What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-31 compared with 2024-04-01 · 166 added, 110 removed, 22 unchanged (93% of the section changed)

Management’s Discussion and Analysis of Financial Condition

and Results of Operations

Results of Operations for the Years

Ended December 31, 2023 and 2022

Our net revenue for the year ended December 31, 2023 was $144,502,351

as compared with $93,203,532 for the year ended December 31, 2022.

These numbers reflect an increase of 55% year over year on our consolidated

When looking at the numbers by subsidiary, we have the following

breakout for the years ended December 31, 2023 and 2022:

December 31, 2023

December 31, 2022

Management’s Discussion and Analysis of Financial Condition and Results of Operations

statements in this Annual Report constitute forward-looking statements.

See " Forward-Looking Statements" immediately prior

to Item 1 of Part I of this report for factors relating to these statements and "Risk Factors" in Item 1A of Part I of this

report for a discussion of certain risk factors applicable to our business, financial condition, results of operations, liquidity or

of Operations for the Years Ended December 31, 2024 and 2023

net revenue for the year ended December 31, 2024 was $283,220,442 as compared with $144,502,351 for the year ended December 31, 2023.

These numbers reflect an increase of 96% year over year on our consolidated Revenues.

looking at the numbers by subsidiary, we have the following breakout for the years ended December 31, 2024 and 2023:

Etelix.com USA, LLC

1 unchanged sentence

$ 283,220,442

The continued growth of our revenue is the result of the development of

our business strategy, which includes the strengthening of our commercial and operating activities and new acquisitions.

Cost of Revenue

Our total cost of sales for the year ended December 31, 2023 was

$139,830,338 as compared with $91,412,016 for the year ended December 31, 2022.

When looking at the numbers by subsidiary, we have the following

breakout for the years ended December 31, 2023 and 2022:

Cost of revenue

December 31, 2023

Cost of revenue

December 31, 2022

$ 144,502,351

continued growth of our revenue is the result of the development of our business strategy, which includes the strengthening of our commercial

and operating activities and new acquisitions.

In fact, 38% of the increase was organic grow, while the remaining 62% was due to the

acquisition of QXTEL Inc.

total cost of revenue for the year ended December 31, 2024 was $274,948,693 as compared with $139,830,338 for the year ended December

looking at the numbers by subsidiary, we have the following breakout for the years ended December 31, 2024 and 2023:

Etelix.com USA, LLC

1 unchanged sentence

$ 274,948,693

Our cost of revenues consists of direct charges from vendors that the Company

incurs to deliver services to its customers.

These costs primarily consist of usage charges for calls and SMS terminated in our vendors’

The behavior in the costs shows a logical correlation with the behavior

of the revenue commented above.

We have reached a higher volume of sales and every additional unit sold (minutes and SMS) has its corresponding

termination cost.

Our gross margin, which is simply the difference between our revenues

and our cost of sales, discussed above, increased from $1,791,516 in 2022 to $4,672,013 in 2023;

represented an increase of 161% year

Gross margins were 3.23% and 1.92% of revenues, respectively.

This is a clear sign the Company is improving it sales margin.

Operating Expenses

Operating expenses for the year ended December 31, 2023 were $4,987,516,

as compared with $4,983,176 for the year ended December 31, 2022.

The detail by major category is reflected in the table below.

Years Ended December 31

$ 139,830,338

revenues consists of direct charges from vendors that the Company incurs to deliver services to its customers.

These costs primarily

consist of usage charges for calls and SMS terminated in our vendors’ networks.

in the costs shows a logical correlation with the behavior of the revenue commented above.

We have reached a higher volume of revenue

and every additional unit sold (minutes and SMS) has its corresponding termination cost.

margin, which is simply the difference between our revenues and our cost of sales, discussed above, increased from $4,672,013 in 2023

to $8,271,749 in 2024, which is an increase of 77.05% year-over-year.

expenses for the year ended December 31, 2024 were $9,105,813, as compared with $4,987,516 for the year ended December 31, 2023.

detail by major category is reflected in the table below.

Salaries, Wages and Benefits

9 unchanged sentences

Total Operating Expenses

Operating Expenses by subsidiary are as follows:

Years Ended December 31,

Expenses by subsidiary are as follows:

Global Money One

Other Income (Expenses)

We had other income of $96,067 for the year ended December 31, 2023, as

compared with other expenses of $2,674,101 for the year ended December 31, 2022.

The positive change in Other Income (Expenses) in 2023

compared to 2022 is due to the positive Change in fair value of derivative liabilities of $381,848 for the year ended December 31, 2023

from a negative value of $2,650,369 for the year ended December 31, 2022.

We finished the year ended December 31, 2023 with a loss of $219,436 as

compared to a loss of $5,865,761 during the year ended December 31, 2022.

These two figures compared result in an important improvement

in the Company’s performance during 2023 versus the previous year.

This can be perfectly noted when looking at the evolution of

the Operating Income and the Net Income by quarter in 2023.

Liquidity and Capital Resources

As of December 31, 2023 we had total current assets of $15,719,172, compared

with current liabilities of $13,840,944, resulting in a positive working capital of $1,878,228 and a current ratio of approximately 1.14

to 1 which represent an important improvement compared to a ratio of 0.99 to 1 as of December 31, 2022.

Following is a table with summary data from the consolidated statement

of cash flows for the year ended December 31, 2023 and 2022, as presented.

Operating Expenses

is a significant increase of 82.57% in Operating Expenses for 2024 when compared with 2023;

however, more than half of that increase

(54%) is due to the inclusion of QXTEL in the consolidated financial statements in the year 2024.

Another 29% of that increase is

due to an increment in IQSTEL's operating expenses concentrated in the categories of Salaries, Wages and Benefits ($442,003 higher

than in 2023), Advertising ($372,908 higher than in 2023) and Stock-based compensation ($180,329 higher than in 2023) Finally, the

third largest expense item contributing to the increase of Operating Expanses is related to technology.

Income (Expenses)

had other expenses of $3,951,942 for the year ended December 31, 2024, as compared with other income of $96,067 for the year ended December

The increase in Other Expenses in 2024 compared to 2023 is due to (1) the negative change in fair value of derivative liabilities

of $1,393,046 for the year ended December 31, 2024 from a positive value of $381,848 for the year ended December 31, 2023;

(2) the increase

of interest expenses to $2,159,425 in 2024 from $94,908 in 2023 and (3) a loss on settlement of debt of $482,085 in 2024.

finished the year ended December 31, 2024 with a loss of $5,180,036 as compared to a loss of $219,436 during the year ended December

The net results of the periods reported are highly impacted by the expenses in the holding entity (IQSTEL), which has a high

component of interest and other financial expenses related to the funds borrowed for the acquisition of QXTEL Limited.

Telecom Division, the division presently generating revenue, has positive operating income when presented separately from the rest of

As we have indicated on several occasions, our strategy is to strengthen our telecommunications division so that it can

serve as a lever for the development of new lines of business, such as Fintech and Cybersecurity.

telecom division revenues have increased by 96% from $144,502,351 in 2023 to $283,220,442 in 2024.

Additionally, its gross profit has

risen by 77%, going from $4,672,013 to $8,271,749;

operating income has grown by 40% from $1,474,218 to $2,063,148;

and net income has

increased by 33%, rising from $1,290,646 to $1,710,241.

These double-digit growth figures demonstrate the strong performance of our telecommunications

Telecom Division

Pre-revenue companies

Year Ended December 31, 2024

Year Ended December 31, 2023

Year Ended December 31, 2024

Year Ended December 31, 2023

Year Ended December 31, 2024

Year Ended December 31, 2023

Year Ended December 31, 2024

Year Ended December 31, 2023

Cost of revenue

Operating expenses

General and administration

Total operating expenses

Operating income/(loss)

Other income (expense)

Net income (loss) before income taxes

Net income (loss)

Depreciation and amortization

Interest expense

Change in fair value of derivative liabilities

Loss on settlement of debt

Stock-based compensation

Adjusted EBITDA

evaluating our financial performance, we utilize Adjusted EBITDA as a supplemental measure to provide insights into the profitability

of our core operations.

(Please see Adjusted EBITDA, which is reconciled to the Net Income in the table above.) Adjusted EBITDA excludes,

in addition to non-operational expenses like interest expenses, taxes, depreciation and amortization;

items that we believe are not indicative

of our operating performance, such as:

Change in Fair Value of Derivative Liabilities:

These adjustments reflect unrealized gains or losses that are non-operational and subject to market volatility.

Loss on Settlement of Debt:

This represents non-recurring expenses associated with specific financing activities and does not impact ongoing business operations.

Stock-Based Compensation:

As a non-cash expense, this adjustment eliminates variability caused by equity-based incentives.

believe Adjusted EBITDA offers a clearer view of the cash-generating potential of our business, excluding non-recurring, non-cash, and

non-operational impacts.

on the analysis of our Adjusted EBITDA our Telecom Division is a high-performing division that generates strong operational profits.

Adjusted EBITDA has increased 86% from $1,419,383 as of December 31, 2023 to $2,645,417 as of December 31, 2024.

figures show a slightly negative Adjusted EBITDA;

while this isn’t ideal, in our opinion it implies the Company is close to breaking

even and might achieve positive Adjusted EBITDA with small improvements in efficiency or revenue growth.

We are in a transitional period,

scaling operations and investing heavily in growth initiatives with the execution of our M&A plan.

Management has also identified

areas for cost-cutting and operational improvements and has acted in that direction.

and Capital Resources

of December 31, 2024 we had total current assets of $63,015,046, compared with total current liabilities of $63,821,196, resulting in

a negative working capital of $ 806,150 and a current ratio of approximately 0.99 to 1.

The negative working capital is due largely to

loans payable of $2,455,641.

is a table with summary data from the consolidated statements of cash flows for the years ended December 31, 2024 and 2023, as presented.

Net cash used in operating activities

$ (2,930,306 )

$ (1,483,801 )

Net cash used in investing activities

1 unchanged sentence

Effect of exchange rate changes on cash

Net change in cash and cash equivalents

Our operating activities used $1,483,801 in the year ended

December 31, 2023, as compared with $1,765,060 used in operating activities in the year ended December 31, 2022.

Our cash flow from operations

varies depending on our operating results and the timing of operating cash receipts and payments, specifically trade accounts receivable

and trade accounts payable.

Investing activities used $332,550 for the year ended December 31, 2023,

as compared with $2,001,506 used in investing activities for the year ended December 31, 2022.

Our negative investing cash flow for 2023

is largely due to the purchase of property and equipment.

Financing activities provided $1,833,965 for the year ended December 31,

2023, as compared to $1,767,982 provided for the year ended December 31, 2022.

Our positive financing cash flow in 2023 was largely the

result of the $1,400,000 from the exercise of warrants.

Based upon our current financial condition, we do not have sufficient cash

to operate our business at the current level for the next twelve months.

We intend to fund operations through increased sales and debt

and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements.

The Company has received

the qualification of an Offering Statement under Form S-1 for the sale of up to 15,000,000 common stocks.

This offering is being conducted

on a “best efforts” basis, which means that there is no guarantee that any minimum amount will be sold.

We also plan to seek

additional financing in a private equity offering to secure funding for operations.

There can be no assurance that we will be successful

in raising additional funding.

If we are not able to secure additional funding, the implementation of our business plan will be impaired.

There can be no assurance that such additional financing will be available to us on acceptable terms or at all.

Although our operations are influenced by general economic conditions,

we do not believe that inflation had a material effect on our results of operations during the twelve-month period ended December 31,

Critical Accounting Policies

A “critical accounting policy”

is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s

most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are

inherently uncertain.

Our accounting policies

are discussed in detail in the footnotes to our financial statements included in this Annual Report on Form 10-K for the year ended December

however, we consider our critical accounting policies to be those related to the allowance for doubtful accounts, valuation

of assets, significant estimates in the valuation of financial instruments and income taxes.

Management bases its estimates and judgments

on historical experience and other factors that are believed to be reasonable under the circumstances.

Actual results may differ from

these estimates under different assumptions or conditions.

See the Consolidated Financial Statements in this Annual Report for a complete

discussion of our significant accounting policies.

Off Balance Sheet Arrangements

As of December 31, 2023, there were

no off-balance sheet arrangements.

Recently Issued Accounting Pronouncements

We do not expect the adoption of these

or other recently issued accounting pronouncements to have a significant impact on our results of operation, financial position or cash

Net change in cash

operating activities used $2,930,306 in the year ended December 31, 2024, as compared with $1,483,801 used in operating activities in

the year ended December 31, 2023.

Our cash flow from operations varies depending on our operating results and the timing of operating

cash receipts and payments, specifically trade accounts receivable and trade accounts payable.

activities used $3,162,971 for the year ended December 31, 2024, as compared with $332,550 used in investing activities for the year

ended December 31, 2023.

The cash used in investing activities is largely due to the acquisition of QXTEL, where the Company invested

$2,955,121, and the purchase of $151,620 of property and equipment.

activities provided $7,240,966 for the year ended December 31, 2024, as compared to $1,833,965 provided for the year ended December 31,

The cash provided in 2024 was largely from loans, convertible debt and warrant exercises, offset by repayments on loans.

financed our operations through private placements, convertible notes, and unsecured debt, and we have also issued debt in our company

secured by all of our assets.

Based upon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next twelve

We intend to fund operations through increased sales and debt and/or equity financing arrangements, which may be insufficient

to fund expenditures or other cash requirements.

We have not attained profitable operations and even though the company maintains a cash

position very close to one third year's operating expenses, we are dependent upon obtaining financing or generating revenue from operations

to continue operations for the next twelve months.

Our future is dependent upon our ability to obtain financing or upon future profitable

We reserve the right to seek additional funds through private placements of our common stock and/or through debt financing.

Our ability to raise additional financing is unknown.

Aside from cash exercises as set forth under an outstanding option that expires

on July 14, 2025, we do not have any formal commitments or arrangements for the advancement or loan of funds.

If we are not able to secure

additional funding, the implementation of our business plan will be impaired.

There can be no assurance that such additional financing

will be available to us on acceptable terms or at all.

our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of

operations during the twelve-month period ended December 31, 2024.

Accounting Policies

“critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and

results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates

about the effect of matters that are inherently uncertain.

accounting policies are discussed in detail in the footnotes to our financial statements included in this Annual Report on Form 10-K

for the year ended December 31, 2024;

however, we consider our critical accounting policies to be those related to the allowance for

doubtful accounts, valuation of assets, significant estimates in the valuation of financial instruments and income taxes.

bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances.

Actual results may differ from these estimates under different assumptions or conditions.

See the Consolidated Financial Statements in

this Annual Report for a complete discussion of our significant accounting policies.

Balance Sheet Arrangements

of December 31, 2024, there were no off-balance sheet arrangements.

Issued Accounting Pronouncements

November 2024, the FASB issued ASU 2024-03 final standard on Income Statement:

Disaggregation of Income Statement Expenses, which requires

disaggregated disclosure of income statement expenses for public business entities.

The ASU does not change the expense captions an entity

presents on the face of the income statement;

rather, it requires disaggregation of certain expense captions into specified categories

in disclosures within the footnotes to the financial statements.

This guidance will be effective for us on January 1, 2027.

is currently evaluating the impact of adopting ASU 2024-03.

Company has reviewed all other recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption

of any such pronouncements may be expected to cause a material impact on our financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis