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, 2025 (unaudited) and December 31, 2024; F-2 Consolidated Statements of Operations for the three months ended March 31, 2025 and 2024 (unaudited); F-3 Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024 (unaudited); and F-4 Consolidated Statements of Stockholder’s Equity for the three months ended March 31, 2025 and 2024 (unaudited); and F-5 Notes to Consolidated Financial Statements (unaudited). These interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended March 31, 2025 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, 2025 2024 ASSETS Current Assets Cash $ 1,085,046 $ 2,510,357 Accounts receivable, net 21,964,399 57,158,967 Inventory, net 30,658 30,658 Due from related parties 638,177 630,715 Prepaid and other current assets 2,325,519 2,684,349 Total Current Assets 26,043,799 63,015,046 Property and equipment, net 604,303 561,802 Intangible assets, net 7,318,341 7,438,654 Goodwill 6,750,045 6,750,045 Deferred tax assets 243,108 243,108 Other assets 1,060,769 999,083 TOTAL ASSETS $ 42,020,365 $ 79,007,738 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 8,840,686 $ 2,129,241 Accrued and other current liabilities 12,378,975 55,624,784 Due to related parties 26,613 26,613 Loans payable - net of discount of $ 75,271 and $ 62,898 , respectively 3,537,307 2,455,641 Loans payable - related parties 548,659 720,485 Convertible notes - net of discount of $ 324,641 and $ 138,654 , respectively 4,947,401 1,864,432 Contingent liability for acquisition of subsidiary — 1,000,000 Total Current Liabilities 30,279,641 63,821,196 Convertible notes - net of discount of $ 0 and $ 210,296 , respectively — 3,011,926 Employee benefits, non-current 184,918 274,353 TOTAL LIABILITIES 30,464,559 67,107,475 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, 35,537 shares issued and outstanding 36 36 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: 3,750,000 authorized; $ 0.001 par value; 2,637,628 and 2,537,209 shares issued and outstanding, respectively 2,638 2,537 Additional paid in capital 40,812,472 39,943,924 Accumulated deficit ( 33,930,013 ) ( 32,703,410 ) Accumulated other comprehensive loss ( 25,340 ) ( 25,340 ) Equity attributed to stockholders of IQSTEL Inc. 6,859,803 7,217,757 Equity attributable to noncontrolling interests 4,696,003 4,682,506 TOTAL STOCKHOLDERS' EQUITY 11,555,806 11,900,263 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 42,020,365 $ 79,007,738 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, 2025 2024 Revenues $ 57,632,816 $ 51,414,878 Cost of revenue 55,697,858 50,035,852 Gross profit 1,934,958 1,379,026 Operating expenses General and administration 2,539,184 1,562,478 Total operating expenses 2,539,184 1,562,478 Operating loss ( 604,226 ) ( 183,452 ) Other income (expense) Other income 23,228 71,777 Other expenses ( 11,162 ) ( 407 ) Interest expense ( 531,726 ) ( 365,474 ) Loss on settlement of debt — ( 102,660 ) Total other expense ( 519,660 ) ( 396,764 ) Net loss before provision for income taxes ( 1,123,886 ) ( 580,216 ) Income taxes ( 20,575 ) — Net loss ( 1,144,461 ) ( 580,216 ) Less: Net income attributable to noncontrolling interests 13,497 229,551 Net loss attributed to IQSTEL Inc. $ ( 1,157,958 ) $ ( 809,767 ) Comprehensive loss Net loss $ ( 1,144,461 ) $ ( 580,216 ) Total loss $ ( 1,144,461 ) $ ( 580,216 ) Less: Comprehensive income attributable to noncontrolling interests 13,497 229,551 Net comprehensive loss attributed to IQSTEL Inc. $ ( 1,157,958 ) $ ( 809,767 ) Basic and diluted loss per common share $ ( 0.44 ) $ ( 0.37 ) Weighted average number of common shares outstanding - Basic and diluted 2,629,867 2,189,412 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, 2025 and 2024 (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' Equity Balance - December 31, 2024 10,000 $ 10 35,537 $ 36 2,537,209 $ 2,537 $ 39,943,924 $ ( 32,703,410 ) $ ( 25,340 ) $ 7,217,757 $ 4,682,506 $ 11,900,263 Common stock issued for compensation — — — — 1,875 2 32,813 — — 32,815 — 32,815 Common stock issued for conversion of debt — — — — 94,981 95 835,739 — — 835,834 — 835,834 Common stock issued for common stock payable — — — — 3,563 4 ( 4 ) — — — — — Dividend to non-controlling interest — — — — — — — ( 68,645 ) — ( 68,645 ) — ( 68,645 ) Net income (loss) — — — — — — — ( 1,157,958 ) — ( 1,157,958 ) 13,497 ( 1,144,461 ) Balance - March 31, 2025 10,000 $ 10 35,537 $ 36 2,637,628 $ 2,638 $ 40,812,472 $ ( 33,930,013 ) $ ( 25,340 ) $ 6,859,803 $ 4,696,003 $ 11,555,806 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' Equity Balance - December 31, 2023 10,000 $ 10 31,080 $ 31 2,151,620 $ 2,152 $ 34,530,862 $ ( 26,084,133 ) $ ( 25,340 ) $ 8,423,582 $ ( 377,710 ) $ 8,045,872 Common stock issued for compensation — — — — 1,875 2 31,063 — — 31,063 — 31,065 Common stock issued for settlement of debt — — — — 22,125 22 279,638 — — 279,638 — 279,660 Common stock issued in conjunction with convertible notes — — — — 44,192 44 597,733 — — 597,733 — 597,777 Net income (loss) — — — — — — — ( 809,767 ) — ( 809,767 ) 229,551 ( 580,216 ) Balance - March 31, 2024 10,000 $ 10 31,080 $ 31 2,219,812 $ 2,220 $ 35,439,296 $ ( 26,893,900 ) $ ( 25,340 ) $ 8,522,317 $ ( 148,159 ) $ 8,374,158 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, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 1,144,461 ) $ ( 580,216 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock based compensation 32,815 31,065 Bad debt expense — 725 Depreciation and amortization 126,995 35,161 Amortization of debt discount 186,230 207,742 Loss on settlement of debt — 102,660 Changes in operating assets and liabilities: Accounts receivable 45,924,000 2,743,089 Inventory — 185 Prepaid and other assets ( 1,391,098 ) ( 552,204 ) Accounts payable 690,057 ( 556,055 ) Accrued and other current liabilities ( 46,331,507 ) ( 1,969,040 ) Net cash used in operating activities ( 1,906,969 ) ( 536,888 ) CASH FLOWS FROM INVESTING ACTIVITIES: Deposit for acquisitions of subsidiary — ( 1,500,000 ) Purchase of property and equipment ( 49,183 ) ( 71,662 ) Payment of loan receivable - related party ( 9,462 ) ( 51,230 ) Net cash used in investing activities ( 58,645 ) ( 1,622,892 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from loans payable 495,000 — Repayments of loans payable ( 9,438 ) ( 8,885 ) Repayments of note payable issued for acquisition of subsidiary (440,000 ) — Repayment of loans payable - related parties ( 190,864 ) — Proceeds from convertible notes 987,500 3,722,500 Repayment of convertible notes ( 233,249 ) ( 190,932 ) Dividend paid to non-controlling interest ( 68,645 ) — Net cash provided by financing activities 540,303 3,522,683 Net change in cash ( 1,425,311 ) 1,362,903 Cash, beginning of period 2,510,357 1,362,668 Cash, end of period $ 1,085,046 $ 2,725,571 Supplemental cash flow information Cash paid for interest $ 280,415 $ 89,578 Cash paid for taxes $ 109,870 $ — Non-cash transactions: Common stock issued for settlement of debt $ — $ 279,660 Common stock issued in connection with convertible notes $ — $ 597,777 Common stock issued for conversion of debt $ 835,833 $ — Note payable issued 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 Unaudited Consolidated Financial Statements March 31, 2025 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 603 active interconnection agreements with mobile companies, fixed line companies and other wholesale carriers. The Company is a technology company with a presence in 20 countries and approximately 100 employees that is offering leading-edge services through its four business divisions. The Telecom Division, which represents the majority of current operations and which also represents the source for all of the Company’s revenues, offers VoIP, SMS, proprietary Internet of Things (IoT) solutions (www.iotsmartgas.com and www.iotsmarttank.com), and international fiber-optic connectivity through its subsidiaries: Etelix.com USA, LLC, SwissLink Carrier AG, Smartbiz Telecom LLC, Whisl Telecom LLC, IoT Labs, LLC, QGlobal SMS, LLC, and QXTEL LIMITED. Also under the Telecom Division, the Company’s developing BlockChain Platform Business Line offers our proprietary Mobile Number Portability Application (MNPA) to serve the in-country portability needs through its subsidiary, itsBchain, LLC. The Company’s developing Fintech Business Line offers a complete Fintech ecosystem MasterCard Debit Card, US Bank Account (No SSN Needed), Mobile App/Wallet (Remittances, Mobile Top Up). The Company’s Fintech subsidiary, Global Money One Inc., is to provide immigrants access to reliable financial services that makes it easier to manage their money and stay connected with their families back home. The Company’s developing Electric Vehicle (EV) Business Line offers electric motorcycles for work and recreational use in the USA, Spain, Portugal, Panama, Colombia, and Venezuela. EVOSS is also working on the development of an EV Mid Speed Car to serve the niche of the 2nd car in the family. The Company’s developing Artificial Intelligence (AI)-Enhanced Metaverse Division offers a white-label solution designed specifically for corporations, businesses, and the telecommunications industry. Delivering a full suite of immersive content services, creating a comprehensive virtual experience that can be accessed through the Web or our proprietary mobile apps. NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited interim consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of March 31, 2025 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2025 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, 2024 filed with the SEC on March 31, 2025. F- 5 Table of Contents 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. Reverse stock split The Company announced a reverse stock split effective on May 2, 2025 (the “Market Effective Date”). The Board of Directors of the Company approved a reverse stock split of the Company’s authorized, issued and outstanding shares of common stock, par value $0.001 per share (the “Common Stock”), at a ratio of 1-for-80. All issued and outstanding common stock, options and warrants to purchase common stock and per share amounts contained in this Report have been adjusted retroactively to reflect the change in capital structure for all periods presented. All share and per share information in these financial statements retroactively reflect this reverse stock split. 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. 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, 2025 and December 31, 2024. 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, 2025 and 2024, the Company recorded bad debt expense of $ 0 and $ 725 , respectively. Net Income (Loss) Per Share of Common Stock The Company has adopted Accounting Standards Codification 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 year. 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 convertible notes, and these were excluded from the computation of diluted net loss per share as the result was anti-dilutive for the three months ended March 31, 2025 and 2024. F- 6 Table of Contents 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, accounts receivable, 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, 2025, we had 19 customers representing 86 % of our revenue compared to 8 customers representing 86 % of our revenue for the three months ended March 31, 2024. This is a significant improvement in the revenue concentration. For the three months ended March 31, 2025 and 2024, 38 % and 47 % of revenue, respectively, comes from customers under prepayment conditions, which means there are no credit or bad debt risks on that portion of the customers’ portfolio. Financial Instruments The Company follows ASC 820, “ Fair Value Measurements and Disclosures, ” which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below: Level 1 Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3 Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The carrying values of our financial instruments, including, cash; accounts receivable; 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 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. F- 7 Table of Contents Usage charges refer to the fees that customers are billed based on their actual usage of the services. For voice services, this typically means charges are based on the duration of calls made. For SMS (text messaging), it usually means charges per message sent. Other recurring charges are referred to charges for services such as (1) Global DIDs, (2) Global Toll-Free Numbers, (3) PBX (Private Branch Exchange) for small businesses, and (4) SIP Trunking. The provision of these services usually has set-up fees and are offered on a subscription or month-to-month basis. Revenue is reported on a gross basis since the Company acts as the principal in the transaction, meaning it has control over the goods or services before they are transferred to the customer. This includes having the primary responsibility for fulfilling the contract and determining the price. With respect to the specific performance obligations of the Company in its contracts with its customers, our standard service agreement establishes the following: • The Company agrees to furnish to Customer, and Customer agrees to purchase from the Company, International Long Distance telecommunication services and/or SMS services at the rates agreed to in writing by the Parties. • The Company will provide, operate and maintain communications equipment, international links and network administration and support in the United States and other countries as may be agreed upon. • The Company will be responsible for its own expenses and will provide, operate, and maintain transmission facilities required to link its domestic network with the other Party's nearest point of presence (POP). • The Company shall provide Customer all required IP network addresses, Domain Name Server (DNS) information and, if necessary, the associated prefixes used to exchange voice traffic as provided on the provisioning form. • The Company shall take all appropriate security measures to protect its network from fraudulent traffic coming from unknown or unauthorized sources. Any and all IP and network information received by the Company from Customer for the purposes of this agreement shall be strictly confidential, and disclosed only to those employees or personnel with a need to know. The Company recognizes revenue from telecommunication services in accordance with ASC 606. Topic 606 establishes a comprehensive 5 step framework for determining revenue recognition. Under this framework, the Company considers each service a single performance obligation, since typically, the Company provides a series of distinct services. The application of the 5 step Topic 606 revenue recognition framework to the Company's operations is depicted as follows: Topic 606 Conceptual Framework Related Company Policy & Procedures Step 1 Identify the contract(s) with customer A contract is defined as an approved mutual agreement between the Company and a customer setting performance obligation, and criteria that must be met in accordance with the Company's customary commercial business practices and entered into with the probable expectation that all estimated consideration will be realized in the ordinary course of business. Step 2 Identify the performance obligations Performance obligations are identified in the customer agreement, and any subsequent amendments stated in per minute, time and message usage criteria. The Company considers each service a single performance obligation, including instances where the Company provides a series of services that are substantially the same and have the same pattern of transfer. Step 3 Determine the transaction price The transaction price is determined at contract inception and is subsequently reviewed periodically to reflect applicable rate amendments, trends in regulatory, market conditions and usage of service by a customer. The transaction price excludes amounts collected on behalf of third parties such as sales taxes and regulatory fees. Step 4 Allocate the transaction price to the performance obligations The transaction price is allocated to each performance obligation based on the standalone contractual selling price of the time measured service, net of any related discount. Step 5 Recognize revenue when the entity satisfies a performance obligation The Company recognizes revenues from contracts with customers when control of the usage of the services has been transferred to the customer, as recorded and measured by the Company's internal information systems. Revenues are recognized at the probable amount of consideration expected in exchange for transferring control of usage. F- 8 Table of Contents Cost of revenue Costs of revenue represent direct charges from vendors that the Company incurs to deliver services to its customers. These costs primarily consist of usage charges for calls terminated in vendors’ networks. Recent Accounting Pronouncements In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update (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. The Company is currently evaluating the impact of adopting ASU 2024-03. The 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 its financial statements. NOTE 3 - GOING CONCERN The Company's consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has suffered recurring losses from operations, negative working capital 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, lines of credit, options and secured and unsecured loans from third parties. 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, 2025 and December 31, 2024 consisted of the following: March 31, December 31, 2025 2024 Other receivable $ 98,069 $ 115,685 Prepaid expenses 1,679,432 2,020,288 Advance payment 21,000 21,000 Tax receivable 40,815 42,673 Deposit for acquisition of asset 357,500 356,000 Security deposit 128,703 128,703 Total prepaid and other current assets $ 2,325,519 $ 2,684,349 F- 9 Table of Contents NOTE 5 – PROPERTY AND EQUIPMENT Property and equipment at March 31, 2025 and December 31, 2024 consisted of the following: March 31, December 31, 2025 2024 Telecommunication equipment $ 709,417 $ 709,417 Telecommunication software 737,001 690,742 Other equipment 158,859 155,935 Total property and equipment 1,605,277 1,556,094 Accumulated depreciation and amortization ( 1,000,974 ) ( 994,292 ) Total property and equipment $ 604,303 $ 561,802 Depreciation expense for the three months ended March 31, 2025 and 2024 amounted to $6,682 and $35,161, respectively. NOTE 6 – INTANGIBLE ASSETS Intangible assets at March 31, 2025 and December 31, 2024 consisted of the following: 2025 NOTE 6- INTANGIBLE ASSETS - Schedule of Intangible Assets (Details) Useful life Gross carrying amount Accumulated amortization Net carrying amount New gas regulator intangible Not yet in service $ 99,592 $ — 99,592 Interconnection agreements 16 year s 7,700,000 ( 481,251 ) 7,218,749 $ 7,799,592 $ ( 481,251 ) $ 7,318,341 2024 Useful life Gross carrying amount Accumulated amortization Net carrying amount New gas regulator intangible Not yet in service $ 99,592 $ — $ 99,592 Interconnection agreements 16 years 7,700,000 ( 360,938 ) 7,339,062 $ 7,799,592 $ ( 360,938 ) $ 7,438,654 Amortization expense for the three months ended March 31, 2025 and 2024 amounted to $ 120,313 and $ 0 , respectively. The following table outlines the estimated future amortization expense as of March 31, 2025: Years ending December 31 2025 (9 months remaining) $ 360,937 2026 481,250 2027 481,250 2028 481,250 2029 481,250 Thereafter 4,932,812 $ 7,218,749 F- 10 Table of Contents NOTE 7 – ACCRUED AND OTHER CURRENT LIABILITIES Accrued and other current liabilities at March 31, 2025 and December 31, 2024 consisted of the following March 31, December 31, 2025 2024 Accrued liabilities $ 818,412 $ 928,858 Cost provision 10,455,762 53,939,336 Accrued interest 169,752 118,204 Salary payable - management 518,947 420,447 Salary payable and employee benefit 85,536 88,357 Other current liabilities 330,566 129,582 Total accrued and other current liabilities $ 12,378,975 $ 55,624,784 NOTE 8 - LOANS PAYABLE Loans payable at March 31, 2025 and December 31, 2024 consisted of the following: March 31, December 31, Interest 2025 2024 Term rate Martus $ 103,738 $ 103,738 Note was issued on October 23, 2018 and due on January 2, 2026 5.0 % Darlene Covid19 70,580 80,019 Note was issued on April 1, 2020 and due on March 31, 2026 0.0 % Promissory note payable 217,391 217,391 Note was issued June 11, 2024 and due on June 11, 2025 2.0 % Promissory note payable - acquisition of QXTEL 850,000 1,275,000 Note was issued April 1, 2024 and due on June 30, 2025 4.9 % Promissory note payable 271,739 271,739 Note was issued July 16, 2024 and due on July 16, 2025 2.0 % Promissory note payable 271,739 271,739 Note was issued July 31, 2024 and due on July 31, 2025 2.0 % Promissory note payable 190,217 190,217 Note was issued September 23, 2024 and due on September 23, 2025 2.0 % Promissory note payable 108,696 108,696 Note was issued October 4, 2024 and due on September 23, 2025 2.0 % Promissory note payable 543,478 — Note was issued January 15, 2025 and due on January 15, 2026 2.0 % Promissory note payable - acquisition of QXTEL 985,000 — Note was issued February 3, 2025 and due on September 30, 2025 4.9 % Total 3,612,578 2,518,539 Less: Unamortized debt discount ( 75,271 ) ( 62,898 ) Total loans payable 3,537,307 2,455,641 Less: Current portion of loans payable ( 3,537,307 ) ( 2,455,641 ) Long-term loans payable $ — $ — F- 11 Table of Contents Loans payable - related parties at March 31, 2025 and December 31, 2024 consisted of the following: March 31, December 31, Interest 2025 2024 Term rate 49% of Shareholder of SwissLink $ 21,606 $ 21,606 Note is due on demand 0.0 % 49% of Shareholder of SwissLink 193,142 219,894 Note is due on demand 5.0 % Minority Shareholder of QXTEL 333,911 478,985 Note is due on October 1, 2025 4.9 % Total 548,659 720,485 Less: Current portion of loans payable - related parties 548,659 720,485 Long-term loans payable - related parties $ — $ — During the three months ended March 31, 2025 and 2024, the Company borrowed from third parties totaling $ 543,478 and $ 0 , which includes original issue discount and financing costs of $ 48,478 and $ 0 and repaid the principal amount of $ 449,438 and $ 8,885 , respectively. During the three months ended March 31, 2025, the Company issued a note payable of $ 1,000,000 for the earn out payment related to the April 1, 2024 acquisition of a subsidiary. During the three months ended March 31, 2025 and 2024, the Company recorded interest expense of $ 99,675 and $ 9,053 and recognized amortization of discount, included in interest expense, of $ 36,105 and $ 3,750 , respectively. NOTE 9 - CONVERTIBLE LOANS Convertible loans at March 31, 2025 and December 31, 2024 consisted of the following: March 31, December 31, 2025 2024 Issued in fiscal year 2024 $ 4,158,726 $ 5,225,308 Issued in fiscal year 2025 1,113,316 — Total convertible notes payable 5,272,042 5,225,308 Less: Unamortized debt discount ( 324,641 ) ( 348,950 ) Total convertible notes 4,947,401 4,876,358 Less: current portion of convertible notes 4,947,401 1,864,432 Long-term convertible notes $ — $ 3,011,926 During the three months ended March 31, 2025 and 2024, the Company recorded interest expense of $ 245,821 and $ 139,979 and recognized amortization of discount, included in interest expense, of $ 150,125 and $ 203,992 , respectively. F- 12 Table of Contents Conversion During the three months ended March 31, 2025, one note holder converted notes with principal amounts of $ 833,334 and conversion fee of $ 2,500 into 94,981 shares of common stock. Issued in fiscal year 2025 During the three months ended March 31, 2025, the Company borrowed amounts from third parties totaling $ 1,113,316 , which includes original issue discount and financing costs of $ 125,816 . Principal Issuance Maturity Interest Payment amount date date rate schedule $ 471,000 February 26, 2025 December 30, 2025 14 % 5 payments, one payment of $ 268,470 and four payments of $ 67,118 , beginning in August 2025 $ 116,000 February 26, 2025 December 30, 2025 14 % 5 payments, one payment of $ 66,120 and four payments of $ 16,530 , beginning in August 2025 $ 526,316 March 4, 2025 December 5, 2025 24 % The outstanding balance shall be paid on December 5, 2025 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. Certain notes allow for the conversion price to be a fixed price of $8.80 per share. Issued in fiscal year 2024 In 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 $ 8.80 per share. Each noteholder received shares of common stock (“Kicker Shares”) in an amount equal to ten percent of the principal amount of any Note issued divided by $8.80. 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 25,253 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 12,627 and 6,314 Kicker Shares, with an original issue discount of $ 111,111 and $ 55,556 , respectively. Each one year note bears interest at 18 % per annum. In October 2024, we entered into a Memorandum of Understanding (the “Agreement”) with M2B Funding Corp. to extend the maturity date on three promissory notes in exchange for stock consideration. Pursuant to the Agreement, the following promissory notes were extended by 12 months from their original date of maturity: • First Note: Originally due January 1, 2025, with an outstanding amount of $ 1,888,889 , extended to January 1, 2026. • Second Note: Originally due March 12, 2025, with an outstanding amount of $ 1,111,111 , extended to March 12, 2026 . • Third Note: Originally due March 25, 2025, with an outstanding amount of $ 555,556 , extended to March 25, 2026 . In consideration for this extension, the Company issued 8,081 restricted common shares. As a result of the extension, the Company recognized the loss on debt extinguishment of $ 297,878 as debt extinguishment and debt discount of $ 61,818 as debt modification during the year ended December 31, 2024. F- 13 Table of Contents Additionally, during the year ended December 31, 2024, the Company borrowed amounts from a third party totaling $ 2,413,707 , which includes original issue discount and financing costs of $ 248,707 . Principal Issuance Maturity Interest Payment amount date date rate schedule $ 146,900 March 7, 2024 January 15, 2025 12 % 10 payments each in the amount of $ 16,453 beginning on April 15, 2024 $ 177,100 March 7, 2024 January 15, 2025 14 % 5 payments, one payment of $ 100,947 and four payments of $ 25,237 , beginning in September 2024 $ 179,400 July 10, 2024 April 30, 2025 14 % 9 payments each in the amount of $ 22,724 beginning on August 30, 2024 $ 151,960 September 16, 2024 July 15, 2025 14 % 5 payments, one payment of $ 86,617 and four payments of $ 21,654 , beginning in March 2025 $ 179,400 October 15, 2024 July 15, 2025 14 % 9 payments each in the amount of $ 22,724 beginning on November 30, 2024 $ 1,578,947 December 6, 2024 June 4, 2025 24 % Outstanding balance shall be paid on June 4, 2025 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. Certain notes allow for the conversion price to be a fixed price of $12.0 per share. NOTE 10 – STOCK PURCHASE OPTION On January 14, 2025, the Company issued a Common Stock Purchase Option (the “Option”) to ADI Funding LLC (“ADI Funding”) under a stock purchase agreement for $ 100,000 that expires on July 14, 2025, for the right to acquire up to 187,500 shares of common stock. The exercise price per share of the common stock under the Option shall be 70% of the VWAP of the common stock during the then 10 Trading Days immediately preceding but not including the date of exercise. The obligation to exercise each specified portion of the Option is subject to the exercise price, being not less than $8.80 per share on the relevant Option exercise date . As of March 31, 2025, the Company did not receive the $ 100,000 and the options were not in effect, and the Options had no impact to the accompanying financial statements. NOTE 11 – STOCKHOLDERS’ EQUITY Common Stock The Board of Directors of the Company approved a reverse stock split of the Company’s authorized, issued and outstanding shares of Common Stock at a ratio of 1-for-80, effective on May 2, 2025. The Company amended its certificate of incorporation to reduce the number of authorized shares of Common Stock that it may issue from 300,000,000 shares to 3,750,000 shares with a par value of $ 0.001 per share. During the three months ended March 31, 2025, the Company issued 100,419 shares of common stock, valued at fair market value on issuance as follows: • 1,875 shares for compensation to our directors valued at $ 32,815 . • 94,981 shares for conversion of debt of $ 835,834 . • 3,563 shares for common stock payable value at $ 82,194 . As of March 31, 2025 and December 31, 2024, 2,637,628 and 2,537,209 shares of common stock were issued and outstanding, respectively. F- 14 Table of Contents 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, 2025 and December 31, 2024, 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 twelve point five (12.5) 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, 2025 and December 31, 2024, 35,537 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 twelve point five (12.5) 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, 2025 and December 31, 2024, no Series C Preferred Stock was issued or outstanding. F- 15 Table of Contents 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 . T he 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 twelve point five (12.5) 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, 2025 and December 31, 2024, no Series D Preferred Stock was issued or outstanding. NOTE 12 - RELATED PARTY TRANSACTIONS Due from related party During the three months ended March 31, 2025 and 2024, the Company loaned $ 9,462 and $ 51,230 to a related party, respectively. As of March 31, 2025 and December 31, 2024, the Company had amounts due from related parties of $ 638,177 and $ 630,715 , respectively. The loans are unsecured, non-interest bearing and due on demand. Due to related parties As of March 31, 2025 and December 31, 2024, 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, 2025 and 2024, the Company recorded management salaries of $ 211,500 , and stock-based compensation bonuses of $32,815 and $31,065, respectively. As of March 31, 2025 and December 31, 2024, the Company recorded and accrued management salaries of $ 518,947 and $ 420,447 , respectively. NOTE 13 – 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, 2025 and 2024, the Company incurred rent expense of $ 6,974 and $ 7,122 , respectively. NOTE 14 - SEGMENT The Company operates in one industry segment, telecommunication services, and three geographic segments, USA, UK and Switzerland, where current assets and equipment are located. The Company's chief operating decision maker ("CODM") is its chief financial officer, who reviews the operating results for the Company as a whole to make decisions about allocating resources and assessing financial performance. The CODM uses operating activities and net assets to assess financial performance and allocate resources. These financial metrics are used by the CODM to make key operating decisions, such as the determination of the rate at which the Company seeks to grow, the allocation of budget between cost of sales and operating expenses and the management of assets. F- 16 Table of Contents Operating Activities The following table shows operating activities information by geographic segment for the three months ended March 31, 2025 and 2024: Three months ended March 31, 2025 NOTE 14 - SEGMENT - Operating Activities by Geographic Segment (Details) USA Switzerland UK Elimination Total Revenues $ 38,537,798 $ 1,349,162 $ 31,154,997 $ ( 13,409,141 ) $ 57,632,816 Cost of revenue 37,688,315 1,080,854 30,325,933 ( 13,397,244 ) 55,697,858 Gross profit 849,483 268,308 829,064 ( 11,897 ) 1,934,958 Operating expenses Salaries, Wages and Benefits 439,393 95,449 426,283 ( 5,966 ) 955,159 Technology 194,115 94,254 148,154 ( 10,930 ) 425,593 Professional Fees 309,049 — — — 309,049 Legal and Regulatory 166,438 — — — 166,438 Travel and Events 18,505 4,291 67,601 ( 1,347 ) 89,050 Public Cost 66,559 — — — 66,559 Advertising 210,523 8,357 — — 218,880 Bank Services and Fees 13,485 ( 21,499 ) 29,455 — 21,441 Depreciation and Amortization 6,682 — — 120,313 126,995 Office, Facility and Other 52,312 4,969 69,021 — 126,302 Insurance 903 — — — 903 Stock-based compensation 32,815 — — — 32,815 General and administration 1,510,779 185,821 740,514 102,070 2,539,184 Operating income (loss) ( 661,296 ) 82,487 88,550 ( 113,967 ) ( 604,226 ) Other income (expense) ( 464,389 ) 8,602 ( 6,527 ) ( 57,346 ) ( 519,660 ) Income tax expense — — ( 20,575 ) — ( 20,575 ) Net income (loss) $ ( 1,125,685 ) $ 91,089 $ 61,448 $ ( 171,313 ) $ ( 1,144,461 ) F- 17 Table of Contents Three months ended March 31, 2024 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 Salaries, Wages and Benefits 336,283 39,143 — 375,426 Technology 162,585 58,878 — 221,463 Professional Fees 449,219 54,353 — 503,572 Legal and Regulatory 30,579 1,585 — 32,164 Travel and Events 26,262 9,474 — 35,736 Public Cost 71,930 — — 71,930 Advertising 184,740 — — 184,740 Bank Services and Fees 13,655 6,081 — 19,736 Depreciation and Amortization 6,897 28,264 — 35,161 Office, Facility and Other 41,270 8,692 — 49,962 Insurance 798 — — 798 Bad Debt Expense 725 — — 725 Stock-based compensation 31,065 — — 31,065 General and administration 1,356,008 206,470 — 1,562,478 Operating loss ( 176,577 ) ( 6,875 ) — ( 183,452 ) Other income (expense) ( 435,483 ) 38,719 — ( 396,764 ) Income tax expense — — — — Net income (loss) $ ( 612,060 ) $ 31,844 $ — $ ( 580,216 ) Asset Information The following table shows asset information by geographic segment as of March 31, 2025 and December 31, 2024: March 31, 2025 USA Switzerland UK Elimination Total Assets Current assets $ 10,013,446 $ 1,418,754 $ 17,379,422 $ ( 2,767,823 ) $ 26,043,799 Non-current assets $ 19,534,109 $ 647,750 $ 7,979,269 $ ( 12,184,562 ) $ 15,976,566 Liabilities Current liabilities $ 14,306,932 $ 2,266,209 $ 16,474,323 $ ( 2,767,823 ) $ 30,279,641 Non-current liabilities $ 140 $ 169,599 $ 15,319 $ — $ 185,058 December 31, 2024 USA Switzerland UK Elimination Total Assets Current assets $ 19,885,086 $ 8,055,475 $ 48,182,373 $ ( 13,107,888 ) $ 63,015,046 Non-current assets $ 19,447,105 $ 633,491 $ 8,096,658 $ ( 12,184,562 ) $ 15,992,692 Liabilities Current liabilities $ 21,386,520 $ 8,415,705 $ 47,126,859 $ ( 13,107,888 ) $ 63,821,196 Non-current liabilities $ 3,012,066 $ 169,599 $ 104,614 $ — $ 3,286,279 F- 18 Table of Contents NOTE 15 – SUBSEQUENT EVENTS . Subsequent to March 31, 2025 and through the date that these financials were made available, the Company had the following subsequent events: On March 10, 2025, the Company signed a non-binding memorandum of understanding (“MOU”) with Accredited Solutions, Inc. (“ASII”) to set forth the preliminary terms and mutual understanding between the parties regarding the Company’s potential sale of its 75% equity interest in ItsBchain, LLC (the “Subsidiary”) to ASII, subject to the negotiation and execution of a definitive Purchase Agreement. The parties have agreed to execute the Purchase Agreement no later than June 1, 2025. Under the MOU, in exchange for the 75% interest in the Subsidiary, ASII proposes paying $1,000,000 to the Company as follows: • $500,000 in restricted preferred shares of ASII, the terms and features of which will be available prior to execution of the Purchase Agreement, but should contain preferential treatment on the stated value in any liquidation of ASII and a conversion price of the lowest stock price with a 10 day look back at conversion (but with a conversion limitation of 4.99%, but no greater than 9.99%), ensuring IQSTEL’s value is preserved regardless of fluctuations in ASII’s common stock price. • $500,000 in restricted common shares of ASII, which are expected to be registered by ASII in a resale offering that is filed on Form S-1 with the SEC within an agreed time from the close of the Purchase Agreement. At some time in the future, the Company plans to distribute the ASII common shares as dividends to its shareholders. Further under the MOU, the Company will retain a 1% lifetime royalty on the Subsidiary’s total sales. The Company acknowledges a remaining investment commitment of $65,000 related to the Subsidiary. This amount will be paid in monthly installments of $2,500 directly to the Subsidiary. On March 19, 2025, IQSTEL Inc. (the “Company”) signed a non-binding memorandum of understanding (“MOU”) with Craig Span (the “Seller”) to set forth the preliminary terms and mutual understanding between the parties regarding the Company’s potential purchase a 51% equity interest in GlobeTopper, LLC, a Delaware limited liability company (the “GlobeTopper”) held by the Seller, subject to the negotiation and execution of a definitive Purchase Agreement. The parties have agreed to execute the Purchase Agreement no later than July 1, 2025, or sooner. Under the MOU, in exchange for the 51% interest in the GlobeTopper, the Company proposes paying $700,000 to the Seller with $200,000 in cash over a period set forth in a schedule extending to September 1, 2025, and $500,000 in common stock of the Company with a share price calculated at a 20% discount to the Volume Weighted Average Price (VWAP) over the five days preceding execution of a definitive Purchase Agreement. Further under the MOU, the Company will pay performance bonuses in 2025 and 2026 based on EBITDA growth of GlobeTopper in shares of common stock of the Company using the same discounted VWAP formula above. To support GlobeTopper’s growth, the MOU provides that the Company will provide up to $1,200,000 in structured financing across 24 months after execution, disbursed in monthly installments of $50,000, contingent upon meeting quarterly financial targets. To ensure stability and operational continuity, the Seller will continue to serve as CEO to GlobeTopper, and 2 of the 3 board members will be selected by the Company. The Board of Directors of the Company approved a reverse stock split of the Company’s authorized, issued and outstanding shares of Common Stock at a ratio of 1-for-80, effective on May 2, 2025. The Company amended its certificate of incorporation to reduce the number of authorized shares of Common Stock that it may issue from 300,000,000 shares to 3,750,000 shares of Common Stock with a par value of $0.001 per share. All share and per share amounts and related stockholders' equity balances presented herein have been retroactively adjusted to reflect the Reverse Stock Split. F- 19 Table of Contents