# iQSTEL Inc: Form 10-Q for the period ended Sep 30, 2024

- Company: [iQSTEL Inc](/companies/iqst.md) (CIK 1527702)
- Form: 10-Q
- Filed: 2024-11-14
- Accepted by EDGAR: Nov 14, 2024, 08:06 ET
- Period: 2024-09-30
- Accession: 0001663577-24-000281
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1527702/000166357724000281/iqst10q3_093024.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1527702/000166357724000281/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $54.2m | us-gaap:Revenues |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $184.3m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $52.2m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $178.7m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $2.0m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-30 | $5.6m | us-gaap:GrossProfit |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$56.6k | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$536.0k | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $69.6k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $134.9k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$773.0k | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$3.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.01 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.02 | us-gaap:EarningsPerShareDiluted |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$2.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $134.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-09-30 | $2.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $19.7m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $32.4m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $24.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $24.3m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $3.2m | us-gaap:LongTermDebt |
| Current portion of debt | at 2024-09-30 | $3.2m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-09-30 | $8.1m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 22,766 characters.

### Forward-Looking Statements

This quarterly report contains forward-looking statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management’s plans and objectives for our future operations. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” and the risks set out below, any of which may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and not in limitation:

- the uncertainty of profitability based upon our history of losses;
- legislative or regulatory changes concerning telecommunications;
- risks related to failure to obtain adequate financing on a timely basis and on acceptable terms;
- risks related to our operations and uncertainties related to our business plan and business strategy;
- changes in economic conditions;
- uncertainty with respect to intellectual property rights, protecting those rights and claims of infringement of other’s intellectual property;
- competition; and
- cybersecurity concerns.

This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully, including those contained in our Annual Report on Form 10-K under “Risk Factors” for the year ended December 31, 2023, and readers should not place undue reliance on our forward-looking statements. Forward looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made, and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

### Overview

iQSTEL Inc. (www.iqstel.com) is a technology company with a presence in 20 countries and over 100 employees that offers leading-edge services through its four business divisions in the telecommunications, electric vehicle (EV), fintech, and AI-enhanced metaverse industries. Our presence is global, with offices in Miami, Venezuela, Argentina, UK, Switzerland, Turkey, and Dubai, we target diverse and high-growth markets. We maintain more than 400 high value network interconnections around the world, delivering international voice, SMS, and connectivity services that form the core of our business. The company’s strategy focuses on leveraging synergies between its 11 subsidiaries to drive innovation and capture emerging opportunities.

Our Telecom Division, which represents the majority of current operations and which also represents the source for all of our revenues for the financial periods presented, 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 (www.etelix.com), SwissLink Carrier (www.swisslink-carrier.com), Smartbiz Telecom (www.smartbiztel.com), Whisl Telecom (www.whisl.com), IoT Labs (www.iotlabs.mx), QGlobal SMS (www.qglobalsms.com), and QXTEL Limited (www.qxtel.com).

Also under the Telecom Division, our developing BlockChain Platform Business Line (www.itsbchain.com) offers our proprietary Mobile Number Portability Application (MNPA) to serve the in-country portability needs through its subsidiary, itsBchain.

Our developing Fintech Business Line (www.globalmoneyone.com) (www.maxmo.vip) offers a complete Fintech ecosystem MasterCard Debit Card, US Bank Account (No SSN Needed), Mobile App/Wallet (Remittances, Mobile Top Up). Our Fintech subsidiary, Global Money One, 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.

Our developing Electric Vehicle (EV) Business Line (www.evoss.net) 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.

Our developing Artificial Intelligence (AI)-Enhanced Metaverse Division (information and content) (www.realityborder.com) is currently developing a groundbreaking 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. The features include up to four simultaneous video screens for versatile content presentation, various virtual halls such as the main hall, home hall, auditorium, exhibition space, shopping center, and meeting rooms. Stands for mobile application downloads, clickable gates for immediate purchasing, and direct communication tools are seamlessly integrated to foster collaboration, engagement, and interactivity. It goes beyond traditional virtual spaces by utilizing cutting-edge AI technology. This ensures video conferencing and real-time communication with other users within the Metaverse, offering our customers a collective and fully immersive experience that caters to diverse needs such as content acquisition, entertainment, and shared virtual experiences. It is a future-ready platform that encourages creativity, connectivity, and collaboration like never before.

Our developing metaverse leverages advanced AI to introduce Non-Player Characters (NPCs) that significantly enhance user engagement and functionality within virtual environments. These NPCs are not mere static elements; rather, they are powered by OpenAI's latest language models, enabling dynamic interaction with users. This AI-driven interaction allows NPCs to serve as sales and brand assistants, guiding users through immersive experiences that can extend to purchasing products from external websites. Furthermore, these intelligent agents can control access to gated spaces within the metaverse based on user interactions, showcasing a personalized approach to user experience.

A key innovation in our AI implementation is the NPCs' ability to autonomously make decisions based on their understanding of user interactions. This is achieved through state-of-the-art natural language processing and understanding capabilities, which are supported in seven languages. Additionally, our NPCs utilize advanced text-to-speech and speech-to-text technologies to facilitate seamless communication with users across diverse linguistic backgrounds. The incorporation of "function call" features further enhances the NPCs' ability to perform complex tasks and interact meaningfully with the environment and the users.

Our reference to our technology as "cutting-edge" is grounded in our commitment to continuous improvement and innovation. We consistently integrate the latest advancements in AI, particularly in the areas of chatbots, language understanding, and user interaction technologies. This ensures that our metaverse remains at the forefront of AI application in virtual spaces, offering an unparalleled user experience that goes beyond traditional virtual environments.

We are currently in an advanced phase of development, with ongoing enhancements to AI functionalities and user interaction models. Our team is dedicated to exploring and implementing the latest AI technologies to ensure that our metaverse remains a leading example of innovation in virtual space technology.

The information contained on our websites is not incorporated by reference into this prospectus and should not be considered part of this or any other report filed with the SEC.

### Results of Operations

### Revenues

Our total revenue reported for the three months ended September 30, 2024 was $54,249,614, compared with $39,757,203 for the three months ended September 30, 2023. These numbers reflect an increase of 36.45% quarter over quarter on our consolidated revenues. Our total revenue reported for the nine months ended September 30, 2024 was $184,346,412, compared with $97,248,561 for the nine months ended September 30, 2023. These numbers reflect an increase of 89.56% year over year on our consolidated revenues.

When looking at the numbers by subsidiary, we have the following breakout for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023:

| Subsidiary | Revenue for the Three Months Ended September 2024 | 2023 | Revenue for the Nine Months Ended September 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Etelix.com USA, LLC | $9,781,863 | $10,344,008 | $43,124,776 | $25,635,273 |
| SwissLink Carrier AG | 1,048,201 | 1,498,054 | 3,157,073 | 4,179,569 |
| QGlobal LLC | 290,256 | 462,331 | 1,119,332 | 780,934 |
| IoT Labs LLC | 21,738,854 | 20,802,592 | 70,525,343 | 53,279,140 |
| Smartbiz Telecom | 4,145,464 | 6,915,218 | 17,321,777 | 14,102,902 |
| Whisl Telecom | 648,316 | 866,406 | 3,558,314 | 3,400,087 |
| QXTEL Limited | 17,202,173 | — | 48,676,228 | — |
| Inter-company sales | (605,513) | (1,131,406) | (3,136,431) | (4,129,344) |
|  | $54,249,614 | $39,757,203 | $184,346,412 | $97,248,561 |

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 the synergies among all our subsidiaries.

### Cost of Revenues

Our total cost of revenues for the three months ended September 30, 2024 increased to $52,229,695, compared with $38,728,682 for the three months ended September 30, 2023. Our total cost of revenues for the nine months ended September 30, 2024 increased to $178,737,687, compared with $94,218,838 for the nine months ended September 30, 2023.

When looking at the numbers by subsidiary, we have the following breakout for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023:

| Subsidiary | Cost of Revenue for the Three Months Ended September 2024 | 2023 | Cost of Revenue for the Nine Months Ended September 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Etelix.com USA, LLC | $9,628,110 | $10,224,778 | $42,690,403 | $25,364,275 |
| SwissLink Carrier AG | 822,313 | 1,266,475 | 2,542,555 | 3,568,774 |
| QGlobal LLC | 236,530 | 306,745 | 817,913 | 516,018 |
| IoT Labs LLC | 21,352,526 | 20,575,212 | 69,379,146 | 52,665,861 |
| Smartbiz Telecom | 3,894,823 | 6,697,793 | 16,622,745 | 13,435,881 |
| Whisl Telecom | 502,365 | 789,056 | 2,992,459 | 2,797,373 |
| QXTEL Limited | 16,165,752 | — | 46,596,108 | — |
| Inter-company sales | (372,724) | (1,131,377) | (2,903,642) | (4,129,344) |
|  | $52,229,695 | $38,728,682 | $178,737,687 | $94,218,838 |

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 vendor’s network.

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.

### Gross Profit

The gross profit for the three months ended September 30, 2024 increased to $2,019,919 from $1,028,521 for the same period of year 2023. For the nine months ended September 30, 2024 the gross profit increased to $5,608,725 from $3,029,723 for the same period of year 2023.

It is important to remark on the evolution of the Gross Profit expressed as a percentage of Revenue. It went up to 3.72% for the three months ended September 2024 from 2.58% for the same period of 2023, but also from 2.75% for the three months ended June 30, 2024.

### Operating Expenses

Operating expenses increased to $2,076,472 for the three months ended September 30, 2024 from $957,768 for the three months ended September 30, 2023.

Operating expenses increased to $6,144,677 for the nine months ended September 30, 2024 from $3,529,218 for the nine months ended September 30, 2023. The details by major category for the nine months ended September 30, 2024 and 2023 is reflected in the table below:

|  | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Salaries, Wages and Benefits | $2,351,471 | $1,218,946 |
| Technology | 879,182 | 273,786 |
| Professional Fees | 1,072,816 | 821,780 |
| Legal and Regulatory | 180,221 | 168,908 |
| Bad Debt Expense | 1,801 | 1,344 |
| Travel and Events | 167,757 | 119,845 |
| Public Cost | 93,646 | 28,526 |
| Advertising | 659,784 | 535,193 |
| Insurances | 41,576 | 10,543 |
| Bank Services and Fees | 127,594 | 44,136 |
| Financial Costs | 43,772 | — |
| Depreciation and Amortization | 104,061 | 103,246 |
| Office, Facility and Other | 311,511 | 172,020 |
| Sub Total | 6,035,192 | 3,498,273 |
| Stock-based compensation | 109,485 | 30,945 |
| Total Operating Expense | $6,144,677 | $3,529,218 |

The main reasons for the overall increase in operating expenses for the nine months ended September 30, 2024 compared to the same period of 2023 is due to the increase in salaries, wages and benefits; technology; the professional fees; office, facilities and other.

As it can be seen in the table below, where operating expenses are shown by subsidiary, 56% of the total increase in operating expenses is due to the inclusion of QXTEL, which was not part of the group of companies in year 2023.

When looking at the numbers by subsidiary, we have the following breakout for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023:

|  | Nine Months Ended September 30, 2024 | 2023 | Difference |
| --- | ---: | ---: | ---: |
| iQSTEL | $2,024,621 | $1,346,415 | $678,206 |
| Etelix | 297,124 | 256,616 | 40,508 |
| Swisslink | 701,427 | 562,310 | 139,117 |
| ItsBchain | 14,582 | 28,945 | -14,363 |
| QGlobal | 405,275 | 184,698 | 220,577 |
| IoT Labs | 190,179 | 112,033 | 78,146 |
| Global Money One | 550 | 47,759 | -47,209 |
| Smartbiz Telecom | 684,061 | 526,079 | 157,982 |
| Whisl Telecom | 645,639 | 464,363 | 181,276 |
| QXTEL Limited | 1,414,008 | — | 1,414,008 |
| Inter-company eliminations | (232,789) | — | -232,789 |
|  | $6,144,677 | $3,529,218 | $2,615,459 |

### Operating Income

The Company had an operating loss of $56,553 for the three months ended September 30, 2024 compared with operating income of $70,753 for the three months ended September 30, 2023.

The Company had an operating loss of $535,952 for the nine months ended September 30, 2024 compared with an operating loss of $499,495 for the nine months ended September 30, 2023

Our Telecom Division, the division presently generating revenue, has positive operating income when presented separately from the rest of our Company. The expenses of our pre-revenue companies are set at the minimum required to finish the development of the product/services prior to market launch. When comparing the tables below, we can see a tremendous evolution of our telecom division comparing the revenues, gross profit and operating income for the three and nine months ended September 30, 2024 versus the same periods of year 2023. 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.

|  | Telecom Division Three Months Ended September 30, 2024 | Nine Months Ended September 30, 2024 | Pre-revenue companies Three Months Ended September 30, 2024 | Nine Months Ended September 30, 2024 | iQSTEL Three Months Ended September 30, 2024 | Nine Months Ended September 30, 2024 | Consolidated Three Months Ended September 30, 2024 | Nine Months Ended September 30, 2024 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenues | 54,249,614 | 184,346,412 | — | — | — | — | 54,249,614 | 184,346,412 |
| Cost of revenue | 52,229,695 | 178,737,687 | — | — | — | — | 52,229,695 | 178,737,687 |
| Gross profit | 2,019,919 | 5,608,725 | — | — | — | — | 2,019,919 | 5,608,725 |
| Operating expenses |  |  |  |  |  |  |  |  |
| General and administration | 1,471,644 | 4,104,924 | 348 | 15,132 | 604,480 | 2,024,621 | 2,076,472 | 6,144,677 |
| Total Operating Expenses | 1,471,644 | 4,104,924 | 348 | 15,132 | 604,480 | 2,024,621 | 2,076,472 | 6,144,677 |
| Operating income/(loss) | 548,274 | 1,503,801 | (348) | (15,132) | (604,480) | (2,024,621) | (56,553) | (535,952) |

8

|  | Telecom Division Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2023 | Pre-revenue companies Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2023 | iQSTEL Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2023 | Consolidated Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2023 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenues | 39,757,203 | 97,248,561 | — | — | — | — | 39,757,203 | 97,248,561 |
| Cost of revenue | 38,728,682 | 94,218,838 | — | — | — | — | 38,728,682 | 94,218,838 |
| Gross profit | 1,028,521 | 3,029,723 | — | — | — | — | 1,028,521 | 3,029,723 |
| Operating expenses |  |  |  |  |  |  |  |  |
| General and administration | 645,260 | 2,106,099 | (6,114) | 76,704 | 318,622 | 1,346,415 | 957,768 | 3,529,218 |
| Total Operating Expenses | 645,260 | 2,106,099 | (6,114) | 76,704 | 318,622 | 1,346,415 | 957,768 | 3,529,218 |
| Operating income/(loss) | 383,261 | 923,625 | 6,114 | (76,704) | (318,622) | (1,346,415) | 70,753 | (499,495) |

### Other Expenses/Other Income

We had other expenses of $2,646,275 for the nine months ended September 30, 2024, as compared with other income of $224,938 for the same period ended 2023. The difference between the compared periods is primarily in due to a change in fair value of derivative liabilities of $(1,063,789); and Interest Expense of $(1,533,820).

### Net Income/Loss

The Company finished the three months ended September 30, 2024 with a net loss of $773,004, as compared to a net income $45,909 during the three months ended September 30, 2023. The Company finished the nine months ended September 30, 2024 with a loss of $3,317,107, as compared to a loss of $274,557 during the nine months ended September 30, 2023.

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.

### Liquidity and Capital Resources

As of September 30, 2024, we had total current assets of $19,664,986 and current liabilities of $24,066,234, resulting in a negative working capital of $4,401,248. This compares with a positive working capital of $1,878,228 at December 31, 2023.

Our operating activities used $2,526,651 in the nine months ended September 30, 2024 as compared with $434,701 used in operating activities in the nine months ended September 30, 2023.

Investing activities used $2,950,367 for the nine months ended September 30, 2024 as compared with $340,583 used in investing activities in the nine months ended September 30, 2023. Use of funds in investing activities were primarily for the acquisition of subsidiary (QXTEL) for $2,730,121.

Financing activities provided $6,239,489 in the nine months ended September 30, 2024 compared with $1,454,756 provided in the nine months ended September 30, 2023. Our positive financing cash flow in 2024 was largely the result of the proceeds from convertible notes of $3,997,500, funds used in the acquisition of QXTEL.

We intend to fund operations through increased sales and debt and/or equity financing arrangements to strengthen our liquidity and capital resources. 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.

### Inflation

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 nine-month period ended September 30, 2024.

### Critical Accounting Polices

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 Annual Report on Form 10-K for the year ended December 31, 2023 and in the footnotes to our financial statements included in this Quarterly Report on Form 10-Q for the nine months ended September 30, 2024. We consider our critical accounting policies to be those related to warrant accounting and complex debt instruments, allowance for doubtful accounts, valuation of long-lived assets, 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 Quarterly Report for a complete discussion of our significant accounting policies.

### Off Balance Sheet Arrangements

As of September 30, 2024, there were no off-balance sheet arrangements.

### Recent Accounting Pronouncements

We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operation, financial position, or cash flow.

## Market risk

As filed, 126 characters.

We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.

## Controls and procedures

As filed, 3,496 characters.

***Disclosure Controls and Procedures -*** Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report.

These controls are designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Based on this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were ineffective as of September 30, 2024. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

We believe that our financial statements presented in this quarterly report on Form 10-Q fairly present, in all material respects, our financial position, results of operations, and cash flows for all periods presented herein.

***Inherent Limitations -*** Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.

***Changes in Internal Control over Financial Reporting*** - There were no changes in our internal control over financial reporting during the nine-month period ended September 30, 2024, which were identified in conjunction with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 662 characters.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, carefully consider the risk factors described under the heading “Part I – Item 1A. Risk Factors” in our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Such risks described are not the only risks facing us. Additional risks and uncertainties not currently known to us, or that our management currently deems to be immaterial, also may adversely affect our business, financial condition, and/or operating results. There have been no material changes to those risk factors since their disclosure in our most recent Annual Report on Form 10-K.

Filed Nov 14, 2024.
Source: SEC EDGAR, the filing index for accession 0001663577-24-000281. Last ingested by Listed: Oct 26, 2026, 17:26 ET. No prices; not investment advice.