What changed in this filing

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Item 1. Financial Statements

2020-08-13 compared with 2020-06-29 · 265 added, 233 removed, 350 unchanged (59% of the section changed)

8 unchanged sentences

Property and equipment, net

Intangible asset

Deferred tax assets

14 unchanged sentences

Stockholders' Deficit

Preferred stock:

1,200,000 authorized;

$0.0001 par value - no shares issued and outstanding

Common stock:

300,000,000 authorized;

$0.001 par value

45,984,148 and 18,008,591 shares issued and outstanding, respectively

$0.001 par value 68,295,300 and 18,008,591 shares issued and outstanding, respectively

Additional paid in capital

3 unchanged sentences

Deficit attributable to noncontrolling interests

Total Shareholders' Deficit

Total stockholders' Deficit

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

3 unchanged sentences

Three Months Ended

Six Months Ended

Cost of revenue

2 unchanged sentences

Total operating expenses

Operating income (loss)

Operating loss

Other income (expense)

2 unchanged sentences

Change in fair value of derivative liabilities

Total other expense

Net loss before provision for income taxes

Net loss attributable to noncontrolling interests

Net loss attributed to stockholders of iQSTEL Inc.

Comprehensive loss

Gain on settlement of debt

Total other income (expense)

Net Income (loss) before provision for income taxes

Net income (loss)

Net income attributable to noncontrolling interests

Net income (loss) attributed to stockholders of iQSTEL Inc.

Comprehensive income (loss)

Net income (loss)

Foreign currency adjustment

Total comprehensive loss

Comprehensive loss attributable to noncontrolling interests

Net comprehensive loss attributed to stockholders of iQSTEL Inc.

Basic and diluted loss per common share

Weighted average number of common shares outstanding

Total comprehensive income (loss)

Comprehensive income attributable to noncontrolling interests

Net comprehensive income (loss)

attributed to stockholders of iQSTEL Inc.

Basic income (loss) per common share

Diluted loss per common share

Weighted average number of common shares outstanding - Basic

Weighted average number of common shares outstanding - Diluted

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

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

For the Three Months Ended March 31, 2020 and 2019

For the Three and Six Months Ended June 30, 2020 and 2019

( Unaudited )

Comprehensive

Stockholders'

Shareholders'

Balance - December 31, 2019

4 unchanged sentences

Common stock issued for exercised cashless warrant

Common stock issued for acquisition of Itsbchain LLC

Common stock to be issued for acquisition of Itsbchain LLC

Resolution of derivative liabilities

1 unchanged sentence

Balance - March 31, 2020

Common stock issued for cash

Common stock issued for conversion of debt

Common stock issued for exercised cashless warrant

Common stock issued for settlement of debt

Resolution of derivative liabilities

Acquisition of loT Labs

Foreign currency translation adjustments

Balance - June 30, 2020

Stockholders'

3 unchanged sentences

Balance - March 31, 2019

Common stock issued for conversion of debt

Resolution of derivative liabilities

Common stock issued in conjunction with convertible notes

Balance - June 30, 2019

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

1 unchanged sentence

( Unaudited )

Three Months Ended

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

5 unchanged sentences

Change in fair value of derivative liabilities

Gain on settlement of debt

Prepayment and default penalty

1 unchanged sentence

Accounts receivable

Accounts receivable - related party

Other current assets

3 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of subsidiary, net of cash acquired

Purchase of property and equipment

Payment of due from related parties - related party

Net cash used in investing activities

Payment of loan receivable - related party

Collection from due from related parties - related party

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

4 unchanged sentences

Repayment of loans payable - related parties

Common stock issued

Proceeds from convertible notes

10 unchanged sentences

Derivative liabilities recognized as debt discount

Common stock issued for acquisition of Itsbchain LLC

Common stock issued in conjunction with convertible notes

3 unchanged sentences

Common stock issued for settlement of debt

Amounts due for acquisition of IOT Labs

Common stock issued for forbearance of debt

Replacement of convertible notes to note payable

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

Notes to the Unaudited Consolidated Financial Statements

March 31, 2020

June 30, 2020

NOTE 1 -ORGANIZATION AND DESCRIPTION OF BUSINESS

3 unchanged sentences

on August 7, 2018.

The Company has been engaged in the business of telecommunication services as a wholesale carrier of voice and data for other telecom companies around the World with more than 150 active interconnection agreements with mobile companies, fix line companies and other wholesale carriers.

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 active interconnection agreements with mobile companies, fix line companies and other wholesale carriers.

On April 15, 2020, we entered into a Company Acquisition Agreement (the “Agreement”) with Francisco Bunt regarding the acquisition of 51% of the shares in loT Labs, LLC (“loT Labs”).

The loT Labs’ principal business activity is the sale of Short Messages (SMS) between USA and Mexico.

A novel strain of coronavirus (COVID-19) was first identified in December 2019, and subsequently declared a global pandemic by the World Health Organization on March 11, 2020.

As a result of the outbreak, many companies have experienced disruptions in their operations and in markets served.

The Company has instituted some and may take additional temporary precautionary measures intended to help ensure the well-being of its employees and minimize business disruption.

The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the Company’s results of operations and financial position at June 30, 2020.

The full extent of the future impacts of COVID-19 on the Company’s operations is uncertain.

A prolonged outbreak could have a material adverse impact on financial results and business operations of the Company, including the timing and ability of the Company to collect accounts receivable and the ability of the Company to continue to provide high quality services to its clients.

The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of August 13, 2020, the date of issuance of this Quarterly Report on Form 10-Q.

These estimates may change, as new events occur and additional information is obtained.

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1 unchanged sentence

Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.

In the opinion of the Company’s management, the accompanying unaudited interim financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of March 31, 2020 and the results of operations and cash flows for the periods presented.

The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the operating results for the full fiscal year or any future period.

In the opinion of the Company’s management, the accompanying unaudited interim financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of June 30, 2020 and the results of operations and cash flows for the periods presented.

The results of operations for the six months ended June 30, 2020 are not necessarily indicative of the operating results for the full fiscal year or any future period.

These unaudited 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, 2019 filed with the SEC on April 15, 2020.

Consolidation Policy

The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries, Etelix.com USA, LLC, SwissLink Carrier AG, ITSBCHAIN, LLC and QGLOBAL SMS, LLC.

The consolidated financial statements of the Company include the accounts of the Company and its owned subsidiaries, Etelix.com USA, LLC, SwissLink Carrier AG, ITSBCHAIN, LLC, QGLOBAL SMS, LLC and loT Labs, LLC.

All significant intercompany balances and transactions have been eliminated in consolidation.

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Use of Estimates

4 unchanged sentences

The Company translates its foreign operations to U.S.

dollar in accordance with ASC 830, “ Foreign Currency Matters ”.

The Company’s, Etelix’s, ITSBCHAIN, LLC’s and QGLOBAL SMS, LLC’s functional currency and reporting currency is the U.S.

dollars in accordance with ASC 830, “ Foreign Currency Matters ”.

The Company’s, Etelix’s, ITSBCHAIN, LLC’s, QGLOBAL SMS, LLC’s and loT Labs LLC’s functional currency and reporting currency is the U.S.

dollar, SwissLink’s functional currency is the Swiss Franc (“CHF”).

The Company’s subsidiaries, whose functional currency is not the U.S.

dollar, translate their records into U.S.

dollar as follows:

SwissLink translates their records into U.S.

dollars as follows:

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

1 unchanged sentence

· 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 in shareholders’ equity.

Notes to the Unaudited Consolidated Financial Statements

March 31, 2020

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

USD exchange rate

6 unchanged sentences

Account balances are charged off after all means of collection have been exhausted and the potential for recovery is considered remote.

As of March 31, 2020 and December 31, 2019, the Company had no valuation allowance for doubtful accounts for the Company’s accounts receivable and recorded no bad debt expense for the quarters ended March 31, 2020 and 2019.

As of June 30, 2020 and December 31, 2019, the Company had no valuation allowance for doubtful accounts for the Company’s accounts receivable and recorded no bad debt expense for the six months ended June 30, 2020 and 2019.

Concentrations of Credit Risk

2 unchanged sentences

At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits;

During the three months ended March 31, 2020, twelve customers represented 83% of our consolidated revenues.

During the three months ended March 31, 2019, six customers represented 83% of our consolidated revenues.

however, management believes that there is no unusual risk present, as the Company places its cash with financial institutions which management considers being of high quality.

During the six months ended June 30, 2020, twelve customers represented 83% of our consolidated revenues.

During the six months ended June 30, 2019, eight customers represented 81% of our consolidated revenues.

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition

1 unchanged sentence

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, and collection was reasonably assured.

Persuasive evidence of a sales arrangement existed upon execution of a written interconnection agreement.

Management considers persuasive evidence of a sales arrangement to be a written interconnection agreement.

The Company’s payment terms vary by clients.

Company leases office space for corporate and network monitoring activities and to house telecommunications equipment.

In accordance with ASC 842, we determine if an arrangement is a lease at inception.

Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities - current, and operating lease liabilities - noncurrent on the balance sheets.

Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date.

The operating lease ROU asset also includes any lease payments made and excludes lease incentives.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Notes to the Unaudited Consolidated Financial Statements

March 31, 2020

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Company leases office space for corporate and network monitoring activities and to house telecommunications equipment.

In accordance with ASC 842, “ Leases ”, we determine if an arrangement is a lease at inception.

The office lease meets the definition of a short-term lease because the lease term is 12 months or less.

17 unchanged sentences

The Company does not have significant cash, nor does it have an established source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern.

In addition, the Company incurred a net loss of $3,909,203 for the three months ended March 31, 2020 and has negative working capital as of March 31, 2020.

In addition, the Company incurred a net loss of $2,531,738 for the six months ended June 30, 2020 and has negative working capital as of June 30, 2020.

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 3 - GOING CONCERN (CONTINUED)

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.

4 unchanged sentences

The Company’s failure to do so could have a material and adverse effect upon its operations and its stockholders.

NOTE 4 - ACQUISITION

On April 15, 2020, we entered into a Company Acquisition Agreement (the “Agreement”) with Francisco Bunt regarding the acquisition of 51% of the shares in loT Labs.

The Company’s principal business activity is the sale of Short Messages (SMS) between USA and Mexico.

We have agreed to pay a total of $180,000 for the 51% interest in the Company.

The consideration shall occur with an installment of $60,000 on the date of the execution of the Agreement, followed by a second payment of $60,000 at closing and a final payment of $60,000 that is set to occur 60 days following the closing date.

Under the Agreement, Mr.

Bunt has the right to request that any of the aforementioned payments be made in shares of our common stock, which the parties have agreed to value at $2.00 per share.

The shares are subject to adjustment after 180 days and up to 360 days after issuance if our stock trades at less than $2.00 per share.

The Agreement provides for a right of return to Mr.

Bunt of the shares in the Company if we fail to make timely payments.

The following table summarizes the fair value of the consideration paid by the Company and the fair value amounts assigned to the assets acquired on the acquisition date:

Fair Value of Consideration:

Total Purchase Price

loT Labs has been included in our consolidated results of operations since the acquisition date.

The following table summarizes the identifiable assets acquired and liabilities assumed upon acquisition of IoT Labs and the calculation of goodwill:

Total purchase price

Other current assets

Property and equipment

Intangible asset

Total identifiable assets

Accounts payable

Total liabilities assumed

Non-controlling interest

Total net assets

Notes to the Unaudited Consolidated Financial Statements

March 31, 2020

June 30, 2020

NOTE 4 - ACQUISITION

Unaudited combined proforma results of operations for the six months ended June 30, 2020 and 2019 as though the Company acquired loT Labs on January 1, 2019, are set forth below:

Six Months Ended

Cost of revenues

Operating expenses

Operating loss

Other expense

NOTE 5 – PREPAID AND OTHER CURRENT ASSETS

Prepaid and other current assets at March 31, 2020 and December 31, 2019 consist of the following:

Prepaid and other current assets at June 30, 2020 and December 31, 2019 consist of the following:

Advance payment to suppliers

3 unchanged sentences

NOTE 6 – PROPERTY AND EQUIPMENT

Property and equipment at March 31, 2020 and December 31, 2019 consist of the following:

Property and equipment at June 30, 2020 and December 31, 2019 consist of the following:

Telecommunication equipment

3 unchanged sentences

Accumulated depreciation and amortization

Total property and equipment, net

Depreciation expense for the three months ended March 31, 2020 and 2019 amounted to $13,425 and $12,557, respectively.

Total property and equipment

Depreciation expense for the six months ended June 30, 2020 and 2019 amounted to $31,140 and $19,281, respectively.

Notes to the Unaudited Consolidated Financial Statements

March 31, 2020

June 30, 2020

NOTE 7 –LOANS PAYABLE

Loans payable at March 31, 2020 and December 31, 2019 consist of the following:

Loans payable at June 30, 2020 and December 31, 2019 consist of the following:

Unique Funding Solutions_2

1 unchanged sentence

YES LENDER LLC

Note was issued on October 17, 2019 and due on March 31, 2020

October 17, 2019 and due on March 31, 2020

Complete Business Solutions_8

Note was issued on December 24, 2010 and due on June 09, 2020

December 24, 2010 and due on August 20, 2020

Nicolas Arvelo

Note was issued on November 20, 2019 and due on May 20, 2020

Note was issued on November 20, 2019 and due on November 20, 2020

Martin Mendoza Diaz

Note was issued on November 20, 2019 and due on May 20, 2020

Note was issued on November 20, 2019 and due on November 20, 2020

Note was issued on October 23, 2018 and due on January 3, 2022

5 unchanged sentences

Note was issued on March 25, 2020 and due on August 25, 2020

Apollo Management Group, Inc 3

Note was issued on April 1, 2020 and due on October 1, 2021

Apollo Management Group, Inc 4

Note was issued on April 2, 2020 and due on October 2, 2021

Apollo Management Group, Inc 5

Note was issued on April 7, 2020 and due on October 7, 2021

Apollo Management Group, Inc 6

Note was issued on April 15, 2020 and due on October 15, 2021

Apollo Management Group, Inc 7

Note was issued on April 20, 2020 and due on May 20, 2021

Note was issued on June 26, 2020 and due on April 1, 2021

YES LENDER LLC 2

Note was issued on January 8, 2020 and due on June 26, 2020

Note was issued on January 8, 2020 and due on August 12, 2020

Darlene Covi19

Note was issued on April 1, 2020 and due on March 31, 2025

Unamortized debt discount

2 unchanged sentences

Long-term loans payable

Notes to the Unaudited Consolidated Financial Statements

March 31, 2020

NOTE 6 –LOANS PAYABLE (CONTINUED)

Loans payable to related parties at March 31, 2020 and December 31, 2019 consist of the following:

Loans payable to related parties at June 30, 2020 and December 31, 2019 consist of the following:

Alonso Van Der Biest

Note was issued on June 12, 2015 and due on June 11, 2019.

Maturity was extended to December 31, 2020.

Alvaro Quintana

Note was issue on September 30, 2016 and due on September 29, 2019.

Maturity was extended to December 31, 2020.

49% of Shareholder of Swisslink

Note is due on demand

49% of Shareholder of Swisslink

Note is due on demand

Current portion of loans payable – related parties

Long-term loans payable – related patties

During the three months ended March 31, 2020 and 2019, the Company borrowed from third parties of $210,000 and $0, respectively, and repaid the principal amount of $98,646 and $95,142, respectively.

During the three months ended March 31, 2020 and 2019, the Company recorded interest expense of $48,294 and $44,600, respectively.

Current portion of loans payable

Long-term loans payable

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 7 –LOANS PAYABLE (CONTINUED)

During the six months ended June 30, 2020 and 2019, the Company borrowed amounts from third parties totaling $760,139 and $82,353, which includes original issue discount and financing costs of $28,579 and $17,953, respectively, and repaid the principal amount of $247,855 and $171,302, respectively.

During the six months ended June 30, 2020 and 2019, the Company recorded interest expense of $85,172 and $90,096 and recognized amortization of discount, included in interest expense, of $18,877 and $17,953, respectively.

NOTE 8 – OTHER CURRENT LIABILITIES

Other current liabilities at March 31, 2020 and December 31, 2019 consist of the following:

Other current liabilities at June 30, 2020 and December 31, 2019 consist of the following:

Accrued liabilities

Credit card liabilities

Accrued interest

Salary payable - management

Salary payable - other

Employee benefit

Employee benefits

Other current liabilities

Notes to the Unaudited Consolidated Financial Statements

March 31, 2020

NOTE 9 - CONVERTIBLE NOTES

At March 31, 2020 and December 31, 2019, convertible loans consisted of the following:

At June 30, 2020 and December 31, 2019, convertible notes consist of the following:

Promissory notes – Issued in fiscal year 2019, with variable conversion features

5 unchanged sentences

Long-term convertible notes

During the three months ended March 31, 2020 and 2019, the Company recorded interest expense of $295,903 and $65,079 and recognized amortization of discount, included in interest expense, of $457,177 and $151,542, respectively.

During the three months ended March 31, 2020 and 2019, the Company repaid notes of $334,500 and $113,151 and accrued interest of $138,415 and $60,200.

During the six months ended June 30, 2020 and 2019, the Company recorded interest expense of $643,693 and $144,172 and recognized amortization of discount, included in interest expense, of $706,773 and $523,941, respectively.

During the six months ended June 30, 2020 and 2019, the Company repaid notes of $477,190 and $221,901 and accrued interest including prepayment penalty of $138,415 and $120,006.

During the six months ended June 30, 2020, the Company converted notes with principal amounts of $616,118 and accrued interest of $85,383 into 33,821,613 shares of common stock.

The corresponding derivative liability at the date of conversion of $3,661,588 was settled through additional paid in capital.

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 9 - CONVERTIBLE NOTES (CONTINUED)

On June 26, 2020, the Company issued a loan payable of $700,000 to Labrys Fund to settle the previously-outstanding convertible notes with accrued interest of $986,340.

As a result, the Company recognized a gain on settlement of debt of $286,340 (Note 7).

On June 10, 2020, the Company settled a convertible note with accrued interest of $64,230 with a total of 650,000 share issuances.

As of June 30, 2020, the Company issued 200,000 shares and shall issue 225,000 shares each in July and August 2020.

As a result, the Company recognized a loss on settlement of debt of $3,110.

Promissory Notes - Issued in fiscal year 2019

8 unchanged sentences

Promissory Notes - Issued in fiscal year 2020

During the three months ended March 31, 2020, the Company issued a total of $900,000 in notes with the following terms:

During the six months ended June 30, 2020, the Company issued a total of $1,449,444 in notes with the following terms:

· Terms 12 months.

 Annual interest rates 12%.

· Annual interest rates 5% or 12%.

· Convertible at the option of the holders 180 days from issuance.

· Conversion prices are typically based on the discounted (60% discount) lowest trading prices of the Company’s shares during 30 trading day periods prior to conversion.

Notes allow the Company to redeem the notes at rates ranging from 150% to 200% depending on the redemption date provided that no redemption is allowed after the 180th day.

Certain note has a capped conversion price of $0.025.

Notes allow the Company to redeem the notes at 125% provided that no redemption is allowed after the 180th day.

Likewise, the notes include original issue discount and financing costs totaling $189,444 and the Company received cash of $1,260,000.

Notes to the Unaudited Consolidated Financial Statements

March 31, 2020

NOTE 8 - CONVERTIBLE NOTES (CONTINUED)

Certain convertible notes were also provided with a total of 4,500,000 warrants.

Derivative liabilities

The Company determined that the conversion option in the note met the definition of a liability in accordance with ASC Topic No.

815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock .

The Company will bifurcate the embedded conversion option in the note once the note becomes convertible and account for it as a derivative liability.

The Company valued the conversion features of convertible notes and warrant using the Black Scholes valuation model.

During the three months ended March 31, 2020, the fair value of the derivative liability for new notes was $0, as there were no notes that became convertible.

The Company valued the conversion features of convertible notes and warrant using the Black Scholes valuation model.

The fair value of the derivative liability for all the note and warrant that became convertible for the year ended December 31, 2019 amounted to $4,916,471.

The Company determined that the conversion option in the notes met the definition of liabilities in accordance with ASC Topic No.

815 - 40, “ Derivatives and Hedging - Contracts in Entity’s Own Stock .” The Company will bifurcate the embedded conversion options in the notes once the notes become convertible and account for them as derivative liabilities.

The Company valued the conversion features of convertible notes and warrants using the Black Scholes valuation model.

The fair value of the derivative liability for all the note and warrants that became convertible for the six months ended June 30, 2020, amounted to $426,390.

$331,499 of the value assigned to the derivative liability was recognized as a debt discount to the notes while the balance of $94,891 was recognized as a “day 1” derivative loss.

A summary of activity during the three months ended March 31, 2020 follows:

The fair value of the derivative liability for all the notes and warrants that became convertible for the year ended December 31, 2019 amounted to $4,916,471.

$1,313,350 of the value assigned to the derivative liability was recognized as a debt discount to the notes while the balance of $3,603,121 was recognized as a “day 1” derivative loss.

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 9 - CONVERTIBLE NOTES (CONTINUED)

A summary of activity during the six months ended June 30, 2020 follows:

Warrants Outstanding

4 unchanged sentences

Forfeited/canceled

Outstanding, March 31, 2020

The reset feature of warrants associated with the convertible note was effective at the time that a separate convertible note with lower exercise price was issued.

As a result of the reset features for warrant, the warrants increased by 10,813,001 at $0.0012 per share.

We accounted for the issuance of the warrants as liability and recognize the derivative liability (Note 9).

The following table summarizes information relating to outstanding and exercisable warrants as of March 31, 2020:

Outstanding, June 30, 2020

The reset feature of warrants associated with the convertible notes was effective at the time that a separate convertible note with lower exercise price was issued.

As a result of the reset features for warrants, the warrants increased by 10,813,001 at $0.0012 per share.

We accounted for the issuance of the warrants as a liability and recognized the derivative liability.

The following table summarizes information relating to outstanding and exercisable warrants as of June 30, 2020:

Warrants Outstanding

6 unchanged sentences

Exercise Price

The intrinsic value of the warrants as of March 31, 2020 is $400,833.

The intrinsic value of the warrants as of June 30, 2020 is $667,600.

NOTE 10 - DERIVATIVE LIABILITIES

The Company analyzed the conversion options for derivative accounting consideration under ASC 815, Derivatives and Hedging, and hedging , and determined that the instrument should be classified as a liability since the conversion options becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.

The Company analyzed the conversion options for derivative accounting consideration under ASC 815, “ Derivatives and Hedging ,” and determined that the instrument should be classified as a liability since the conversion options become effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.

Fair Value Assumptions Used in Accounting for Derivative Liabilities .

ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item.

Notes to the Unaudited Consolidated Financial Statements

March 31, 2020

NOTE 9 - DERIVATIVE LIABILITIES (CONTINUED)

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, 2020 and December 31, 2019.

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 June 30, 2020 and December 31, 2019.

The Black-Scholes model requires six basic data inputs:

2 unchanged sentences

The fair value of each convertible note is estimated using the Black-Scholes valuation model.

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 10 - DERIVATIVE LIABILITIES (CONTINUED)

The estimated fair values of the liabilities measured on a recurring basis are as follows:

Three Months Ended

Six Months Ended

Expected term

6 unchanged sentences

1.44% - 2.57%

The following table summarizes the changes in the derivative liabilities during the three months ended March 31, 2020:

Fair Value Measurements Using

Significant Observable Inputs (Level 3)

The following table summarizes the changes in the derivative liabilities during the six months ended June 30, 2020:

Fair Value Measurements Using Significant Observable Inputs (Level 3)

Balance - December 31, 2019

Addition of new derivatives recognized as debt discounts

Addition of new derivatives recognized as loss on derivatives

Settled on issuance of common stock

Change in fair value of the derivative

Balance - March 31, 2020

The aggregate loss on derivatives during the three months ended March 31, 2020 and 2019 was as follows:

Three Months Ended

Balance - June 30, 2020

The aggregate (gain) loss on derivatives during the six months ended June 30, 2020 and 2019 was as follows:

Six Months Ended

Addition of new derivatives recognized as loss on derivatives

Loss (Gain) on change in fair value of the derivative

Change in fair value of derivatives

NOTE 11 – 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.

During the three months ended March 31, 2020, the Company issued 27,975,557 shares of common stock, valued at fair market value on issuance as follows;

During the six months ended June 30, 2020, the Company issued 50,286,709 shares of common stock, valued at fair market value on issuance as follows;

· 4,500,000 shares issued for cash of $360,000

· 4,508,510 shares issued for settlement of debt of $269,840

3 unchanged sentences

· 3,233,586 shares issued for cashless exercised warrant

As of March 31, 2020 and December 31, 2019, 45,984,148 and 18,008,591 shares of common stock were issued and outstanding, respectively.

As of June 30, 2020 and December 31, 2019, 68,295,300 and 18,008,591 shares of common stock were issued and outstanding, respectively.

Notes to the Unaudited Consolidated Financial Statements

March 31, 2020

June 30, 2020

NOTE 12 - RELATED PARTY TRANSACTIONS

Due from related party

During the three months ended March 31, 2020, the Company loaned $13,399 to a related party who is a shareholder and a former director and wrote off amounts totaling $43,375.

As of March 31, 2020 and December 31, 2019, the Company had due from related parties of $286,884 and $316,860, respectively.

During the six months ended June 30, 2020, the Company loaned $14,787 to related parties who are a shareholder and a former director, collected $388 and wrote off amounts totaling $43,375.

As of June 30, 2020 and December 31, 2019, the Company had due from related parties of $287,884 and $316,860, respectively.

The amounts are unsecured, non-interest bearing and due on demand.

Due to related parties

During the three months ended March 31, 2020, the Company borrowed $182 from CFO of the Company and repaid $162, respectively.

As of March 31, 2020 and December 31, 2019, the Company had due to related parties of $34,651 and $34,631, respectively.

During the six months ended June 30, 2020, the Company borrowed $182 from the CFO of the Company and repaid $197 to the CEO and CFO.

As of June 30, 2020, the Company owed $120,000 to Francisco Bunt who owns 49% of loT Labs (Note 4).

As of June 30, 2020 and December 31, 2019, the Company had amounts due to related parties of $154,616 and $34,631, respectively.

The amounts are unsecured, non-interest bearing and due on demand.

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· Cash payment of $15,000.

As of March 31, 2020, the Company owed $9,500 to Mr.

We also appointed Mr.

Brito as an advisor to our Board of Directors and agreed to pay him $5,000 per month for such services.

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 12 - RELATED PARTY TRANSACTIONS (CONTINUED)

On March 16, 2020, our Board of Directors adopted a Director Compensation Plan that applies to members of our Board of Directors.

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· All Directors shall be compensated $3,000 monthly for their service as Directors.

Notes to the Unaudited Consolidated Financial Statements

March 31, 2020

NOTE 11 - RELATED PARTY TRANSACTIONS (CONTINUED)

· In lieu of the cash compensation set forth above, each Director may elect to receive shares of the Corporation's Common Stock equal to the total cash compensation divided by the average market value of the Company's Common Stock during the last 10 trading days and applying a discount of 10%.

· Directors Alvaro Cardona and Leandro Iglesias shall each receive 1,000,000 shares of the Company’s Common Stock, valued at $70,000 each, for their service as members of the Board of Directors for the period from June 2018 to December 2019.

During the three months ended March 31, 2020 and 2019, the Company recorded management fees of $126,000 and $34,500 and paid $28,600 and $13,700, respectively.

During the three months ended March 31, 2020, the Company settled accrued salary – management of $202,500 and issued 4,308,510 shares issued.

As at March 31, 2020 and December 31, 2019, the Company accrued management salaries of $163,131 and $268,231, respectively.

During the six months ended June 30, 2020 and 2019, the Company recorded management fees of $252,000 and $118,000 and paid $62,300 and $62,200, respectively.

During the six months ended June 30, 2020, the Company settled accrued salary – management of $202,500 and issued 4,308,510 shares.

As at June 30, 2020 and December 31, 2019, the Company accrued management salaries of $255,431 and $268,231, respectively.

NOTE 13 – COMMITMENTS AND CONTIGENCIES

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The Company leases facilities which the term is 12 months.

For the three months ended March 31, 2020 and 2019, the Company incurred $9,200 and 0, respectively.

For the six months ended June 30, 2020 and 2019, the Company incurred $16,100 and $0, respectively.

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 14 – EARNING PER SHARE

Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the periods.

Diluted net income per common share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the periods.

Common equivalent shares consist of stock options, unvested restricted shares, and outstanding warrants that are computed using the treasury stock method.

Antidilutive stock awards consist of stock options that would have been antidilutive in the application of the treasury stock method.

Three Months Ended

Six Months Ended

Net Income (Loss)

Change in fair value of derivatives

Interest on convertible debt

Net Loss - diluted

Weighted average common shares outstanding

Effect of dilutive shares

Net income per common share:

For the six months ended June 30, 2020 and three and six months ended June 30, 2019, the convertible instruments are anti-dilutive and therefore, have been excluded from earnings (loss) per share.

NOTE 15 – SEGMENT

At March 31, 2020, the Company operates in one industry segment, telecommunication services, and two geographic segments, USA and Switzerland, where current assets and equipment are located .

At June 30, 2020, 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 months ended March 31, 2020 and 2019:

Three Months Ended March 31, 2020

The following table shows operating activities information by geographic segment for the three and six months ended June 30, 2020 and 2019:

Three months Ended June 30, 2020

Cost of revenue

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General and administration

Operating loss

Other expense

Operating income (loss)

Other income (expense)

Notes to the Unaudited Consolidated Financial Statements

March 31, 2020

June 30, 2020

NOTE 15 – SEGMENT (CONTINUED)

Three Months Ended March 31, 2019

Three months Ended June 30, 2019

Cost of revenue

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Other income (expense)

Six months Ended June 30, 2020

Cost of revenue

Operating expenses

General and administration

Operating income (loss)

Other income (expense)

Six months Ended June 30, 2019

Cost of revenue

Operating expenses

General and administration

Operating income (loss)

Other income (expense)

As of August 7, 2019, having completed all conditions under the Purchase Agreement, the Company acquired SwissLink located in Switzerland.

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 15 – SEGMENT (CONTINUED)

Asset Information

The following table shows asset information by geographic segment at March 31, 2020 and December 31, 2019:

March 31, 2020

The following table shows asset information by geographic segment at June 30, 2020 and December 31, 2019:

June 30, 2020

Current assets

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Non-current liabilities

Notes to the Unaudited Consolidated Financial Statements

March 31, 2020

NOTE 15 - SUBSEQUENT EVENTS

Subsequent to March 31, 2020 and through the date that these financials were made available, the Company had the following subsequent events:

Between April 01, 2020 and May 06, 2020 issued several promissory notes.

These notes are non-convertible have different terms, accrues interest at 12% annually, which details are shown below.

On April 15, 2020, we entered into a Company Acquisition Agreement (the “Agreement”) with Francisco Bunt regarding the acquisition of 51% of the shares in loT Labs, LLC (“The Company”).

The Company’s principal business activity is the sale of Short Messages (SMS) between USA and Mexico.

We have agreed to pay a total of $180,000 for the 51% interest in the Company.

The consideration shall occur with an installment of $60,000 on the date of the execution of the Agreement, followed by a second payment of $60,000 at Closing and a final payment of $60,000 that is set to occur 60 days following the Closing Date.

Under the Agreement, Mr.

Bunt has the right to request that any of the aforementioned payments be made in shares of our common stock, which the parties have agreed to value at $2.00 per share.

The shares are subject to adjustment after 180 days and up to 360 days after issuance if our stock trades at less than $2.00 per share.

The Agreement provides for a right of return to Mr.

Bunt of the shares in the Company if we fail to make timely payments.

We have also agreed to invest in the Company the sum of $500,000 that will be used by the Company to acquire loT Labs MX SAPI to make it a wholly owned subsidiary of the Company.

In addition, we and Mr.

Bunt have further agreed to finance the Company in order to cover its budget with $300,000, with us responsible for 51% of and Mr.

Bunt responsible for 49% of that amount.

On April 28, 2020, the Company issued a convertible note in the principal amount of $44,444.44.

The convertible note has a term of twelve months, accrues interest at 12% annually and the balance outstanding thereunder is convertible into the Company’s common stock at a price equal to 40% multiplied by the lowest trading price during the previous thirty days ending on the latest complete trading day prior to the conversion date.

On April 28, 2020, our majority owned subsidiary, QGlobal SMS, LLC (the “Buyer”), entered into a Company Acquisition Agreement (the “Purchase Agreement”) by and between the Buyer and the Jesus Vega (the “Seller”), which agreement provides for the purchase of 100% of the equity and certain assets of Alcyon Cloud SMS, S.a.S., registered with the Secretary of Information and Communication Technology in Colombia (the “Company”).

The Company’s principal business activity is the sale of short messages (SMS) for the retail market.

The parties plan to expand services from SMS to offer onmichannel products and services such as SMS, Emails, Rich Communications Services (RCS), Social Media Channels (WhatsApp Messenger, etc.), Web Real-Time Communication (WebRTC), VoIP (IP-PBX, SIP Trunking), ChatBots (Artificial Intelligence Based), SMS to Email and Email to SMS.

The consideration for the acquisition consists of $25,000 USD, payable as follows:

 $15,000 USD shall be paid in cash within a year to be used for the development of the retail marketing plan;

 The balance of $10,000 USD shall be paid in cash to Seller within a year.

Notes to the Unaudited Consolidated Financial Statements

March 31, 2020

NOTE 14 - SUBSEQUENT EVENTS (CONTINUED)

The Purchase Agreement may be terminated if either the Buyer or the Company are deemed economically unviable or bankrupt;

if during due diligence process there is discovered a material impact on the valuation of the Company or the parties mutually agreed to terminate the Purchase Agreement.

The Closing of the Purchase Agreement is scheduled for 90 days from execution, and is subject to conditions, which include the following:

 Buyer’s board of directors approving the transaction;

 Satisfactory due diligence by Buyer;

 Buyer has prepared financial statements that are auditable by a PCAOB auditor.

The Purchase Agreement contains customary representations and warranties of the parties, including, among others, with respect to corporate organization, capitalization, corporate authority, financial statements and compliance with applicable laws.

The representations and warranties of each party set forth in the Purchase Agreement were made solely for the benefit of the other parties to the Purchase Agreement, and investors are not third-party beneficiaries of the Purchase Agreement.

In addition, such representations and warranties (a) are subject to materiality and other qualifications contained in the Purchase Agreement, which may differ from what may be viewed as material by investors, (b) were made only as of the date of the Purchase Agreement or such other date as is specified in the Purchase Agreement and (c) may have been included in the Purchase Agreement for the purpose of allocating risk between the parties rather than establishing matters as facts.

Accordingly, the Purchase Agreement is included with this filing only to provide investors with information regarding the terms of the Purchase Agreement, and not to provide investors with any other factual information regarding any of the parties or their respective businesses.

On May 6, 2020, our majority owned subsidiary, loT Labs, LLC (the “Buyer”), entered into a Company Acquisition Agreement (the “Purchase Agreement”) by and between the Buyer and the Francisco Bunt (the “Seller”), which agreement provides for the purchase of 100% of the equity and certain assets of loT Labs MX SAPI., a Mexican corporation domiciled at Hegel 207, Col.

Polanco CDMX 11570 Mexico (the “Company”).

The Company has developed a technological solution in loT (“Smart Gas IoT Platform”), which consist of equipment (Hardware) and complete administration platforms (Software), mobile users’ platforms and intellectual property, internet domains among others.

The “Smart Gas IoT Platform” device will be installed in the propane gas vessels, and will transmit on real time the pressure that the tank has, and collecting that information into the smart gas software platform, providing to users a very efficient way to manage the propane refill trunks.

The consideration for the acquisition consists of $550,000 USD, payable as follows:

 $100,000 USD payable at closing;

 $150,000 USD payable 90 days from closing;

 $150,000 USD payable 180 days from closing;

 $150,000 USD payable 270 days from closing.

All payments shall have a maximum tolerance of 15 days, from which will generate interests 3% monthly.

After 90 days of delay of the established dates, Seller will have the right to dissolve the acquisition and will return only 50% of Buyer's payment for the acquisition affected by the payment delay.

Seller agrees that he will have the right to request that any of the $150,000 USD payments be made in shares of iQSTEL at a value of $2.00 USD per share.

Seller will have the right, after 180 days and up to 360 days of issuance of the iQSTEL shares, to adjust the number of shares if the stock at that time has a value below $2.00 USD per share.

The Purchase Agreement may be terminated if either the Buyer or the Company are deemed economically unviable or bankrupt;

if during due diligence process there is discovered a material impact on the valuation of the Company, or the parties mutually agreed to terminate the Purchase Agreement.

The Closing of the Purchase Agreement is scheduled for 90 days from execution, and is subject to conditions, which are included in the Purchase Agreement.

Notes to the Unaudited Consolidated Financial Statements

March 31, 2020

NOTE 14 - SUBSEQUENT EVENTS (CONTINUED)

On May 07, 2020, the Company issued a convertible note in the principal amount of $55,000.00.

On May 20, 2020, we entered into a Subscription Agreement with Alpha Capital Anstalt (“Purchaser”), pursuant to which we issued and sold to the Purchaser 2,000,000 shares of our common stock (the “Shares”) for total proceeds of $160,000.

The Shares were sold at $0.08 per share, after applying a 20% discount to the purchase price of $0.10 per share.

The Shares were offered and sold pursuant to qualified offering circular on Form 1-A (File No.

024-10950) and related supplement, in each case filed with the Securities and Exchange Commission.

A copy of the form of Subscription Agreement used in the offer and sale is attached as Exhibit 13.1 to the Form 1-A/A filed with the SEC on June 3, 2019 and is incorporated herein by reference.

Also on May 20, 2020, we entered into a Securities Purchase Agreement (“SPA”) with Purchaser for the sale of a convertible promissory note, executed on March 20, 2019, in the principal amount of $200,000 (the “Note”).

We received $160,000 after paying a $40,000 original issue discount on the Note.

The Note bears interest at 5% per annum and matures one year from the date of issuance.

After 180 days from issuance, the Note may be converted by purchaser into shares of our common stock at a conversion price of the lesser of (i) $0.025 or (ii) 40% of the lowest trading price of our common stock in the 20 days preceding the issuance date of the Note.

As additional consideration for the Note, we issued to Purchaser a warrant (the “Warrant”) to purchase 2,000,000 shares of common stock at an exercise price of $0.02 per share (subject to adjustment as set forth in the Warrant) expiring six months from the date of issuance.

On May 22, 2020, we entered into an amendment (the “Amendment”) to the convertible promissory note, executed on December 3, 2019 in the principal amount of $235,000 (the “Note”) with Labrys Fund, LP, a Delaware limited partnership (“Purchaser”).

Purchaser agreed to waive all existing events of default under the Note provided that we fulfill all of our obligations under the Amendment.

If we fail to do so, any default existing as of May 22, 2020 shall be reinstated.

Under the Amendment, we agreed to amend Section 1.9 of the Note in order to pay the Purchaser in installments until the Note is paid in full.

There shall be 9 total monthly installment payments for an aggregate of $308,660.80.

The first payment of $35,000 is due on or before June 19, 2020 and the final payment of $28,660.80 is due on or before February 19, 2021.

On June 3, 2020, we entered into a Subscription Agreement with Alpha Capital Anstalt (“Purchaser”), pursuant to which we issued and sold to the Purchaser 2,500,000 shares of our common stock (the “Shares”) for total proceeds of $200,000.

Subsequent to June 30, 2020 and through the date that these financials were made available, the Company had the following subsequent events:

On July 14, 2020, we entered into a Subscription Agreement with Alpha Capital Anstalt (“Purchaser”), pursuant to which we issued and sold to the Purchaser 2,000,000 shares of our common stock (the “Shares”) for total proceeds of $160,000.

The Shares were sold at $0.08 per share, after applying a 20% discount to the purchase price of $0.10 per share.

1 unchanged sentence

024-10950) and related supplement, in each case filed with the Securities and Exchange Commission.

A copy of the form of Subscription Agreement used in the offer and sale is attached as Exhibit 13.1 to the Form 1-A/A filed with the SEC on June 3, 2019 and is incorporated herein by reference.

Notes to the Unaudited Consolidated Financial Statements

March 31, 2020

NOTE 14 - SUBSEQUENT EVENTS (CONTINUED)

Also on June 3, 2020, we entered into a Securities Purchase Agreement (“SPA”) with Purchaser for the sale of a convertible promissory note, executed on June 3, 2019, in the principal amount of $250,000 (the “Note”).

A copy of the form of Subscription Agreement used in the offer and sale is attached as Exhibit 13.1 to the Form 1-A/A filed with the SEC on June 3, 2019.

Also on July 14, 2020, we entered into a Securities Purchase Agreement (“SPA”) with Purchaser for the sale of a convertible promissory note, executed on July 15, 2019, in the principal amount of $200,000 (the “Note”).

We received $160,000 after paying a $40,000 original issue discount on the Note.

2 unchanged sentences

On June 08, 2020, we entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Triton Funds, LP, a Delaware limited partnership (the “Investor”), whereby we shall have the right to require the Investor to purchase up to $1,042,157 of shares of our common stock (the “Investment Amount”), par value $0.001 per share (“Common Stock”) during the commitment period (the “Commitment Period” commencing on June 08, 2020, and terminating on the earlier of (i) December 31, 2020, or (iii) the date that the Investor has purchased the Investment Amount).

The purchase price for the shares to be paid by the Investor at each closing shall be 80% of the lowest trading price of our Common Stock during the 7 business days prior to closing.

The obligation of the Investor to purchase the shares is subject to several conditions, including, among other thing, (i) that the Company has filed a registration statement with the United States Securities and Exchange Commission registering the shares, and (ii) that the purchase of the shares shall not cause the Investor to own more than 9.99% of the outstanding shares of the Company’s common stock.

On July 01, 2020, we entered into a 60-day term bridge loan with Apollo Management Group for the principal amount of $73,684.21 bearing interest at the rate of Twelve (12%) percent per annum, commencing on the date such Loan is funded until the date the Loan is paid in full.

On July 22, 2020, we entered into an Exchange Agreement with Jefferson Street Capital LLC, whereby we agreed to exchange a February 22, 2019 Common Stock Purchase Warrant and June 27, 2019 Convertible Promissory Note in the principal amount of $35,000 into a total of 650,000 shares of our common stock.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements