UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the quarterly period ended ~~September 30, 2022~~March 31, 2023

☐	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

	For the transition period from __________ to__________

	Commission File Number: 000-55984

iQSTEL Inc.

(Exact name of registrant as specified in its charter)


Nevada	45-2808620
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

300 Aragon Avenue, Suite 375 Coral Gables, FL33134
(Address of principal executive offices)

(954) 951-8191
(Registrant’s telephone number)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). [X] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

☐ Large accelerated filer	☐ Accelerated filer
☒ Non-accelerated Filer	☒Smaller reporting company
	☐ Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[ ] Yes [X] No

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 164,596,688 ~~155,320,975~~common shares as of ~~November 14, 2022~~May 15, 2023

Table of Contents

TABLE OF CONTENTS
		Page
PART I – FINANCIAL INFORMATION
Item 1:	Financial Statements	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	98
Item 4:	Controls and Procedures	98
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	109
Item 1A:	Risk Factors	109
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	109
Item 3:	Defaults Upon Senior Securities	109
Item 4:	Mine Safety Disclosures	109
Item 5:	Other Information	109
Item 6:	Exhibits	1110

Table of Contents

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 ~~September 30, 2022~~March 31, 2023 (unaudited) and December 31, ~~2021;~~2022;
F-2	Consolidated Statements of Operations for the three and nine months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited);
F-3	Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited); and
F-4	Consolidated Statements of Stockholder’s Equity as of ~~September 30, 2022;~~March 31, 2023 and ~~2021.~~2022.(unaudited)
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 ~~September 30, 2022~~March 31, 2023 are not necessarily indicative of the results that can be expected for the full year.

Table of Contents

iQSTEL INC

Consolidated Balance Sheets

(Unaudited)

	September 30,			December 31,			March 31,			December 31,
	2022			2021			2023			2022
ASSETS
Current Assets
Cash	$	1,294,981		$	3,334,813		$	1,777,226		$	1,329,389
Accounts receivable, net		3,922,778			2,540,515			3,969,503			4,209,125
Inventory		26,124			—			26,124			26,124
Due from related parties		351,139			424,086			400,893			326,324
Prepaid and other current assets		546,160			267,110			563,221			545,628
Total Current Assets		6,141,182			6,566,524			6,736,967			6,436,590

Property and equipment, net		391,762			409,382			433,119			401,021
Intangible asset		99,592			99,592			99,592			99,592
Goodwill		5,172,146			1,537,742			5,172,146			5,172,146
Deferred tax assets		413,438			446,402			445,100			440,135
TOTAL ASSETS	$	12,218,120		$	9,059,642		$	12,886,924		$	12,549,484

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable		1,913,304			1,474,595			2,270,211			2,254,636
Accrued and other current liabilities								2,748,968			2,482,352
Due to related parties		26,613			26,613			26,613			26,613
Loans payable - net of discount of $0 and $7,406		93,204			315,450
Loans payable								95,407			94,342
Loans payable - related parties		221,637			239,308			238,610			235,949
Other current liabilities		515,223			307,049
Derivative liabilities								921,222			1,357,787
Total Current Liabilities		2,769,981			2,363,015			6,301,031			6,451,679

Loans payable, non-current		101,590			119,295			100,255			108,150
Employee benefits, non-current		144,883			156,434			155,978			154,238
TOTAL LIABILITIES		3,016,454			2,638,744			6,557,264			6,714,067

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, respectively		10			10			10			10
Series B Preferred stock: 200,000 designated; $0.001 par value, 21,000 shares issued and outstanding		21			21			21			21
Series C Preferred stock: 200,000 designated; $0.001 par value, No shares issued and outstanding		—			—			—			—
Common stock: 300,000,000 authorized; $0.001 par value 151,830,378 and 147,477,358 shares issued and outstanding, respectively		151,830			147,477
Common stock: 300,000,000 authorized; $0.001 par value 164,596,688 and 161,595,511 shares issued and outstanding, respectively								164,597			161,595
Additional paid in capital		29,437,832			25,842,982			31,784,606			31,136,120
Accumulated deficit		(19,511,934	)		(18,536,921	)		(24,867,580	)		(24,504,395	)
Accumulated other comprehensive loss		(37,935	)		(36,658	)		(32,753	)		(33,557	)
Equity attributed to stockholders of iQSTEL Inc.		10,039,824			7,416,911
Equity attributable to stockholders of iQSTEL Inc.								7,048,901			6,759,794
Deficit attributable to noncontrolling interests		(838,158	)		(996,013	)		(719,241	)		(924,377	)
Total Stockholders' Equity		9,201,666			6,420,898
TOTAL STOCKHOLDERS' EQUITY								6,329,660			5,835,417

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	12,218,120		$	9,059,642		$	12,886,924		$	12,549,484

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						Nine Months Ended						Three Months Ended
		September 30,						September 30,						March 31,
		2022			2021			2022			2021			2023			2022

Revenues		$	21,936,634		$	16,516,739		$	65,055,661		$	46,842,717		$	24,666,529		$	19,419,311
Cost of revenue			20,621,674			15,675,687			62,410,367			45,469,730			23,449,793			18,935,251
Gross profit			1,314,960			841,052			2,645,294			1,372,987			1,216,736			484,060

Operating expenses
General and administration			1,256,147			957,195			3,390,097			3,664,473			1,534,266			989,498
Total operating expenses			1,256,147			957,195			3,390,097			3,664,473			1,534,266			989,498

Operating income (loss)			58,813			(116,143	)		(744,803	)		(2,291,486	)
Operating loss															(317,530	)		(505,438	)

Other income (expense)
Other income			43,219			11,252			38,591			40,431			—			24,159
Other expenses			(71,027	)		475			(54,247	)		(421	)		(33,954	)		(28,564	)
Interest expense			(3,693	)		(6,802	)		(22,417	)		(648,889	)		(3,645	)		(14,888	)
Change in fair value of derivative liabilities			—			—			—			317,080			196,307			—
Loss on settlement of debt			—			—			—			(528,794	)
Total other income (expense)			(31,501	)		4,925			(38,073	)		(820,593	)		158,708			(19,293	)

Net income (loss) before provision for income taxes			27,312			(111,218	)		(782,876	)		(3,112,079	)
Net loss before provision for income taxes															(158,822	)		(524,731	)
Income taxes			—			—			—			—			—			—
Net income (loss)			27,312			(111,218	)		(782,876	)		(3,112,079	)
Net loss															(158,822	)		(524,731	)
Less: Net income attributable to noncontrolling interests			96,175			87,736			192,137			16,642			204,363			30,239
Net loss attributed to stockholders of iQSTEL Inc.		$	(68,863	)	$	(198,954	)	$	(975,013	)	$	(3,128,721	)
Net loss attributable to stockholders of iQSTEL Inc.														$	(363,185	)	$	(554,970	)

Comprehensive income (loss)	��
Net income (loss)		$	27,312		$	(111,218	)	$	(782,876	)	$	(3,112,079	)
Net loss														$	(158,822	)	$	(524,731	)
Foreign currency adjustment			(1,096	)		3,406			(2,503	)		54,398			1,577			(384	)
Total comprehensive income (loss)			26,216		$	(107,812	)	$	(785,379	)	$	(3,057,681	)
Total comprehensive (loss)														$	(157,245	)	$	(525,115	)
Less: Comprehensive income attributable to noncontrolling interests			95,638			89,405			190,911			43,297			205,136			30,051
Net comprehensive loss attributed to stockholders of iQSTEL Inc.		$	(69,422	)	$	(197,217	)	$	(976,290	)	$	(3,100,978	)
Net comprehensive (loss) attributable to stockholders of iQSTEL Inc.														$	(362,381	)	$	(555,166	)

Basic income (loss) per common share		$	0.00		$	(0.00	)	$	(0.01	)	$	(0.02	)
Diluted income (loss) per common share		$	0.00		$	(0.00	)	$	(0.01	)	$	(0.02	)
Basic and diluted loss per common share														$	(0.00	)	$	(0.00	)

Weighted average number of common shares outstanding - Basic and diluted			151,750,426			141,697,141			150,057,315			133,173,421			164,034,479			147,539,580
Weighted average number of common shares outstanding - Diluted			153,930,452			141,697,141			150,057,315			133,173,421

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 ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~

(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' Deficit
Balance - December 31, 2022		10,000	$	10		21,000	$	21		161,595,511	$	161,595	$	31,136,120	$	(24,504,395	)	$	(33,557	)	$	6,759,794		$	(924,377	)	$	5,835,417

Common stock issued for warrant exercises		—		—		—		—		2,941,177		2,942		397,058		—			—			400,000			—			400,000
Common stock issued for compensation		—		—		—		—		60,000		60		11,170		—			—			11,230			—			11,230
Resolution of derivative liabilities upon exercise of warrants		—		—		—		—		—		—		240,258		—			—			240,258			—			240,258
Foreign currency translation adjustments		—		—		—		—		—		—		—		—			804			804			773			1,577
Net income (loss)		—		—		—		—		—		—		—		(363,185	)		—			(363,185	)		204,363			(158,822	)
Balance - March 31, 2023		10,000	$	10		21,000	$	21		164,596,688	$	164,597	$	31,784,606	$	(24,867,580	)	$	(32,753	)	$	7,048,901		$	(719,241	)	$	6,329,660

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, 2021 10,000 $ 10 21,000 $ 21 147,477,358 $ 147,477 $ 25,842,982 $ (18,536,921 ) $ (36,658 ) $ 7,416,911 $ (996,013 ) $ 6,420,898

Common stock issued for cash —   —   —   —   2,000,000 2,000 998,000 —   —   1,000,000 —   1,000,000
Common stock issued for compensation —   —   —   —   60,000 60 41,079 —   —   41,139 —   41,139
Foreign currency translation adjustments —   —   —   —   —   —   —   —   (196 ) (196 ) (188 ) (384)
Net income (loss) —   —   —   —   —   —   —   (554,970 ) —   (554,970 ) 30,239 (524,731)
Balance - March 31, 2022 10,000 $ 10 21,000 $ 21 149,537,358 $ 149,537 $ 26,882,061 $ (19,091,891 ) $ (36,854 ) $ 7,902,884 $ (965,962 ) $ 6,936,922

Common stock issued for compensation —   —   —   —   60,000 60 30,430 —   —   30,490 —   30,490
Common stock issued and to be issued for acquisition of subsidiaries —   —   —   —   1,461,653 1,462 1,548,538 —   —   1,550,000 (33,056 ) 1,516,944
Common stock issued for asset acquisition —   —   —   —   500,000 500 324,500 —   —   325,000 —   325,000
Common stock payable —   —   —   —   —   —   18,900 —   —   18,900 —   18,900
Warrant granted —   —   —   —   —   —   500,000 —   —   500,000 —   500,000
Foreign currency translation adjustments —   —   —   —   —   —   —   —   (522 ) (522 ) (501 ) (1,023)
Net income (loss) —   —   —   —   —   —   —   (351,180 ) —   (351,180 ) 65,723 (285,457)
Balance - June 30, 2022 10,000 $ 10 21,000 $ 21 151,559,011 $ 151,559 $ 29,304,429 $ (19,443,071 ) $ (37,376 ) $ 9,975,572 $ (933,796 ) $ 9,041,776

Common stock issued for compensation —   —   —   —   60,000 60 20,440 —   —   20,500 —   20,500
Common stock issued for settlement of debt —   —   —   —   161,367 161 80,513 —   —   80,674 —   80,674
Common stock issued for asset acquisition —   —   —   —   50,000 50 32,450 —   —   32,500 —   32,500
Foreign currency translation adjustments —   —   —   —   —   —   —   —   (559 ) (559 ) (537 ) (1,096)
Net income (loss) —   —   —   —   —   —   —   (68,863 ) —   (68,863 ) 96,175 27,312
Balance - September 30, 2022 10,000 $ 10 21,000 $ 21 151,830,378 $ 151,830 $ 29,437,832 $ (19,511,934 ) $ (37,935 ) $ 10,039,824 $ (838,158 ) $ 9,201,666


	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’ Deficit
Balance - December 31, 2021		10,000	$	10		21,000	$	21		147,477,358	$	147,477	$	25,842,982	$	(18,536,921	)	$	(36,658	)	$	7,416,911		$	(996,013	)	$	6,420,898

Common stock issued for cash		—		—		—		—		2,000,000		2,000		998,000		—			—			1,000,000			—			1,000,000
Common stock issued for compensation		—		—		—		—		60,000		60		41,079		—			—			41,139			—			41,139
Foreign currency translation adjustments		—		—		—		—		—		—		—		—			(196	)		(196	)		(188	)		(384	)
Net income (loss)		—		—		—		—		—		—		—		(554,970	)		—			(554,970	)		30,239			(524,731	)
Balance - March 31, 2022		10,000	$	10		21,000	$	21		149,537,358	$	149,537	$	26,882,061	$	(19,091,891	)	$	(36,854	)	$	7,902,884		$	(965,962	)	$	6,936,922

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'
Deficit
Balance - December 31, 2020 10,000 $ 10 —   $ —   118,133,432 $ 118,133 $ 13,267,261 $ (14,699,148 ) $ (74,831 ) $ (1,388,575 ) $ (1,006,461 ) $ (2,395,036)

Preferred stock issued for conversion of common stock —   —   21,000 21 (21,000,000 ) (21,000 ) 20,979 —   —   —   —   —
Common stock issued for cash —   —   —   —   35,862,500 35,863 3,550,387 —   —   3,586,250 —   3,586,250
Common stock issued for service —   —   —   —   195,000 195 284,505 —   —   284,700 —   284,700
Common stock issued for compensation —   —   —   —   600,000 600 563,400 —   —   564,000 —   564,000
Common stock issued for forbearance of debt —   —   —   —   250,000 250 49,675 —   —   49,925 —   49,925
Common stock issued for conversion of debt —   —   —   —   6,080,632 6,081 416,214 —   —   422,295 —   422,295
Cancellation of common stock —   —   —   —   (1,294,600 ) (1,295 ) (88,809 ) —   —   (90,104 ) —   (90,104)
Resolution of derivative liabilities —   —   —   —   —   —   708,611 —   —   708,611 —   708,611
Foreign currency translation adjustments —   —   —   —   —   —   —   —   54,905 54,905 52,751 107,656
Net income (loss) —   —   —   —   —   —   —   (1,942,391 ) —   (1,942,391 ) 63,902 (1,878,489)
Balance - March 31, 2021 10,000 $ 10 21,000 $ 21 138,826,964 $ 138,827 $ 18,772,223 $ (16,641,539 ) $ (19,926 ) $ 2,249,616 $ (889,808 ) $ 1,359,808

Common stock issued for compensation —   —   —   —   600,000 600 411,600 —   —   412,200 —   412,200
Common stock issued for settlement of debt —   —   —   —   2,230,394 2,230 2,054,300 —   —   2,056,530 —   2,056,530
Debt forgiveness —   —   —   —   —   —   807,103 —   —   807,103 —   807,103
Foreign currency translation adjustments — —   — —   — —   —   —   (28,899 ) (28,899 ) (27,765 ) (56,664)
Net loss — —   — —   — —   —   (987,376 ) —   (987,376 ) (134,996 ) (1,122,372)
Balance - June 30, 2021 10,000 $ 10 21,000 $ 21 141,657,358 $ 141,657 $ 22,045,226 $ (17,628,915 ) $ (48,825 ) $ 4,509,174 $ (1,052,569 ) $ 3,456,605

Common stock issued for compensation —   —   —   —   60,000 60 34,478 —   —   34,538 —   34,538
Foreign currency translation adjustments —   —   —   —   —   —   —   —   1,737 1,737 1,669 3,406
Net income (loss) —   —   —   —   —   —   —   (198,954 ) —   (198,954 ) 87,736 (111,218)
Balance - September 30, 2021 10,000 $ 10 21,000 $ 21 141,717,358 $ 141,717 $ 22,079,704 $ (17,827,869 ) $ (47,088 ) $ 4,346,495 $ (963,164 ) $ 3,383,331

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Table of Contents

iQSTEL INC

Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended						Three Months Ended
	September 30,						March 31,
	2022			2021			2023			2022

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(782,876	)	$	(3,112,079	)	$	(158,822	)	$	(524,731	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		111,029			1,205,334
Bad debt		26,299			—
Write-off of due from related party		—			7,648
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Stock based compensation								11,230			41,139
Depreciation and amortization		91,221			66,924			34,060			33,547
Amortization of debt discount		7,407			435,956			—			7,407
Change in fair value of derivative liabilities		—			(317,080	)		(196,307	)		—
Loss on settlement of debt		—			528,794
Prepayment and default penalty		—			122,020
Changes in operating assets and liabilities:
Accounts receivable		(832,263	)		(943,615	)		564,365			(87,361	)
Inventory		(26,124	)		—
Prepaid and other current assets		(31,714	)		(108,338	)		(16,204	)		24,677
Due from related parties		(5,143	)		—
Due from related party								5,131			23,316
Accounts payable		(97,373	)		(239,857	)		537,667			73,445
Other current liabilities		50,636			(131,752	)		(583,957	)		(39,091	)
Net cash used in operating activities		(1,488,901	)		(2,486,045	)
Net cash provided by (used in) operating activities								197,163			(447,652	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of subsidiaries, net of cash acquired		(1,814,132	)		(60,000	)
Purchase of property and equipment		(86,491	)		(74,799	)		(63,247	)		(24,918	)
Purchase of intangible assets		—			(27,824	)
Payment of loan receivable - related parties		(1,000	)		(215,674	)
Payment of loan receivable - related party								(80,000	)		—
Collection of amounts due from related parties		400			226			300			—
Net cash used in investing activities		(1,901,223	)		(378,071	)		(142,947	)		(24,918	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans payable		—			400,000
Repayments of loans payable		(232,018	)		(331,150	)		(9,006	)		(232,018	)
Repayment of loans payable - related parties		—			(90,787	)
Proceeds from common stock issued		1,100,000			3,586,250			—			1,100,000
Proceed from issuance of common stock purchase option		500,000			—
Repayment of convertible notes		—			(250,000	)
Proceeds from exercise of warrants								400,000			—
Proceeds from issuance of common stock purchase options								—			500,000
Net cash provided by financing activities		1,367,982			3,314,313			390,994			1,367,982

Effect of exchange rate changes on cash		(17,690	)		(12,709	)		2,627			(3,181	)

Net change in cash		(2,039,832	)		437,488			447,837			892,231
Cash, beginning of period		3,334,813			753,316			1,329,389			3,334,813
Cash, end of period	$	1,294,981		$	1,190,804		$	1,777,226		$	4,227,044

Supplemental cash flow information
Cash paid for interest	$	3,333		$	117,198		$	—		$	3,333
Cash paid for taxes	$	—		$	—		$	—		$	—

Non-cash transactions:
Common stock issued for asset acquisition	$	357,500		$	—
Common stock issued and to be issued for acquisition of subsidiaries	$	1,550,000		$	—
Common stock issued for conversion of debt	$	—		$	422,295
Resolution of derivative liabilities	$	—		$	708,611
Related party debt forgiveness	$	—		$	807,103
Common stock issued for settlement of debt	$	80,674		$	2,056,530
Common stock issued for forbearance of debt	$	—		$	49,925
Preferred stock issued for conversion of common stock	$	—		$	21,000
Resolution of derivative liabilities upon exercise of warrants							$	240,258		$	—

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

~~September 30, 2022~~March 31, 2023

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 ~~more than 150~~404 active interconnection agreements with mobile companies, fixed line companies and other wholesale carriers.

~~Acquisitions~~

~~On May 13, 2022, we entered into a Company Acquisition Agreement regarding the acquisition of~~ ~~51%~~ ~~of the shares in~~ ~~Whisl telecom LLC (“Whisl”)~~.

~~On June 1, 2022, we entered into a Company Acquisition Agreement regarding the acquisition of~~ ~~51%~~ ~~of the shares in~~ ~~Smartbiz Telecom LLC (“Smartbiz”).~~

~~Both acquisitions are detailed in Note 4.~~

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 ~~September 30, 2022~~March 31, 2023 and the results of operations and cash flows for the periods presented. The results of operations for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 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, ~~2021~~2022 filed with the SEC on April ~~15, 2022.~~14, 2023.

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~~Inc. (“Global Money One”), Whisl ~~telecom~~Telecom LLC (“Whisl”) and Smartbiz Telecom LLC (“Smartbiz”). All significant intercompany balances and transactions have been eliminated in consolidation.

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Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP 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.

~~Business Combinations~~

~~In accordance with ASC 805-10, “~~~~Business Combinations~~”, the Company accounts for all business combinations using the acquisition method of accounting. Under this method, assets and liabilities, including any remaining non-controlling interests, are recognized at fair value at the date of acquisition. The excess of the purchase price over the fair value of assets acquired, net of liabilities assumed, and non-controlling interests is recognized as goodwill. Certain adjustments to the assessed fair values of the assets, liabilities, or non-controlling interests made subsequent to the acquisition date, but within the measurement period, which is up to one year, are recorded as adjustments to goodwill. Any adjustments subsequent to the measurement period are recorded in income. Any cost or equity method interest that the Company holds in the acquired company prior to the acquisition is re-measured to fair value at acquisition with a resulting gain or loss recognized in income for the difference between fair value and the existing book value. Results of operations of the acquired entity are included in the Company’s results from the date of the acquisition onward and include amortization expense arising from acquired tangible and intangible assets.

Foreign Currency Translation and Re-measurement

The Company translates its foreign operations to ~~the~~ U.S. ~~dollar~~dollars in accordance with ASC 830, “Foreign Currency Matters”.

The functional currency and reporting currency of ~~the Company,~~ Etelix, QGlobal, ~~Itsbchain,~~ItsBchain, IoT Labs, Whisl, Smartbiz and Global Money One ~~Whisl, and Smartbiz~~ is the U.S. dollar, while ~~the~~SwissLink’s functional currency ~~of SwissLink~~ is the Swiss Franc (“CHF”).

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SwissLink translates their records into ~~the~~ U.S. ~~dollar~~dollars as follows:

•

Assets and liabilities at the rate of exchange in effect at the balance sheet date

•

Equities at historical rate

•

Revenue and expense items at the average rate of exchange prevailing during the period

Adjustments arising from such translations are included in accumulated other comprehensive income (loss) in stockholders’ equity.

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, 2023 and December 31, 2022.

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~~Under the expected credit loss model, the Company reviews its allowance for doubtful accounts daily and past due balances over 60 days and a specified amount are reviewed individually for collectability. Account balances are charged off after all means of collection have been exhausted and the potential for recovery is considered remote. During the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company recorded no bad debt ~~expense of $26,299 and $0 respectively.~~expense.

Net Income (Loss) Per Share of Common Stock

The Company has adopted ASC 260, ”Earnings per ~~Share”~~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 period. 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. ~~There were 4,800,000 warrants~~Dilutive potential common shares include outstanding ~~during~~Series B Preferred stock, and it was excluded from the ~~nine~~computation of diluted net loss per share as the result was anti-dilutive for the three months ended September 30, 2022, which were included in the calculation of the diluted earnings per share. There were no other potentially dilutive shares of common stock outstanding for the nine months ended September 30, 2021.March 31, 2023 and 2022.

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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 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 ~~nine~~three months ended ~~September 30, 2022, 10~~March 31, 2023, 12 customers represented ~~87%~~86% of our ~~revenues. During the nine months ended September 30, 2021, 6~~revenue compared to 4 customers ~~represented~~representing ~~87%~~86% of our ~~revenues.~~revenue for the three months ended March 31, 2022. For the three months ended March 31, 2023 and 2022, 62% and 64% of the revenue comes from customers under prepayment conditions which means there is no credit or bad debt risk on that portion of the customers portfolio.

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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.

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company used a Black-Scholes valuation model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.

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Revenue Recognition

The Company recognizes revenue from telecommunication services in accordance with ASC 606, “Revenue from Contracts with Customers.”

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 ~~existed,~~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 ~~clients.~~client.

Recent Accounting Pronouncements

~~Management~~In June 2022, the FASB issued ASU 2022-03, ASC Subtopic “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” These amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments in this update are effective for public business entities for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments Credit Losses —Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected, which includes the Company’s accounts receivable. This ASU is effective for the Company for reporting periods beginning after December 15, 2022. The Company adopted this accounting pronouncement on January 1, 2023 and it did not have any impact to its financial statements.

The Company has ~~considered~~reviewed all ~~recent~~other recently issued, but not yet effective, accounting pronouncements ~~issued since~~and does not believe the ~~last audit~~future adoption of any such pronouncements may be expected to cause a material impact on our financial statements. ~~The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s 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 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. 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.

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~~NOTE 4 – ACQUISITIONS~~

On May 13, 2022, we entered into a Company Acquisition Agreement (Purchase Agreement) with US Acquisitions, LLC, a California limited liability company (Seller) concerning the contemplated sale by Seller and the purchase by us of ~~51%~~ of the membership interests Seller held in Whisl, a Texas limited liability company. Whisl provides local US termination for Voice through its FCC license of VoIP Service number 832742; and is in the process to obtain a C-Lec FCC License over next 12 months. Whisl is one of the premier Intermediate Voice Providers in the USA. It has been a carrier since 2017 with billions of minutes traversing its network and provides its customers with multiple levels of Redundancy, Diversity, and Disaster Recovery for their applications and ability to make changes to underlying carrier configuration in real time. Whisl offers a single carrier solution for Voice Global services, and its customers benefit from hundreds of interconnection agreements that the company has cultivated since its inception. Pursuant to the Purchase Agreement, the closing of the purchase of the ~~51%~~ ~~membership interests was~~ ~~$1,800,000, which consisted of~~ ~~$1,250,000~~ ~~in cash and~~ ~~$550,000~~ ~~in our restricted common stock to Seller, which amounts to~~ ~~1,461,653~~ ~~shares of common stock.~~

~~On June 1, 2022, we entered into a Purchase Agreement for the purchase of~~ ~~51%~~ of the membership interests in Smartbiz, a Florida Corporation which provides telecommunication services, dedicated to VoIP business for wholesale and retail markets. The purchase price for the acquisition was ~~$1,800,000, which consisted of~~ ~~$800,000~~ ~~in cash and~~ ~~$1,000,000~~ ~~in our common stock to the seller, which amounts to~~ ~~2,850,330~~ ~~shares of common stock.~~

~~Smartbiz and Whisl have been included in our consolidated results of operations since the acquisition dates.~~

~~The following table summarizes the fair value of the consideration paid by the Company:~~

~~Whisl~~

May 13,
Fair Value of Consideration: 2022
Cash $ 1,000,000
Payable to seller 250,000
1,461,653 shares of common stock 550,000
Total Purchase Price $ 1,800,000

~~Smartbiz~~

June 1,
Fair Value of Consideration: 2022
Cash $ 725,000
Payable to seller 75,000
2,850,330 shares of common stock 1,000,000
Total Purchase Price $ 1,800,000

~~The following table summarizes the identifiable assets acquired and liabilities assumed upon acquisition of Smartbiz and Whisl and the calculation of goodwill:~~

~~Whisl~~

Total purchase price $ 1,800,000
Cash 141,113
Accounts receivable 109,762
Total identifiable assets 250,875

Accounts payable (241,426 )
Other current liabilities (2,075 )
Total liabilities assumed (243,501 )
Net assets 7,374

Non-controlling interest 3,613
Total net assets 3,761
Goodwill $ 1,796,239

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~~Smartbiz~~NOTE 4 – PREPAID AND OTHER CURRENT ASSETS

Total purchase price $ 1,800,000
Cash 19,755
Accounts receivable 789,515
Total identifiable assets 809,270

Accounts payable (807,265 )
Other current liabilities (76,839 )
Total liabilities assumed (884,104 )
Net assets (74,834 )

Non-controlling interest (36,669 )
Total net assets (38,165 )
Goodwill $ 1,838,165

Prepaid and other current assets as of March 31, 2023 and December 31, 2022 consisted of the following:

~~Unaudited combined proforma results of operations for the nine months ended September 30, 2022 and 2021 as though the Company acquired Smartbiz and Whisl on January 1, 2021, are set forth below:~~

Nine Months Ended
September 30,
2022 2021
Revenues $ 69,165,130 $ 59,028,492
Cost of revenues 66,683,557 56,430,726
Gross profit 2,481,573 2,597,766

Operating expenses 4,322,526 4,724,857
Operating loss (1,840,953 ) (2,127,091 )

Other expense (38,073 ) (820,593 )

Net Loss $ (1,879,026 ) $ (2,947,684 )

	March 31,		December 31,
	2023		2022
Other receivable	$	129,967	$	120,139
Prepaid expenses		20,450		26,600
Advance payment		21,000		21,000
Tax receivable		394		389
Deposit for acquisition of asset		362,000		357,500
Security deposit		20,000		20,000
Process costing		9,410		—
Total prepaid and other current assets	$	563,221	$	545,628

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment ~~at September 30, 2022~~as of March 31, 2023 and December 31, ~~2021~~2022 consisted of the following:

	September 30,			December 31,			March 31,			December 31,
	2022			2021			2023			2022
Telecommunication equipment	$	301,462		$	258,871		$	332,944		$	317,958
Telecommunication software		581,545			618,125			693,006			640,566
Other equipment		97,096			108,805			99,192			99,126
Total property and equipment		980,103			985,801			1,125,142			1,057,650
Accumulated depreciation and amortization		(588,341	)		(576,419	)		(692,023	)		(656,629	)
Property and equipment, net	$	391,762		$	409,382
Total property and equipment							$	433,119		$	401,021

Depreciation ~~and amortization~~ expense for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ amounted to $~~91,221~~34,060 and $~~66,924~~33,547, respectively.

NOTE 6 –LOANS PAYABLE

Loans payable as of March 31, 2023 and December 31, 2022 consisted of the following:

	March 31,			December 31,				Interest
	2023			2022			Term	rate
Martus	$	95,407		$	94,342		Note was issued on October 23, 2018 and due on January 2, 2024		5.0%
Darlene Covid19		100,255			108,150		Note was issued on April 1, 2020 and due on March 31, 2025		0.0%
Total		195,662			202,492
Less: Unamortized debt discount		—			—
Total loans payable		195,662			202,492
Less: Current portion of loans payable		(95,407	)		(94,342	)
Long-term loans payable	$	100,255		$	108,150

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~~NOTE 6 –LOANS PAYABLE~~

Loans payable ~~at September 30, 2022~~- related parties as of March 31, 2023 and December 31, ~~2021~~2022 consisted of the following:

September 30, December 31, Interest
2022 2021 Term rate
Bridge Loan $ —   $ 222,222 Note was issued on November 1, 2020 and due on January 30, 2022 18.0%
Martus 93,204 100,634 Note was issued on October 23, 2018 and due on January 3, 2023 5.0%
Swisspeers AG —   9,605 Note was issued on April 8, 2019 and originally due on October 4, 2022 7.0%
Darlene Covid19 101,590 109,690 Note was issued on April 1, 2020 and due on March 31, 2025 0.0%
Total 194,794 442,151
Less: Unamortized debt discount —   (7,406 )
Total loans payable 194,794 434,745
Less: Current portion of loans payable (93,204 ) (315,450 )
Long-term loans payable $ 101,590 $ 119,295

	March 31,		December 31,			Interest
	2023		2022		Term	rate
49% of Shareholder of SwissLink	$	19,870	$	19,649	Note is due on demand		0%
49% of Shareholder of SwissLink		218,740		216,300	Note is due on demand		5%
Total		238,610		235,949
Less: Current portion of loans payable		238,610		235,949
Long-term loans payable	$	—	$	—

~~During the nine months ended September 30, 2022 and 2021, the Company borrowed from third parties totaling~~ $0 ~~and~~ ~~$444,444, which includes original issue discount and financing costs of $0 and $44,444 and repaid the principal amount of~~ ~~$232,018~~ ~~and~~ ~~$331,150, respectively.~~

During the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company recorded interest expense of $~~22,417~~3,645 and $~~179,504~~ ~~and recognized amortization of discount, included in interest expense, of $7,406and~~ ~~$63,666, respectively. In 2021, the Company recorded interest expense from convertible notes of~~ ~~$33,430~~7,481 and recognized amortization of discount, included in interest expense, of $~~372,290~~0 .and $7,407 , respectively.

~~During~~NOTE 7 – WARRANTS

On April 5, 2022, we entered into a Common Stock Purchase Option Agreement with Apollo Management Group, Inc (Holder) to subscribe for and purchase from the ~~nine months ended~~ Company, 4,800,000 shares of Common Stock with an exercise price per share of $2.00; and an initial exercisable date on September 30, ~~2021,~~2022. The purchase price of this option was $500,000. The Company determined that the warrants had a ~~related party loan~~fixed monetary value with a variable number of shares at inception and categorized the warrants as a liability in the accompanying consolidated financial statements.

~~$807,103~~ ~~(Euro 735,000) was forgiven~~The Holder and the Company ~~recorded it as~~agreed that the Holder had the right and the obligation to exercise, on a cashless basis, $1,000,000 of the Options not later than October 15, 2022. Thereafter, the Holder shall undertake to exercise not less than (i) $400,000 of the Options on a “cash basis” not later than the later of (y) November 14, 2022 or (z) the date on which there is an effective registration statement permitting the issuance of the Option Shares to or resale of the Option Shares by the Holder and (ii) an additional ~~paid~~$400,000 of the Options on a “cash basis” not later than the latest of (x) thirty (30) days following the exercise of the Option under subsection (i), above, (y) December 14, 2022, or (z) the date on which there is an effective registration statement permitting the issuance of the Option Shares to or resale of the Option Shares by the Holder. From and after the occurrence of the three above-referenced exercises, each additional exercise of Options hereunder shall be in ~~capital.~~an amount not less than $200,000 and exercised only on a cash basis.

~~Loans payable~~The Holder’s obligation to ~~related parties~~exercise each specified portion of this option on the specific dates above is subject to the volume-weighted average price (“VWAP”, market value), being not less than $0.20 per share on the relevant option exercise date. Adjusted option shares at ~~September 30, 2022 and December 31, 2021 consisted~~VWAP of ~~the following:~~$0.20 shall be 48,000,000 shares.

September 30, December 31,
2022 2021
49% of Shareholder of SwissLink $ 18,457 $ 19,929
49% of Shareholder of SwissLink 203,180 219,379
Total 221,637 239,308
Less: Current portion of loans payable –related parties 221,637 239,308
Long-term loans payable – related parties $ — $ —

A summary of activity regarding warrants issued as follows:

	Warrants Outstanding
				Weighted Average		Weighted Average Remaining
	Warrants			Exercise Price		Contractual life (in years)

Outstanding, December 31, 2022		23,112,575		$	0.17		0.75
Granted		—			—		—
Increase in number of warrants by VWAP		5,262,465			0.14		—
Exercised		(2,941,177	)		0.14		0.70
Forfeited/canceled		—			—		—
Outstanding, March 31, 2023		25,433,863		$	0.14		0.50

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NOTE 78 – ~~OTHER CURRENT~~DERIVATIVE LIABILITIES

~~Other~~Fair Value Assumptions Used in Accounting for Derivative Liabilities

ASC 815, “Derivatives and Hedging,” requires we assess the fair market value of derivative liabilities at the end of each reporting period and recognize any change in the fair market value as other income or expense.

The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of March 31, 2023. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current ~~liabilities~~ ~~at September 30, 2022~~stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement.

For the three months ended March 31, 2023 and year ended December 31, ~~2021 consisted~~2022, the estimated fair values of the ~~following:~~liabilities measured on a recurring basis are as follows:


	Three months ended March 31, 2023	Year ended December 31, 2022
Expected term	0.50 - 0.70 years	0.75 - 1.49 years
Expected average volatility	77% - 81%	83% - 152%
Expected dividend yield	—	—
Risk-free interest rate	4.67% - 4.94%	0.06% - 4.73%

September 30, December 31,
2022 2021
Accrued liabilities $ 30,825 $ 61,153
Payable for acquisition of subsidiaries 75,000 —
Accrued interest —   8,173
Salary payable - management 89,628 92,229
Salary payable 3,708 —
Employee benefits 112,309 105,221
Other current liabilities 203,753 40,273
$ 515,223 $ 307,049

The following table summarizes the changes in the derivative liabilities during the three months ended March 31, 2023 and 2022:

Fair Value Measurements Using Significant Observable Inputs (Level 3)

Balance - December 31, 2022	$	1,357,787

Settled on issuance of common stock		(240,258	)
Change in fair value of the warrant		(196,307	)
Balance - March 31, 2023	$	921,222

The following table summarizes the change in fair value of derivative liabilities included in the income statement for the three months ended March 31, 2023 and 2022, respectively.

	Three months ended
	March 31,
	2023			2022
Addition of new derivatives recognized as loss on derivatives	$	—		$	—
Revaluation of derivative liabilities		(196,307	)		—
Change in fair value of derivative liabilities	$	(196,307	)	$	—

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NOTE 89 – STOCKHOLDERS’ EQUITY

The Company’s authorized capital consists of 300,000,000 shares of common stock with a par value of $0.001 per share.

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.~~ $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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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.~~ $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 one thousand (1,000) shares of Common Stock for every one (1) share of Series B Preferred Stock. Upon conversion, the shares are subject to a one-year ~~leak-out~~ restriction on sales into the market of no more than 5% previous month’s stock liquidity.

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 21,000 shares of Series B Preferred Stock were issued and outstanding.

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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.~~ $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 one thousand (1,000) 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, no Series C Preferred Stock was issued or outstanding.

Common Stock

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the Company issued ~~4,353,020~~3,001,177 shares of common stock, valued at fair market value on issuance as follows:

•·

60,000 ~~2,000,000~~ ~~shares issued for cash of~~ ~~$1,000,000~~

•

~~180,000~~shares for compensation to our directors valued at $~~92,129~~11,230

•·

2,941,177 ~~1,461,653~~shares for ~~acquisition~~exercise of ~~Whisl valued at~~warrants for $~~550,000~~400,000

•

~~550,000~~ ~~shares for asset acquisition valued at~~ ~~$357,500~~

•

~~161,367~~ ~~shares for settlement of debt valued at~~ ~~$80,674~~

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, ~~151,830,378~~164,596,688 and ~~147,477,358~~161,595,511 shares of common stock were issued and outstanding, respectively.

~~Common Stock Purchase Option~~

~~On April 25, 2022, we entered into a Common Stock Purchase Option Agreement with Apollo Management Group, Inc. to subscribe for and purchase from the Company,~~ ~~4,800,000~~ ~~shares of Common Stock with an exercise price per share of~~ ~~$2.00; and an initial exercise date September 30, 2022. The purchase price of this option is~~ ~~$500,000~~.

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NOTE 910 - RELATED PARTY TRANSACTIONS

Due from related ~~parties~~party

~~During the nine months ended September 30, 2022 and 2021, the Company advanced~~ ~~$1,000~~ ~~and~~ ~~$35,674~~ ~~to related parties and collected~~ ~~$100~~ ~~and~~ ~~$226, respectively.~~

~~During the nine months ended September 30, 2021, the Company loaned~~ ~~$180,000~~ ~~to our CEO and wrote off amounts totaling~~ ~~$8,004~~.

~~During the nine months ended September 30, 2021, the Company wrote off due from related party of~~ ~~$7,648~~.

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had amounts due from related parties of $~~351,139~~400,893 and $~~424,086~~326,324., respectively. The loans are unsecured, non-interest bearing and due on demand.

Due to related parties

~~During the nine months ended September 30, 2022 and 2021, the Company repaid~~ $0 ~~and $90,787~~ ~~to certain members of Company management.~~

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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 ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company recorded management ~~fees~~salaries of $~~405,000~~144,000 and stock-based compensation bonuses of $11,230 and $~~414,000~~41,139, ~~bonus~~respectively.

As of March 31, 2023 and December 31, 2022, the Company recorded and accrued management salaries of $0104,628 and ~~$976,200~~ ~~and paid~~ $~~407,602~~79,628, respectively. ~~and~~ ~~$411,300, respectively.~~ ~~Additionally, management received stock-based compensation of~~ ~~$92,130~~ ~~and~~ ~~$34,538~~ ~~during the nine months ended September 30, 2022 and 2021, respectively~~.

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NOTE 1011 – 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 ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company incurred rent expense of $~~56,405~~900 and $~~32,023~~20,150, respectively.

NOTE 1112 - SEGMENTS

At ~~September 30,~~December 31, 2022 and 2021, the Company operates in one industry segment, telecommunication services, and two geographic segments, USA and Switzerland, where current assets and equipment are located.

Operating Activities

The following table shows operating activities information by geographic segment for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

Three months ended ~~September 30, 2022~~March 31, 2023

NOTE 1112 - ~~SEGMENTS~~SEGMENT - Schedule of Operating Activities by Geographic Segment

USA Switzerland Elimination Total
Revenues $ 22,364,201 1,291,688 $ (1,719,255 ) $ 21,936,634
Cost of revenue 21,226,541 1,114,388 (1,719,255 ) 20,621,674
Gross profit 1,137,660 177,300 —   1,314,960

Operating expenses
General and administration 1,089,194 166,953 —   1,256,147

Operating income 48,466 10,347 —   58,813

Other expense (29,411 ) (2,090 ) —   (31,501)

Net income $ 19,055 $ 8,257 $ —   $ 27,312

~~Three months Ended September 30, 2021~~


	USA			Switzerland			Elimination			Total		USA			Switzerland			Elimination			Total
Revenues	$	15,347,282			1,189,230		$	(19,773	)	$	16,516,739	$	24,847,671			1,347,435		$	(1,528,577	)	$	24,666,529
Cost of revenue		14,706,065			989,395			(19,773	)		15,675,687		23,825,886			1,152,484			(1,528,577	)		23,449,793
Gross profit		641,217			199,835			—			841,052		1,021,785			194,951			—			1,216,736

Operating expenses
General and administration		738,578			218,617			—			957,195		1,350,956			183,310			—			1,534,266

Operating loss		(97,361	)		(18,782	)		—			(116,143)
Operating (loss) income													(329,171	)		11,641			—			(317,530	)

Other income		1,525			3,400			—			4,925
Other income (expense)													174,955			(16,247	)		—			158,708

Net loss	$	(95,836	)	$	(15,382	)	$	—		$	(111,218)	$	(154,216	)	$	(4,606	)	$	—		$	(158,822	)

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~~Nine~~Three months ended ~~September 30,~~March 31, 2022


	USA			Switzerland			Elimination			Total		USA			Switzerland			Elimination			Total
Revenues	$	63,898,961			3,554,591		$	(2,397,891	)	$	65,055,661	$	18,475,113			1,026,080		$	(81,882	)	$	19,419,311
Cost of revenue		61,838,539			2,969,719			(2,397,891	)		62,410,367		18,193,952			823,181			(81,882	)		18,935,251
Gross profit		2,060,422			584,872			—			2,645,294		281,161			202,899			—			484,060

Operating expenses
General and administration		2,792,287			597,810			—			3,390,097		781,300			208,198			—			989,498

Operating loss		(731,865	)		(12,938	)		—			(744,803)
Operating (loss)													(500,139	)		(5,299	)		—			(505,438	)

Other income (expense)		(45,938	)		7,865			—			(38,073)
Other (expense) income													(29,841	)		10,548			—			(19,293	)

Net loss	$	(777,803	)	$	(5,073	)	$	—		$	(782,876)
Net (loss) income												$	(529,980	)	$	5,249		$	—		$	(524,731	)

~~Nine months Ended September 30, 2021~~

USA Switzerland Elimination Total
Revenues $ 43,404,674 3,474,215 $ (36,172 ) $ 46,842,717
Cost of revenue 42,487,024 3,018,878 (36,172 ) 45,469,730
Gross profit 917,650 455,337 —   1,372,987

Operating expenses
General and administration 3,077,319 587,154 —   3,664,473

Operating loss (2,159,669 ) (131,817 ) —   (2,291,486)

Other income (expense) (839,316 ) 18,723 —   (820,593)

Net loss $ (2,998,985 ) $ (113,094 ) $ —   $ (3,112,079)

Asset Information

The following table shows asset information by geographic segment as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


September 30, 2022	USA		Switzerland		Elimination			Total
March 31, 2023										USA		Switzerland		Elimination			Total
Assets
Current assets	$	5,628,559	$	1,091,622	$	(578,999	)	$	6,141,182	$	6,419,124	$	1,235,556	$	(917,713	)	$	6,736,967
Non-current assets	$	11,660,618	$	600,882	$	(6,184,562	)	$	6,076,938	$	11,631,453	$	703,066	$	(6,184,562	)	$	6,149,957
Liabilities
Current liabilities	$	1,729,868	$	1,619,112	$	(578,999	)	$	2,769,981	$	5,378,018	$	1,840,726	$	(917,713	)	$	6,301,031
Non-current liabilities	$	—	$	246,473	$	—		$	246,473	$	—	$	256,233	$	—		$	256,233


December 31, 2021	USA		Switzerland		Elimination			Total
December 31, 2022										USA		Switzerland		Elimination			Total
Assets
Current assets	$	5,783,859	$	997,216	$	(214,551	)	$	6,566,524	$	6,496,354	$	1,172,889	$	(1,232,653	)	$	6,436,590
Non-current assets	$	4,468,491	$	609,189	$	(2,584,562	)	$	2,493,118	$	11,646,662	$	650,794	$	(6,184,562	)	$	6,112,894
Liabilities
Current liabilities	$	1,070,972	$	1,506,594	$	(214,551	)	$	2,363,015	$	5,967,729	$	1,716,603	$	(1,232,653	)	$	6,451,679
Non-current liabilities	$	—	$	275,729	$	—		$	275,729	$	—	$	262,388	$	—		$	262,388

NOTE 1213 – SUBSEQUENT EVENTS.

Management has evaluated subsequent events through the date these consolidated financial statements were available to be issued. ~~The following subsequent event was identified:~~Based on our evaluation no material events have occurred that require disclosure.

~~The Company issued~~ ~~3,790,597~~ ~~shares of common stock for cashless exercise of warrants.~~

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Overview

iQSTEL Inc. (the “Company”) ~~(OTCQB:~~(OTC Pink: IQST) (www.iqstel.com) is a technology company offering a wide array of services to global telecommunications and technology industries with presence in 13 countries.

The Company has an extensive portfolio of products and services for its clients such as: SMS, VoIP, 4G & 5G international infrastructure connectivity, Cloud-PBX, OmniChannel Marketing, IoT services, blockchain and payment solutions. These services are grouped within four business divisions: Telecom, Fintech, Electric vehicles and Metaverse.

The company operates its business through its wholly-owned subsidiary Etelix.com USA, LLC (“Etelix”) (www.etelix.com); and its majority-owned subsidiaries SwissLink Carrier AG (www.swisslink-carrier.com), QGlobal ~~SMA (www.qglobalsms.com/~~SMS (https://www.qglobalsms.com/), Smart Gas ~~(www.iotsmartgas.com/~~(http://iotsmartgas.com/) and ItsBChain ~~(www.itsbchain.com/~~(http://itsbchain.com/), Whisl Telecom LLC (www.whisl.com), and Smartbiz Telecom LLC (www.smartbiztel.com) ~~and Whisl Telecom (www.whisl.com)~~.

The information contained on our websites is not incorporated by reference into this Quarterly Report on Form 10-Q 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, 2022~~March 31, 2023 was ~~$21,936,634,~~$24,666,529, compared with ~~$16,516,739~~$19,419,311 for the three months ended ~~September 30, 2021.~~March 31, 2022. These numbers reflect an increase of ~~32.81%~~27.02% quarter over quarter on our consolidated revenues. Our total revenue reported for the nine months ended September 30, 2022 was $65,055,661, compared with $46,842,717 for the nine months ended September 30, 2021. These numbers reflect an increase of 38.88% year over year on our consolidated revenues.

~~Table of Contents~~

When looking at the numbers by subsidiary, we have the following breakout for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to the ~~nine~~three months ended ~~September 30, 2021:~~March 31, 2022:

Subsidiary	Revenue Three Months Ended March 31, 2023		Revenue Three Months Ended March 31, 2022
Etelix.com USA, LLC	$	4,348,986	$	5,914,300
SwissLink Carrier AG		1,275,285		1,026,080
QGlobal LLC		85,051		109,196
IoT Labs LLC		15,261,282		12,369,735
Whisl		304,686		—
Smartbiz		3,391,240		—
	$	24,666,529	$	19,419,311

Subsidiary
Revenue
Nine Months Ended
September 30, 2022

Revenue
Nine Months Ended
September 30, 2021
Etelix.com USA, LLC $ 17,510,601 $ 11,271,992
SwissLink Carrier AG 3,554,591 3,474,215
QGlobal LLC 317,594 585,151
IoT Labs LLC 39,733,761 31,547,531
Smartbiz Telecom 3,712,432 —
Whisl Telecom 2,624,573 —
Sub-total $ 67,453,552 $ 46,878,889
Inter-company sales (2,397,891 ) (36,172 )
$ 65,055,661 $ 46,842,717

The continued growth of our revenue is the result of the development of our business strategy, which includes the strengthening of our commercial and operating activities and new acquisitions.

Table of Contents

Cost of Revenues

Our total cost of revenues for the three months ended ~~September 30, 2022~~March 31, 2023 increased to ~~$20,621,674,~~$23,449,793, compared with ~~$15,675,687~~$18,935,251 for the three months ended ~~September 30, 2021. Our total cost of revenues for the nine months ended September 30, 2022 increased to $62,410,367, compared with $45,469,730 for the nine months ended September 30, 2021.~~

March 31, 2022.

Subsidiary	Cost of Revenue Nine Months Ended September 30, 2022			Cost of Revenue Nine Months Ended September 30, 2021			Cost of Revenue Three Months Ended March 31, 2023		Cost of Revenue Three Months Ended March 31, 2022
Etelix.com USA, LLC	$	16,818,292		$	10,855,644		$	3,764,473	$	5,804,495
SwissLink Carrier AG		2,969,719			3,018,877			1,103,857		823,181
QGlobal LLC		236,402			486,296			51,549		89,998
IoT Labs LLC		39,356,735			31,145,085			14,878,901		12,217,577
Smartbiz Telecom		3,330,051			—
Whisl Telecom		2,097,059			—
Sub-total	$	64,808,258		$	45,505,902
Inter-company sales		(2,397,891	)		(36,172	)
Whisl								567,719		—
Smartbiz								3,083,294		—
	$	62,410,367		$	45,469,730		$	23,449,793	$	18,935,251

Our cost of ~~revenues~~revenue 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 Margin

Our gross margin, which is simply the difference between our revenues and our cost of sales, discussed above, was $1,216,736 for the three months ended March 31, 2023 compared to $484,060 for the three months ended March 31, 2022. This represents an increase of 151.36% in the gross margin quarter over quarter.

But more importantly, the Gross Margin in terms of percentage of Revenue was 2.49% for the three months ended March 31, 2022 compared to 4.93% for the three months ended March 31, 2023, representing an increase of 98% quarter over quarter.

Operating Expenses

Operating expenses increased to $1,534,266 for the three months ended March 31, 2023 from $989,498 for the three months ended March 31, 2022. The detail by major category is reflected in the table below.

	Three Months Ended March 31,
	2023		2022
Salaries, Wages and Benefits	$	459,130	$	325,628
Technology		124,215		45,160
Professional Fees		450,487		323,315
Legal and Regulatory		60,495		10,699
Travel and Events		24,361		7,561
Public Cost		10,445		9,556
Advertising		287,126		76,878
Bank Services and Fees		7,756		29,457
Depreciation and Amortization		34,060		33,547
Office, Facility and Other		62,978		86,558
Insurance		1,983		—

Sub Total		1,523,039		948,359

Stock-based compensation		11,230		41,139
Total Operating Expense	$	1,534,266	$	989,498

Table of Contents

~~Gross Profit~~

The gross profit for the three months ended September 30, 2022 increased to $1,314,960 from $841,052 for the same period of year 2021. For the nine months ended September 30, 2022 the gross profit increased to $2,645,294 from $1,372,987 for the same period of year 2021.

When we analyze the numbers expressed in percentages, the gross profit for the nine months ended September 30, 2022 was 4.07%, which compared to 2.93% for the nine months ended September 30, 2021, an increase in the consolidated gross profit of 38.91%.

Subsidiary
Gross Margin
Nine Months Ended
September 30, 2022

Gross Margin
Nine Months Ended
September 30, 2021
Etelix.com USA, LLC % 3.95 % 3.69
SwissLink Carrier AG 16.45 13.11
QGlobal LLC 25.56 16.89
IoT Labs LLC 0.95 1.28
Smartbiz Telecom 10.30 —
Whisl Telecom 20.10 —
% 4.07 % 2.93

	Three Months Ended March 31,
	2023		2022		Difference
iQSTEL	$	664,552	$	537,032	$	127,520
Etelix		105,286		103,292		1,994
SwissLink		183,309		208,197		-24,888
ItsBchain		11,789		254		11,535
QGlobal		63,875		28,137		35,738
IoT Labs		62,806		59,158		3,648
Global Money One		43,449		53,428		-9,979
Whisl		154,440		—		154,440
Smartbiz		244,760		—		244,760
	$	1,534,266	$	989,498	$	544,768

The most significant differences are: (1) the increase ~~of our consolidated gross margin is~~in Salaries, wages and benefits primarily due to an increment in the ~~result~~headcount related to Whisl and Smartbiz; (2) the increases in technology expenses related to the deployment and upgrade of the ~~improvement of~~Switching platform; and (3) the ~~gross margin of Etelix, SwissLink and QGlobal; combined with the relatively high gross margin of our most recent acquisitions Smartbiz and Whisl.~~increase in Advertising expenses.

Operating ~~Expenses~~Income

The Company showed negative Operating ~~expenses increased to $1,256,147~~Income for the three months ended ~~September 30, 2022 from $957,195~~March 31, 2023 of $317,530 compared with a negative result of $505,438 for the three months ended September 30, 2021. Operating expenses decreased to $3,390,097 for the nine months ended September 30, 2022 from $3,664,473 for the nine months ended September 30, 2021. The detail by major category for the nine months ended September 30, 2022 and 2021 is reflected in the table below.March 31, 2022.

Nine Months Ended September 30,

2022
2021
Salaries, Wages and Benefits $ 1,239,271 $ 863,413
Technology 188,950 198,143
Professional Fees 475,143 353,080
Legal and Regulatory 199,768 87,448
Bad Debt Expense 26,299 —
Travel and Events 55,281 15,710
Public Cost 24,122 30,078
Advertising 486,153 705,175
Insurances
7,328 —
Bank Services and Fees 27,109 85,885
Financial Expenses 134,608 —
Depreciation and Amortization 91,221 66,924
Penalties and Settlements 110,767 —
Office, Facility and Other 231,947 337,983

      Sub Total 3,297,967 2,743,839

Stock-based compensation 92,130 920,634
Total Operating Expense $ 3,390,097 $ 3,664,473

Even though the Company showed a negative Operating Income, the number shows a trend of significant improvement year over year.

Our Telecom Division, which is the one generating revenue at the present time, has a positive Operating Income. 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. Management implemented a process that intends to reduce future general and administrative expenses of iQSTEL to a maximum of $400,000 per quarter.

			Pre revenue companies
	Telecom Division		ItsBchain			Global Money One			iQSTEL			Consolidated
Revenues	$	24,666,529		—			—			—			24,666,529
Cost of revenue		23,449,793		—			—			—			23,449,793
Gross profit		1,216,736		—			—			—			1,216,736

Operating expenses
General and administration		814,477		11,789			43,449			664,552			1,534,266
Total operating expenses		814,477		11,789			43,449			664,552			1,534,266

Operating income/(loss)	$	402,260		(11,789	)		(43,449	)		(664,552	)		(317,530	)

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The main reasons for the overall decrease in operating expenses for the nine months ended September 30, 2022 compared to the same period of 2021 is due to the significant decrease in Stock-based compensation.

~~When looking at the numbers by subsidiary, we have the following breakout for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021:~~

Nine Months Ended September 30,
2022 2021 Difference
iQSTEL $ 1,382,701 2,395,047 -1,012,346
Etelix 326,432 266,894 59,538
SwissLink 597,810 587,154 10,656
ItsBchain 12,653 2,198 10,455
QGlobal 133,532 92,881 40,651
IoT Labs 185,736 187,773 -2,037
Global Money One 109,627 132,526 -22,899
Smartbiz Telecom 246,268 — 246,268
Whisl Telecom 395,338 — 395,338
$ 3,390,097 3,664,473 -274,376

~~The most significant difference is generated by iQSTEL which is due to the reduction in Stock-based compensation.~~

~~Operating Income~~

~~The Company showed positive Operating Income for the three months ended September 30, 2022 of $58,813 compared with a negative result of $116,143 for the three months ended September 30, 2021.~~

~~The Company showed negative Operating Income for the nine months ended September 30, 2022 of $744,803 compared with a negative result of $2,291,486 for the nine months ended September 30, 2021.~~

Despite the operating loss incurred during the nine months ended September 30, 2022, the numbers compared with the same period of year 2021 reflect a positive evolution process as shown by the positive operating income during the three months ended September 30, 2022.

Other Expenses/Other Income

We had other ~~expenses~~income of ~~$38,073~~$158,708 for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared with other expenses of ~~$820,593~~$19,293 for the same period ended ~~2021.~~2022. The ~~decrease~~increase in other ~~expenses~~income is ~~a consequence~~largely due to the positive change in fair value of ~~a significant reduction in interest expenses and other expenses related to derivatives.~~derivative liabilities.

Net ~~Income~~Loss

We finished the three months ended ~~September 30, 2022~~March 31, 2023 with a net ~~income~~loss attributable to shareholders of ~~$27,312,~~iQSTEL Inc. of $363,185, as compared to a loss of ~~$111,218~~$554,970 during the three months ended ~~September 30, 2021. We also finished~~March 31, 2022. When comparing the ~~nine months ended September 30, 2022 with a loss of $782,876, as compared to a loss of $3,112,079 during the nine months ended September 30, 2021.~~

~~The decreased loss for the nine-month period above is primarily due to a $1,012,346~~results year over year, ~~reduction in~~these numbers show a significant improvement, as the ~~costs associated with the operation~~fundamentals of the ~~public entity (iQSTEL, Inc.).~~Company are getting stronger quarter after quarter leading to our goal of generating positive net income.

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Liquidity and Capital Resources

As of ~~September 30, 2022,~~March 31, 2023, we had total current assets of ~~$6,141,182~~$6,736,967 and current liabilities of ~~$2,769,981,~~$6,301,031, resulting in a positive working capital of ~~$3,371,201.~~$435,936 and a current ratio of approximately 1.07 to 1. This compares ~~with the~~to a negative working capital of ~~$4,203,509~~$15,089 at December 31, 2021. This decrease in working capital, as discussed in more detail below, is primarily the result of the decrease of $2,039,832 in the cash position due to the funds used in the acquisitions of Smartbiz and Whisl.2022.

Our operating activities ~~used $1,488,901~~provided $197,163 in the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 as compared with ~~$2,486,045~~$447,652 used in operating activities in the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. Our cash flow from operations varies depending on our operating results and the timing of operating cash receipts and payments, specifically trade accounts receivable and trade accounts payable.

Investing activities used ~~$1,901,223~~$142,947 for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 compared with $24,918 for the three months ended March 31, 2022. Uses of funds inon investing activities in 2023 were primarily ~~for~~ the acquisition ~~of subsidiaries of $1,814,132 and the purchase~~ of property and equipment ~~for $86,491.~~and the issuance of a related party loan.

Financing activities provided ~~$1,367,982~~$390,994 in the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared with ~~$3,314,313~~$1,367,982 provided in the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. Our positive financing cash flow in ~~2022~~2023 was largely the result of the net proceeds from ~~common stock issued~~the execution of ~~$1,100,000 and~~ the ~~common stock purchase option~~Option shares in the amount of ~~$500,000.~~$400,000.

Our current financial condition has improved ~~significantly with a positive working capital of~~ ~~$3,371,201~~ ~~and a cash position of $1,294,981~~ ~~as of September 30, 2022.~~significantly. However, we intend to fund operations through increased sales and debt and/or equity financing arrangements, to strengthen our liquidity and capital resources. The Company has received the qualification of ~~a S-1~~an Offering Statement under Form S-1 for the sale of up to 10,000,000 shares of common ~~stocks.~~stock. This offering ~~will be~~is being conducted on a “best efforts” basis, which means that there is no guarantee that any minimum amount will be ~~sold from the available shares.~~sold. We also plan to seek additional financing in a private equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.

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~~three-month period ended ~~September 30, 2022.~~March 31, 2023.

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 financial statements included in this Quarterly Report on Form 10-Q for the ~~nine~~three months ended ~~September 30, 2022;~~March 31, 2023; however, we consider our critical accounting policies to be those related to 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.

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Off Balance Sheet Arrangements

As of ~~September 30, 2022,~~March 31, 2023, 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.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures

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, 2022.~~ March 31, 2023. 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~~three-month period ended ~~September 30, 2022,~~March 31, 2023, 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.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any material pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

Item 1A: Risk Factors

See Risk Factors contained in our Form 10-K filed with the SEC on April ~~15, 2022.~~14, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933.

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the Company issued ~~4,353,020~~3,001,177 shares of common stock, valued at fair market value on issuance as ~~follows;~~follows:

•

~~2,000,000 shares issued for cash of $1,000,000~~

•

~~180,000~~60,000 shares for compensation to our directors valued at ~~$92,129~~$11,230

•

~~1,461,653~~2,941,177 shares for ~~acquisition~~exercise of ~~Whisl valued at $550,000~~warrants for $400,000

•

~~550,000 shares for asset acquisition valued at $357,500~~

•

~~161,367 shares for settlement of debt valued at $80,674~~

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

N/A

Item 5. Other Information

None

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Item 6. Exhibits


Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101**	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30,~~March 31, 2022 formatted in Extensible Business Reporting Language (XBRL).
	**Provided herewith

1110

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on ~~November 14, 2022~~May 15, 2023 on its behalf by the undersigned thereunto duly authorized.

IQSTEL INC.

/s/Leandro Iglesias
Leandro Iglesias Principal Executive Officer


/s/ Alvaro Quintana Cardona
Alvaro Quintana Cardona Principal Financial and Accounting Officer

1211


	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, 2021	10,000	$	10	21,000	$	21	147,477,358	$	147,477	$	25,842,982	$	(18,536,921	)	$	(36,658	)	$	7,416,911		$	(996,013	)	$	6,420,898

Common stock issued for cash	—		—	—		—	2,000,000		2,000		998,000		—			—			1,000,000			—			1,000,000
Common stock issued for compensation	—		—	—		—	60,000		60		41,079		—			—			41,139			—			41,139
Foreign currency translation adjustments	—		—	—		—	—		—		—		—			(196	)		(196	)		(188	)		(384)
Net income (loss)	—		—	—		—	—		—		—		(554,970	)		—			(554,970	)		30,239			(524,731)
Balance - March 31, 2022	10,000	$	10	21,000	$	21	149,537,358	$	149,537	$	26,882,061	$	(19,091,891	)	$	(36,854	)	$	7,902,884		$	(965,962	)	$	6,936,922

Common stock issued for compensation	—		—	—		—	60,000		60		30,430		—			—			30,490			—			30,490
Common stock issued and to be issued for acquisition of subsidiaries	—		—	—		—	1,461,653		1,462		1,548,538		—			—			1,550,000			(33,056	)		1,516,944
Common stock issued for asset acquisition	—		—	—		—	500,000		500		324,500		—			—			325,000			—			325,000
Common stock payable	—		—	—		—	—		—		18,900		—			—			18,900			—			18,900
Warrant granted	—		—	—		—	—		—		500,000		—			—			500,000			—			500,000
Foreign currency translation adjustments	—		—	—		—	—		—		—		—			(522	)		(522	)		(501	)		(1,023)
Net income (loss)	—		—	—		—	—		—		—		(351,180	)		—			(351,180	)		65,723			(285,457)
Balance - June 30, 2022	10,000	$	10	21,000	$	21	151,559,011	$	151,559	$	29,304,429	$	(19,443,071	)	$	(37,376	)	$	9,975,572		$	(933,796	)	$	9,041,776

Common stock issued for compensation	—		—	—		—	60,000		60		20,440		—			—			20,500			—			20,500
Common stock issued for settlement of debt	—		—	—		—	161,367		161		80,513		—			—			80,674			—			80,674
Common stock issued for asset acquisition	—		—	—		—	50,000		50		32,450		—			—			32,500			—			32,500
Foreign currency translation adjustments	—		—	—		—	—		—		—		—			(559	)		(559	)		(537	)		(1,096)
Net income (loss)	—		—	—		—	—		—		—		(68,863	)		—			(68,863	)		96,175			27,312
Balance - September 30, 2022	10,000	$	10	21,000	$	21	151,830,378	$	151,830	$	29,437,832	$	(19,511,934	)	$	(37,935	)	$	10,039,824		$	(838,158	)	$	9,201,666

	May 13,
Fair Value of Consideration:	2022
Cash	$	1,000,000
Payable to seller		250,000
1,461,653 shares of common stock		550,000
Total Purchase Price	$	1,800,000

	June 1,
Fair Value of Consideration:	2022
Cash	$	725,000
Payable to seller		75,000
2,850,330 shares of common stock		1,000,000
Total Purchase Price	$	1,800,000

Subsidiary	Revenue Nine Months Ended September 30, 2022			Revenue Nine Months Ended September 30, 2021
Etelix.com USA, LLC	$	17,510,601		$	11,271,992
SwissLink Carrier AG		3,554,591			3,474,215
QGlobal LLC		317,594			585,151
IoT Labs LLC		39,733,761			31,547,531
Smartbiz Telecom		3,712,432			—
Whisl Telecom		2,624,573			—
Sub-total	$	67,453,552		$	46,878,889
Inter-company sales		(2,397,891	)		(36,172	)
	$	65,055,661		$	46,842,717

Subsidiary	Gross Margin Nine Months Ended September 30, 2022		Gross Margin Nine Months Ended September 30, 2021
Etelix.com USA, LLC	%	3.95	%	3.69
SwissLink Carrier AG		16.45		13.11
QGlobal LLC		25.56		16.89
IoT Labs LLC		0.95		1.28
Smartbiz Telecom		10.30		—
Whisl Telecom		20.10		—
	%	4.07	%	2.93

	Nine Months Ended September 30,
	2022		2021
Salaries, Wages and Benefits	$	1,239,271	$	863,413
Technology		188,950		198,143
Professional Fees		475,143		353,080
Legal and Regulatory		199,768		87,448
Bad Debt Expense		26,299		—
Travel and Events		55,281		15,710
Public Cost		24,122		30,078
Advertising		486,153		705,175
Insurances		7,328		—
Bank Services and Fees		27,109		85,885
Financial Expenses		134,608		—
Depreciation and Amortization		91,221		66,924
Penalties and Settlements		110,767		—
Office, Facility and Other		231,947		337,983

Sub Total		3,297,967		2,743,839

Stock-based compensation		92,130		920,634
Total Operating Expense	$	3,390,097	$	3,664,473