IQSTEL Inc. 10-Q Summary: Quarter Ended September 30, 2025
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2025, for IQSTEL Inc., a technology company operating in telecommunications, fintech, electric vehicles (EV), and AI-enhanced metaverse sectors. The company operates globally with over 100 employees and 603 active interconnection agreements. The reporting period includes the consolidation of Globetopper LLC, acquired on July 1, 2025, which contributes to the Fintech division. The company is classified as a non-accelerated filer and a smaller reporting company.
Key Financial Metrics
| Metric | Three Months Ended Sept 30, 2025 | Nine Months Ended Sept 30, 2025 |
|---|---|---|
| Revenues | $102,867,553 | $232,683,605 |
| Cost of Revenue | $100,126,838 | $226,136,445 |
| Gross Profit | $2,740,715 | $6,547,160 |
| Gross Margin | 2.66% | 2.81% |
| Operating Loss | $(559,083) | $(1,819,538) |
| Net Loss | $(2,325,869) | $(5,819,244) |
| Net Loss Attributable to IQSTEL Inc. | $(2,466,830) | $(6,031,766) |
| Cash and Cash Equivalents | $2,259,432 | $2,259,432 (Ending Balance) |
| Total Current Assets | $29,837,729 | $29,837,729 |
| Total Current Liabilities | $28,742,676 | $28,742,676 |
| Working Capital | $1,095,053 | $1,095,053 |
| Net Cash Used in Operating Activities | N/A | $(2,602,320) |
| Net Cash Provided by Financing Activities | N/A | $2,570,726 |
Material Changes vs. Prior Period
- Revenue Growth: Consolidated revenue increased 89.6% quarter-over-quarter (Q3 2025 vs. Q3 2024) and 26.2% year-to-date. This growth is driven by higher intercompany transaction volumes optimizing routing and the inclusion of Globetopper LLC.
- Operating Expenses: General and administrative expenses rose 58.9% for the quarter and 36.2% year-to-date. Increases are attributed to the full-year inclusion of QXTEL Limited expenses, the addition of Globetopper, and technology platform upgrades.
- Debt Settlements: Significant non-cash debt settlements occurred, resulting in a $2.2 million loss on settlement of debt for the nine months ended September 30, 2025. This includes settlements via common stock and Series D Preferred Stock.
- Accounts Receivable: Accounts receivable decreased significantly from $57.2 million (Dec 31, 2024) to $24.0 million (Sept 30, 2025), reflecting strong collections and a reduction in credit sales.
- Accrued Liabilities: Accrued and other current liabilities dropped from $55.6 million to $15.0 million, indicating substantial payments made during the period.
Guidance, Outlook, Risks, and Unusual Items
- Going Concern: The filing includes a "Going Concern" note (Note 3), stating that recurring losses, negative working capital history, and lack of established revenue sources sufficient to cover costs raise substantial doubt about the company's ability to continue as a going concern. Future operations depend on raising additional capital.
- Internal Controls: Management concluded that disclosure controls and procedures were ineffective as of September 30, 2025, citing material weaknesses in segregation of duties and insufficient written accounting policies.
- Capital Structure Changes: A 1-for-80 reverse stock split was effective May 2, 2025. The company issued Series D Preferred Stock to settle debt and amended its certificate of designation in October 2025 to include a "True-Up Adjustment" mechanism for conversion rates.
- Segment Performance: The Telecom Division remains the primary revenue generator (94% of YTD revenue) and is profitable on an operating basis. The Fintech division (Globetopper) began generating revenue in Q3 2025. Pre-revenue divisions (EV, Metaverse) continue to incur costs.
- Adjusted EBITDA: Management reports Adjusted EBITDA of $(330,723) for the quarter and $(940,029) for the nine months, excluding non-recurring items like debt settlement losses and stock-based compensation.
Key Facts for Investor Verification
- Liquidity Position: Verify the sustainability of the current positive working capital ($1.1M) given the negative operating cash flow and the "Going Concern" warning.
- Debt Obligations: Review the terms of outstanding convertible notes and loans payable, particularly those with high interest rates (up to 24%) and the recent issuance of Series D Preferred Stock used for debt settlement.
- Revenue Quality: Assess the concentration of revenue, noting that 87.4% of YTD revenue came from 31 customers, though the largest single customer concentration dropped from 40.4% to 8.75%.
- Intercompany Transactions: Scrutinize the high volume of intercompany eliminations ($41M YTD) to ensure revenue recognition is not artificially inflated by internal routing strategies.
- Internal Control Remediation: Monitor the company's plan to address the identified material weaknesses in internal controls over financial reporting.