iQSTEL Inc 10-Q

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 March 31, 2024 (unaudited) and December 31, 2023; F-2 Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023 (unaudited); F-3 Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (unaudited); and F-4 Consolidated Statements of Stockholder’s Equity as of March 31, 2024 and 2023 (unaudited) 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 March 31, 2024 are not necessarily indicative of the results that can be expected for the full year. 3 Table of Contents iQSTEL INC Consolidated Balance Sheets (Unaudited) March 31, December 31, 2024 2023 ASSETS Current Assets Cash $ 2,725,571 $ 1,362,668 Accounts receivable, net 9,000,237 12,539,774 Inventory 26,936 27,121 Due from related parties 391,745 340,515 Deposit for acquisition 1,500,000 — Prepaid and other current assets 1,975,266 1,449,094 Total Current Assets 15,619,755 15,719,172 Property and equipment, net 559,497 522,997 Intangible asset 99,592 99,592 Goodwill 5,172,146 5,172,146 Deferred tax assets 426,755 426,755 Other asset 241,025 214,991 TOTAL ASSETS $ 22,118,770 $ 22,155,653 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 1,614,500 $ 2,966,279 Accrued and other current liabilities 8,010,927 9,993,585 Due to related parties 26,613 26,613 Loans payable - net of discount of $ 0 and $ 3,750 , respectively 103,738 264,988 Loans payable - related parties 259,447 259,447 Convertible notes - net of discount of $ 923,185 and $ 39,012 , respectively 3,469,435 330,032 Total Current Liabilities 13,484,660 13,840,944 Loans payable, non-current 90,214 99,099 Employee benefits, non-current 169,738 169,738 TOTAL LIABILITIES 13,744,612 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 177,584,984 and 172,129,630 shares issued and outstanding, respectively 177,585 172,130 Additional paid in capital 35,263,931 34,360,884 Accumulated deficit ( 26,893,900 ) ( 26,084,133 ) Accumulated other comprehensive loss ( 25,340 ) ( 25,340 ) Equity attributed to stockholders of iQSTEL Inc. 8,522,317 8,423,582 Deficit attributable to noncontrolling interests ( 148,159 ) ( 377,710 ) TOTAL STOCKHOLDERS' EQUITY 8,374,158 8,045,872 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 22,118,770 $ 22,155,653 The accompanying notes are an integral part of these unaudited consolidated financial statements. F- 1 Table of Contents iQSTEL INC Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, 2024 2023 Revenues $ 51,414,878 $ 24,666,529 Cost of revenues 50,035,852 23,449,793 Gross profit 1,379,026 1,216,736 Operating expenses General and administration 1,562,478 1,534,266 Total operating expenses 1,562,478 1,534,266 Operating loss ( 183,452 ) ( 317,530 ) Other income (expense) Other income 71,777 — Other expenses ( 407 ) ( 33,954 ) Interest expense ( 365,474 ) ( 3,645 ) Change in fair value of derivative liabilities — 196,307 Gain (loss) on settlement of debt ( 102,660 ) — Total other income (expense) ( 396,764 ) 158,708 Net loss before provision for income taxes ( 580,216 ) ( 158,822 ) Income taxes — — Net loss ( 580,216 ) ( 158,822 ) Less: Net income attributable to noncontrolling interests 229,551 204,363 Net loss attributed to iQSTEL Inc. $ ( 809,767 ) $ ( 363,185 ) Comprehensive income (loss) Net loss $ ( 580,216 ) $ ( 158,822 ) Foreign currency adjustment — 1,577 Total comprehensive loss $ ( 580,216 ) $ ( 157,245 ) Less: Comprehensive income attributable to noncontrolling interests 229,551 205,136 Net comprehensive loss attributed to iQSTEL Inc. $ ( 809,767 ) $ ( 362,381 ) Basic and diluted loss per common share $ ( 0.00 ) $ ( 0.00 ) Weighted average number of common shares outstanding - Basic and diluted 175,152,920 164,034,479 The accompanying notes are an integral part of these unaudited consolidated financial statements. F- 2 Table of Contents iQSTEL INC Consolidated Statements of Changes in Stockholders’ Equity (Deficit) For the three months ended March 31, 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 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 warrants — — — — — — 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 The accompanying notes are an integral part of these unaudited consolidated financial statements. F- 3 Table of Contents iQSTEL INC Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 580,216 ) $ ( 158,822 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Stock-based compensation 31,065 11,230 Bad debt expense 725 — Depreciation and amortization 35,161 34,060 Amortization of debt discount 207,742 — Change in fair value of derivative liabilities — ( 196,307 ) Loss on settlement of debt 102,660 — Changes in operating assets and liabilities: Accounts receivable 2,743,089 564,365 Inventory 185 — Prepaid and other current assets ( 552,204 ) ( 16,204 ) Due from related parties — 5,131 Accounts payable ( 556,055 ) 537,667 Accrued and other current liabilities ( 1,969,040 ) ( 583,957 ) Net cash (used in) provided by operating activities ( 536,888 ) 197,163 CASH FLOWS FROM INVESTING ACTIVITIES: Deposit for acquisitions of subsidiary ( 1,500,000 ) — Purchase of property and equipment ( 71,662 ) ( 63,247 ) Purchase of intangible assets — ( 80,000 ) Advances of loans receivable - related party ( 51,230 ) — Collection of amounts due from related parties — 300 Net cash used in investing activities ( 1,622,892 ) ( 142,947 ) CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of loans payable ( 8,885 ) ( 9,006 ) Proceeds from exercise of warrants — 400,000 Proceeds from convertible notes 3,722,500 — Repayment of convertible notes ( 190,932 ) — Net cash provided by financing activities 3,522,683 390,994 Effect of exchange rate changes on cash — 2,627 Net change in cash 1,362,903 447,837 Cash, beginning of period 1,362,668 1,329,389 Cash, end of period $ 2,725,571 $ 1,777,226 Supplemental cash flow information Cash paid for interest $ 89,578 $ — Cash paid for taxes $ — $ — Non-cash transactions: Common stock issued for settlement of debt $ 279,660 $ — Resolution of derivative liabilities upon exercise of warrants $ — $ 240,258 Common stock issued in connection with convertible notes $ 597,777 $ — The accompanying notes are an integral part of these unaudited consolidated financial statements. F- 4 Table of Contents iQSTEL INC Notes to the Consolidated Financial Statements March 31, 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 19 countries and 70 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, and QGlobal SMS, 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 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 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 March 31, 2024 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 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”) and Smartbiz Telecom LLC (“Smartbiz”). 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. 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 and Global Money One 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 no cash equivalents at March 31, 2024 and December 31, 2023. 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 three months ended March 31, 2024 and 2023, the Company recorded bad debt expense of $ 725 and $ 0 , respectively. F- 6 Table of Contents 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 three months ended March 31, 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 three months ended March 31, 2024, 8 customers represented 86 % of our revenue compared to 12 customers representing 86 % of our revenue for the three months ended March 31, 2023. For the three months ended March 31, 2024 and 2023, 47 % and 62 % 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. F- 7 Table of Contents 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 Table of Contents 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 relied upon funds from its stockholders. Management may raise additional capital through future public or private offerings of the Company's stock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company's failure to do so could have a material and adverse effect upon its operations and its stockholders. NOTE 4 – PREPAID AND OTHER CURRENT ASSETS Prepaid and other current assets at March 31, 204 and December 31, 2023 consisted of the following: March 31, December 31, 2024 2023 Other receivable $ 115,922 $ 312,116 Prepaid expenses 1,320,870 738,050 Advance payment 21,000 21,000 Tax receivable 26,767 428 Deposit for acquisition of asset 357,500 357,500 Security deposit 133,207 20,000 Total Prepaid and Other Current Assets $ 1,975,266 $ 1,449,094 NOTE 5 – PROPERTY AND EQUIPMENT Property and equipment at March 31, 204 and December 31, 2023 consisted of the following: March 31, December 31, 2024 2023 Telecommunication equipment $ 386,700 $ 386,700 Telecommunication software 908,503 836,840 Other equipment 91,468 99,892 Total property and equipment 1,386,671 1,323,432 Accumulated depreciation and amortization ( 827,174 ) ( 800,435 ) Total property and equipment $ 559,497 $ 522,997 Depreciation expense for the three months ended March 31, 2024 and 2023 amounted to $ 35,161 and $ 34,060 , respectively. F- 9 Table of Contents NOTE 6 –LOANS PAYABLE Loans payable at March 31, 204 and December 31, 2023 consisted of the following: March 31, December 31, Interest 2024 2023 Term rate Martus $ 103,738 $ 103,738 Note was issued on October 23, 2018 and due on June 30, 2024 5.0 % Darlene Covid19 90,214 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 paid in full in March 2024 24.0 % Total 193,952 367,837 Less: Unamortized debt discount — ( 3,750 ) Total loans payable 193,952 364,087 Less: Current portion of loans payable ( 103,738 ) ( 264,988 ) Long-term loans payable $ 90,214 $ 99,099 During the three months ended March 31, 2024 and 2023, the Company repaid the principal amount of $ 8,885 and $ 9,006 , respectively. During the three months ended March 31, 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 March 31, 204 and December 31, 2023 consisted of the following: March 31, 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 % Total 259,447 259,447 Less: Current portion of loans payable - related parties 259,447 259,447 Long-term loans payable - related parties $ — $ — During the three months ended March 31, 2024 and 2023, the Company recorded interest expense of $ 9,053 and $ 3,645 and recognized amortization of discount, included in interest expense, of $ 3,750 and $ 0 , respectively. F- 10 Table of Contents NOTE 7 - CONVERTIBLE NOTES Convertible notes at March 31, 2024 and December 31, 2023 consisted of the following: March 31, December 31, 2024 2023 Issued in fiscal year 2023 $ 179,732 $ 369,044 Issued in fiscal year 2024 4,212,888 — Total convertible notes payable 4,392,620 369,044 Less: Unamortized debt discount ( 923,185 ) ( 39,012 ) Total convertible notes 3,469,435 330,032 Less: current portion of convertible notes 3,469,435 330,032 Long-term convertible notes $ — $ — Issued in fiscal year 2023 During the year ended December 31, 2023, the Company borrowed $ 284,760 and $ 256,760 from a third party totaling $ 541,520 , which includes original issue discount and financing costs of $ 66,520 . The notes are due on June 1, 2024 and October 15, 2024 , and a one-time interest charge of 12 % shall be applied. Accrued, unpaid interest and outstanding principal shall be paid in 10 payments each in the amount of $ 31,893 and $ 28,757 beginning on July 16, 2023 and January 15, 2024 . The notes are convertible at the option of the holders at any time following an event of default, and the conversion price is 75% multiplied by the lowest trading price of Company’s common stock during the 10 trading days prior to the conversion date . Issued in fiscal year 2024 On January 24, 2024, we entered into a securities purchase agreement (the “SPA”) with M2B Funding Corp., a Florida corporation, for it to purchase up to the principal amount of $ 3,888,889 in secured convertible promissory notes (the “Notes”) for an aggregate purchase price of $ 3,500,000 (the “Purchase Price”), which Notes are convertible into shares (“Conversion Shares”) of our common stock with an initial conversion price of $ 0.11 per share. Each noteholder shall receive shares of common stock (“Kicker Shares”) in an amount equal to ten percent of the principal amount of any Note issued divided by $0.11. The Notes are secured by all of our assets under a Security Agreement signed with the SPA . The initial tranche was executed in January 2024 for $ 2,222,222 in face value of Notes and 2,020,200 Kicker Shares, with an original issue discount of $ 222,222 ; second and third tranches were executed in March 2024 for $ 1,111,111 and $ 555,556 , respectively, in face value of Notes and 1,010,101 and 505,051 Kicker Shares, with an original issue discount of US $ 111,111 and $ 55,556 , respectively. Each one year note bears interest at 18 % per annum. During the period ended March 31, 2024, the Company borrowed $ 146,900 and $ 177,100 from a third party totaling $ 324,000 , which includes original issue discount and financing costs of $ 49,000 . The notes are due on January 15, 2025 , and a one-time interest charge of 12 % and 14 % , respectively, shall be applied. Accrued, unpaid interest and outstanding principal on the $146,900 note shall be paid in 10 payments each in the amount of $ 16,453 beginning on April 15, 2024; accrued, unpaid interest and outstanding principal on the $177,100 note shall be paid in 5 payments, one payment of $ 100,947 and four payments of $ 25,237 , beginning in September 2024 . The notes are convertible at the option of the holders at any time following an event of default, and the conversion price is 75% multiplied by the lowest trading price of Company’s common stock during the 10 trading days prior to the conversion date. During the three months ended March 31, 2024 and 2023, the Company recorded interest expense of $ 139,979 and $ 0 and recognized amortization of discount, included in interest expense, of $ 203,992 and $ 0 , respectively. F- 11 Table of Contents NOTE 8 – STOCKHOLDERS’ EQUITY Common Stock The Company’s authorized capital consists of 300,000,000 shares of common stock with a par value of $ 0.001 per share. During the three months ended March 31, 2024, the Company issued 5,455,354 shares of common stock, valued at fair market value on issuance as follows: • 150,000 shares for compensation to our directors valued at 31,065 • 3,535,354 shares in connection with convertible notes valued at $ 597,777 ; and • 1,770,000 shares for settlement of debt valued at $ 279,660 As of March 31, 2024 and December 31, 2023, 177,584,984 and 172,129,630 shares of common stock were issued and outstanding, respectively. Preferred Stock The Company’s authorized capital consists of 1,200,000 shares of preferred stock with a par value of $ 0.001 per share. Series A Preferred Stock On November 3, 2020, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock entitled Series A Preferred Stock, consisting of up 10,000 shares, par value $ 0.001 . Under the Certificate of Designation, holders of Series A Preferred Stock will participate on an equal basis per-share with holders of our common stock in any distribution upon winding up, dissolution, or liquidation . Holders of Series A Preferred Stock are entitled to vote together with the holders of our common stock on all matters submitted to stockholders at a rate of 51% of the total vote of stockholders . The rights of the holders of Series A Preferred Stock are defined in the relevant Certificate of Designation filed with the Nevada Secretary of State on November 3, 2020 As of March 31, 2024 and December 31, 2023, 10,000 shares of Series A Preferred Stock were issued and outstanding. Series B Preferred Stock On November 11, 2020, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock entitled Series B Preferred Stock, consisting of up 200,000 shares, par value $ 0.001 . Under the Certificate of Designation, holders of Series B Preferred Stock will receive a liquidation preference of $ 81 per share in any distribution upon winding up, dissolution, or liquidation of the Company before junior security holders, as provided in the designation. Holders of Series B Preferred Stock are entitled to receive as, when, and if declared by the Board of Directors, dividends in kind at an annual rate equal to twenty four percent (24%) of $81 per share for each of the then outstanding shares of Series B Preferred Stock, calculated on the basis of a 360-day year consisting of twelve 30-day months . Holders of Series B Preferred Stock do not have voting rights but may convert into common stock after twelve months from the issuance date, at a conversion rate of one thousand (1,000) shares of Common Stock for every one (1) share of Series B Preferred Stock. Upon conversion, the shares are subject to a one-year restriction on sales into the market of no more than 5% previous month’s stock liquidity. As of March 31, 2024 and December 31, 2023, 31,080 shares of Series B Preferred Stock were issued and outstanding. F- 12 Table of Contents Series C Preferred Stock On January 7, 2021, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock entitled Series C Preferred Stock, consisting of up 200,000 shares, par value $ 0.001 . Under the Certificate of Designation, holders of Series C Preferred Stock will rank junior to the Series B Preferred Stock, but on par with common stock and Series A Preferred Stock in any distribution upon winding up, dissolution, or liquidation of the company, as provided in the designation . The holders of shares of Series C Preferred Stock have no dividend rights except as may be declared by the Board in its sole and absolute discretion, out of funds legally available for that purpose . Holders of Series C Preferred Stock do not have voting rights but may convert into common stock after twenty four months from the issuance date, at a conversion rate of one thousand (1,000) shares of Common Stock for every one (1) share of Series C Preferred Stock. Upon conversion, the shares are subject to a one-year restriction on sales into the market of no more than 5% previous month’s stock liquidity. The rights of the holders of Series C Preferred Stock are defined in the relevant Certificate of Designation filed with the Nevada Secretary of State on January 7, 2021. As of March 31, 2024 and December 31, 2023, no Series C Preferred Stock was issued or outstanding. Series D Preferred Stock On November 3, 2023, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock entitled Series D Preferred Stock, consisting of up 75,000 shares, par value $ 0.001 . Under the Certificate of Designation, in the event of any dissolution, liquidation or winding up of the Corporation, the Holders of Series D Preferred Stock shall be entitled to participate in any distribution out of the assets of the Corporation before the holders of the Common Stock, Series A Preferred Stock and Series C Preferred Stock, but shall be considered on parity to the liquidation rights of the Series B Preferred Stockholders. The holders of shares of Series D Preferred Stock have no dividend rights except as may be declared by the Board in its sole and absolute discretion, out of funds legally available for that purpose . Holders of Series D Preferred Stock do not have voting rights but may convert into common stock at a conversion rate of one thousand (1,000) shares of Common Stock for every one (1) share of Series D Preferred Stock. The rights of the holders of Series D Preferred Stock are defined in the relevant Certificate of Designation filed with the Nevada Secretary of State on November 3, 2023. As of March 31, 2024 and December 31, 2023, no Series D Preferred Stock was issued or outstanding. NOTE 9 - RELATED PARTY TRANSACTIONS Due from related party As of March 31, 2024 and December 31, 2023, the Company had amounts due from related parties of $ 391,745 and $ 340,515 , respectively. The loans are unsecured, non-interest bearing and due on demand. Due to related parties As of March 31, 2024 and December 31, 2023, the Company had amounts due to related parties of $ 26,613 . The amounts are unsecured, non-interest bearing and due on demand. Employment agreements During the three months ended March 31, 2024 and 2023, the Company recorded management salaries of $ 211,500 and $ 144,000 , respectively, and stock-based compensation bonuses of $ 31,065 and $ 11,230 , respectively. As of March 31, 2024 and December 31, 2023, the Company recorded and accrued management salaries of $ 137,127 and $ 100,128 , respectively. F- 13 Table of Contents NOTE 10 – COMMITMENTS AND CONTINGENCIES Leases and Long-term Contracts The Company has not entered into any long-term leases, contracts or commitments. The Company leases facilities which the term is 12 months . For the three months ended March 31, 2024 and 2023, the Company incurred rent expense of $ 7,122 and $ 900 , respectively. NOTE 11 – DEPOSIT FOR ACQUISITION On January 19, 2024 , we entered into a Share Purchase Agreement (“Purchase Agreement”) with Yukon River Holdings, Ltd. (“Yukon River”), a corporation formed under the laws of the British Virgin Islands (“Seller”) concerning the contemplated sale by Seller and the purchase by us of 51% of the ordinary shares Seller holds in QXTEL LIMITED (“QXTEL”), a company incorporated in England and Wales. The purchase price (the “Purchase Price”) payable to the Seller for the shares is $ 5,000,000 . Upon the execution of the Purchase Agreement, we agreed to deposit $ 1,500,000 of the Purchase Price into the trust account of a law firm acting as escrow agent (the “Escrow Agent”) as a nonrefundable deposit to evidence our good faith intention to purchase the shares. If the Purchase Agreement does not close before April 30, 2024, the deposit is non-refundable. If the Purchase Agreement closes, the deposit will be credited against the Purchase Price. At closing, in addition to the $ 1,500,000 with the Escrow Agent that will form part of the Purchase Price, we are required to pay $ 1,500,000 in cash and $2,000,000 to the Seller, either (A) in the form of a promissory note (the “Promissory Note”), or (B) by the delivery of iQSTEL shares to Seller. Seller may decide the form of payment between the Promissory Note or the share of iQSTEL, and if a Promissory Note is chosen, we have agreed to allow Seller the option to exchange the Promissory Note for shares of iQSTEL . As of March 31, 2024, the acquisition was not closed yet. The acquisition was closed on April 1, 2024 , please refer to Note 13 – Subsequent Events for more details. NOTE 12 - SEGMENT At March 31, 2024 and December 31, 2023, the Company operates in one industry segment, telecommunication services, and two geographic segments, USA and Switzerland, where current assets and equipment are located . Operating Activities The following table shows operating activities information by geographic segment for the three months ended March 31, 2024 and 2023: Three months ended March 31, 2024 NOTE 12 - SEGMENTS - Operating Activities by Geographic Segment (Details) USA Switzerland Elimination Total Revenues $ 52,111,257 1,035,919 $ ( 1,732,298 ) $ 51,414,878 Cost of revenue 50,931,826 836,324 ( 1,732,298 ) 50,035,852 Gross profit 1,179,431 199,595 — 1,379,026 Operating expenses General and administration 1,356,006 206,472 — 1,562,478 Operating loss ( 176,575 ) ( 6,877 ) — ( 183,452 ) Other income (expense) ( 435,483 ) 38,719 — ( 396,764 ) Net income (loss) $ ( 612,058 ) $ 31,842 $ — $ ( 580,216 ) F- 14 Table of Contents Three months ended March 31, 2023 USA Switzerland Elimination Total Revenues $ 24,847,671 1,347,435 $ ( 1,528,577 ) $ 24,666,529 Cost of revenue 23,825,886 1,152,484 ( 1,528,577 ) 23,449,793 Gross profit 1,021,785 194,951 — 1,216,736 Operating expenses General and administration 1,350,956 183,310 — 1,534,266 Operating (loss) income ( 329,171 ) 11,641 — ( 317,530 ) Other income (expense) 174,955 ( 16,247 ) — 158,708 Net loss $ ( 154,216 ) $ ( 4,606 ) $ — $ ( 158,822 ) Asset Information The following table shows asset information by geographic segment as of March 31, 204 and December 31, 2023: March 31, 2024 USA Switzerland Elimination Total Assets Current assets $ 15,834,379 $ 748,064 $ ( 962,688 ) $ 15,619,755 Non-current assets $ 11,859,742 $ 823,835 $ ( 6,184,562 ) $ 6,499,015 Liabilities Current liabilities $ 13,027,346 $ 1,420,002 $ ( 962,688 ) $ 13,484,660 Non-current liabilities $ 139 $ 259,813 $ — $ 259,952 December 31, 2023 USA Switzerland Elimination Total Assets Current assets $ 14,537,969 $ 1,874,627 $ ( 693,424 ) $ 15,719,172 Non-current assets $ 11,810,606 $ 810,437 $ ( 6,184,562 ) $ 6,436,481 Liabilities Current liabilities $ 11,978,244 $ 2,556,124 $ ( 693,424 ) $ 13,840,944 Non-current liabilities $ 139 $ 268,698 $ — $ 268,837 NOTE 13 – SUBSEQUENT EVENTS Subsequent to March 31, 2024 and through the date that these financials were made available, the Company had the following subsequent events: On April 1, 2024 the Company closed the acquisition of 51% of the issued ordinary shares of QXTEL Limited as it was established in the Shares Purchase Agreement executed and disclosed in a Form 8-K on January 19, 2024 . At closing, the Company acquired 51% of the issued ordinary shares of QXTEL Limited. The purchase price (the “Purchase Price”) payable to the Seller for the shares is US $5,000,000. Upon the execution of the Purchase Agreement, on January 19, 2024 we deposited US $1,500,000 of the Purchase Price into the trust account of a law firm acting as escrow agent (the “Escrow Agent”) as a nonrefundable deposit to evidence our good faith intention to purchase the shares. At closing on April 1, 2024, in addition to the US $1,500,000 with the Escrow Agent that will form part of the Purchase Price, we paid US $1,500,000 in cash and US $2,000,0000 to the Seller, in the form of a promissory note (the “Promissory Note”). We have agreed to allow Seller the option to exchange the Promissory Note for shares of iQSTEL under a formula discounted by 20% of the average closing sales price for 5 consecutive days on the trading market. If the Promissory Note is not exchanged for shares, the $2,000,000 will be paid with no interest in 7 monthly payments of $200,000 each and an eighth payment of $600,000. F- 15 Table of Contents On May 10, 2024, the Company entered into a Purchase Company Agreement (“Purchase Company Agreement”) with Omar Luna and Lynk Holding LLC (together, the “Seller”) concerning the sale by Seller and the purchase by us of 51% of the membership interests the Seller holds in Lynk Telecom, LLC, a Virginia limited liability company (“Lynk Telecom”). The closing of the Purchase Company Agreement is expected to occur no later than July 1, 2024, once due diligence has been completed. Lynk Telecom provides certified business telephone, SMS, connectivity, and networking services across various sectors in the United States. Lynk Holding LLC recently acquired selected assets from a company known as Voyce Telecom, and Lynk Holding LLC has the obligation to pay the shareholders of Voyce Telecom the purchase price in that acquisition, which is outstanding. The Purchase Price for 51% of the membership interests of Lynk Telecom is US $1,500,000, and this amount will be paid by the Seller to the Buyer in 12 consecutive monthly cash payments of US$ 125,000 each. The Seller agrees to use these funds for the amortization of the payments that it owes to Voyce in relation to the contract between Lynk Holding and Voyce Telecom. Once we have paid the $1,500,000 for the acquisition of Lynk Telecom, and Lynk Telecom has achieved the business goals outlined in the Purchase Company Agreement, under what we refer to as “Phase I,” we have agreed to lend up to US$1,500,000 to Lynk Telecom, in installments of up to US$100,000 per month, to be used solely for marketing campaigns, promotion and development of the retail services, according to a business plan that has to be approved by Lynk Telecom’s board of directors. The disbursements of this loan will be subject to the achievements of the quarterly goals set in the business plan of Lynk Telecom. This retail business plan will have the aim of achieving the objective of generating a minimum of US$200,000 in operating income per month, with intermediate staggered quarterly goals. Upon the completion of Phase I, and the business goals in the Purchase Company Agreement have been achieved, we have agreed to lend Lynk Telecom up to US$1,500,000 in at least three stages, each of up to US$500,000 per year to help accelerate the amortization of the debt Lynk Holding LLC has with the Voyce Telecom shareholders. These loans would be linked to compliance with the financial statements for fiscal years 2026, 2027, 2028, 2029 and 2030. The goals for these years will be defined posteriori by the parties and approved by Lynk Telecom’s Board of Directors. The payment of this loan will be guaranteed with the portion of dividends that correspond to Lynk Holding LLC when Lynk Telecom makes a dividend distribution. If, as a result of operations, Lynk Telecom does not reach the projections in the Purchase Company Agreement, and the business plan for the years 2026, 2027, 2028, 2029 and 2030 approved by Lynk Telecom´s Board of Directors, we may retain the stipulated loan. If Lynk Telecom surpassed the projections in the Purchase Company Agreement, we have agreed to true up the purchase price, with details of the true up contained in the Purchase Company Agreement. Once this Purchase Company Agreement is signed, the manager of Lynk Telecom, Omar Luna, is expected to enter into a 3-year employment agreement with Lynk Telecom, that will be executed before the closing date, renewable for a 2-year period to guarantee the operational continuity of Lynk Telecom and the implementation of a business plan that will lead Lynk Telecom into a productive company with positive net income as established in the Purchase Company Agreement. Lynk Telecom shall have a Board of Directors composed of 3 members: 2 of the members shall be appointed by us and the remaining member shall be appointed by the Seller. The position of President and Secretary will be reserved for us. The closing of the Purchase Agreement is subject to, among other things, Lynk Telecom having prepared all accounting information in accordance with SEC standards in such a manner that any audit of the Company, if required, may be performed. F- 16 Table of Contents