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NOTE 11 – ACQUISITION

9 Months Ended

Sep. 30, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

NOTE 11 – ACQUISITION

NOTE 11 – ACQUISITION

On January 19, 2024, we entered into a Share Purchase Agreement (“Purchase Agreement”) with Yukon River Holdings, Ltd. (“Yukon River”), a corporation formed under the laws of the British Virgin Islands (“Seller”) concerning the contemplated sale by Seller and the purchase by us of 51% of the ordinary shares Seller holds in QXTEL LIMITED (“QXTEL”), a company incorporated in England and Wales.

The purchase price (the “Purchase Price”) payable to the Seller for the shares is $5,000,000. Upon the execution of the Purchase Agreement, we agreed to deposit $1,500,000 of the Purchase Price into the trust account of a law firm acting as escrow agent (the “Escrow Agent”) as a nonrefundable deposit to evidence our good faith intention to purchase the shares, which was credited against the Purchase Price.

At closing, in addition to the $1,500,000 with the Escrow Agent that formed part of the Purchase Price, we were required to pay $1,500,000 in cash and $2,000,000 to the Seller, either (A) in the form of a promissory note (the “Promissory Note”), or (B) by the delivery of iQSTEL shares to Seller. Seller could decide the form of payment between the Promissory Note or the shares of iQSTEL, and if a Promissory Note was chosen, we agreed to allow Seller the option to exchange the Promissory Note for shares of iQSTEL. On June 27, 2024, we entered into a second amendment to the Purchase Agreement (the “Amendment”) that required us to issue an amended and restated promissory note to the Seller. We had paid down $200,000 of the note, so the amended and restated promissory note was issued in the principal amount of US $1,800,000. The amended and restated promissory note also changed the payment structure, from installment payments of $200,000 for each of the months of May through November ($1,400,000) with a balloon payment of $600,000, to monthly installments of $75,000 plus interest during 2024, and $212,500 plus interest during the first 6 months of 2025.  We also revised the Earnout Payment due to the Seller. The Earnout Payment was redefined at $721,035 net income, to be achieved in Q2, Q3 and Q4 of 2024. The $1,000,000 payment that IQSTEL has to pay upon achievement of the Earnout Payment will be paid during the first half of 2025, in monthly installments.

During the nine months ended September 30, 2024, the Company repaid $500,000 on the Promissory Note.

The acquisition was closed on April 1, 2024. QXTEL has been included in our consolidated results of operations since the acquisition date.

The following table summarizes the fair value of the consideration paid by the Company:

		April 1,
Fair Value of Consideration:		2024
Cash		$	3,000,000
Promissory note			2,000,000
Contingent liability			1,000,000
Total Purchase Price		$	6,000,000

The following table summarizes the preliminary identifiable assets acquired and liabilities assumed upon acquisition of QXTEL and the calculation of goodwill:

Total purchase price		$	6,000,000
Cash			769,879
Accounts receivable			14,946,919
Due from related party			208,550
Other asset			214,564
Equipment			30,963
Total identifiable assets			16,170,875
Accounts payable			(14,796,505	)
Other current liabilities			(403,584	)
Total liabilities assumed			(15,200,089	)
Net assets			970,786
Non-controlling interest - 49%			475,685
Total net assets			495,101
Goodwill		$	5,504,899

Unaudited combined proforma results of operations for the nine months ended September 30, 2024 and 2023 as though the Company acquired QXTEL on January 1, 2023, are set forth below:

		Nine Months Ended
		September 30,
		2024				2023
Revenues		$	212,029,873			$	156,944,034
Cost of revenues			205,899,685				150,745,335
Gross profit			6,130,188				6,198,699
Operating expenses			6,773,339				5,747,451
Operating loss			(643,151	)			451,248
Other income (expense)			(2,646,275	)			224,938
Income tax			(134,880	)			(203,975	)
Net income (loss)		$	(3,424,306	)		$	472,211

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- Definition

The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings.

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-Topic 805
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org/805/tableOfContent

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-Topic 205
-SubTopic 20
-Name Accounting Standards Codification
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