iQSTEL Inc - Quarter Report: 2018 September (Form 10-Q)

iQSTEL INC

Consolidated Balance Sheets

(Unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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iQSTEL INC

Consolidated Statements of Operations

(Unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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iQSTEL INC

Consolidated Statements of Cash Flows

(Unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

September 30, 2018

NOTE 1 -ORGANIZATION AND DESCRIPTION OF BUSINESS

Organization and Operations

The Company has been engaged in the business of telecommunication services as a wholesale carrier of voice and data for other telecom companies around the World with more than 150 active interconnection agreements with mobile companies, fix line companies and other wholesale carriers.

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.

In the opinion of the company’s management, the accompanying unaudited interim financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the company as of September 30, 2018 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended September 30, 2018 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited financial statements should be read in conjunction with the financial statements and related notes thereto included in the company’s Annual Report on Form 10-K for the year ended September 30, 2018 filed with the SEC on November 14, 2018.

Consolidation Policy

For September 30, 2018, the consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiary, Etelix.com USA, LLC. All significant intercompany balances and transactions have been eliminated in consolidation. Prior to June 25, 2018, the financial statements presented are those of Etelix.

Use of Estimates

The preparation of financial statements in conformity with GAAP in the United States of America 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 statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.

Accounts Receivable and Allowance for Uncollectible Accounts

Substantially all of the Company’s accounts receivable balance is related to 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 reviews its allowance for doubtful accounts daily, past due balances over 60 days and a 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. As of September 30, 2018, and June 30, 2018, the Company had no valuation allowance for doubtful accounts for the Company’s accounts receivable and recorded no bad debt expense.

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iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

September 30, 2018

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Concentrations of Credit Risk

The Company’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 three months ended September 30, 2018 and 2017, four customers represented 64% of our revenues and fourteen customer represented 64% of our revenues, respectively.

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.

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 expenses; accounts payable and other payable and due 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.

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iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

September 30, 2018

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition

The Company recognizes revenue from the sale of products in accordance with ASC 606, “Revenue from Contracts with Customers.” The Company recognizes revenue only when all of the following criteria have been met:

Identify the contract(s) with a customer  

Identify the performance obligations in the contract  

Determine the transaction price.  

Allocate the transaction price to the performance obligations in the contract.  

Recognize revenue when (or as) the entity satisfies a performance obligation. 

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 existed, and collection was reasonably assured. Persuasive evidence of a sales arrangement existed upon execution of a written interconnection agreement. The Company’s payment terms vary by clients.

Recent Accounting Pronouncements

Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.

NOTE 3 - GOING CONCERN

The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company does not have significant cash, nor does it have an established source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern. In addition, as of September 30, 2018, the Company had a net loss of $503,595. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. The 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 and marketing expenses. 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.

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iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

September 30, 2018

NOTE 4 – OTHER CURRENT ASSETS

Other current assets at September 30, 2018 and June 30, 2018 consist of the following:

NOTE 5 – FIXED ASSETS, NET

Fixed assets, net at September 30, 2018 and June 30, 2018 consist of the following:

Depreciation expense for the three months ended September 30, 2018 and 2017 amounted to $18,449 and $23,861, respectively.

NOTE 6 –LOANS PAYABLE

Loans payable at September 30, 2018 and June 30, 2018 consist of the following:

During the three months ended September 30, 2018 and 2017, the Company recorded interest expenses of $119,755 and $96,921, respectively.

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iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

September 30, 2018

NOTE 6 –LOANS PAYABLE (CONTINUED)

During the three months ended September 30, 2018 and 2017, the Company borrowed $203,689 and $225,342, respectively, and repaid the principal amount of $228,246 and $171,163 and interest expense of $101,314 and $81,065, respectively.

NOTE 7 – OTHER CURRENT LIABILITIES

Other current liabilities at September 30, 2018 and June 30, 2018 consist of the following:

NOTE 8 _ CONVERTIBLE LOANS

At September 30, 2018 and June 30, 2018, convertible loans consisted of the following:

During the three months ended September 30, 2018 and 2017, the Company recognized amortization of discount, included in interest expense, of $13,447 and $0, respectively.

Promissory Notes - Issued in fiscal year 2019

During the three months ended September 30, 2018, the Company issued a total of $75,000 notes with the following terms:

Terms ranging from 9 months to 12 months. 

Annual interest rates of 10%. 

Convertible at the option of the holders at issuance. 

Conversion prices are typically based on the discounted (50% discount) lowest trading prices of the Company’s shares during various periods prior to conversion. 

Certain notes allow the Company to redeem the notes at rates ranging from 130% to 140% depending on the redemption date provided that no redemption is allowed after the 180th day. Likewise, the notes include financing costs totaling to $2,750 and the Company received cash of $72,250. Convertible notes are currently in default.

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iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

September 30, 2018

NOTE 8 _ CONVERTIBLE LOANS (CONTINUED)

Derivative liabilities

The Company determined that the exercise feature of the warrants met the definition of a liability in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock. The Company will bifurcate the embedded conversion option in the note once the note becomes convertible and account for it as a derivative liability.

The Company valued the conversion features using the Black Scholes valuation model. The fair value of the derivative liability for all the note and warrants that became convertible for the three months ended September 30, 2018 amounted to $588,818. $72,250 of the value assigned to the derivative liability was recognized as a debt discount to the notes while the balance of $516,568 was recognized as a “day 1” derivative loss.

NOTE 9 - DERIVATIVE LIABILITIES

The Company analyzed the conversion option for derivative accounting consideration under ASC 815, Derivatives and Hedging, 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 September 30, 2018. 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 three months ended September 30, 2018, the estimated fair values of the liabilities measured on a recurring basis are as follows:

The following table summarizes the changes in the derivative liabilities during the three months ended September 30, 2018:

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iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

September 30, 2018

NOTE 9 - DERIVATIVE LIABILITIES (CONTINUED)

The aggregate loss on derivatives during the three months ended September 30, 2018 and 2017 was as follows;

NOTE 10 – SHAREHOLDERS’ EQUITY

During the three months ended September 30, 2018, the Company issued 11,718 shares valued at $25,000 for the consulting services.

As of September 30, 2018 and June 30, 2018, 15,014,317 and 15,002,598 shares of common stock were issued and outstanding, respectively.

Subscription receivable

During the three months ended September 30, 2018, the company received $7,500 from unrelated investors for 350,000 shares of common stock subscribed for at $0.025 per share.

NOTE 11 - RELATED PARTY TRANSACTIONS

Loans payable – related parties

Due to related parties

As of September 30, 2018 and June 30, 2018, the Company had due to related parties of $23,193 and $26,593, respectively. The loans are unsecured, non-interest bearing and due on demand.

Employment agreements

On June 25, 2018, 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 $54,000; (ii) Juan Carlos Lopez Silva as Chief Commercial Officer with an annual salary of $54,000; and Alvaro Quintana Cardona as Chief Operating Officer and Chief Financial Officer with an annual salary of $30,000. 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.

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iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

September 30, 2018

NOTE 11 - RELATED PARTY TRANSACTIONS (CONTINUED)

Employment agreements (continued)

During the three months ended September 30, 2018 and September 30, 2017, the Company record management fees of $34,500 and $0, respectively. As at September 30, 2018 and June 30, 2018, the Company accrued management salaries of $30,000 and $138,297, respectively.

NOTE 12 - SUBSEQUENT EVENTS

Subsequent to September 30, 2018 and through the date that these financials were made available, the Company had the following subsequent events:

On October 1, 2018, we issued a convertible note in the principal amount of $30,000. The convertible note has a term of nine months, accrues interest at 10% annually and the balance outstanding thereunder is convertible into the Company’s common stock at a price equal the lesser of (i) 50% multiplied by the lowest trading price during the previous twenty days before the issue date of this Note and (ii) 50% multiplied by the lowest trading price for the common stock during the twenty days period ending on the latest complete trading day prior to the conversion date. The Note in currently in default.

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Forward-Looking Statements

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” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. 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. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Overview

We are a technology company offering a wide array of services to the telecommunications and internet industry. We currently offer, through our wholly owned subsidiary, Etelix.com USA LLC, international long-distance voice services for telecommunications operators (ILD Wholesale), and submarine fiber optic network capacity for Internet (4G and 5G).

Etelix.com USA LLC is based in the city of Miami, Florida; founded in 2008 and holder of an International Telecommunications Carrier 214-license issued by the Federal Telecommunications Commission (FCC).

In addition to pursuing the growth and development of the business of our subsidiary, Etelix.com USA LLC, we plan to expand our services to the retail market offering international long-distance voice communications to corporate, small business and individuals (ILD retail), supported in part on our current infrastructure.

We are also exploring opportunities in new business areas and markets, such as satellite communications; mobile services under the figure of a Mobile Virtual Network Operator (MVNO); Internet of Things (IoT) solutions and Data Centers. We expect that these new ventures will be developed either through mergers or acquisitions, or through strategic partnerships.

In addition, we are allocating resources to develop a Blockchain Payment Solution to facilitate the settlement of exchanged traffic among international carriers based on smart contracts.

Our principal place of business is located at 300 Aragon Avenue, Suite 375 Coral Gables, FL 33134. General information about us can be found at www.iqstel.com. The information contained on or connected to our website is not incorporated by reference into this Quarterly Report on Form 10-Q and should not be considered part of this or any other report filed with the SEC.

Results of Operations

Revenues

Our total revenue reported for the three months ended September 30, 2018 was $3,794,359, compared with $1,899,910 for the three months ended September 30, 2017.

We expect our revenues to increase in future quarters as a result of de development of our business plan and the expected growth of Etelix revenues.

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Cost of Revenues

Our total cost of revenues for the three months ended September 30, 2018 increased to $3,531,877, compared with $1,834,938 for the three months ended September 30, 2017.

Our cost of revenues consists of 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.

We expect our cost of revenues to increase in future quarters as a result of the increase in the volume of traffic carried; but the expected increase is in proportion lower than the increase expected in the revenues, which we believe will result in a higher and positive net gross profit.

Operating Expenses

Operating expenses decreased to $195,884 for the three months ended September 30, 2018 from $197,947 for the three months ended September 30, 2017. The detail by major category is reflected in the table below.

There was no a significant variation in operating expenses in 2018 compared with the same period of 2017.

Other Expenses/Other Income

We had other expenses of $570,193 for the three months ended September 30, 2018, as compared with other expenses of $89,795 for the same period ended 2017. The increase in other expenses is a result of the change in fair value of derivative liabilities in $448,471, and the increase of interest expenses of $119,755 for the three months ended September 30, 2018 compared to $96,921 for the same period ended 2017.

Net Loss

We finished the three months ended September 30, 2018 with a loss of $503,595, as compared to a loss of $222,770 during the three months ended September 30, 2017.

The net loss is the result of the increment in other expenses as explained above; but it is important to remark that Company was able to increase its gross profit 304% comparing the three months ended September 30, 2018 with the same period ended 2017. We believe that in future quarters the increase in our gross profit accompanied by a strict control of the operating and administrative expenses will result in positive net operating results.

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Liquidity and Capital Resources

As of September 30, 2018, we had total current assets of $2,153,178 and current liabilities of $2,285,280, resulting in a working capital deficit of $132,102. This compares with the working capital of $290,170 at June 30, 2018. This decrease in working capital deficit, as discussed in more detail below, is primarily the result of the increment in the derivative liabilities.

Our operating activities used $88,655 in the three months ended September 30, 2018 as compared with $127,135 used in operating activities in the three months ended September 30, 2017.

Investing activities used $426 in the three months ended September 30, 2018 compared with $0 in the three months ended September 30, 2017.

Financing activities provided $81,793 in the three months ended September 30, 2018 compared with $84,179 provided in the three months ended September 30, 2017. Our positive financing cash flow in 2018 was largely the result of the proceeds from loans, capital contributions and proceeds from convertible notes.

Based upon our current financial condition, we do not have 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. We plan to seek additional financing in a private equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.

Inflation

Although our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the three month period ended September 30, 2018.

Critical Accounting Polices

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies are disclosed in Note 2 of our audited consolidated financial statements included in the Form 10-K filed with the Securities and Exchange Commission.

Off Balance Sheet Arrangements

As of September 30, 2018, there were no off balance sheet arrangements.

Recent Accounting Pronouncements

The recent accounting pronouncements that are material to our financial statements are disclosed in Note 2 of our consolidated audited financial statements included in the Form 10-K filed with the Securities and Exchange Commission and in Note 2 of our unaudited consolidated financial statements included herein.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.

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Item 4. Controls and Procedures

Disclosure Controls and Procedures - Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report.

These controls are designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Based on this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective as of September 30, 2018.

We believe that our financial statements presented in this quarterly report on Form 10-Q fairly present, in all material respects, our financial position, results of operations, and cash flows for all periods presented herein.

Inherent Limitations - Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives 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 there 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 that neither human error nor system weakness has resulted in erroneous reporting of financial data.

Changes in Internal Control over Financial Reporting - There were no changes in our internal control over financial reporting during the three month period ended September 30, 2018, 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 are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any material pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

Item 1A: Risk Factors

See Risk Factors contained in our Form 10-K filed with the SEC on November 13, 2018.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933.

During the three months ended September 30, 2018, we issued 11,718 shares valued at $25,000 for the consulting services.

These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for 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 transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

N/A

Item 5. Other Information

None

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Item 6. Exhibits

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on November 16, 2018 on its behalf by the undersigned thereunto duly authorized.

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