iQSTEL Inc(IQST) - 2025 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements This section presents IQSTEL Inc.'s unaudited consolidated financial statements for the three months ended March 31, 2025, including Balance Sheets, Statements of Operations, Cash Flows, and Stockholders' Equity, reporting a net loss of $1.14 million Consolidated Financial Statements Key financial summaries for the consolidated balance sheet, statement of operations, and cash flows are presented for the periods ended March 31, 2025 Consolidated Balance Sheet Summary | Metric | March 31, 2025 ($) | December 31, 2024 ($) | | :--- | :--- | :--- | | Total Assets | $42,020,365 | $79,007,738 | | Total Current Assets | $26,043,799 | $63,015,046 | | Total Liabilities | $30,464,559 | $67,107,475 | | Total Current Liabilities | $30,279,641 | $63,821,196 | | Total Stockholders' Equity | $11,555,806 | $11,900,263 | Consolidated Statement of Operations Summary (Three Months Ended March 31) | Metric | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Revenues | $57,632,816 | $51,414,878 | | Gross Profit | $1,934,958 | $1,379,026 | | Operating Loss | ($604,226) | ($183,452) | | Net Loss | ($1,144,461) | ($580,216) | | Net Loss Attributed to IQSTEL Inc. | ($1,157,958) | ($809,767) | | Basic and Diluted Loss Per Share | ($0.44) | ($0.37) | Consolidated Statement of Cash Flows Summary (Three Months Ended March 31) | Cash Flow Activity | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($1,906,969) | ($536,888) | | Net Cash Used in Investing Activities | ($58,645) | ($1,622,892) | | Net Cash Provided by Financing Activities | $540,303 | $3,522,683 | | Net Change in Cash | ($1,425,311) | $1,362,903 | | Cash, End of Period | $1,085,046 | $2,725,571 | Notes to Financial Statements This section provides detailed explanations and disclosures supporting the consolidated financial statements, covering business operations, going concern, stock adjustments, and significant subsequent events - The company operates four divisions: Telecom, Fintech, EV, and AI-Enhanced Metaverse, with the Telecom Division currently generating all revenue[25][27][28] - Recurring losses, negative working capital, and insufficient revenue raise substantial doubt about the company's ability to continue as a going concern[55] - A 1-for-80 reverse stock split of common stock became effective May 2, 2025, with all share and per-share data retroactively adjusted[33][107] - Post-quarter, non-binding MOUs were signed for the potential sale of 75% interest in ItsBchain, LLC and acquisition of 51% interest in GlobeTopper, LLC[100][103] - Customer concentration improved, with 19 customers representing 86% of revenue in Q1 2025, compared to 8 customers representing 86% in the prior year[40] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial results, noting a 12% revenue increase to $57.6 million and 40% gross margin rise, despite a widened net loss due to increased operating and interest expenses from the QXTEL acquisition, alongside liquidity challenges and future financing reliance Business Overview This section outlines IQSTEL's global operations across its four technology divisions: Telecommunications, EV, Fintech, and AI-Enhanced Metaverse, emphasizing the Telecom Division as the sole revenue generator - IQSTEL is a technology company with a global presence in 20 countries, operating through four divisions: Telecommunications, EV, Fintech, and AI-Enhanced Metaverse[110] - The Telecom Division is the core business and sole revenue source, providing VoIP, SMS, IoT, and international fiber-optic connectivity via nine subsidiaries[111] - Pre-revenue divisions under active development include the Fintech ecosystem (Global Money One), EV business line (EVOSS), and AI-enhanced Metaverse platform (Reality Border)[113][114][115] Results of Operations This section analyzes the company's financial performance, detailing revenue growth, gross margin improvements, and the factors contributing to the increased net loss, including operating and interest expenses Revenue and Gross Margin (Three Months Ended March 31) | Metric | 2025 ($) | 2024 ($) | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $57,632,816 | $51,414,878 | +12% | | Gross Profit | $1,934,958 | $1,379,026 | +40% | | Gross Margin % | 3.36% | 2.68% | +25.4% | - Gross margin increase is attributed to strategic portfolio restructuring, eliminating low-margin routes and incorporating the newly acquired QXTEL[126][130] - Operating expenses increased by 62% to $2.5 million in Q1 2025, primarily due to QXTEL's expenses and higher technology costs for a unified switching platform[132][134][135] - Net loss for Q1 2025 was $1.14 million, widening from $0.58 million in Q1 2024, mainly due to increased operating and interest expenses from the QXTEL acquisition[139][140] - The Telecom Division, on a standalone basis, generated a positive operating income of $266,653 and a positive net income of $247,288 in Q1 2025[138][142] Liquidity and Capital Resources This section details the company's financial liquidity, highlighting its negative working capital position and outlining strategies for funding operations through sales growth and external financing - As of March 31, 2025, the company reported negative working capital of $4,235,842, with current assets of $26.0 million and current liabilities of $30.3 million[146] Cash Flow Summary (Three Months Ended March 31, 2025) | Cash Flow Activity | Amount ($) | | :--- | :--- | | Net Cash Used in Operating Activities | ($1,906,969) | | Net Cash Used in Investing Activities | ($58,645) | | Net Cash Provided by Financing Activities | $540,303 | - The company plans to fund operations through increased sales and additional debt or equity financing, though success is not assured[150] Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of March 31, 2025, due to identified material weaknesses in internal control over financial reporting, despite believing the financial statements are fairly presented - Material weaknesses in internal control include inadequate segregation of duties, ineffective risk assessment, and insufficient written policies for accounting and financial reporting[162] - No material changes to internal control over financial reporting occurred during the quarter[165] PART II – OTHER INFORMATION Other Disclosures This section confirms no material legal proceedings, discloses the issuance of 100,419 common shares in unregistered sales for compensation and debt conversion, and refers to the Annual Report for detailed risk factors - The company is not a party to any material pending legal proceedings[167] - In Q1 2025, 100,419 common shares were issued in unregistered transactions for director compensation ($32,815), debt conversion ($835,834), and common stock payable ($82,194)[170][171] - For detailed risk factors, the company refers to its Annual Report for the year ended December 31, 2024[168]