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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

 

 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  $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.   

 

 F-1 

 

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.   

   

 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   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. 

 

 F-3 

 

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.   

 

 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 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 

 

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 $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:

 

 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  $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.

 

 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  $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.

  

 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  $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<