IQST iQSTEL Inc (QX)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

☒	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended June 30, 2024
☐	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from __________ to__________
	Commission File Number: 000-55984

 

iQSTEL Inc.

(Exact name of registrant as specified in its charter)

Nevada	45-2808620
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
300 Aragon Avenue, Suite 375 Coral Gables, FL 33134
(Address of principal executive offices)
(954) 951-8191
(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] Yes [ ] No

 

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] Yes [ ] No

 

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
☒   Non-accelerated Filer	☒ Smaller reporting company
	☐   Emerging growth company

 

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] No

 

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 183,532,742 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

 

 

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.

 

 

Item 1. Financial Statements

iQSTEL INC

Consolidated Balance Sheets

 (Unaudited)

 

		June 30,				December 31,
		2024				2023
ASSETS
Current Assets
Cash		$	797,227			$	1,362,668
Accounts receivable, net			13,765,855				12,539,774
Inventory			26,936				27,121
Due from related parties			661,087				340,515
Prepaid and other current assets			1,969,155				1,449,094
Total Current Assets			17,220,260				15,719,172
Property and equipment, net			583,314				522,997
Intangible asset			99,592				99,592
Goodwill			10,677,045				5,172,146
Deferred tax assets			426,755				426,755
Other asset			979,694				214,991
TOTAL ASSETS		$	29,986,660			$	22,155,653
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable		$	7,507,182			$	2,966,279
Accrued and other current liabilities			5,498,006				9,993,585
Due to related parties			26,613				26,613
Loans payable - net of discount of $143,197 and $3,750, respectively			2,544,878				264,988
Loans payable - related parties			1,092,766				259,447
Convertible note - net of discount of $726,900 and $39,012, respectively			3,555,006				330,032
Contingent liability for acquisition of subsidiary			1,000,000				—
Warrant liability			976,187				—
Total Current Liabilities			22,200,638				13,840,944
Loans payable, non-current			—				99,099
Employee benefits, non-current			214,143				169,738
TOTAL LIABILITIES			22,414,781				14,109,781
Stockholders' Equity
Preferred stock: 1,200,000 authorized; $0.001 par value
Series A Preferred stock: 10,000 designated; $0.001 par value, 10,000 shares issued and outstanding			10				10
Series B Preferred stock: 200,000 designated; $0.001 par value, 31,080 shares issued and outstanding			31				31
Series C Preferred stock: 200,000 designated; $0.001 par value, No shares issued and outstanding			—				—
Series D Preferred stock: 75,000 designated; $0.001 par value, No shares issued and outstanding			—				—
Common stock: 300,000,000 authorized; $0.001 par value 179,557,200 and 172,129,630 shares issued and outstanding, respectively			179,557				172,130
Additional paid in capital			35,947,882				34,360,884
Accumulated deficit			(28,902,052	)			(26,084,133	)
Accumulated other comprehensive loss			(25,340	)			(25,340	)
Equity attributed to stockholders of iQSTEL Inc.			7,200,088				8,423,582
Equity (Deficit) attributable to noncontrolling interests			371,791				(377,710	)
TOTAL STOCKHOLDERS' EQUITY			7,571,879				8,045,872
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	29,986,660			$	22,155,653

 

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

 

 

iQSTEL INC

Consolidated Statements of Operations

   (Unaudited)  

		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Revenues		$	78,635,764			$	32,824,829			$	130,050,642			$	57,491,358
Cost of revenue			76,472,140				32,040,363				126,507,992				55,490,156
Gross profit			2,163,624				784,466				3,542,650				2,001,202
Operating expenses
General and administration			2,505,727				1,037,184				4,068,205				2,571,450
Total operating expenses			2,505,727				1,037,184				4,068,205				2,571,450
Operating income (loss)			(342,103	)			(252,718	)			(525,555	)			(570,248	)
Other income (expense)
Other income			55,524				4,164				127,301				519
Other expenses			(443	)			(39,255	)			(850	)			(73,209	)
Interest expense			(496,080	)			(20,103	)			(861,554	)			(20,103	)
Change in fair value of derivative liabilities			(1,115,510	)			146,268				(1,115,510	)			342,575
Gain (loss) on settlement of debt			—				—				(102,660	)			—
Total other income (expense)			(1,556,509	)			91,074				(1,953,273	)			249,782
Net loss before provision for income taxes			(1,898,612	)			(161,644	)			(2,478,828	)			(320,466	)
Income taxes			(65,275	)			—				(65,275	)			—
Net loss			(1,963,887	)			(161,644	)			(2,544,103	)			(320,466	)
Less: Net income attributable to noncontrolling interests			44,265				52,301				273,816				256,664
Net loss attributed to iQSTEL Inc.		$	(2,008,152	)		$	(213,945	)		$	(2,817,919	)		$	(577,130	)
Comprehensive income (loss)
Net loss		$	(1,963,887	)		$	(161,644	)		$	(2,544,103	)		$	(320,466	)
Foreign currency adjustment			—				2,993				—				4,570
Total comprehensive loss			(1,963,887	)		$	(158,651	)		$	(2,544,103	)		$	(315,896	)
Less: Comprehensive income attributable to noncontrolling interests			44,265				53,767				273,816				258,903
Net comprehensive loss attributed to iQSTEL Inc.		$	(2,008,152	)		$	(212,418	)		$	(2,817,919	)		$	(574,799	)
Basic and diluted loss per common share		$	(0.01	)		$	(0.00	)		$	(0.02	)		$	(0.00	)
Weighted average number of common shares outstanding - Basic and diluted			178,445,909				164,636,688				176,799,415				164,346,860

  

 

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

   

 

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			10,000			$	10				31,080			$	31				172,129,630			$	172,130			$	34,360,884			$	(26,084,133	)		$	(25,340	)		$	8,423,582			$	(377,710	)		$	8,045,872
Common stock issued for compensation			—				—				—				—				150,000				150				30,915				—				—				31,065				—				31,065
Common stock issued for settlement of debt			—				—				—				—				1,770,000				1,770				277,890				—				—				279,660				—				279,660
Common stock issued in conjunction with convertible notes			—				—				—				—				3,535,354				3,535				594,242				—				—				597,777				—				597,777
Net income (loss)			—				—				—				—				—				—				—				(809,767	)			—				(809,767	)			229,551				(580,216)
Balance - March 31, 2024			10,000			$	10				31,080			$	31				177,584,984			$	177,585			$	35,263,931			$	(26,893,900	)		$	(25,340	)		$	8,522,317			$	(148,159	)		$	8,374,158
Common stock issued for compensation			—				—				—				—				150,000				150				46,450				—				—				46,600				—				46,600
Common stock issued for warrant exercises			—				—				—				—				1,822,216				1,822				398,178				—				—				400,000				—				400,000
Resolution of derivative liabilities upon exercise of warrant			—				—				—				—				—				—				239,323				—				—				239,323				—				239,323
Acquisition of subsidiary			—				—				—				—				—				—				—				—				—				—				475,685				475,685
Net income (loss)			—				—				—				—				—				—				—				(2,008,152	)			—				(2,008,152	)			44,265				(1,963,887)
Balance - June 30, 2024			10,000			$	10				31,080			$	31				179,557,200			$	179,557			$	35,947,882			$	(28,902,052			$	(25,340	)		$	7,200,088			$	371,791			$	7,571,879

 

 

 

 

 

		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			10,000			$	10				21,000			$	21				161,595,511			$	161,595			$	31,136,120			$	(24,504,395	)		$	(33,557	)		$	6,759,794			$	(924,377	)		$	5,835,417
Common stock issued for warrant exercises			—				—				—				—				2,941,177				2,942				397,058				—				—				400,000				—				400,000
Common stock issued for compensation			—				—				—				—				60,000				60				11,170				—				—				11,230				—				11,230
Resolution of derivative liabilities upon exercise of warrant			—				—				—				—				—				—				240,258				—				—				240,258				—				240,258
Foreign currency translation adjustments			—				—				—				—				—				—				—				—				804				804				773				1,577
Net income (loss)			—				—				—				—				—				—				—				(363,185	)			—				(363,185	)			204,363				(158,822)
Balance - March 31, 2023			10,000			$	10				21,000			$	21				164,596,688			$	164,597			$	31,784,606			$	(24,867,580	)		$	(32,753	)		$	7,048,901			$	(719,241	)		$	6,329,660
Common stock issued for compensation			—				—				—				—				60,000				60				6,840				—				—				6,900				—				6,900
Foreign currency translation adjustments			—				—				—				—				—				—				—				—				1,527				1,527				1,466				2,993
Net income (loss)			—				—				—				—				—				—				—				(213,945	)			—				(213,945	)			52,301				(161,644)
Balance - June 30, 2023			10,000			$	10				21,000			$	21				164,656,688			$	164,657			$	31,791,446			$	(25,081,525	)		$	(31,226	)		$	6,843,383			$	(665,474	)		$	6,177,909

 

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

 

 

iQSTEL INC

Consolidated Statements of Cash Flows 

  (Unaudited)  

		Six Months Ended June 30,
		2024				2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(2,544,103	)		$	(320,466	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation			77,665				18,130
Bad debt expense			1,801				—
Depreciation and amortization			68,939				68,488
Amortization of debt discount			468,797				7,226
Change in fair value of derivative liabilities			1,115,510				(342,575	)
Loss on settlement of debt			102,660				—
Changes in operating assets and liabilities:
Accounts receivable			12,944,081				(589,928	)
Inventory			185				(1,995	)
Prepaid and other assets			(500,544	)			(75,867	)
Due from related parties			—				46,631
Accounts payable			(9,519,447	)			1,144,422
Accrued and other current liabilities			(5,367,232	)			(675,466	)
Net cash used in operating activities			(3,151,688	)			(721,400	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of subsidiary, net of cash received			(2,505,121	)			—
Purchase of property and equipment			(103,474	)			(132,249	)
Purchase of intangible assets			—				(149,537	)
Advances of loan receivable - related party			(111,602	)			—
Collection of amounts due from related parties			—				2,700
Net cash used in investing activities			(2,720,197	)			(279,086	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans payable			699,525				150,000
Repayments of loans payable			(147,253	)			(9,006	)
Proceeds from loans payable - related parties			1,000,000				—
Repayment of loans payable - related parties			(166,681	)			—
Proceeds from exercise of warrants			400,000				400,000
Proceeds from convertible notes			3,722,500				250,000
Proceeds from stock purchase option			100,000				—
Repayment of convertible notes			(301,647	)			—
Net cash provided by financing activities			5,306,444				790,994
Effect of exchange rate changes on cash			—				6,873
Net change in cash			(565,441	)			(202,619	)
Cash, beginning of period			1,362,668				1,329,389
Cash, end of period		$	797,227			$	1,126,770
Supplemental cash flow information
Cash paid for interest		$	289,493			$	6,600
Cash paid for taxes		$	—			$	—
Non-cash transactions:
Common stock issued for settlement of debt		$	279,660			$	—
Resolution of derivative liabilities upon exercise of warrants		$	239,323			$	240,258
Common stock issued in connection with convertible notes		$	597,777			$	—
Note payable issued for acquisition of subsidiary		$	2,000,000			$	—
Contingent liability for acquisition of subsidiary		$	1,000,000			$	—

 

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

 

 

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 Nevada on June 24, 2011 under the name of B-Maven Inc. The Company changed its name to PureSnax International, Inc. on September 18, 2015; and more recently it changed its name to iQSTEL Inc. on August 7, 2018.

 

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

Table of Contents

 

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

Table of Contents

 

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 $797,227 and $1,362,668 in cash and cash equivalents at June 30, 2024 and December 31, 2023, respectively.

 

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 $1,801 and $0, respectively.

 

Net Income (Loss) Per Share of Common Stock

 

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 86% of our revenue compared to 23 customers representing 87% of our revenue for the six months ended June 30, 2023. For the six months ended June 30, 2024 and 2023, 38% and 39% of the revenue comes from customers under prepayment conditions which means there is no credit or bad debt risk on that portion of the customers portfolio.

 

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:

 

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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.

  

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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		$	150,726			$	312,116
Prepaid expenses			1,285,619				738,050
Advance payment			21,000				21,000
Tax receivable			25,607				428
Deposit for acquisition of asset			357,500				357,500
Security deposit			128,703				20,000
Prepaid Expenses and Other Current Assets		$	1,969,155			$	1,449,094

 

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		$	709,417			$	386,700
Telecommunication software			645,861				836,840
Other equipment			150,940				99,892
Total property and equipment			1,506,218				1,323,432
Accumulated depreciation and amortization			(922,904	)			(800,435	)
Total property and equipment		$	583,314			$	522,997

 

Depreciation expense for the six months ended June 30, 2024 and 2023 amounted to $68,939 and $68,488, respectively.

 

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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		$	103,738			$	103,738			Note was issued on October 23, 2018 and due on January 2, 2025			5.0	%
Darlene Covid19			89,866				99,099			Note was issued on April 1, 2020 and due on March 31, 2025			0.0	%
Promissory note payable			—				165,000			Note was issued April 4, 2023 and due on April 4, 2024			24.0	%
Future receipts loan			552,080				—			Loan was issued April 23, 2023 and due in February 26, 2025			Effective rate (1) 98.9	%
Promissory note payable			217,391				—			Note was issued June 11, 2024 and due on June 11, 2025			2.0	%
Promissory note payable - acquisition of QXTEL			1,725,000				—			Note was issued April 1, 2024 and due on June 30, 2025			4.89	%
Total			2,688,075				367,837
Less: Unamortized debt discount			(143,197	)			(3,750	)
Total loans payable			2,544,878				364,087
Less: Current portion of loans payable			(2,544,878	)			(264,988	)
Long-term loans payable		$	—			$	99,099

 

(1)

The purchase price is $504,575, net of financing fee of $10,425, and the amount to be paid is $690,100. The monthly payment amount is $69,010.

 

During the six months ended June 30, 2024 and 2023, the Company repaid the principal amount of $147,253 and $9,006, respectively.

 

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 1,770,000 shares of common stock. As a result, the Company recorded a loss on settlement of debt of $102,660.

  

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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		$	21,606			$	21,606			Note is due on demand			0	%
49% of Shareholder of SwissLink			237,841				237,841			Note is due on demand			5	%
Minority Shareholder of QXTEL			833,319				—			Note is due on October 1, 2025			4.89	%
Total			1,092,766				259,447
Less: Current portion of loans payable - related parties			1,092,766				259,447
Long-term loans payable - related parties		$	—			$	—

 

 

During the six months ended June 30, 2024 and 2023, the Company recorded interest expense of $47,665 and $9,460 and recognized amortization of discount, included in interest expense, of $68,519 and $3,750, respectively.

  

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		$	109,494			$	369,044
Issued in fiscal year 2024			4,172,412				—
Total convertible notes payable			4,281,906				369,044
Less: Unamortized debt discount			(726,900	)			(39,012	)
Total convertible notes			3,555,006				330,032
Less: current portion of convertible notes			3,555,006				330,032
Long-term convertible notes<