iQSTEL Inc 10-Q

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 Table of Contents 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 Table of Contents 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 Table of Contents 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 Table of Contents iQSTEL INC Notes to the Consolidated Financial Statements June 30, 2024 NOTE 1 -ORGANIZATION AND DESCRIPTION OF BUSINESS Organization and Operations iQSTEL Inc. (“iQSTEL”, “we”, “us”, or the “Company”) was incorporated under the laws of the State of Nevada on June 24, 2011 under the name of B-Maven Inc. The Company changed its name to PureSnax International, Inc. on September 18, 2015; and more recently it changed its name to iQSTEL Inc. on August 7, 2018. The Company has been engaged in the business of telecommunication services as a wholesale carrier of voice, SMS and data for other telecom companies around the World with over 400 active interconnection agreements with mobile companies, fixed line companies and other wholesale carriers. The Company is a technology company with presence in 20 countries and over 100 employees that is offering leading-edge services through its four business divisions. The Telecom Division, which represents the majority of current operations and which also represents the source for all of the Company’s revenues, offers VoIP, SMS, proprietary Internet of Things (IoT) solutions (www.iotsmartgas.com and www.iotsmarttank.com), and international fiber-optic connectivity through its subsidiaries: Etelix.com USA, LLC, SwissLink Carrier AG, Smartbiz Telecom LLC, Whisl Telecom LLC, IoT Labs, LLC, QGlobal SMS, LLC, and QXTEL LIMITED. Also under the Telecom Division, the Company’s developing BlockChain Platform Business Line offers our proprietary Mobile Number Portability Application (MNPA) to serve the in-country portability needs through its subsidiary, itsBchain, LLC. The Company’s developing Fintech Business Line offers a complete Fintech ecosystem MasterCard Debit Card, US Bank Account (No SSN Needed), Mobile App/Wallet (Remittances, Mobile Top Up). The Company’s Fintech subsidiary, Global Money One Inc., is to provide immigrants access to reliable financial services that makes it easier to manage their money and stay connected with their families back home. The Company’s developing Electric Vehicle (EV) Business Line offers electric motorcycles for work and recreational use in the USA, Spain, Portugal, Panama, Colombia, and Venezuela. EVOSS is also working on the development of an EV Mid Speed Car to serve the niche of the 2nd car in the family. The Company’s developing Artificial Intelligence (AI)-Enhanced Metaverse Division offers a white-label solution designed specifically for corporations, businesses, and the telecommunications industry. Delivering a full suite of immersive content services, creating a comprehensive virtual experience that can be accessed through the Web or our proprietary mobile apps. NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements. F- 5 Table of Contents In the opinion of the Company’s management, the accompanying unaudited interim consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of June 30, 2024 and the results of operations and cash flows for the periods presented. The results of operations for the six months ended June 30, 2024 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on April 1, 2024. Reclassification Certain accounts from prior periods have been reclassified to conform to the current period presentation. Consolidation Policy The consolidated financial statements of the Company include the accounts of the Company and its owned subsidiaries, Etelix.com USA, LLC (“Etelix”), SwissLink Carrier AG (“Swisslink”), ITSBCHAIN, LLC (“ItsBchain”), QGLOBAL SMS, LLC (“QGlobal”), IoT Labs, LLC (“IoT Labs”), Global Money One Inc (“Global Money One”), Whisl Telecom LLC (“Whisl”), Smartbiz Telecom LLC (“Smartbiz”) and QXTEL LIMITED (“QXTEL”). All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments. Business Combinations In accordance with ASC 805-10, “ Business Combinations ”, the Company accounts for all business combinations using the acquisition method of accounting. Under this method, assets and liabilities, including any remaining non-controlling interests, are recognized at fair value at the date of acquisition. The excess of the purchase price over the fair value of assets acquired, net of liabilities assumed, and non-controlling interests is recognized as goodwill. Certain adjustments to the assessed fair values of the assets, liabilities, or non-controlling interests made subsequent to the acquisition date, but within the measurement period, which is up to one year, are recorded as adjustments to goodwill. Any adjustments subsequent to the measurement period are recorded in income. Any cost or equity method interest that the Company holds in the acquired company prior to the acquisition is re-measured to fair value at acquisition with a resulting gain or loss recognized in income for the difference between fair value and the existing book value. Results of operations of the acquired entity are included in the Company’s results from the date of the acquisition onward and include amortization expense arising from acquired tangible and intangible assets. Foreign Currency Translation and Re-measurement The Company translates its foreign operations to U.S. dollars in accordance with ASC 830, “ Foreign Currency Matters ”. The functional currency and reporting currency of Etelix, QGlobal, ItsBchain, IoT Labs, Whisl, Smartbiz, Global Money One and QXTEL is the U.S. dollar, while SwissLink’s functional currency was the Swiss Franc (“CHF”). As of January 1, 2024, we changed the functional currency of SwissLink from their respective local currency to the US dollar. The change in functional currency is due to increased exposure to the US dollar as a result of a change in facts and circumstances in the primary economic environment in which this subsidiary operates. The effects of the change in functional currency were not significant to our consolidated financial statements. F- 6 Table of Contents Cash and Cash Equivalents Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company had $ 797,227 and $ 1,362,668 in cash and cash equivalents at June 30, 2024 and December 31, 2023, respectively. Accounts Receivable and Allowance for Uncollectible Accounts Substantially all of the Company’s accounts receivable balance is related to trade receivables. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable . The Company estimates expected credit losses related to accounts receivable balances based on a review of available and relevant information including current economic conditions, projected economic conditions, historical loss experience, account aging, and other factors that could affect collectability. During the six months ended June 30, 2024 and 2023, the Company recorded bad debt expense of $ 1,801 and $ 0 , respectively. Net Income (Loss) Per Share of Common Stock The Company has adopted ASC 260, ”Earnings per Share” which requires presentation of basic earnings per share on the face of the statements of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic earnings per share computation. In the accompanying financial statements, basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants unless the result would be antidilutive. Dilutive potential common shares include outstanding Series B Preferred stock, and it was excluded from the computation of diluted net loss per share as the result was anti-dilutive for the six months ended June 30, 2024 and 2023. Concentrations of Credit Risk The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables. The Company places its cash and cash equivalents with financial institutions of high creditworthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. During the six months ended June 30, 2024, 15 customers represented 86 % of our revenue compared to 23 customers representing 87 % of our revenue for the six months ended June 30, 2023. For the six months ended June 30, 2024 and 2023, 38 % and 39 % of the revenue comes from customers under prepayment conditions which means there is no credit or bad debt risk on that portion of the customers portfolio. Financial Instruments The Company follows ASC 820, “ Fair Value Measurements and Disclosures, ” which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below: F- 7 Table of Contents 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 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 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 Table of Contents 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 Table of Contents 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 $ — $ — 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. F- 11 Table of Contents 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 $ 111,111 and $ 55,556 , respectively. Each one year note bears interest at 18 % per annum. During the three months ended June 30, 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 six months ended June 30, 2024 and 2023, the Company recorded interest expense of $ 345,092 and $ 3,417 and recognized amortization of discount, included in interest expense, of $ 400,278 and $ 3,476 , respectively. 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 six months ended June 30, 2024, the Company issued 7,427,570 shares of common stock, valued at fair market value on issuance as follows: • 300,000 shares for compensation to our directors valued at $ 77,665 • 1,770,000 shares for settlement of debt valued at $ 279,660 • 3,535,354 shares in connection with convertible notes valued at $ 597,777 ; and • 1,822,216 shares for exercise of warrants for $ 400,000 As of June 30, 2024 and December 31, 2023, 179,557,200 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 F- 12 Table of Contents As of June 30, 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 June 30, 2024 and December 31, 2023, 31,080 shares of Series B Preferred Stock were issued and outstanding. Series C Preferred Stock On January 7, 2021, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock entitled Series C Preferred Stock, consisting of up 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 June 30, 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 June 30, 2024 and December 31, 2023, no Series D Preferred Stock was issued or outstanding. F- 13 Table of Contents NOTE 9 - RELATED PARTY TRANSACTIONS Due from related party As of June 30, 2024 and December 31, 2023, the Company had amounts due from related parties of $ 661,087 and $ 340,515 , respectively. The loans are unsecured, non-interest bearing and due on demand. Due to related parties As of June 30, 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 six months ended June 30, 2024 and 2023, the Company recorded management salaries of $ 423,000 and $ 270,000 , respectively, and stock-based compensation bonuses of $ 77,665 and $ 18,130 , respectively. As of June 30, 2024 and December 31, 2023, the Company recorded and accrued management salaries of $ 205,627 and $ 100,128 , respectively. 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 six months ended June 30, 2024 and 2023, the Company incurred rent expense of $ 14,028 and $ 2,137 , respectively. NOTE 11 – 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, which was credited against the Purchase Price. At closing, in addition to the $ 1,500,000 with the Escrow Agent that formed part of the Purchase Price, we were 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 could decide the form of payment between the Promissory Note or the shares of iQSTEL, and if a Promissory Note was chosen, we agreed to allow Seller the option to exchange the Promissory Note for shares of iQSTEL . On June 27, 2024, we entered into a second amendment to the Purchase Agreement (the “Amendment”) that required us to issue an amended and restated promissory note to the Seller. We have paid down $ 200,000 of the note, so the amended and restated promissory note was issued in the principal amount of US $ 1,800,000 . The amended and restated promissory note also changed the payment structure, from installment payments of $ 200,000 for each of the months of May through November ($1,400,000) with a balloon payment of $ 600,000 , to monthly installments of $ 75,000 plus interest during 2024, and $ 212,500 plus interest during the first 6 months of 2025 . We also revised the Earnout Payment due to the Seller. The Earnout Payment was redefined at $ 721,035 net income, to be achieved in Q2, Q3 and Q4 of 2024. The $ 1,000,000 payment that IQSTEL has to pay upon achievement of the Earnout Payment will be paid during the first half of 2025, in monthly installments. F- 14 Table of Contents During the six months ended June 30, 2024, the Company repaid a note payable of $ 275,000 . The acquisition was closed on April 1, 2024. QXTEL has been included in our consolidated results of operations since the acquisition date. The following table summarizes the fair value of the consideration paid by the Company: April 1, Fair Value of Consideration: 2024 Cash $ 3,000,000 Promissory note 2,000,000 Contingent liability 1,000,000 Total Purchase Price $ 6,000,000 The following table summarizes the preliminary identifiable assets acquired and liabilities assumed upon acquisition of QXTEL and the calculation of goodwill: Total purchase price $ 6,000,000 Cash 769,879 Accounts receivable 14,946,919 Due from related party 208,550 Other asset 214,564 Equipment 30,963 Total identifiable assets 16,170,875 Accounts payable ( 14,796,505 ) Other current liabilities ( 403,584 ) Total liabilities assumed ( 15,200,089 ) Net assets 970,786 Non-controlling interest - 49% 475,685 Total net assets 495,101 Goodwill $ 5,504,899 Unaudited combined proforma results of operations for the six months ended June 30, 2024 and 2023 as though the Company acquired QXTEL on January 1, 2023, are set forth below: Six Months Ended June 30, 2024 2023 Revenues $ 157,734,103 $ 97,988,300 Cost of revenues 153,669,990 94,185,602 Gross profit 4,064,113 3,802,698 Operating expenses 4,696,867 3,992,419 Operating loss ( 632,754 ) ( 189,721 ) Other income (expense) ( 1,953,273 ) 249,782 Income tax ( 65,275 ) ( 94,225 ) Net Loss $ ( 2,651,302 ) $ ( 34,164 ) F- 15 Table of Contents NOTE 12 - SEGMENT At June 30, 2024 and December 31, 2023, the Company operates in one industry segment, telecommunication services, and three geographic segments, USA, UK and Switzerland, where current assets and equipment are located . Operating Activities The following table shows operating activities information by geographic segment for the three and six months ended June 30, 2024 and 2023: Three months ended June 30, 2024 NOTE 12 - SEGMENT - Operating Activities by Geographic Segment USA Switzerland UK Elimination Total Revenues $ 46,933,532 1,026,797 31,474,055 $ ( 798,620 ) $ 78,635,764 Cost of revenue 45,956,484 883,919 30,430,357 ( 798,620 ) 76,472,140 Gross profit 977,048 142,878 1,043,698 — 2,163,624 Operating expenses General and administration 1,602,751 237,073 665,903 — 2,505,727 Operating income (loss) ( 625,703 ) ( 94,195 ) 377,795 — ( 342,103 ) Other income (expense) ( 1,597,506 ) 47,525 ( 6,528 ) — ( 1,556,509 ) Income tax expense — — ( 65,275 ) — ( 65,275 ) Net income (loss) $ ( 2,223,209 ) $ ( 46,670 ) $ 305,992 $ — $ ( 1,963,887 ) Three months ended June 30, 2023 USA Switzerland Elimination Total Revenues $ 32,960,138 1,334,080 $ ( 1,469,389 ) $ 32,824,829 Cost of revenue 32,359,937 1,149,815 ( 1,469,389 ) 32,040,363 Gross profit 600,201 184,265 — 784,466 Operating expenses General and administration 845,485 191,699 — 1,037,184 Operating loss ( 245,284 ) ( 7,434 ) — ( 252,718 ) Other income (expense) 98,224 ( 7,150 ) — 91,074 Net loss $ ( 147,060 ) $ ( 14,584 ) $ — $ ( 161,644 ) F- 16 Table of Contents Six months ended June 30, 2024 USA Switzerland UK Elimination Total Revenues $ 99,044,789 2,062,716 31,474,055 $ ( 2,530,918 ) $ 130,050,642 Cost of revenue 96,888,310 1,720,243 30,430,357 ( 2,530,918 ) 126,507,992 Gross profit 2,156,479 342,473 1,043,698 — 3,542,650 Operating expenses General and administration 2,958,757 443,545 665,903 — 4,068,205 Operating income (loss) ( 802,278 ) ( 101,072 ) 377,795 — ( 525,555 ) Other income (expense) ( 2,032,989 ) 86,244 ( 6,528 ) — ( 1,953,273 ) Income tax expense — — ( 65,275 ) — ( 65,275 ) Net income (loss) $ ( 2,835,267 ) $ ( 14,828 ) $ 305,992 $ — $ ( 2,544,103 ) Six months ended June 30, 2023 USA Switzerland Elimination Total Revenues $ 57,807,809 2,681,515 $ ( 2,997,966 ) $ 57,491,358 Cost of revenue 56,185,823 2,302,299 ( 2,997,966 ) 55,490,156 Gross profit 1,621,986 379,216 — 2,001,202 Operating expenses General and administration 2,196,441 375,009 — 2,571,450 Operating (loss) income ( 574,455 ) 4,207 — ( 570,248 ) Other income (expense) 273,179 ( 23,397 ) — 249,782 Net loss $ ( 301,276 ) $ ( 19,190 ) $ — $ ( 320,466 ) Asset Information The following table shows asset information by geographic segment as of June 30, 2024 and December 31, 2023: June 30, 2024 USA Switzerland UK Elimination Total Assets Current assets $ 9,072,423 $ 763,359 $ 7,997,811 $ ( 613,333 ) $ 17,220,260 Non-current assets $ 23,368,080 $ 828,551 $ 754,331 $ ( 12,184,562 ) $ 12,766,400 Liabilities Current liabilities $ 13,806,116 $ 1,576,897 $ 7,430,958 $ ( 613,333 ) $ 22,200,638 Non-current liabilities $ 139 $ 169,599 $ 44,405 $ — $ 214,143 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 F- 17 Table of Contents NOTE 13 – WARRANTS On February 12, 2024, we issued a Common Stock Purchase Option (the “Option”) to ADI Funding LLC (“ADI Funding”) for $ 100,000 that expires on December 31, 2024, for the right to acquire up to 10,000,000 shares of common stock. The exercise price per share of the common stock under the Option shall be (i) 70% of the VWAP of the common stock during the then 10 Trading Days immediately preceding, but not including the date of exercise if the VWAP is below $2.00 or (ii) seventy five percent (75%) of the VWAP of the common stock during the then 10 Trading Days immediately preceding, but not including the date of exercise if the VWAP is equal or above $2.00. ADI Funding has the right and the obligation to exercise, on a “cash basis”, not less than (i) 2,000,000 of the shares of common stock underlying the option not later than the later of March 31, 2024 or the date on which there is an effective registration statement permitting the resale of the shares by ADI Funding. From and after the occurrence of the above-referenced exercise, each additional exercise of the Option shall be in an amount not less than 1,000,000 shares, which shall occur every thirty (30) days and shall be exercised only on a cash basis. ADI Funding’s obligation to exercise each specified portion of the Option is subject to the exercise price being not less than $0.11 If the Company issues securities less than the exercise price of the option, ADI Funding has a right to also use that lesser price in the exercise of its Option. The Option also contains rights to any company distributions and consideration in fundamental transactions. The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. The Company determined that the warrants had net cash settlement and categorized the warrants as a liability in the accompanying consolidated financial statements. A summary of activity regarding warrants issued as follows: Weighted Average Remaining Warrants outstanding Contractual life (in years) Outstanding, December 31, 2023 — — Granted 10,000,000 0.88 Exercised ( 1,822,216 ) — Forfeited/canceled — — Outstanding, June 30, 2024 8,177,784 0.50 The intrinsic value of the warrants as of June 30, 2024 is approximately $ 680,000 . All of the outstanding warrants are exercisable as of June 30, 2024; however, each exercise is subject to a beneficial ownership limitation of 4.99 % of the Company’s outstanding common stock, which, upon notice, may be increased to 9.99 % . Fair Value Assumptions Used in Accounting for Derivative Liabilities ASC 815 requires we assess the fair market value of derivative liabilities at the end of each reporting period and recognize any change in the fair market value as other income or expense. F- 18 Table of Contents The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of June 30, 2024. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. As of June 30, 2024, the estimated fair values of the liabilities measured on a recurring basis are as follows: As of June 30, 2024 Expected term 0.50 - 0.65 years Exercise price $ 0.17 – $ 0.23 Expected average volatility 108 % - 117 % Expected dividend yield — Risk-free interest rate 5.33 % - 5.44 % The following table summarizes the changes in the derivative liabilities during the six months ended June 30, 2024: Fair Value Measurements Using Significant Observable Inputs (Level 3) Balance - December 31, 2023 $ — Addition of new derivatives recognized as cash received 100,000 Settled on issuance of common stock ( 239,323 ) Change in fair value of derivative liabilities 1,115,510 Balance - June 30, 2024 $ 976,187 NOTE 14 – SUBSEQUENT EVENTS Subsequent to June 30, 2024, and through the date that these financials were made available, the Company had the following subsequent events: On May 10, 2024, the Company entered into a Purchase Company Agreement (“Purchase Company Agreement”) with Omar Luna and Lynk Holding LLC (together, the “Seller”) concerning the sale by Seller and the purchase by us of 51% of the membership interests the Seller holds in Lynk Telecom, LLC, a Virginia limited liability company (“Lynk Telecom”). The closing of the Purchase Company Agreement is expected to occur, once due diligence has been completed, during the third quarter of fiscal year 2024, although there are no assurances that the deal will close as planned. Lynk Telecom provides certified business telephone, SMS, connectivity, and networking services across various sectors in the United States. Lynk Holding LLC recently acquired selected assets from a company known as Voyce Telecom, and Lynk Holding LLC has the obligation to pay the shareholders of Voyce Telecom the purchase price in that acquisition, which is outstanding. The Purchase Price for 51% of the membership interests of Lynk Telecom is US $1,500,000, and this amount will be paid by the Seller to the Buyer in 12 consecutive monthly cash payments of US$ 125,000 each. The Seller agrees to use these funds for the amortization of the payments that it owes to Voyce in relation to the contract between Lynk Holding and Voyce Telecom. F- 19 Table of Contents Once we have paid the $1,500,000 for the acquisition of Lynk Telecom, and Lynk Telecom has achieved the business goals outlined in the Purchase Company Agreement, under what we refer to as “Phase I,” we have agreed to lend up to US$1,500,000 to Lynk Telecom, in installments of up to US$100,000 per month, to be used solely for marketing campaigns, promotion and development of the retail services, according to a business plan that has to be approved by Lynk Telecom’s board of directors. The disbursements of this loan will be subject to the achievements of the quarterly goals set in the business plan of Lynk Telecom. This retail business plan will have the aim of achieving the objective of generating a minimum of US$200,000 in operating income per month, with intermediate staggered quarterly goals. Upon the completion of Phase I, and the business goals in the Purchase Company Agreement have been achieved, we have agreed to lend Lynk Telecom up to US$1,500,000 in at least three stages, each of up to US$500,000 per year to help accelerate the amortization of the debt Lynk Holding LLC has with the Voyce Telecom shareholders. These loans would be linked to compliance with the financial statements for fiscal years 2026, 2027, 2028, 2029 and 2030. The goals for these years will be defined posteriori by the parties and approved by Lynk Telecom’s Board of Directors. The payment of this loan will be guaranteed with the portion of dividends that correspond to Lynk Holding LLC when Lynk Telecom makes a dividend distribution. If, as a result of operations, Lynk Telecom does not reach the projections in the Purchase Company Agreement, and the business plan for the years 2026, 2027, 2028, 2029 and 2030 approved by Lynk Telecom´s Board of Directors, we may retain the stipulated loan. If Lynk Telecom surpassed the projections in the Purchase Company Agreement, we have agreed to true up the purchase price, with details of the true up contained in the Purchase Company Agreement. Once this Purchase Company Agreement is signed, the manager of Lynk Telecom, Omar Luna, is expected to enter into a 3-year employment agreement with Lynk Telecom, that will be executed before the closing date, renewable for a 2-year period to guarantee the operational continuity of Lynk Telecom and the implementation of a business plan that will lead Lynk Telecom into a productive company with positive net income as established in the Purchase Company Agreement. Lynk Telecom shall have a Board of Directors composed of 3 members: 2 of the members shall be appointed by us and the remaining member shall be appointed by the Seller. The position of President and Secretary will be reserved for us. The closing of the Purchase Agreement is subject to, among other things, Lynk Telecom having prepared all accounting information in accordance with SEC standards in such a manner that any audit of the Company, if required, may be performed. F- 20 Table of Contents