S-1: iQSTEL Files for Resale of 32.2 Million Common Shares Amidst Going Concern Concerns

iQSTEL Inc. has filed a registration statement for the resale of up to 32,222,222 shares of its common stock by selling shareholders, while also acknowledging substantial doubt about its ability to continue as a going concern.

Summary

• iQSTEL Inc. has filed a Form S-1 registration statement with the SEC to allow selling shareholders to resell up to 32,222,222 shares of the company's common stock.
• The shares include 2,020,202 currently outstanding, 20,202,020 issuable upon conversion of a secured convertible promissory note, and 10,000,000 issuable upon exercise of a common stock purchase option.
• iQSTEL will not receive any proceeds from the resale of common stock or the conversion of the note, but will receive cash from the sale of the option if it is exercised, which they intend to use as working capital.
• The company's common stock is quoted on the OTCQX Market under the symbol IQST, with the last reported sale price on February 9, 2024, at $0.261 per share.
• The company's auditor has issued a going concern opinion, citing recurring losses from operations and an accumulated deficit of $25,960,018 as of September 30, 2023.
• iQSTEL's ability to continue as a going concern is dependent on raising capital, increasing revenue, and managing operating expenses.
• The company anticipates needing $1,750,000 for acquisitions to fully implement its business plan.
• iQSTEL is a technology company with a presence in 19 countries, offering services through its Telecom, Fintech, Blockchain, EV, and AI-Enhanced Metaverse divisions.
• The Telecom Division represents the majority of current operations and revenue.
• The company faces risks related to its financial condition, business operations, legal uncertainties, and the market for its stock.

Sentiment

Score: 3

Explanation: The document presents a mixed picture. While the company is pursuing growth initiatives and has a presence in multiple technology sectors, the going concern opinion and dependence on external financing raise significant concerns. The potential for dilution from future equity offerings and the volatility of the stock price further contribute to a negative sentiment.

Positives

• iQSTEL operates in multiple technology sectors, including Telecom, Fintech, Blockchain, EV, and AI-Enhanced Metaverse, potentially diversifying its revenue streams.
• The company has a global presence in 19 countries.
• The company intends to use the proceeds from the sale of the option, if exercised, for working capital.

Negatives

• The company has an accumulated deficit of $25,960,018 as of September 30, 2023.
• The auditor has issued a going concern opinion, raising doubts about the company's ability to continue operating.
• The company is dependent on raising capital from financing transactions, increasing revenue, and keeping operating expenses below revenue levels.
• The company's telecommunications business is sensitive to declining prices.
• The company faces intense competition in all of its product lines.
• The company's largest shareholders, officers and directors and related parties, Leandro Iglesias and Alvaro Cardona, have substantial control over the company and its policies as a result of their holdings in Series A Preferred Stock, and will be able to influence all corporate matters, which might not be in other shareholders interests.

Risks

• The company's auditor has issued a going concern opinion, indicating a significant risk to the company's ability to continue operations.
• The company is dependent on outside financing for the continuation of its operations.
• The telecommunications business is highly sensitive to declining prices.
• The company faces intense competitive challenges, including rapid technological changes, and pricing pressure from competitors.
• The company's operating results may fluctuate, which could have a negative impact on its ability to grow its client base, establish sustainable revenues and succeed overall.
• The termination of carrier agreements or the inability to enter into new carrier agreements in the future could materially and adversely affect the company's ability to compete.
• The company's customers could experience financial difficulties, which could adversely affect the company's revenues and profitability if the company experiences difficulties in collecting its receivables.
• The company may fail to successfully integrate its acquisitions or otherwise be unable to benefit from pursuing acquisitions.
• Natural disasters, terrorist acts, acts of war, cyber-attacks or other breaches of network or information technology security may cause equipment failures or disrupt the company's operations.
• The company operates a global business that exposes it to currency, economic and regulatory risks.
• If the company is unable to successfully manage growth, its operations could be adversely affected.
• The company may be subject to securities litigation, which is expensive and could divert management attention.
• The company may be subject to tax and regulatory audits which could subject it to liabilities.
• The company's global operations subject it to many different and complex laws and rules, and it may face difficulty in compliance.
• Changes in regulations or user concerns regarding privacy and protection of user data, or any failure to comply with such laws, could adversely affect the company's business.
• The company may be subject to legal liability associated with providing online services or content.
• Nevada law and certain anti-takeover provisions of the company's corporate documents could entrench its management or delay or prevent a third party from acquiring it or a change in control even if it would benefit its shareholders.
• The company is no longer an emerging growth company and therefore no longer eligible for reduced reporting requirements applicable to emerging growth companies.
• As a smaller reporting company and will be exempt from certain disclosure requirements, which could make its Common Stock less attractive to potential investors.
• If the company fails to maintain an effective system of internal control over financial reporting in the future, it may not be able to accurately report its financial condition, results of operations or cash flows, which may adversely affect investor confidence in it and, as a result, the value of its common shares.
• The company's disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
• Deficiencies in disclosure controls and procedures and internal control over financial reporting could result in a material misstatement in the company's financial statements.
• The company has the right to issue additional common stock and preferred stock without consent of stockholders.
• The company's largest shareholders, officers and directors and related parties, Leandro Iglesias and Alvaro Cardona, have substantial control over the company and its policies as a result of their holdings in Series A Preferred Stock, and will be able to influence all corporate matters, which might not be in other shareholders interests.
• The company does not expect to pay dividends in the foreseeable future.
• If a market for the company's common stock does not develop, shareholders may be unable to sell their shares.
• The market price of the company's common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond its control.
• Because the company is subject to the Penny Stock rules, the level of trading activity in its stock may be reduced.
• The company will likely conduct further offerings of its equity securities in the future, in which case your proportionate interest may become diluted.
• If securities or industry analysts do not publish research or reports about the company's business, or publish negative reports about its business, its share price and trading volume could decline.

Future Outlook

The company's future is dependent on raising capital from financing transactions, increasing revenue, and keeping operating expenses below revenue levels in order to achieve positive cash flows.

Industry Context

The document indicates that the telecommunications industry is characterized by intense price competition and 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.

Related Party Transactions

• As of September 30, 2023, the Company had amounts due from related parties of $427,194.
• As of September 30, 2023, the Company had amounts due to related parties of $26,613.

Stakeholder Impact

• Shareholders face the risk of dilution from future equity offerings and potential loss of investment due to the company's financial condition.
• Employees' job security may be uncertain due to the company's going concern status.
• Customers may be concerned about the company's ability to provide ongoing services and support.
• Suppliers and creditors face increased risk of non-payment due to the company's financial difficulties.

Next Steps

• The selling shareholders may offer and sell the shares of common stock described in the prospectus in a number of different ways and at varying prices.
• The company may raise additional capital through future public or private offerings of its stock or through loans from investors.
• The company will need to improve and expand operations, including its financial and management information systems, and to recruit, train and manage sales personnel.

Key Dates

Keywords

iQSTEL, common stock, resale, registration statement, selling shareholders, convertible note, stock option, OTCQX, going concern, financial condition, telecommunications, fintech, blockchain, electric vehicle, metaverse