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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
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 | |
| |
| | | |
| | | |
| | | |
| | |
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.
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.
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:
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.
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.
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.
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< |