UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
| For the quarterly period
ended | |
| Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 | |
| For the transition period from __________ to__________ | |
| Commission File Number:
|
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
| (Address of principal executive offices) | |
| ( | |
| (Registrant’s telephone number) | |
_______________________________________________________ | |
| (Former name, former address and former fiscal year, if changed since last report) | |
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X]
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| ☐ Large accelerated filer | ☐ Accelerated filer |
| ☒ |
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[
] Yes [X]
State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: common shares as of August 14, 2024
| TABLE OF CONTENTS | ||
| Page | ||
PART I – FINANCIAL INFORMATION
| ||
| Item 1: | Financial Statements | 3 |
| Item 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4 |
| Item 3: | Quantitative and Qualitative Disclosures About Market Risk | 10 |
| Item 4: | Controls and Procedures | 10 |
PART II – OTHER INFORMATION
| ||
| Item 1: | Legal Proceedings | 11 |
| Item 1A: | Risk Factors | 11 |
| Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds | 11 |
| Item 3: | Defaults Upon Senior Securities | 11 |
| Item 4: | Mine Safety Disclosures | 11 |
| Item 5: | Other Information | 11 |
| Item 6: | Exhibits | 12 |
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Our unaudited consolidated financial statements included in this Form 10-Q are as follows:
| F-1 | Consolidated Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023; |
| F-2 | Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023 (unaudited); |
| F-3 | Consolidated Statements of Stockholder’s Equity (Deficit) for the three and six months ended June 30, 2024 and 2023 (unaudited). |
| F-4 | Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (unaudited); and |
| F-5 | Notes to Consolidated Financial Statements (unaudited). |
These interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended June 30, 2024 are not necessarily indicative of the results that can be expected for the full year.
| 3 |
Item 1. Financial Statements
iQSTEL INC
Consolidated Balance Sheets
(Unaudited)
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Due from related parties | ||||||||
| Prepaid and other current assets | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible asset | ||||||||
| Goodwill | ||||||||
| Deferred tax assets | ||||||||
| Other asset | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued and other current liabilities | ||||||||
| Due to related parties | ||||||||
| Loans
payable - net of discount of $ | ||||||||
| Loans payable - related parties | ||||||||
| Convertible
note - net of discount of $ | ||||||||
| Contingent liability for acquisition of subsidiary | ||||||||
| Warrant liability | ||||||||
| Total Current Liabilities | ||||||||
| Loans payable, non-current | ||||||||
| Employee benefits, non-current | ||||||||
| TOTAL LIABILITIES | ||||||||
| Stockholders' Equity | ||||||||
| Preferred stock: authorized; par value | ||||||||
| Series
A Preferred stock: designated; par value, 10,000 shares issued and outstanding | ||||||||
| Series
B Preferred stock: designated; par value, 31,080 shares issued and outstanding | ||||||||
| Series C Preferred stock: designated; par value, No shares issued and outstanding | ||||||||
| Series D Preferred stock: designated; par value, No shares issued and outstanding | ||||||||
| Common
stock: authorized; par value and shares issued and outstanding, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Equity attributed to stockholders of iQSTEL Inc. | ||||||||
| Equity (Deficit) attributable to noncontrolling interests | ( | ) | ||||||
| TOTAL STOCKHOLDERS' EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-1 |
iQSTEL INC
Consolidated Statements of Operations
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| General and administration | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Other income | ||||||||||||||||
| Other expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in fair value of derivative liabilities | ( | ) | ( | ) | ||||||||||||
| Gain (loss) on settlement of debt | ( | ) | ||||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ||||||||||||
| Net loss before provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income taxes | ( | ) | ( | ) | ||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Less: Net income attributable to noncontrolling interests | ||||||||||||||||
| Net loss attributed to iQSTEL Inc. | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Comprehensive income (loss) | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Foreign currency adjustment | ||||||||||||||||
| Total comprehensive loss | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| Less: Comprehensive income attributable to noncontrolling interests | ||||||||||||||||
| Net comprehensive loss attributed to iQSTEL Inc. | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted loss per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares outstanding - Basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-2 |
iQSTEL INC
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
For the three and six months ended June 30, 2024 and 2023
(Unaudited)
| Series A Preferred Stock | Series B Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Additional Paid in Capital | Accumulated Deficit | Accumulated Comprehensive Loss | Total | Non Controlling Interest | Total Stockholders' Deficit | ||||||||||||||||||||||||||||||||||||
| Balance - December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||
| Common stock issued for compensation | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for settlement of debt | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued in conjunction with convertible notes | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ||||||||||||||||||||||||||||||||||||||||||
| Balance - March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||
| Common stock issued for compensation | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for warrant exercises | |||||||||||||||||||||||||||||||||||||||||||||||
| Resolution of derivative liabilities upon exercise of warrant | |||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition of subsidiary | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ||||||||||||||||||||||||||||||||||||||||||
| Balance - June 30, 2024 | $ | $ | $ | $ | $ | ( | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Series A Preferred Stock | Series B Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Additional Paid in Capital | Accumulated Deficit | Accumulated Comprehensive Loss | Total | Non Controlling Interest | Total Stockholders' Deficit | ||||||||||||||||||||||||||||||||||||
| Balance - December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||
| Common stock issued for warrant exercises | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for compensation | |||||||||||||||||||||||||||||||||||||||||||||||
| Resolution of derivative liabilities upon exercise of warrant | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ||||||||||||||||||||||||||||||||||||||||||
| Balance - March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||
| Common stock issued for compensation | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ||||||||||||||||||||||||||||||||||||||||||
Balance - June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-3 |
iQSTEL INC
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation | ||||||||
| Bad debt expense | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of debt discount | ||||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||
| Loss on settlement of debt | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Prepaid and other assets | ( | ) | ( | ) | ||||
| Due from related parties | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued and other current liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Acquisitions of subsidiary, net of cash received | ( | ) | ||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Purchase of intangible assets | ( | ) | ||||||
| Advances of loan receivable - related party | ( | ) | ||||||
| Collection of amounts due from related parties | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from loans payable | ||||||||
| Repayments of loans payable | ( | ) | ( | ) | ||||
| Proceeds from loans payable - related parties | ||||||||
| Repayment of loans payable - related parties | ( | ) | ||||||
| Proceeds from exercise of warrants | ||||||||
| Proceeds from convertible notes | ||||||||
| Proceeds from stock purchase option | 100,000 | — | ||||||
| Repayment of convertible notes | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash | ||||||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| Non-cash transactions: | ||||||||
| Common stock issued for settlement of debt | $ | $ | ||||||
| Resolution of derivative liabilities upon exercise of warrants | $ | $ | ||||||
| Common stock issued in connection with convertible notes | $ | $ | ||||||
| Note payable issued for acquisition of subsidiary | $ | $ | ||||||
| Contingent liability for acquisition of subsidiary | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-4 |
iQSTEL INC
Notes to the Consolidated Financial Statements
June 30, 2024
NOTE 1 -ORGANIZATION AND DESCRIPTION OF BUSINESS
Organization and Operations
iQSTEL
Inc. (“iQSTEL”, “we”, “us”, or the “Company”) was incorporated under the laws of the
State of
The Company has been engaged in the business of telecommunication services as a wholesale carrier of voice, SMS and data for other telecom companies around the World with over 400 active interconnection agreements with mobile companies, fixed line companies and other wholesale carriers.
The Company is a technology company with presence in 20 countries and over 100 employees that is offering leading-edge services through its four business divisions.
The Telecom Division, which represents the majority of current operations and which also represents the source for all of the Company’s revenues, offers VoIP, SMS, proprietary Internet of Things (IoT) solutions (www.iotsmartgas.com and www.iotsmarttank.com), and international fiber-optic connectivity through its subsidiaries: Etelix.com USA, LLC, SwissLink Carrier AG, Smartbiz Telecom LLC, Whisl Telecom LLC, IoT Labs, LLC, QGlobal SMS, LLC, and QXTEL LIMITED.
Also under the Telecom Division, the Company’s developing BlockChain Platform Business Line offers our proprietary Mobile Number Portability Application (MNPA) to serve the in-country portability needs through its subsidiary, itsBchain, LLC.
The Company’s developing Fintech Business Line offers a complete Fintech ecosystem MasterCard Debit Card, US Bank Account (No SSN Needed), Mobile App/Wallet (Remittances, Mobile Top Up). The Company’s Fintech subsidiary, Global Money One Inc., is to provide immigrants access to reliable financial services that makes it easier to manage their money and stay connected with their families back home.
The Company’s developing Electric Vehicle (EV) Business Line offers electric motorcycles for work and recreational use in the USA, Spain, Portugal, Panama, Colombia, and Venezuela. EVOSS is also working on the development of an EV Mid Speed Car to serve the niche of the 2nd car in the family.
The Company’s developing Artificial Intelligence (AI)-Enhanced Metaverse Division offers a white-label solution designed specifically for corporations, businesses, and the telecommunications industry. Delivering a full suite of immersive content services, creating a comprehensive virtual experience that can be accessed through the Web or our proprietary mobile apps.
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
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 (“GAAP”) for annual financial statements.
| F-5 |
In the opinion of the Company’s management, the accompanying unaudited interim consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of June 30, 2024 and the results of operations and cash flows for the periods presented. The results of operations for the six months ended June 30, 2024 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited consolidated 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 December 31, 2023 filed with the SEC on April 1, 2024.
Reclassification
Certain accounts from prior periods have been reclassified to conform to the current period presentation.
Consolidation Policy
The consolidated financial statements of the Company include the accounts of the Company and its owned subsidiaries, Etelix.com USA, LLC (“Etelix”), SwissLink Carrier AG (“Swisslink”), ITSBCHAIN, LLC (“ItsBchain”), QGLOBAL SMS, LLC (“QGlobal”), IoT Labs, LLC (“IoT Labs”), Global Money One Inc (“Global Money One”), Whisl Telecom LLC (“Whisl”), Smartbiz Telecom LLC (“Smartbiz”) and QXTEL LIMITED (“QXTEL”). All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated 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.
Business Combinations
In accordance with ASC 805-10, “Business Combinations”, the Company accounts for all business combinations using the acquisition method of accounting. Under this method, assets and liabilities, including any remaining non-controlling interests, are recognized at fair value at the date of acquisition. The excess of the purchase price over the fair value of assets acquired, net of liabilities assumed, and non-controlling interests is recognized as goodwill. Certain adjustments to the assessed fair values of the assets, liabilities, or non-controlling interests made subsequent to the acquisition date, but within the measurement period, which is up to one year, are recorded as adjustments to goodwill. Any adjustments subsequent to the measurement period are recorded in income. Any cost or equity method interest that the Company holds in the acquired company prior to the acquisition is re-measured to fair value at acquisition with a resulting gain or loss recognized in income for the difference between fair value and the existing book value. Results of operations of the acquired entity are included in the Company’s results from the date of the acquisition onward and include amortization expense arising from acquired tangible and intangible assets.
Foreign Currency Translation and Re-measurement
The Company translates its foreign operations to U.S. dollars in accordance with ASC 830, “Foreign Currency Matters”.
The functional currency and reporting currency of Etelix, QGlobal, ItsBchain, IoT Labs, Whisl, Smartbiz, Global Money One and QXTEL is the U.S. dollar, while SwissLink’s functional currency was the Swiss Franc (“CHF”). As of January 1, 2024, we changed the functional currency of SwissLink from their respective local currency to the US dollar. The change in functional currency is due to increased exposure to the US dollar as a result of a change in facts and circumstances in the primary economic environment in which this subsidiary operates. The effects of the change in functional currency were not significant to our consolidated financial statements.
| F-6 |
Cash and Cash Equivalents
Cash and
cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months
from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant
risk of loss in value. The Company had $
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 estimates expected credit losses related to accounts receivable balances based on a review of available and relevant information
including current economic conditions, projected economic conditions, historical loss experience, account aging, and other factors that
could affect collectability. During the six months ended June 30, 2024 and 2023, the Company
recorded bad debt expense of $
The Company has adopted ASC 260, ”Earnings per Share” which requires presentation of basic earnings per share on the face of the statements of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic earnings per share computation. In the accompanying financial statements, basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants unless the result would be antidilutive. Dilutive potential common shares include outstanding Series B Preferred stock, and it was excluded from the computation of diluted net loss per share as the result was anti-dilutive for the six months ended June 30, 2024 and 2023.
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. 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 six months ended June 30, 2024, 15 customers represented
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:
| F-7 |
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; accounts receivable; deposit for acquisition, prepaid and other current assets; accounts payable; accrued liabilities and other current liabilities; and due from/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 parties due to their related party nature.
Revenue Recognition
The Company recognizes revenue from telecommunication services in accordance with ASC 606, “Revenue from Contracts with Customers.”
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 exists, and collection is reasonably assured. Management considers persuasive evidence of a sales arrangement to be a written interconnection agreement. The Company’s payment terms vary by client.
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" which allows disclosure of one or more measures of segment profit or loss used by the chief operating decision maker to allocate resources and assess performance. Additionally, the standard requires enhanced disclosures of significant segment expenses and other segment items, as well as incremental qualitative disclosures on both an annual and interim basis. This guidance is effective for annual reporting periods beginning after December 15, 2023, and interim reporting periods after December 15, 2024. Early adoption is permitted and retrospective application is required for all periods presented. The Company is currently evaluating the impact of adopting this guidance on its Consolidated Financial Statements and disclosures included within Notes to Consolidated Financial Statements.
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” which requires enhanced disclosures, including specific categories and disaggregation of information in the effective tax rate reconciliation, disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. This guidance is effective for annual reporting periods beginning after December 15, 2024. Early adoption is permitted and should be applied on a prospective basis; however, retrospective application is permitted. The Company is currently evaluating the impact of adopting this guidance on its Consolidated Financial Statements and disclosures included within Notes to Consolidated Financial Statements.
| F-8 |
NOTE 3 - GOING CONCERN
The Company's consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has suffered recurring losses from operations and does not have an established source of revenues sufficient to cover its operating costs. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated 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 in the industry and continuing its marketing efforts. The Company may experience a cash shortfall and be required to raise additional capital.
Historically, the Company has financed its operations through private placements, Regulation A offerings, related party loans, convertible notes, and unsecured debt. 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.
NOTE 4 – PREPAID AND OTHER CURRENT ASSETS
Prepaid and other current assets at June 30, 2024 and December 31, 2023 consisted of the following:
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Other receivable | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Advance payment | ||||||||
| Tax receivable | ||||||||
| Deposit for acquisition of asset | ||||||||
| Security deposit | ||||||||
| $ | $ | |||||||
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment at June 30, 2024 and December 31, 2023 consisted of the following:
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Telecommunication equipment | $ | $ | ||||||
| Telecommunication software | ||||||||
| Other equipment | ||||||||
| Total property and equipment | ||||||||
| Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Total property and equipment | $ | $ | ||||||
Depreciation
expense for the six months ended June 30, 2024 and 2023 amounted to $
| F-9 |
NOTE 6 –LOANS PAYABLE
Loans payable at June 30, 2024 and December 31, 2023 consisted of the following:
| June 30, | December 31, | Interest | ||||||||||||
| 2024 | 2023 | Term | rate | |||||||||||
| Martus | $ | $ | Note
was issued on | % | ||||||||||
| Darlene Covid19 | Note
was issued on | % | ||||||||||||
| Promissory note payable | Note
was issued | % | ||||||||||||
| Future receipts loan | Loan
was issued | Effective
rate (1) | % | |||||||||||
| Promissory note payable | Note
was issued | % | ||||||||||||
| Promissory note payable - acquisition of QXTEL | Note
was issued | % | ||||||||||||
| Total | ||||||||||||||
| Less: Unamortized debt discount | ( | ) | ( | ) | ||||||||||
| Total loans payable | ||||||||||||||
| Less: Current portion of loans payable | ( | ) | ( | ) | ||||||||||
| Long-term loans payable | $ | $ |
| |||||||||||
| (1) | The
purchase price is $ |
During
the six months ended June 30, 2024 and 2023, the Company repaid the principal amount of $
During
the six months ended June 30, 2024, the Company settled principal amount and accrued interest of a note payable issued in April 2023
by issuing shares of common stock. As a result, the Company recorded a loss on settlement of debt of $
| F-10 |
Loans payable - related parties at June 30, 2024 and December 31, 2023 consisted of the following:
| June 30, | December 31, | Interest | ||||||||||||
| 2024 | 2023 | Term | rate | |||||||||||
| 49% of Shareholder of SwissLink | $ | $ | % | |||||||||||
| 49% of Shareholder of SwissLink | % | |||||||||||||
| Minority Shareholder of QXTEL | Note is due on | % | ||||||||||||
| Total | ||||||||||||||
| Less: Current portion of loans payable - related parties | ||||||||||||||
Long-term loans payable - related parties | $ | $ | ||||||||||||
During
the six months ended June 30, 2024 and 2023, the Company recorded interest expense of $
NOTE 7 - CONVERTIBLE NOTES
Convertible notes at June 30, 2024 and December 31, 2023 consisted of the following:
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Issued in fiscal year 2023 | $ | $ | ||||||
| Issued in fiscal year 2024 | ||||||||
| Total convertible notes payable | ||||||||
| Less: Unamortized debt discount | ( | ) | ( | ) | ||||
| Total convertible notes | ||||||||
| Less: current portion of convertible notes | ||||||||
| Long-term convertible notes | $ | $ | ||||||
Issued in fiscal year 2023
During
the year ended December 31, 2023, the Company borrowed $
| F-11 |
Issued in fiscal year 2024
On
January 24, 2024, we entered into a securities purchase agreement (the “SPA”) with M2B Funding Corp., a Florida corporation,
for it to purchase up to the principal amount of $
The
initial tranche was executed in January 2024 for $
During
the three months ended June 30, 2024, the Company borrowed $
During
the six months ended June 30, 2024 and 2023, the Company recorded interest expense of $
NOTE 8 – STOCKHOLDERS’ EQUITY
Common Stock
The Company’s authorized capital consists of shares of common stock with a par value of per share.
During the six months ended June 30, 2024, the Company issued shares of common stock, valued at fair market value on issuance as follows:
| • | shares for compensation to our directors valued at |
| • |
shares for settlement of debt valued at $ |
| • |
shares in connection with convertible notes valued at $ |
| • |
shares for exercise of warrants for $ |
As of June 30, 2024 and December 31, 2023, and shares of common stock were issued and outstanding, respectively.
Preferred Stock
The Company’s authorized capital consists of shares of preferred stock with a par value of per share.
Series A Preferred Stock
On
November 3, 2020, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred
stock entitled Series A Preferred Stock, consisting of up shares, par value . Under the Certificate
of Designation,
The rights of the holders of Series A Preferred Stock are defined in the relevant Certificate of Designation filed with the Nevada Secretary of State on November 3, 2020
| F-12 |
As of June 30, 2024 and December 31, 2023, shares of Series A Preferred Stock were issued and outstanding.
Series B Preferred Stock
On
November 11, 2020, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred
stock entitled Series B Preferred Stock, consisting of up shares, par value .
As of June 30, 2024 and December 31, 2023, shares of Series B Preferred Stock were issued and outstanding.
Series C Preferred Stock
On
January 7, 2021, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred
stock entitled Series C Preferred Stock, consisting of up shares, par value .
The rights of the holders of Series C Preferred Stock are defined in the relevant Certificate of Designation filed with the Nevada Secretary of State on January 7, 2021.
As of June 30, 2024 and December 31, 2023, Series C Preferred Stock was issued or outstanding.
Series D Preferred Stock
On
November 3, 2023, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred
stock entitled Series D Preferred Stock, consisting of up shares, par value .
The rights of the holders of Series D Preferred Stock are defined in the relevant Certificate of Designation filed with the Nevada Secretary of State on November 3, 2023.
As of June 30, 2024 and December 31, 2023, Series D Preferred Stock was issued or outstanding.
| F-13 |
NOTE 9 - RELATED PARTY TRANSACTIONS
Due from related party
As
of June 30, 2024 and December 31, 2023, the Company had amounts due from related parties of $
Due to related parties
As
of June 30, 2024 and December 31, 2023, the Company had amounts due to related parties of $
Employment agreements
During
the six months ended June 30, 2024 and 2023, the Company recorded management salaries of $
As
of June 30, 2024 and December 31, 2023, the Company recorded and accrued management salaries of $
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Leases and Long-term Contracts
The
Company has not entered into any long-term leases, contracts or commitments. The Company leases facilities which the term is
NOTE 11 – ACQUISITION
On
The
purchase price (the “Purchase Price”) payable to the Seller for the shares is $
| F-14 |
During
the six months ended June 30, 2024, the Company repaid a note payable of $
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 | $ | |||
| Promissory note | ||||
| Contingent liability | ||||
| Total Purchase Price | $ | |||
The following table summarizes the preliminary identifiable assets acquired and liabilities assumed upon acquisition of QXTEL and the calculation of goodwill:
| Total purchase price | $ | |||
| Cash | ||||
| Accounts receivable | ||||
| Due from related party | ||||
| Other asset | ||||
| Equipment | ||||
| Total identifiable assets | ||||
| Accounts payable | ( | ) | ||
| Other current liabilities | ( | ) | ||
| Total liabilities assumed | ( | ) | ||
| Net assets | ||||
| Non-controlling interest - 49% | ||||
| Total net assets | ||||
| Goodwill | $ |
Unaudited combined proforma results of operations for the six months ended June 30, 2024 and 2023 as though the Company acquired QXTEL on January 1, 2023, are set forth below:
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Revenues | $ | $ | ||||||
| Cost of revenues | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other income (expense) | ( | ) | ||||||
| Income tax | ( | ) | ( | ) | ||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| F-15 |
NOTE 12 - SEGMENT
At June 30, 2024 and December 31, 2023, the Company operates in one industry segment, telecommunication services, and three geographic segments, USA, UK and Switzerland, where current assets and equipment are located.
Operating Activities
The following table shows operating activities information by geographic segment for the three and six months ended June 30, 2024 and 2023:
Three months ended June 30, 2024
| USA | Switzerland | UK | Elimination | Total | ||||||||||||||||
| Revenues | $ | $ | ( | ) | $ | |||||||||||||||
| Cost of revenue | ( | ) | ||||||||||||||||||
| Gross profit | ||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||
| General and administration | ||||||||||||||||||||
| Operating income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Other income (expense) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Income tax expense | ( | ) | ( | ) | ||||||||||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | |||||||||
Three months ended June 30, 2023
| USA | Switzerland | Elimination | Total | |||||||||||||
| Revenues | $ | $ | ( | ) | $ | |||||||||||
| Cost of revenue | ( | ) | ||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| General and administration | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income (expense) | ( | ) | ||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| F-16 |
Six months ended June 30, 2024
| USA | Switzerland | UK | Elimination | Total | ||||||||||||||||
| Revenues | $ | $ | ( | ) | $ | |||||||||||||||
| Cost of revenue | ( | ) | ||||||||||||||||||
| Gross profit | ||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||
| General and administration | ||||||||||||||||||||
| Operating income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Other income (expense) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Income tax expense | ( | ) | ( | ) | ||||||||||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | |||||||||
Six months ended June 30, 2023
| USA | Switzerland | Elimination | Total | |||||||||||||
| Revenues | $ | $ | ( | ) | $ | |||||||||||
| Cost of revenue | ( | ) | ||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| General and administration | ||||||||||||||||
| Operating (loss) income | ( | ) | ( | ) | ||||||||||||
| Other income (expense) | ( | ) | ||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
Asset Information
The following table shows asset information by geographic segment as of June 30, 2024 and December 31, 2023:
| June 30, 2024 | USA | Switzerland | UK | Elimination | Total | |||||||||||||||
| Assets | ||||||||||||||||||||
| Current assets | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Non-current assets | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Liabilities | ||||||||||||||||||||
| Current liabilities | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Non-current liabilities | $ | $ | $ | $ | $ | |||||||||||||||
| December 31, 2023 | USA | Switzerland | Elimination | Total | ||||||||||||
| Assets | ||||||||||||||||
| Current assets | $ | $ | $ | ( | ) | $ | ||||||||||
| Non-current assets | $ | $ | $ | ( | ) | $ | ||||||||||
| Liabilities | ||||||||||||||||
| Current liabilities | $ | $ | $ | ( | ) | $ | ||||||||||
| Non-current liabilities | $ | $ | $ | $ | ||||||||||||
| F-17 |
NOTE 13 – WARRANTS
On
February 12, 2024, we issued a Common Stock Purchase Option (the “Option”) to ADI Funding LLC (“ADI Funding”)
for that expires on December 31, 2024, for the right to acquire up to shares of common stock.
If the Company issues securities less than the exercise price of the option, ADI Funding has a right to also use that lesser price in the exercise of its Option. The Option also contains rights to any company distributions and consideration in fundamental transactions.
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
The Company determined that the warrants had net cash settlement and categorized the warrants as a liability in the accompanying consolidated financial statements.
A summary of activity regarding warrants issued as follows:
| Weighted Average Remaining | |||||||||
| Warrants outstanding | Contractual life (in years) | ||||||||
| Outstanding, December 31, 2023 | |||||||||
| Granted | |||||||||
| Exercised | ( | ) | |||||||
| Forfeited/canceled | |||||||||
| Outstanding, June 30, 2024 | |||||||||
The
intrinsic value of the warrants as of June 30, 2024 is approximately .
All of the outstanding warrants are exercisable as of June 30, 2024; however, each exercise is subject to a beneficial ownership
limitation of
Fair Value Assumptions Used in Accounting for Derivative Liabilities
ASC 815 requires we assess the fair market value of derivative liabilities at the end of each reporting period and recognize any change in the fair market value as other income or expense.
| F-18 |
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 June 30, 2024. 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.
As of June 30, 2024, the estimated fair values of the liabilities measured on a recurring basis are as follows:
| As of June 30, 2024 | |||
| Expected term | - years | ||
| Exercise price | – | ||
| Expected average volatility | - | ||
| Expected dividend yield | |||
| Risk-free interest rate | - |
The following table summarizes the changes in the derivative liabilities during the six months ended June 30, 2024:
| Fair Value Measurements Using Significant Observable Inputs (Level 3) | ||||
| Balance - December 31, 2023 | $ | |||
| Addition of new derivatives recognized as cash received | ||||
| Settled on issuance of common stock | ( | ) | ||
| Change in fair value of derivative liabilities | ||||
| Balance - June 30, 2024 | $ | |||
NOTE 14 – SUBSEQUENT EVENTS
Subsequent to June 30, 2024, and through the date that these financials were made available, the Company had the following subsequent events:
On May 10, 2024, the Company entered into a Purchase Company Agreement (“Purchase Company Agreement”) with Omar Luna and Lynk Holding LLC (together, the “Seller”) concerning the sale by Seller and the purchase by us of 51% of the membership interests the Seller holds in Lynk Telecom, LLC, a Virginia limited liability company (“Lynk Telecom”). The closing of the Purchase Company Agreement is expected to occur, once due diligence has been completed, during the third quarter of fiscal year 2024, although there are no assurances that the deal will close as planned.
Lynk Telecom provides certified business telephone, SMS, connectivity, and networking services across various sectors in the United States. Lynk Holding LLC recently acquired selected assets from a company known as Voyce Telecom, and Lynk Holding LLC has the obligation to pay the shareholders of Voyce Telecom the purchase price in that acquisition, which is outstanding.
The Purchase Price for 51% of the membership interests of Lynk Telecom is US $1,500,000, and this amount will be paid by the Seller to the Buyer in 12 consecutive monthly cash payments of US$ 125,000 each. The Seller agrees to use these funds for the amortization of the payments that it owes to Voyce in relation to the contract between Lynk Holding and Voyce Telecom.
| F-19 |
Once we have paid the $1,500,000 for the acquisition of Lynk Telecom, and Lynk Telecom has achieved the business goals outlined in the Purchase Company Agreement, under what we refer to as “Phase I,” we have agreed to lend up to US$1,500,000 to Lynk Telecom, in installments of up to US$100,000 per month, to be used solely for marketing campaigns, promotion and development of the retail services, according to a business plan that has to be approved by Lynk Telecom’s board of directors.
The disbursements of this loan will be subject to the achievements of the quarterly goals set in the business plan of Lynk Telecom. This retail business plan will have the aim of achieving the objective of generating a minimum of US$200,000 in operating income per month, with intermediate staggered quarterly goals.
Upon the completion of Phase I, and the business goals in the Purchase Company Agreement have been achieved, we have agreed to lend Lynk Telecom up to US$1,500,000 in at least three stages, each of up to US$500,000 per year to help accelerate the amortization of the debt Lynk Holding LLC has with the Voyce Telecom shareholders. These loans would be linked to compliance with the financial statements for fiscal years 2026, 2027, 2028, 2029 and 2030. The goals for these years will be defined posteriori by the parties and approved by Lynk Telecom’s Board of Directors. The payment of this loan will be guaranteed with the portion of dividends that correspond to Lynk Holding LLC when Lynk Telecom makes a dividend distribution.
If, as a result of operations, Lynk Telecom does not reach the projections in the Purchase Company Agreement, and the business plan for the years 2026, 2027, 2028, 2029 and 2030 approved by Lynk Telecom´s Board of Directors, we may retain the stipulated loan. If Lynk Telecom surpassed the projections in the Purchase Company Agreement, we have agreed to true up the purchase price, with details of the true up contained in the Purchase Company Agreement.
Once this Purchase Company Agreement is signed, the manager of Lynk Telecom, Omar Luna, is expected to enter into a 3-year employment agreement with Lynk Telecom, that will be executed before the closing date, renewable for a 2-year period to guarantee the operational continuity of Lynk Telecom and the implementation of a business plan that will lead Lynk Telecom into a productive company with positive net income as established in the Purchase Company Agreement.
Lynk Telecom shall have a Board of Directors composed of 3 members: 2 of the members shall be appointed by us and the remaining member shall be appointed by the Seller. The position of President and Secretary will be reserved for us.
The closing of the Purchase Agreement is subject to, among other things, Lynk Telecom having prepared all accounting information in accordance with SEC standards in such a manner that any audit of the Company, if required, may be performed.
| F-20 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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
iQSTEL Inc. (www.iqstel.com) is a technology company with a presence in 20 countries and over 100 employees that is offering leading-edge services through its four business divisions.
Our Telecom Division, which represents the majority of current operations and which also represents the source for all of our revenues for the financial periods presented, offers VoIP, SMS, proprietary Internet of Things (IoT) solutions (www.iotsmartgas.com and www.iotsmarttank.com), and international fiber-optic connectivity through its subsidiaries: Etelix (www.etelix.com), SwissLink Carrier (www.swisslink-carrier.com), Smartbiz Telecom (www.smartbiztel.com), Whisl Telecom (www.whisl.com), IoT Labs (www.iotlabs.mx), QGlobal SMS (www.qglobalsms.com), and QXTEL Limited (www.qxtel.com).
Also under the Telecom Division, our developing BlockChain Platform Business Line (www.itsbchain.com) offers our proprietary Mobile Number Portability Application (MNPA) to serve the in-country portability needs through its subsidiary, itsBchain.
Our developing Fintech Business Line (www.globalmoneyone.com) (www.maxmo.vip) offers a complete Fintech ecosystem MasterCard Debit Card, US Bank Account (No SSN Needed), Mobile App/Wallet (Remittances, Mobile Top Up). Our Fintech subsidiary, Global Money One, is to provide immigrants access to reliable financial services that makes it easier to manage their money and stay connected with their families back home.
Our developing Electric Vehicle (EV) Business Line (www.evoss.net) offers electric motorcycles for work and recreational use in the USA, Spain, Portugal, Panama, Colombia, and Venezuela. EVOSS is also working on the development of an EV Mid Speed Car to serve the niche of the 2nd car in the family.
Our developing Artificial Intelligence (AI)-Enhanced Metaverse Division (information and content) (www.realityborder.com) is currently developing a groundbreaking white-label solution designed specifically for corporations, businesses, and the telecommunications industry. Delivering a full suite of immersive content services, creating a comprehensive virtual experience that can be accessed through the Web or our proprietary mobile apps. The features include up to four simultaneous video screens for versatile content presentation, various virtual halls such as the main hall, home hall, auditorium, exhibition space, shopping center, and meeting rooms. Stands for mobile application downloads, clickable gates for immediate purchasing, and direct communication tools are seamlessly integrated to foster collaboration, engagement, and interactivity. It goes beyond traditional virtual spaces by utilizing cutting-edge AI technology. This ensures video conferencing and real-time communication with other users within the Metaverse, offering our customers a collective and fully immersive experience that caters to diverse needs such as content acquisition, entertainment, and shared virtual experiences. It is a future-ready platform that encourages creativity, connectivity, and collaboration like never before.
| 4 |
Our metaverse leverages advanced AI to introduce Non-Player Characters (NPCs) that significantly enhance user engagement and functionality within virtual environments. These NPCs are not mere static elements; rather, they are powered by OpenAI's latest language models, enabling dynamic interaction with users. This AI-driven interaction allows NPCs to serve as sales and brand assistants, guiding users through immersive experiences that can extend to purchasing products from external websites. Furthermore, these intelligent agents can control access to gated spaces within the metaverse based on user interactions, showcasing a personalized approach to user experience.
A key innovation in our AI implementation is the NPCs' ability to autonomously make decisions based on their understanding of user interactions. This is achieved through state-of-the-art natural language processing and understanding capabilities, which are supported in seven languages. Additionally, our NPCs utilize advanced text-to-speech and speech-to-text technologies to facilitate seamless communication with users across diverse linguistic backgrounds. The incorporation of "function call" features further enhances the NPCs' ability to perform complex tasks and interact meaningfully with the environment and the users.
Our reference to our technology as "cutting-edge" is grounded in our commitment to continuous improvement and innovation. We consistently integrate the latest advancements in AI, particularly in the areas of chatbots, language understanding, and user interaction technologies. This ensures that our metaverse remains at the forefront of AI application in virtual spaces, offering an unparalleled user experience that goes beyond traditional virtual environments.
We are currently in an advanced phase of development, with ongoing enhancements to AI functionalities and user interaction models. Our team is dedicated to exploring and implementing the latest AI technologies to ensure that our metaverse remains a leading example of innovation in virtual space technology.
The information contained on our websites is not incorporated by reference into this prospectus 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 June 30, 2024 was $78,635,764, compared with $32,824,829 for the three months ended June 30, 2023. These numbers reflect an increase of 139.56% quarter over quarter on our consolidated revenues. Our total revenue reported for the six months ended June 30, 2024 was $130,050,642, compared with $57,491,358 for the six months ended June 30, 2023; an increase of 126.21%.
When looking at the numbers by subsidiary, we have the following breakout for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023:
| Revenue for the Three Months Ended June | Revenue for the Six Months Ended June | |||||||||||||||
| Subsidiary | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Etelix.com USA, LLC | $ | 14,381,303 | $ | 10,692,139 | $ | 33,011,213 | $ | 15,041,124 | ||||||||
| SwissLink Carrier AG | 901,198 | 1,273,004 | 1,875,932 | 2,548,289 | ||||||||||||
| QGlobal LLC | 422,982 | 211,258 | 790,242 | 296,309 | ||||||||||||
| IoT Labs LLC | 24,448,290 | 17,215,267 | 48,786,489 | 32,476,549 | ||||||||||||
| Smartbiz Telecom | 6,210,123 | 2,935,867 | 12,391,570 | 6,327,107 | ||||||||||||
| Whisl Telecom | 800,003 | 497,294 | 1,723,331 | 801,980 | ||||||||||||
| QXTEL Limited | 31,471,866 | — | 31,471,866 | — | ||||||||||||
| $ | 78,635,764 | $ | 32,824,829 | $ | 130,050,642 | $ | 57,491,358 | |||||||||
The increase in revenue is due to an increment in the commercial efforts and the result of commercial synergies amongst all companies. The organic growth during the three-months ended June 30, 2024 was 60% of the total revenue for that period, while the newly acquired company QXTEL Limited contributed with 40% of the total revenue.
| 5 |
When looking at the figures for the six months ended June 30, 2024, the organic growth was 76%, while QXTEL Limited contributed 24%.
We consider organic growth the revenues reported by our existing subsidiaries; including Etelix, SwissLink, QGlobal, IoT Labs, Smartbiz and Whisl.
The continued growth of our revenue is the result of the development of our business strategy, which includes the strengthening of our commercial and operating activities and new acquisitions.
Cost of Revenue
Our total cost of revenue for the three months ended June 30, 2024 increased to $76,472,140, compared with $32,040,363 for the three months ended June 30, 2023. Our total cost of revenue for the six months ended June 30, 2024 increased to $126,507,992, compared with $55,490,156 for the six months ended June 30, 2023.
When looking at the numbers by subsidiary, we have the following breakout for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023:
| Cost of Revenue for the Three Months Ended June | Cost of Revenue for the Six Months Ended June | |||||||||||||||
| Subsidiary | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Etelix.com USA, LLC | $ | 14,089,625 | $ | 10,019,546 | $ | 31,922,561 | $ | 13,784,019 | ||||||||
| SwissLink Carrier AG | 829,267 | 1,055,418 | 1,599,435 | 2,159,275 | ||||||||||||
| QGlobal LLC | 299,915 | 142,330 | 542,332 | 193,879 | ||||||||||||
| IoT Labs LLC | 24,230,045 | 17,211,748 | 48,026,620 | 32,090,649 | ||||||||||||
| Smartbiz Telecom | 6,074,427 | 3,125,835 | 12,339,173 | 6,209,129 | ||||||||||||
| Whisl Telecom | 526,551 | 485,486 | 1,655,561 | 1,053,205 | ||||||||||||
| QXTEL Limited | 30,422,311 | — | 30,422,311 | — | ||||||||||||
| $ | 76,472,140 | $ | 32,040,363 | $ | 126,507,992 | $ | 55,490,156 | |||||||||
Our cost of revenue 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 and SMS terminated in vendor’s network.
The behavior in the costs shows a logical correlation with the behavior of the revenue commented above. We have reached a higher volume of sales and every additional unit sold (minutes and SMS) has its corresponding termination cost.
Gross Margin
The Consolidated Gross Margin for the three months ended June 30, 2024 was 2.75%, which compared to 2.39% for the three months ended June 30, 2023 represents an increase in our consolidated Gross Margin of 15.13%.
The Consolidated Gross Margin for the six months ended June 30, 2024 was 2.72%, which compared to 3.48% for the six months ended June 30, 2023.
The decrease in the Gross Margin is due to the decrease in the margins of voice services, which is an expected trend in the industry. To offset this trend, the Company has implemented a plan to modify the composition of the product portfolio by increasing SMS businesses that have increasing margins. As an example, we can indicate that for the six months ended on June 30, 2024, the contribution to the margin of the SMS business with respect to the total was 24% compared to only 8% for the same period in 2023. With the incorporation of QXTEL and the increase in the QGlobal SMS business, the gross margin of our SMS services portfolio increased by 297% when comparing the figures of June 2024 vs. June 2023.
Operating Expenses
Operating expenses, consisting entirely of general and administrative expenses, increased to $2,505,727 for the three months ended June 30, 2024 from $1,037,184 for the three months ended June 30, 2023. Operating expenses, consisting entirely of general and administrative expenses, increased to $4,068,205 for the six months ended June 30, 2024 from $2,571,450 for the six months ended June 30, 2023. The detail by major category for the six months ended June 30, 2024 and 2023 is reflected in the table below.
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| Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Salaries, Wages and Benefits | $ | 1,143,692 | $ | 881,830 | ||||
| Technology | 542,140 | 185,975 | ||||||
| Professional Fees | 1,064,047 | 586,726 | ||||||
| Legal & Regulatory | 151,639 | 110,179 | ||||||
| Travel & Events | 97,489 | 102,356 | ||||||
| Public Cost | 85,378 | 18,083 | ||||||
| Advertising | 501,997 | 405,537 | ||||||
| Bank Services and Fees | 121,566 | 25,709 | ||||||
| Depreciation and Amortization | 68,939 | 68,488 | ||||||
| Office, Facility and Other | 190,132 | 160,010 | ||||||
| Insurances | 21,720 | 8,427 | ||||||
| Bad debt expense | 1,801 | — | ||||||
| Sub Total | 3,990,540 | 2,553,320 | ||||||
| Stock-based compensation | 77,665 | 18,130 | ||||||
| Total Operating Expense | $ | 4,068,205 | $ | 2,571,450 | ||||
When looking at the numbers by subsidiary, we have the following breakout for the six months ended June 30, 2024 compared to the six months ended June 30, 2023:
| Six Months Ended June 30, | ||||||||||||
| 2024 | 2023 | Difference | ||||||||||
| iQSTEL | $ | 1,420,141 | $ | 1,027,793 | $ | 392,348 | ||||||
| Etelix | 182,516 | 207,309 | -24,793 | |||||||||
| Swisslink | 443,546 | 375,008 | 68,538 | |||||||||
| ItsBchain | 14,384 | 22,019 | -7,635 | |||||||||
| QGlobal | 262,845 | 119,035 | 143,810 | |||||||||
| IoT Labs | 134,718 | 115,013 | 19,705 | |||||||||
| Global Money One | 400 | 60,799 | -60,399 | |||||||||
| Smartbiz Telecom | 461,282 | 316,129 | 145,153 | |||||||||
| Whisl Telecom | 482,470 | 328,345 | 154,125 | |||||||||
| QXTEL Limited | 665,903 | — | 665,903 | |||||||||
| $ | 4,068,205 | $ | 2,571,450 | $ | 1,496,755 | |||||||
During the three months ended June 30, 2024 we were consolidating QXTEL from April 1 to June 30. This new subsidiary was not present before the mentioned period which explains 44% of the total $1,496,755 expense increase in the total consolidated figures for 2024 compared to the same period in 2023.
Operating Income
The Company had an operating loss for the three months ended June 30, 2024 of $342,103 compared with an operating loss of $252,718 for the three months ended June 30, 2023.
The Company had an operating loss for the six months ended June 30, 2024 of $525,555 compared with an operating loss of $570,248 for the six months ended June 30, 2023.
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Our Telecom Division, the division presently generating revenue, has operating income when presented separately from the rest of our Company. The expenses of our pre-revenue companies are set at the minimum required to finish the development of the product/services prior to market launch. When comparing the tables below, we can see a tremendous evolution of our telecom division comparing the revenues, gross profit and operating income for the three and six months ended June 30, 2024 versus the same periods of year 2023. As we have indicated on several occasions, our strategy is to strengthen our telecommunications division so that it can serve as a lever for the development of new lines of business.
| Telecom Division | Pre-revenue companies | iQSTEL | Consolidated | |||||||||||||||||||||||||||||
| Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | |||||||||||||||||||||||||
| Revenues | 78,635,764 | 130,050,642 | — | — | — | — | 78,635,764 | 130,050,642 | ||||||||||||||||||||||||
| Cost of revenue | 76,472,140 | 126,507,992 | — | — | — | — | 76,472,140 | 126,507,992 | ||||||||||||||||||||||||
| Gross profit | 2,163,624 | 3,542,650 | — | — | — | — | 2,163,624 | 3,542,650 | ||||||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||||||||||
| General and administration | 1,738,878 | 2,633,280 | 4,118 | 14,784 | 762,731 | 1,420,141 | 2,505,727 | 4,068,205 | ||||||||||||||||||||||||
| Total Operating Expenses | 1,738,878 | 2,633,280 | 4,118 | 14,784 | 762,731 | 1,420,141 | 2,505,727 | 4,068,205 | ||||||||||||||||||||||||
| Operating income/(loss) | 424,746 | 909,370 | (4,118 | ) | (14,784 | ) | (762,731 | ) | (1,420,141 | ) | (342,103 | ) | (525.555 | ) | ||||||||||||||||||
| Telecom Division | Pre-revenue companies | iQSTEL | Consolidated | |||||||||||||||||||||||||||||
| Three Months Ended June 30, 2023 | Six Months Ended June 30, 2023 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2023 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2023 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2023 | |||||||||||||||||||||||||
| Revenues | 32,824,829 | 57,491,358 | — | — | — | — | 32,824,829 | 57,491,358 | ||||||||||||||||||||||||
| Cost of revenue | 32,040,363 | 55,490,156 | — | — | — | — | 32,040,363 | 55,490,156 | ||||||||||||||||||||||||
| Gross profit | 784,466 | 2,001,202 | — | — | — | — | 784,466 | 2,001,202 | ||||||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||||||||||
| General and administration | 646,362 | 1,460,839 | 27,580 | 82,818 | 363,240 | 1,027,793 | 1,037,182 | 2,571,450 | ||||||||||||||||||||||||
| Total Operating Expenses | 646,362 | 1,460,839 | 27,580 | 82,818 | 363,240 | 1,027,793 | 1,037,182 | 2,571,450 | ||||||||||||||||||||||||
| Operating income/(loss) | 138,104 | 540,363 | (27,580 | ) | (82,818 | ) | (363,240 | ) | (1,027,793 | ) | (252,716 | ) | (570,248 | ) | ||||||||||||||||||
| 8 |
Other Expenses/Other Income
We had other expenses of $1,556,509 for the three months ended June 30, 2024, as compared with other income of $91,074 for the same period ended 2023. We had other expenses of $1,953,273 for the six months ended June 30, 2024, as compared with other income of $249,782 for the same period ended 2023. The increase in other expenses is mainly due to the change in the fair value of derivative liabilities, and the interest expenses incurred. Both concept are related to the financing structure put in place for the acquisition of QXTEL Limited, which has had a positive impact in the revenues and operating income of the Telecom Division, and also a positive impact in our balance sheet.
Net Loss
We finished the three months ended June 30, 2024 with a loss of $1,963,887, as compared to a loss of $161,644 during the three months ended June 30, 2023. We finished the six months ended June 30, 2024 with a loss of $2,544,103, as compared to a loss of $320,466 during the six months ended June 30, 2023.
The net results of the periods reported are highly impacted by the expenses in the holding entity (iQSTEL), which has a high component of interest and other financial expenses related to the funds borrowed for the acquisition of QXTEL Limited.
Liquidity and Capital Resources
As of June 30, 2024, we had total current assets of $17,220,260 and current liabilities of $22,200,638, resulting in a negative working capital of $4,980,378. This negative working capital is driven largely by the $3,555,006 of current convertible notes, derivative liabilities of $976,187 and contingent liability for the acquisition of QXTEL of $1,000,000.
Our operating activities used $3,151,688 in the six months ended June 30, 2024 as compared with $721,400 used in operating activities in the six months ended June 30, 2023. Our negative operating cash flow for both periods is a result of our net loss and changes in operating assets and liabilities.
Investing activities used $2,720,197 for the six months ended June 30, 2024 compared to $279,086 used during the same period of year 2023. For the six months ended June 30, 2024 the use of funds in investing activities consisted primarily of the acquisition of QXTEL Limited.
Financing activities provided $5,306,444 in the six months ended June 30, 2024 compared with $790,994 provided in the six months ended June 30, 2023. Our positive financing cash flow in 2024 is mainly the result of proceeds from loans, and proceeds from convertible notes.
We intend to fund operations through increased sales and debt and/or equity financing arrangements to strengthen our liquidity and capital resources. We also plan to seek additional financing in public and 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 six-month period ended June 30, 2024.
Critical Accounting Polices
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.
| 9 |
Our accounting policies are discussed in detail in the footnotes to our financial statements included in this Quarterly Report on Form 10-Q for the six months ended June 30, 2024; however, we consider our critical accounting policies to be those related to allowance for doubtful accounts, valuation of long-lived assets, and income taxes. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. See the Consolidated Financial Statements in this Quarterly Report for a complete discussion of our significant accounting policies.
Off Balance Sheet Arrangements
As of June 30, 2024, there were no off-balance sheet arrangements.
Recent Accounting Pronouncements
We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operation, financial position, or cash flow.
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.
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 ineffective as of June 30, 2024. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.
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 six-month period ended June 30, 2024, 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.
| 10 |
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 April 1, 2024.
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 in reliance on Section 4(a)(2) of the Securities Act, and/or Regulation D promulgated thereunder.
During the six months ended June 30, 2024, the Company issued 7,427,570 shares of common stock, valued at fair market value on issuance as follows:
| • | 300,000 shares for compensation to our directors valued at $77,665 |
| • | 1,770,000 shares for settlement of debt valued at $279,660 |
| • | 3,535,354 shares in connection with convertible notes valued at $597,777; and |
| • | 1,822,216 shares for exercise of warrants for $400,000 |
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
N/A
Item 5. Other Information
None
| 11 |
Item 6. Exhibits
| Exhibit Number | Description of Exhibit
|
| 31.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101** | The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 formatted in Extensible Business Reporting Language (XBRL). |
**Provided herewith |
| 12 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on August 14, 2024 on its behalf by the undersigned thereunto duly authorized.
| IQSTEL INC. | |
| /s/Leandro Iglesias | |
Leandro Iglesias Principal Executive Officer |
|
| /s/ Alvaro Quintana Cardona | |
Alvaro Quintana Cardona Principal Financial and Accounting Officer |
|
| 13 |