10-K: iQSTEL Inc. Reports 55% Revenue Increase in 2023 Annual Results, Despite Ongoing Losses

iQSTEL Inc. saw a significant 55% increase in revenue in 2023, reaching $144.5 million, but still reported a net loss for the year.

Summary

• iQSTEL Inc. reported a substantial 55% increase in revenue, reaching $144,502,351 for the year ended December 31, 2023, compared to $93,203,532 in 2022.
• The company's voice services contributed 46.85% of the total revenue in 2023, while SMS services accounted for 53.15%.
• iQSTEL's subsidiaries carried 4.2 billion minutes of voice traffic in 2023, a 56% increase from 2.7 billion minutes in 2022.
• SMS traffic increased by 32.94%, with 11.3 billion SMS and short codes carried in 2023 compared to 8.5 billion in 2022.
• The company's gross margin improved to 3.23% in 2023 from 1.92% in 2022, with gross profit increasing to $4,672,013 from $1,791,516.
• Operating expenses remained relatively stable at $4,987,516 in 2023 compared to $4,983,176 in 2022.
• iQSTEL reported a net loss of $219,436 for 2023, a significant improvement from the $5,865,761 loss in 2022.
• The company had a positive working capital of $1,878,228 and a current ratio of 1.14 to 1 as of December 31, 2023.
• iQSTEL's auditors have expressed substantial doubt about the company's ability to continue as a going concern due to recurring losses and dependence on external financing.

Sentiment

Score: 4

Explanation: While the company shows strong revenue growth, the going concern warning, ongoing losses, and internal control weaknesses significantly dampen the positive aspects. The need for further capital raises also adds to the uncertainty.

Positives

• The company experienced a significant increase in revenue, demonstrating strong growth in its core business.
• There was a substantial improvement in gross margin, indicating better profitability on sales.
• The company significantly reduced its net loss compared to the previous year.
• iQSTEL achieved a positive working capital and improved its current ratio, suggesting better short-term financial health.

Negatives

• The company continues to operate at a loss, raising concerns about its long-term financial sustainability.
• The auditors have expressed substantial doubt about the company's ability to continue as a going concern.
• iQSTEL is dependent on external financing to continue operations.
• The company has identified material weaknesses in its internal control over financial reporting.

Risks

• The company's auditor has issued a going concern opinion, indicating significant financial uncertainty.
• iQSTEL has a limited operating history, making it difficult to evaluate its long-term prospects.
• The company is dependent on outside financing and may not be able to secure additional funds.
• The telecommunications industry is highly competitive and sensitive to price declines.
• The company faces intense competition and pricing pressure from competitors.
• iQSTEL's operating results may fluctuate due to various factors, including economic conditions and regulatory changes.
• The company relies on carrier agreements, which may not be renewed or may be terminated.
• iQSTEL's customers could experience financial difficulties, affecting the company's receivables.
• The company may fail to successfully integrate acquisitions or benefit from pursuing them.
• Natural disasters, cyber-attacks, or other disruptions could harm the company's operations.
• iQSTEL operates a global business, exposing it to currency, economic, and regulatory risks.
• The company may be subject to securities litigation, tax audits, and regulatory audits.
• Changes in regulations or user concerns regarding privacy and data protection could adversely affect the business.
• The company may be subject to legal liability associated with providing online services or content.
• Nevada law and anti-takeover provisions could entrench management or delay a change in control.
• The company is no longer an emerging growth company and is subject to increased reporting requirements.
• The company may be unable to maintain an effective system of internal control over financial reporting.
• The company's disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
• The company has the right to issue additional common and preferred stock, diluting investors' ownership.
• The company's largest shareholders have substantial control over the company and its policies.
• The company does not expect to pay dividends in the foreseeable future.
• The market price of the company's common stock is likely to be highly volatile.
• The company is subject to penny stock rules, which may reduce trading activity.
• The company will likely conduct further offerings of its equity securities, diluting existing shareholders.

Future Outlook

The company intends to fund operations through increased sales and debt and/or equity financing arrangements. iQSTEL has received the qualification of an Offering Statement under Form S-1 for the sale of up to 15,000,000 common stocks and plans to seek additional financing in a private equity offering.

Management Comments

• Management is focused on strengthening commercial and operating activities and pursuing new acquisitions.
• 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.

Industry Context

The telecommunications industry is characterized by intense price competition and rapid technological changes. The continued growth of Over-The-Top calling and messaging services is impacting traditional phone communications. The global A2P SMS market is expected to grow at a CAGR of 4.1% to account for US$ 101 billion in 2030.

Comparison to Industry Standards

• While iQSTEL's revenue growth is notable, many telecom companies, including larger players, face challenges in achieving profitability.
• The company's gross margin of 3.23% is relatively low compared to industry benchmarks, indicating potential for improvement in cost management.
• The company's reliance on a small number of large customers (12 customers accounting for 89% of revenue) is a risk, as is common in the wholesale telecom sector.
• The company's focus on emerging markets aligns with industry trends, but also exposes it to higher risks.
• The company's expansion into Fintech, EV, and Metaverse is a diversification strategy, but these are still in pre-revenue stages.

Management Changes

Related Party Transactions

• The company had amounts due from related parties of $340,515 and $326,324 as of December 31, 2023 and 2022, respectively.
• The company had amounts due to related parties of $26,613 as of December 31, 2023 and 2022.

Stakeholder Impact

• Shareholders face significant risks due to the company's going concern status and potential dilution from future equity offerings.
• Employees may be affected by the company's financial instability and potential restructuring.
• Customers may be impacted by potential service disruptions or changes in pricing.
• Suppliers and creditors face increased risk due to the company's financial challenges.

Next Steps

• The company plans to enhance and improve the design of its internal control over financial reporting.
• The company intends to fund operations through increased sales and debt and/or equity financing arrangements.
• The company will continue to develop its new business lines in Fintech, EV, and Metaverse.

Key Dates

Keywords

Telecommunications, VoIP, SMS, Fintech, Electric Vehicles, Metaverse, International Carrier, Revenue Growth, Financial Results, Acquisitions, Going Concern, Internal Controls