options of the note. The debt discount is being amortized over the one year term.
F-14
On June 7, 2016, the Company issued a one year convertible note to an otherwise unaffiliated, non-institutional third party in the principal amount of $27,500. The note (i) is unsecured, (ii) bears interest at rate of eight (8) percent per annum, and (iii) was issued with an original issue discount of $2,500. The holder of the note may convert any or all of the principal outstanding into shares of the Company’s common stock at $.50 per shares. In connection with the issuance of the Promissory Note, the Company also issued 31,852 common stock purchase warrants, with a term of three years, at an exercise price of $0.69 per share.
The Company determined an initial derivative liability of $17,166, which is recorded as a derivative liability as of the date of issuance while also recording an $17,166 debt discount on its balance sheet in relation to the bifurcation of the embedded conversion options of the note. The debt discount is being amortized over the one-year term.
Pinz Convertible Note Transaction
On March 1, 2016, the Company issued a one year convertible note to an otherwise unaffiliated, non-institutional third party in the principal amount of $30,556. The note (i) is unsecured, (ii) bears interest at rate of ten (10) percent per annum, and (iii) was issued with an original issue discount of $3,056.
The principal is convertible into shares of the Company’s common stock at any time and from time-to-time at the instance of either the Company or the holder. The per-share conversion price is an amount equal to sixty percent (60%) of the lowest (20)-day volume weighted average closing bid price for the Company’s common stock, as reported in the Stock Market, for the twenty (20)-trading days immediately preceding the date of the notice of conversion, subject to downward adjustment in the event that the Company issues any securities at a price per share lower than the then-current conversion price, provided. The Company provided the holder with certain negative covenants and events of default, each standard for transactions of this nature.
Due to the "reset" and "dilutive issuance" clause in this note relating to the conversion price from dilutive share issuance, the Company has determined that the conversion feature is considered a derivative liability for the Company, which is detailed in Note 7.
The Company determined an initial derivative liability of $28,885, which is recorded as a derivative liability as of the date of issuance while also recording an $30,556 debt discount on its balance sheet, and $(1,671) derivative expense on its profit and loss in relation to the bifurcation of the embedded conversion options of the note. The debt discount is being amortized over the one year term.
On October 25, 2016,Pinz completed the final conversion and hereby surrendered the Note to the Company.
Adar Bay Note Transaction
On February 8, 2017, the Company issued a one-year convertible note to an otherwise unaffiliated, non-institutional third party in the principal amount of $30,000. The note (i) is unsecured, and (ii) bears interest at rate of eight (8) percent per annum.
The principal is convertible into shares of the Company’s common stock at any time and from time-to-time at the instance of either the Company or the holder. The per-share conversion price is an amount equal to sixty percent (50%) of the lowest (20)-day volume weighted average closing bid price for the Company’s common stock, as reported in the Stock Market, for the twenty (20)-trading days immediately preceding the date of the notice of conversion, subject to downward adjustment in the event that the Company issues any securities at a price per share lower than the then-current conversion price, provided. The Company provided the holder with certain negative covenants and events of default, each standard for transactions of this nature.
Due to the "reset" and "dilutive issuance" clause in this note relating to the conversion price from dilutive share issuance, the Company has determined that the conversion feature is considered a derivative liability for the Company, which is detailed in Note 7.
The Company determined an initial derivative liability of $53,592, which is recorded as a derivative liability as of the date of issuance. The debt discount is being amortized over the one-year term.
7.Derivative Liabilities
The Convertible note discussed in Note 6 had a reset provision and a dilutive issuance clause that gave rise to a derivative liability. The reset provided for the conversion price to be adjusted downward in the event that the Company issued any securities at a price per shares than the then-current conversion price; provided, however, the holder(s) of the note may convert any or all of the principal outstanding into shares of the Company’s common stock at a price equal to 50% and 60% of the lowest trading price of the common stock during the 20 trading days prior to issuing a notice of conversion to the Company and at $0.5 per shares.
The fair value of the derivative liability was recorded and shown separately under current liabilities. Changes in the fair value derivative liability were recorded in the consolidated statement of operations under other income (expenses).
F-15
The company evaluates all of its agreements to determine if such instruments have 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 consolidated statements of operations. For stock-base derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option pricing model to value the derivative instrument at inception and on subsequent valuation dates. The classification of derivative instrument, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
The range of significant assumptions which the Company used to measure the fair value of the derivative liability at June 30, 2017 was as follows:
Typenex Warrant 2 |
|
| Inception |
| June 30, 2017 |
Stock price |
| $ | 0.69 | $ | 0.0007 |
Risk free rate |
|
| 0.94% |
| 1.55% |
Volatility |
|
| 129.67% |
| 295.36% |
Exercise prices |
| $ | 0.43 | $ | 0.0021 |
Terms (years) |
|
| 2.73 |
| 1.67 |
|
|
|
|
|
|
Adar Bay |
|
| Inception |
| June 30, 2017 |
Stock price |
| $ | 0.0023 | $ | 0.0007 |
Risk free rate |
|
| 0.79% |
| 1.24% |
Volatility |
|
| 284.69% |
| 295.36% |
Exercise prices |
| $ | 0.0012 | $ | 0.00035 |
Terms (years) |
|
| 1 |
| 0.61 |
The convertible notes were not repaid during the year ended June 30, 2017
The following table represents the Company’s derivative liability activity for the embedded conversion features for the years ended June 30, 2017 and 2016:
Derivative liability balance, June 30, 2015 | $ | - |
Issuance of derivative liability during the year ended June 30, 2016 |
| 107,896.00 |
Change in derivative liability during the year ended June 30, 2016 |
| 4,347.00 |
Derivative liability balance, June 30, 2016 |
| 112,243.00 |
Issuance of derivative liability during the year ended June 30, 2017 |
| 98,234.00 |
Change in derivative liability during the year ended June 30, 2017 |
| (112,436.00) |
Derivative liability balance, June 30, 2017 | $ | 98,041.00 |
8.Income Taxes
The Company accountsuses the liability method of accounting for income taxes usingtaxes. Under the asset and liability method, which provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporarydetermined based on differences between the financial reporting and the tax basesbasis of assets, and liabilities, and forthe carry forward of operating losslosses and tax credit carry forwards. Deferred tax assetscredits, and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuationAn allowance to reduceagainst deferred tax assets to the amount that is believedrecorded when it is more likely than not tothat such tax benefits will not be realized.
DeferredRelated 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.
| F-10 |
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.
| F-11 |
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 | ||||
| F-12 |
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 |
| F-13 |
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 | ||||||||
| 49% of Shareholder of SwissLink | ||||||||
| 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 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 | ||||
| F-14 |
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 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 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 share issuances. The Company issued shares in June, shares in July and shares in August, which included 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 share issuances. During the period ended September 30, 2020, the Company issued shares which included 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 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.
| F-15 |
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 | $ | 0.480 | 4.05 | |||||||||
| Granted | ||||||||||||
| Reset | ||||||||||||
| Cashless Exercised | ( | ) | ||||||||||
| Settled | ( | ) | ||||||||||
| 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.
| F-16 |
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 | - | - | |||||
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 | $ | — | ||
| F-17 |
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 shares of common stock with a par value of 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 shares, par value . 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, 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 shares, par value . 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, shares of common stock were converted into shares of Series B Preferred Stock by our management.
As of December 31, 2021 and 2020, and shares of Series B Preferred Stock were issued and outstanding, respectively.
| F-18 |
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 shares, par value . 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, Series C Preferred Stock was issued or outstanding.
Common Stock
During the year ended December 31, 2021, the Company issued shares of common stock, valued at fair market value on issuance as follows;
| · | 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 on January 3, 2022. |
| · | shares, valued at $2,056,530, issued for settlement of debt of $1,516,667 |
| · | shares for services valued at $284,700 |
| · | shares issued to our management for compensation valued at |
| · | shares for forbearance of debt valued at $49,925 |
| · | 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 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 shares of common stock, valued at fair market value on issuance as follows;
As of December 31, 2021 and 2020, and shares of common stock were issued and outstanding, respectively.
| F-19 |
NOTE 12 – PROVISION FOR INCOME TAXES
The Company provides for income taxes arise fromunder ASC 740, “Income Taxes.” Under the temporaryasset 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 recognitionamount 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. These loss carryovers are limited underlosses (“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 should significant change inof 1986, as amended (the “Code”). These ownership occur.
At June 30, 2017 and 2016changes may limit the Company had net operating lossamount of the NOL carry forwards of approximately $263,691 and $245,047 respectively, that maycan be utilized annually to offset against future taxable income if any, rateableand 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 2035. These carry-forwards2021 are subject to review by the Internal Revenue Service.tax authorities.
The deferred tax assets of at each date of $92,292, and $85,766 created by the net operating losses has been offset by a 100% valuation allowance because the likelihood of realization of the tax benefit cannot be determined. The change in the valuation allowance in the 2016 and 2015 was $6,526 and $74,261, respectively.
F-16
The effects of the temporary differences that gives rise to significant portions of the deferred tax assets at June 30, 2017 and 2016 are as follows:NOTE 13 - RELATED PARTY TRANSACTIONS
|
| June 30, |
| June 30, |
|
| 2017 |
| 2016 |
Deferred income tax assets |
|
|
|
|
Federal | $ | 92,292 | $ | 85,766 |
Valuation allowance |
| (92,292) |
| (85,766) |
|
|
|
|
|
Net deferred income tax assets | $ | 0 | $ | 0 |
Due from related party
There is no current or deferred tax expense forDuring 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 to related parties who are a stockholder and a former director, collected and wrote off amounts totaling .
During the years ended June 30, 2017December 31, 2021 and 2016.2020, the Company loaned $220,674 and $18,888 to a related party and collected $226 and $2,088, respectively.
| F-20 |
As of December 31, 2021 and 2020, the Company had due from related parties of $424,086 and $221,790, respectively. The Company has not filed tax returns however management believes thereloans are no taxes dues as of June 30, 2017unsecured, non-interest bearing and 2016.due on demand.
There was no Federal income tax expense forDue to related parties
During the years ended June 30, 2017December 31, 2021 and 20162020, 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 the Company’s net losses. Thererelated parties of $26,613 and $94,616, respectively, which included $0 and $60,000 to Francisco Bunt (Note 4), respectively. The amounts are no state taxes in the State of Nevada.unsecured, non-interest bearing and due on demand.
The company includes interest and penalties arising from the underpayment of income taxes in the consolidated statements of operations in general and administrative expenses.Debt to Equity Swap
The tax years that remain subjectDuring the year ended December 31, 2021 the Company recorded a debt to examination by major taxing jurisdictions are those for the tax yearsequity swap of 2017, 2016 and 2015.
The Company has net operating loss carry forwards of $573,368, which expire commencing$1,647,150 as additional paid in 2035.capital.
9.Subsequent Events Employment agreements
On July 7, 2017, Typenex Co-Investment, LLC elected1, 2021, the Company appointed three independent directors. Effective on July 1, 2021 and thereafter, all directors shall be compensated monthly up to 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 portionrate of warrant # 2ten (10) common shares for each Series A Preferred share.
| F-21 |
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;
| • | shares of common stock valued at | |
| • | Additional shares in order to apply the anti-dilution protection, valued at | |
| • | 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 shares of the Company’s Common Stock, valued at 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 and were stock based compensation.
During the year ended December 31, 2020, the Company settled accrued salary – management of $619,531 and issued shares. As at December 31, 2021 and 2020, the Company recorded and accrued management salaries of $92,229 and $22,300, respectively.
| F-22 |
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 fair market valueFINRA member dated September 22, 2020, and cancelled shares of $5,966.34 into 23,841,344common 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 at an exercise price of $0.000250 per share. 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 | ) | |||||
| F-23 |
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 August 1, 2017, Typenex elected to convert $11,500.00March 31, 2022 the Company sold common shares under a subscription agreement of its convertible promissory note in the principalour Regulation A offering statement for an aggregated amount of $115,000 into 31,944,444$1,000,000. The shares of the company’s common stock at a conversion price of $0.00036.were issued on April, 6, 2022.
On August 14, 2017, Typenex elected to convert $11,750.00 of its convertible promissory note in the principal amount of $115,000 into 32,638,889 shares of the company’s common stock at a conversion price of $0.00036.
On August 25, 2017, Typenex Co-Investment, LLC elected to convert a portion of warrant # 2 with a fair market value of $8,561.35 into 32,885,950 shares of the Company’s common stock, at an exercise price of $0.000260 per share.
On September 19, 2017, Typenex Co-Investment, LLC elected to convert a portion of warrant # 3 with a fair market value of $7,900.46 into 32,885,263 shares of the Company’s common stock, at an exercise price of $0.000240 per share.
On September 27, 2017, Adar Bays elected to convert $5,000.00 of its convertible promissory note in the principal amount of $30,000 into 25,000,000 shares of the company’s common stock at a conversion price of $0.0002.
On September 28, 2017, Typenex Co-Investment, LLC elected to convert a portion of warrant # 3 with a fair market value of $7,889.62 into 32,885,900 shares of the Company’s common stock, at an exercise price of $0.000240 per share.
F-17
| F-24 |
Item 9. Changes inIn 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 PROCEDURES9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s Principal Executive Officer, Mr. Gosselin and Principal Financial Officer, Mr. Engler, evaluatedAs 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, pursuantbeing 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 Rule 13a-15(b)ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”). 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 onupon that evaluation, the Company’s Principalincluding our Chief Executive Officer Principaland Chief Financial Officer, we have concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report, our disclosure controls and procedures were not effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our current Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.annual report.
ManagementManagement’s Annual Report on Internal Control over FinancialFinancing Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system is designed to provide reasonable assurance to our management,reporting (as defined in Rule 13a-15(f) under the BoardSecurities Exchange Act of Directors and investors regarding reliable preparation and presentation of published financial statements. Nonetheless, all internal control systems, no matter how well designed, have inherent limitations. Even systems determined to be effective as of a particular date can only provide reasonable assurance with respect to reliable financial statement preparation and presentation.
A material weakness in internal control over financial reporting is a control deficiency, or a combination of control deficiencies, that result in there being more than a remote likelihood of material misstatement in the annual or interim financial statements would not be prevented or detected.
Our management1934). Management has assessed the effectiveness of our internal control over financial reporting as of June 30, 2017. In making this assessment, management used theDecember 31, 2021 based on criteria set forthestablished in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (COSO)Commission. As a result of 2013. Based on ourthis assessment, we believemanagement concluded that, as of June 30, 2017,December 31, 2021, our internal control over financial reporting was ineffective basednot 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 those criteria, in consideration ofForm 10-K, we have not been able to remediate the material weaknesses described below.
Control environment. We did not maintain an effective control environment. Specifically,identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending December 31, 2022: (i) we did not have an audit committee,appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) we failed to maintain aadopt sufficient complement of skilled personnel in the areas ofwritten 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.
SegregationThis annual report does not include an attestation report of duties. We did not maintain proper segregation of duties. Specifically, due to the limited personnel in the company, proper segregation of duties affecting expenditures, accounts payable, and cash disbursementsour registered public accounting firm regarding internal control over financial reporting. Management’s report was not maintained. Management identified multiple instances where a single employee was responsiblesubject to attestation by our independent registered public accounting firm pursuant to an exemption for custody, initiating, recording, and/or approving transactions, as well as custodynon-accelerated filers set forth in Section 989G of assets.the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Inherent Limitations
Our management, including our Chief Executive Officer and Chief Financial closeOfficer, do not expect that our disclosure controls and reporting. We didprocedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not maintain enough skilled accounting resources supportingabsolute, assurance that the financial closeobjectives 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 reportingthere 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 (i) changes and entry to spreadsheets utilizedthat neither human error nor system weakness has resulted in theerroneous reporting of financial reporting process were properly reviewed, (ii) significant estimates and judgments were adequately supported, reviewed, approved and evaluated against actual experiences, (iii) effective and timely analysis and reconciliation of significant accounts, and (iv) a proper review of period close entries and procedures.data.
Changes in Internal Controls over Financial Reporting
There was a changewere no changes in the Company’sour internal controlscontrol over financial reporting that occurred during the quarterthree month period ended June 30, 2017December 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 isare reasonably likely to materially affect, our internal controlscontrol over financial reporting. The Company appointed a CFO, Mr. Mark Engler, on November 6, 2015.reporting..
Internal control systems, no matter how well designed and operated, have inherent limitations. Therefore, even a system which is determined to be effective cannot provide absolute assurance
Item 9B. Other Information
None
Item 9C. Disclosure Regarding Foreign Jurisdictions that all control issues have been detected or prevented. Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.Prevent Inspections
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None
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
Our directors will serve in that capacity until our next annual shareholder meeting or until their successors are elected and qualified. Officers hold their positions at the will of our board of directors. There are no arrangements, agreements or understandings between non-management security holders and management under which non-management security holders may directly or indirectly participate in or influence the management of our affairs.
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Business Experience
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 accountdescription of the educationbackground and business experience duringof 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 leastCANTV/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 of each director, executive officer and key employee of our company, indicating the person’s principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.
Patrick Gosselin – President, Secretary, Treasurer and Director
Pat’s talent and success in concepts are born out of a unique combination of hands on progressive experience and expertise in developing and implementing strategic objectives while creating business improvement processes and new business relationships. Applications include the analyzing of technical cost savings data, along with the negotiation, implementation and validation of detailed contracts. Pat has been called upon to consult and coach small business in a variety of different genres in the specific areas of project, expense and staff management, planning resource allocation, mediating disputes and sales. Pat spent 8 years training and teaching telecommunications consultants before starting his own successful consulting practice. He has been advising small and medium business customers across North America for the past 15 years.
Pat also has experience in facilitating M&A activities as a consultant for a merger & acquisition firm (enterprise value $10M or less) along with an expert understanding of Merchant Services across North America’s markets. Most recently over the past 5 years, Pat spearheaded the creation of PureSnax, and coordinated the stringent approval process of Xylitol for use in peanut and tree nut free manufacturing facilities securing the ability to use Xylitol in a large scale manufacturing environment. He also established the framework for sales and distribution of healthy snacks and food products throughout North America through setting up an EDI portal, GS1 compliant barcodes and systems, and developing several key relationships.
In his younger formative years, Pat had a prolific baseball career as a member of Championship winning teams between 1986 and 1990. He became a member of Baseball Canada’s junior team in 1990 and was ultimately drafted by the Pittsburgh Pirates in 1993. After a short stint in the minor leagues, Pat returned to school to complete his formal education. A graduate with a degree in Arts and Psychology from the University of Sherbrooke, Mr. Gosselin is fluent in English and French.
Mark Engler – CFO
Mark Engler provides leadership, sought after advice and direction in the areas of finance, accounting, investor relations, business and corporate development, business structure and operations for both public and private companies. Through his extensive knowledge and experience, he helps build high performing organizations that achieve predictable results. He is focused on annual and long-term financial planning, business unit analytics, and company-wide execution of strategic objectives. His specialties include merger and acquisition consultation, forensic accounting, corporate accounting, corporate tax regulation, and corporate tax preparation.
Mark began his career with the Internal Revenue Service Agency (IRS) as a Senior Field Revenue Agent where he investigated and performed audits specifically on large corporate tax payers and high profile individuals. Since leaving the IRS in 1977, Mark has been in private practice using his knowledge and expertise to help his corporate clients navigate the stringent rules and regulations of corporate tax law. He also represents clients in front of the IRS and other tax governing authorities in tax audits, appeals, as well as criminal and civil tax litigation when necessary. His deep knowledge and understanding of forensic accounting and tax law provides Mark with a unique perspective allowing him to deliver high results and long lasting value for each of his clients.
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Other Directorships
None of our directors hold 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 sectionSection 15(d) of suchthe Exchange Act or any company registered as an investment company under the Investment Company Act of 1940.
Our officers and directors or any affiliates ofWe believe that Mr. Iglesias is qualified to serve on our company have not been previously involved in the management or ownership of have not acted as a promoter or in which they have a controlling interest in any other previous registration statement of companies. Therefore, there are no companies that are viable or dormant and which businesses have been modified and restated from that described in their offering documents, and the sole officer and director have no connection to companies that are still actively reporting with the United States Securities and Exchange Commission.
Board of Directors and Director Nomineesbecause of his wealth of experience in the telecom industry.
SinceAlvaro 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.
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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.
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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 does not include a majority of independent directors, the decisions ofand hold office until removed by the board, regarding director nominees are made by persons who have an interest in the outcome of the determination. The board will consider candidates for directors proposed by security holders, although no formal procedures for submitting candidates have been adopted. Unless otherwise determined, at any time not less than 90 days priorsubject to the next annual board meeting at which the slate of director nominees is adopted, the board will accept written submissions from proposed nominees that include the name, address and telephone number of the proposed nominee; a brief statement of the nominee’s qualifications to serve as a director; and a statement as to why the security holder submitting the proposed nominee believes that the nomination would be in the best interests of our security holders. If the proposed nominee is not the same person as the security holder submitting the name of the nominee, a letter from the nominee agreeing to the submission of his or her name for consideration should be provided at the time of submission. The letter should be accompanied by a résumé supporting the nominee's qualifications to serve on the board, as well as a list of references.
The board identifies director nominees through a combination of referrals from different people, including management, existing board members and security holders. Once a candidate has been identified, the board reviews the individual's experience and background and may discuss the proposed nominee with the source of the recommendation. If the board believes it to be appropriate, board members may meet with the proposed nominee before making a final determination whether to include the proposed nominee as a member of the slate of director nominees submitted to security holders for election to the board.
Some of the factors which the board considers when evaluating proposed nominees include their knowledge of and experience in business matters, finance, capital markets and mergers and acquisitions. The board may request additional information from each candidate prior to reaching a determination. The board is under no obligation to formally respond to all recommendations, although as a matter of practice, it will endeavor to do so.
Conflicts of Interest
Our directors are not obligated to commit their full time and attention to our business and, accordingly, they may encounter a conflict of interest in allocating time between our operations and those of other businesses. In the course of their other business activities, they may become aware of investment and business opportunities which may be appropriate for presentation to us as well as other entities to which they owe a fiduciary duty. As a result, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. They may also in the future become affiliated with entities, engaged in business activities similar to those we intend to conduct. In general, officers and directors of a corporation are required to present business opportunities to a corporation if:
the corporation could financially undertake the opportunity;
the opportunity is within the corporation’s line of business; and
it would be unfair to the corporation and its stockholders not to bring the opportunity to the attention of the corporation.
We plan to adopt a code of ethics that obligates our directors, officers and employees to disclose potential conflicts of interest and prohibits those persons from engaging in such transactions without our consent.respective employment agreements.
Significant Employees
We have no significant employees other than our officers and directors.
Family Relationships
There are no individuals other than ourfamily relationships between or among the directors, executive officers who make a significant contributionor persons nominated or chosen by us to our business.become directors or executive officers.
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Involvement in Certain Legal Proceedings
ToDuring the best of our knowledge,past 10 years, none of our current directors, nominees for directors or current executive officers has during the past ten years:
been involved in any legal proceeding identified in Item 401(f) of Regulation S-K, including:
1. been convictedAny 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 beenbeing named a subject toof a pending criminal proceeding (excluding traffic violations and other minor offences)offenses);
2. had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
3. beenBeing subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, or federal or state authority, 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;
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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 his involvementfor more than 60 days the right of such person to engage in any type of business regulated by the Commodity Futures Trading Commission, securities, futures, commodities, investment, banking, savings and loan,insurance or insurancebanking activities, or to be associated with persons engaged in any such activity;
4. been5. Being found by a court of competent jurisdiction in a civil action or by the SecuritiesSEC to have violated any Federal or State securities law, and Exchangethe 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 a federal or state securities orany 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;
5. been the7. Being subject of,to, or a party to, any federalFederal or stateState judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federalof:
i. Any Federal or stateState securities or commodities law or regulation, anyregulation; 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,order; or any
iii. Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or been the
8. Being subject of,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.
Compliance with Section 16(a)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 Securities Exchange Actdirector’s immediate family, and other entities with which the director is affiliated, on the other hand. The purpose of 1934such 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 common stock is not registered pursuant to 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 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, our officers, directors, and principal stockholders are not subject to the beneficial ownership reporting requirements of 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act.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.
Family Relationships
There are no family relationships among our officers, directors, or persons nominated for such positions.
Code of Ethics
We havedo not adoptedhave a code of ethics that appliesbut we plan to our officers, directors and employees. When we do adopt a code of ethics, we will disclose it in a Current Report on Form 8-K.one this fiscal year.
Audit Committee and Audit Committee Financial Expert
We do not currently have an audit committee or a committee performing similar functions. The board of directors as a whole participates in the review of financial statements and disclosure.
Our board of directors has determined that it does not have a member of its audit committee that qualifies as an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K, and is “independent” as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.
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We believe that the sole member of our board of directors is capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. We believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated any material revenues to date. In addition, we currently do not have nominating, compensation or audit committees or committees performing similar functions nor do we have a written nominating, compensation or audit committee charter. Our sole director does not believe that it is necessary to have such committees because believes the functions of such committees can be adequately performed by the sole member of our board of directors.
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Item 11. Executive Compensation
The particulars of thetable below summarizes all compensation paid to the following persons:
(a)our principal executive officer;
(b)our CFO
(c) each of our two most highly compensated executive officers who were serving as executive officers at the end of the years ended June 30, 2017 and 2016; and
(d)up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the years ended June 30, 2017 and 2016; who we will collectively refer to as the named executive officers of our company, are set out in the following summary compensation table, except that no disclosure is provided for any named executive officer, other than our principal executive officers, whose total compensation did not exceed $100,000 for the respective fiscal year:
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(1)We have omitted certain columns in the summary compensation table pursuant to Item 402(a)(5) of Regulation S-K as no compensation was awarded to, earned by, or paid to our former or current executive officers for the fiscal years ended December 31, 2020 and 2020.
Name and principal Position | Year | Salary ($) | 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 directors requirednewly created Series A Preferred Stock. For common shares, the amount of accrued salary to be reported in that table or column inconverted 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 fiscal year covered by that table. 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.
(2)The amended employment agreement in favor of Mr. Gosselin was appointed asQuintana 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 sole officercommon 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 director on April 30, 2015. 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.
(3)Mark Engler was appointed asThe 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 CFO on November 6, 2015. 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%.
(4)Restituto Cenia was appointed as our president, secretary, treasurer and director on May 14, 2013.
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(5)Anna Jones was appointed as our president, secretary, treasurer and director on June 24, 2011. She resigned on May 14, 2013
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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.
Management Agreements
We have not entered into any management agreements with any of our executive officers.
Compensation of Directors
None.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. Related Party Transactionsoutstanding.
NoneItem 12. Security Ownership of the directors or executive officersCertain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth, as of the Company, nor anyMarch 8, 2022, certain information as to shares of our voting stock owned by (i) each person who owned of record or was known by us to beneficially own beneficially more than 5% of the Company’sour 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 its commonvoting stock, norexcept 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 associateother purpose. Under these rules, beneficial ownership includes any shares as to which the individual or affiliateentity 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 such personsany stock option, warrant or companies, has any material interest,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 in any transaction that has occurred during the past fiscal year, or in any proposed transaction, which has materially affected or will affect the Company.beneficial owner.
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| 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 | % | |||||
With regard to any future related party transaction, we plan to fully disclose any and all related party transactions
| 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 following manner: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.
Disclosing such transactions in reports where required;
Disclosing in(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 all filings withalso any shares which the SEC, where required;
Obtaining disinterested directors consent; and
Obtaining shareholder consent where required. 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.
Director Independence
For purposes of determining director independence, we have applied the definitions set out in NASDAQ Rule 5605(a)(2). The OTCBB on which shares(3) Pursuant to Rules 13d-3 and 13d-5 of the Company’s Common Stock are quoted does not haveExchange Act, beneficial ownership includes any director independence requirements. The NASDAQ definition of “Independent Director” meansshares as to which a person other than an Executive Officershareholder has sole or employeeshared voting power or investment power, and also any other individual having a relationship,shares which in the opinion ofshareholder has the Board of Directors, would interfere with theright to acquire within 60 days, including upon exercise of independent judgment in carrying out the responsibilitiescommon shares purchase options or warrants. The percent of a director.
According to the NASDAQ definition, we have no independent directors.
Review, Approval or Ratificationclass is based on 10,000 voting shares as of Transactions with Related PersonsMarch 8, 2022.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
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Item 13. Certain Relationships and Related Transactions, and Director Independence
Except as disclosed herein, no director, executive officer, shareholder holding at least 5% of shares of our common stock,Other than described below or any family member thereof, had any material interest, direct or indirect,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 proposed transaction since the year ended June 30, 2017,series of similar transactions to which we were or will be a participant in which the amount involved in the transaction exceeded or exceedswill exceed the lesser of $120,000 or one percent of the average of our total assets at the year-end for the last threetwo completed fiscal years.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.
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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.
Director IndependenceDue to related parties
We currently act with one director, Patrick Gosselin. We have determined that our director is not an “independent director”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 $1,647,150 as definedadditional paid in NASDAQ Marketplace Rule 4200(a)(15).capital.
Item 14. Principal AccountAccounting Fees and Services
The following table presentsBelow are tables of Audit Fees (amounts in US$) billed by our auditors in connection with the fees for professional audit services rendered by Boyle CPA, LLC, for the auditaudits of the Company’s annual financial statements for the fiscal years ended June 30, 2017 and 2016ended:
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| June 30, 2017 |
| June 30, 2016 |
Audit fees(1) | $ | 10,000 | $ | 7,000 |
Audit-related fees |
| - |
| - |
Tax fees |
| - |
| - |
All other fees |
| - |
| - |
Total Fees | $ | 10,000 | $ | 10,000 |
| 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 | |||||||||
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Notes:
(1)Audit fees consist of audit and review services, consents and review of documents filed with the SEC.
In its capacity, the Board pre-approves all audit (including audit-related) and permitted non-audit services to be performed by the independent auditors. The Board will annually approve the scope and fee estimates for the year-end audit to be performed by the Company’s independent auditors for the fiscal year. With respect to other permitted services, the Board pre-approves specific engagements, projects and categories of services on a fiscal year basis, subject to individual project and annual maximums. To date, the Company has not engaged its auditors to perform any non-audit related services.
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PART IV
Item 15. Exhibits, Financial StatementStatements Schedules
(a) Financial Statements
(1) Financial statements for our company are listed in the index under Item 8 of this document.
(2) All financial statement schedules are omitted because they are not applicable, not material or the required information is shown in the financial statements or notes thereto.
(b) Exhibits
| (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)
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Filed herewith**
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* Filed herewith.
** Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.Item 16. Form 10-K Summary
None
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, theretothereunto duly authorized.
| IQSTEL Inc. | ||
| By: | /s/ Leandro Iglesias | |
Leandro Iglesias |
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| 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.
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| By: | /s/ Leandro Iglesias | |
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| April 15, 2022 |
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| Date: | April 15, 2022 |
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