Item 1A. Risk Factors
Item 1A. Risk Factors
Risks Relating to Business and Financial Condition
Our business, operating results or financial condition could
be materially adversely affected by any of the following risks.
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.
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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.
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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.
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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
The disclosures concerning our properties are contained in Item 1 Business
above and incorporated herein by reference.
Item 3. Legal Proceedings
We have no current legal proceedings.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.