iQSTEL Inc 10-Q

Item 1. Financial Statements iQSTEL INC Consolidated Balance Sheets (Unaudited) September 30, December 31, 2020 2019 ASSETS Current Assets Cash and cash equivalents $ 647,334 $ 270,503 Accounts receivable, net 1,961,608 2,759,164 Due from related parties 290,284 316,860 Prepaid and other current assets 69,427 91,970 Total Current Assets 2,968,653 3,438,497 Property and equipment, net 354,466 287,970 Intangible asset 21,875 - Goodwill 1,537,742 1,455,960 Deferred tax assets 441,519 420,519 TOTAL ASSETS $ 5,324,255 $ 5,602,946 LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities Accounts payable 1,802,925 2,291,921 Due to related parties 94,616 34,631 Loans payable - net of discount of $474 and $0 1,369,580 89,671 Loans payable - related parties 1,975,342 1,885,708 Current portion of convertible notes - net of discount of $416,316 and $597,654 1,279,011 1,251,096 Other current liabilities 761,212 848,484 Derivative liabilities 658,203 4,744,134 Total Current Liabilities 7,940,889 11,145,645 Convertible notes - net of discount of $2,556 and $48,558 2,444 11,442 Loans payable 269,112 178,021 Employee benefits, non-current 155,080 38,253 TOTAL LIABILITIES 8,367,525 11,373,361 Stockholders' Deficit Preferred stock: 1,200,000 authorized; $0.001 par value - no shares issued and outstanding - - Common stock: 300,000,000 authorized; $0.001 par value 78,186,210 and 18,008,591 shares issued and outstanding, respectively 78,186 18,008 Additional paid in capital 9,391,402 3,240,528 Accumulated deficit (11,673,729) (8,125,257) Accumulated other comprehensive loss (39,099) (181) Deficit attributed to stockholders of iQSTEL Inc. (2,243,240) (4,866,902) Deficit attributable to noncontrolling interests (800,030) (903,513) Total stockholders' Deficit (3,043,270) (5,770,415) TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 5,324,255 $ 5,602,946 The accompanying notes are an integral part of these unaudited consolidated financial statements. 3 iQSTEL INC Consolidated Statements of Comprehensive Loss ( Unaudited ) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Revenues $ 13,291,698 $ 4,172,547 $ 29,439,196 $ 12,589,109 Cost of revenue 13,158,685 3,929,137 28,735,016 12,001,850 Gross profit 133,013 243,410 704,180 587,259 Operating expenses General and administration 958,787 492,782 3,161,330 1,024,842 Total operating expenses 958,787 492,782 3,161,330 1,024,842 Operating loss (825,774) (249,372) (2,457,150) (437,583) Other income (expense) Other income 4,412 - 29,144 2,600 Other expenses (61) (5,149) (8,118) (5,524) Interest expense (913,592) (1,009,467) (2,368,107) (1,785,629) Change in fair value of derivative liabilities 1,096,265 (2,254,035) 1,350,513 (2,801,706) Loss on settlement of debt (331,475) - (48,245) - Total other income (expense) (144,451) (3,268,651) (1,044,813) (4,590,259) Net loss before provision for income taxes (970,225) (3,518,023) (3,501,963) (5,027,842) Income taxes - 852 - 852 Net loss (970,225) (3,517,171) (3,501,963) (5,026,990) Less: Net income attributable to noncontrolling interests (26,224) 15,668 46,509 15,668 Net loss attributed to stockholders of iQSTEL Inc. $ (944,001) $ (3,532,839) $ (3,548,472) $ (5,042,658) Comprehensive income (loss) Net loss $ (970,225) $ (3,517,171) $ (3,501,963) $ (5,026,990) Foreign currency adjustment (42,722) 44,593 (76,310) 44,593 Total comprehensive loss (1,012,947) $ (3,472,578) $ (3,578,273) $ (4,982,397) Less: Comprehensive income (loss) attributable to noncontrolling interests (47,158) 37,519 9,117 37,519 Net comprehensive loss attributed to stockholders of iQSTEL Inc. $ (965,789) $ (3,510,097) $ (3,587,390) $ (5,019,916) Basic and Diluted loss per common share $ (0.01) $ (0.22) $ (0.07) $ (0.33) Weighted average number of common shares outstanding – Basic and Diluted 73,045,296 15,933,527 53,705,271 15,446,876 The accompanying notes are an integral part of these unaudited consolidated financial statements. 4 iQSTEL INC Consolidated Statements of Changes in Stockholders’ Equity (Deficit) For the Three and Nine Months Ended September 30, 2020 and 2019 ( Unaudited ) Additional Paid in Capital Accumulated Comprehensive Loss Non Total Common Stock Accumulated Deficit Controlling Shareholders' Shares Amount Total Interest Deficit Balance - December 31, 2019 18,008,591 $ 18,008 $ 3,240,528 $ (8,125,257) $ (181) $ (4,866,902) $ (903,513) $ (5,770,415) Common stock issued for settlement of debt 4,308,510 4,309 198,191 - - 202,500 - 202,500 Common stock issued for services 4,173,000 4,173 445,861 - - 450,034 - 450,034 Common stock issued for forbearance of debt 50,000 50 2,850 - - 2,900 - 2,900 Common stock issued for conversion of debt 17,208,350 17,208 256,760 - - 273,968 - 273,968 Common stock issued for exercised cashless warrant 2,235,697 2,235 (2,235) - - - - - Common stock to be issued for acquisition of Itsbchain LLC - - 50,000 - - 50,000 - 50,000 Resolution of derivative liabilities - - 2,567,348 - - 2,567,348 - 2,567,348 Foreign currency translation adjustments - - - - (1,672) (1,672) (1,606) (3,278) Net loss - - - (3,890,490) - (3,890,490) (18,713) (3,909,203) Balance - March 31, 2020 45,984,148 $ 45,983 $ 6,759,303 $ (12,015,747) $ (1,853) $ (5,212,314) $ (923,832) $ (6,136,146) Common stock issued for cash 4,500,000 4,500 355,500 - - 360,000 - 360,000 Common stock issued for conversion of debt 16,613,263 16,614 410,918 - - 427,532 - 427,532 Common stock issued for exercised cashless warrant 997,889 998 (998) - - - - - Common stock issued for settlement of debt 200,000 200 67,140 - - 67,340 - 67,340 Resolution of derivative liabilities - - 1,094,240 - - 1,094,240 - 1,094,240 Acquisition of IOT Lab - - - - - - 94,366 94,366 Foreign currency translation adjustments - - - - (15,458) (15,458) (14,852) (30,310) Net income - - - 1,286,019 - 1,286,019 91,446 1,377,465 Balance - June 30, 2020 68,295,300 $ 68,295 $ 8,686,103 $ (10,729,728) $ (17,311) $ (1,992,641) $ (752,872) $ (2,745,513) Common stock issued for cash 4,437,500 4,437 350,568 - - 355,005 - 355,005 Common stock issued for conversion of debt 1,991,864 1,992 63,939 - - 65,931 - 65,931 Common stock issued for settlement of debt 1,766,946 1,767 94,071 - - 95,838 - 95,838 Common stock issued for service 1,694,600 1,695 116,249 - - 117,944 - 117,944 Resolution of derivative liabilities - - 80,472 - - 80,472 - 80,472 Foreign currency translation adjustments - - - - (21,788) (21,788) (20,934) (42,722) Net loss - - - (944,001) - (944,001) (26,224) (970,225) Balance - September 30, 2020 78,186,210 $ 78,186 $ 9,391,402 $ (11,673,729) $ (39,099) $ (2,243,240) $ (800,030) $ (3,043,270) 5 Common Stock Additional Paid in Accumulated Accumulated Comprehensive Non Control Total Shareholders' Shares Amount Capital Deficit Loss Total Interest Deficit Balance - December 31, 2018 15,022,650 $ 15,023 $ 1,054,718 $ (2,667,388) $ - $ (1,597,647) $ - $ (1,597,647) Common stock issued in conjunction with convertible notes 254,074 254 249,746 - - 250,000 - 250,000 Capital contribution - - 10,000 - - 10,000 - 10,000 Net loss - - - (1,025,578) - (1,025,578) - (1,025,578) Balance - March 31, 2019 15,276,724 $ 15,277 $ 1,314,464 $ (3,692,966) $ - $ (2,363,225) $ - $ (2,363,225) Common stock issued for conversion of debt 76,335 76 4,924 - - 5,000 - 5,000 Resolution of derivative liabilities - - 181,326 - - 181,326 - 181,326 Common stock issued in conjunction with convertible notes 122,857 123 244,577 - - 244,700 - 244,700 Net loss - - - (484,241) - (484,241) - (484,241) Balance - June 30, 2019 15,475,916 $ 15,476 $ 1,745,291 $ (4,177,207) $ - $ (2,416,440) $ - $ (2,416,440) Common stock issued for acquisition 343,512 344 449,656 - - 450,000 (918,471) (468,471) Common stock issued in conjunction with convertible notes 284,285 284 322,916 - - 323,200 - 323,200 Debt forgiveness - - 406,080 - - 406,080 - 406,080 Foreign currency translation adjustments - - - - 22,742 22,742 21,851 44,593 Net loss - - - (3,532,839) - (3,532,839) 15,668 (3,517,171) Balance - September 30, 2019 16,103,713 $ 16,104 $ 2,923,943 $ (7,710,046) $ 22,742 $ (4,747,257) $ (880,952) $ (5,628,209) The accompanying notes are an integral part of these unaudited consolidated financial statements. 6 iQSTEL INC Consolidated Statements of Cash Flows ( Unaudited ) Nine Months Ended September 30, 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (3,501,963) $ (5,026,990) Adjustments to reconcile net loss to net cash used in operating activities: Stock based compensation 617,978 - Write-off of due from related party 43,375 - Depreciation and amortization 49,318 26,473 Amortization of debt discount 1,497,268 1,273,768 Change in fair value of derivative liabilities (1,350,513) 2,801,706 Gain on settlement of debt 48,245 - Prepayment and Default penalty 245,546 - Changes in operating assets and liabilities: - Accounts receivable 527,627 440,471 Accounts receivable - related party - - Other current assets 26,762 4,086 Accounts payable (221,583) (827,381) Other current liabilities 491,427 (22,332) Deferred tax asset - (852) Net cash used in operating activities (1,526,513) (1,331,051) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of subsidiary, net of cash acquired 15,781 239,516 Purchase of property and equipment (78,306) - Payment of loan receivable - related party (17,187) (24,500) Collection from due from related parties - related party 388 - Net cash provided by (used in) investing activities (79,324) 215,016 CASH FLOWS FROM FINANCING ACTIVITIES: Bank overdraft - (82) Proceeds from loans payable 933,280 446,824 Repayments of loans payable (607,447) (534,651) Proceeds from loans payable - related parties 20,182 46,438 Repayment of loans payable - related parties (20,197) (38,400) Contribution - 10,000 Common stock issued 715,004 - Proceeds from convertible notes 1,420,000 2,058,250 Repayment of convertible notes (492,190) (660,401) Net cash provided by financing activities 1,968,632 1,327,978 Effect of exchange rate changes on cash 14,036 (6,239) Net change in cash and cash equivalents 376,831 205,704 Cash and cash equivalents, beginning of period 270,503 4,570 Cash and cash equivalents, end of period $ 647,334 $ 210,274 Supplemental cash flow information Cash paid for interest $ 641,390 $ 530,572 Cash paid for taxes $ - $ - Non-cash transactions: Derivative liabilities recognized as debt discount $ 1,006,642 $ 1,005,350 Common stock issued in conjunction with convertible notes $ - $ 817,900 Common stock issued for conversion of debt $ 767,431 $ 5,000 Common stock issued for cashless warrant exercised $ 3,233 $ - Resolution of derivative liabilities $ 3,742,060 $ 181,326 Debt forgiveness $ - $ 406,080 Common stock issued for settlement of debt $ 365,678 $ - Amount owing for acquisition of IOT $ 60,000 $ - Common stock issued for forbearance of debt $ 2,900 $ - Replacement of convertible notes to note payable $ 1,000,000 $ - The accompanying notes are an integral part of these unaudited consolidated financial statements. 7 iQSTEL INC Notes to the Unaudited Consolidated Financial Statements September 30, 2020 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 PureSnax International, Inc. and 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 active interconnection agreements with mobile companies, fix line companies and other wholesale carriers. 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, LLC (“loT Labs”). The loT Labs’ principal business activity is the sale of Short Messages (SMS) between USA and Mexico. COVID-19 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 September 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 November 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 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 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 September 30, 2020 and the results of operations and cash flows for the periods presented. The results of operations for the nine months ended September 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 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. 8 iQSTEL INC Notes to the Unaudited Consolidated Financial Statements September 30, 2020 NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Use of Estimates The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) in the United States of America 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. Foreign Currency Translation and Re-measurement The Company translates its foreign operations to 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”). 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 · 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 in stockholders’ equity. September 30, December 31, 2020 2019 Spot CHF: USD exchange rate $ 1.0849 $ 1.0333 Average CHF: USD exchange rate $ 1.0528 $ 1.0122 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 Company reviews its allowance for doubtful accounts daily, 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. As of September 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 nine months ended September 30, 2020 and 2019. 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 that it will likely incur in the near future. 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; 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 nine months ended September 30, 2020, fourteen customers represented 80% of our consolidated revenues. During the nine months ended September 30, 2019, six customers represented 79% of our consolidated revenues. 39% 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. 9 iQSTEL INC Notes to the Unaudited Consolidated Financial Statements September 30, 2020 NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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, and collection was reasonably assured. Management considers persuasive evidence of a sales arrangement to be a written interconnection agreement. The Company’s payment terms vary by clients. Lease 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. Consequently, consistent with Company’s accounting policy election, the Company does not recognize the right-of-use asset and the lease liability arising from this lease. Retirement Benefit Costs Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the Company’s obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme. For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognized in full in the period in which they occur. They are recognized outside the income statement and are presented in other comprehensive income. Past service cost is recognized immediately in the income statement in the period in which it occurs. The retirement benefit obligation recognized in the balance sheet represents the present value of the defined obligation as adjusted for unrecognized past service cost, and as reduced by the fair value of the scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the scheme. Reclassifications Certain prior year amounts have been reclassified to conform with the current year presentation. Recent Accounting Pronouncements Management has considered all recent accounting pronouncements issued since the last audit of 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 financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. 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 $3,501,963 for the nine months ended September 30, 2020 and has negative working capital as of September 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. 10 iQSTEL INC Notes to the Unaudited Consolidated Financial Statements September 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. 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 and marketing expenses. 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. 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: April 15, 2020 Fair Value of Consideration: Cash $ 180,000 Total Purchase Price $ 180,000 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 $ 180,000 Cash 135,781 Other current assets 953 Property and equipment 34,075 Intangible asset 21,875 Total identifiable assets 192,684 Accounts payable (100) Total liabilities assumed (100) Net assets 192,584 Non-controlling interest 94,366 Total net assets 98,218 Goodwill $ 81,782 11 iQSTEL INC Notes to the Unaudited Consolidated Financial Statements September 30, 2020 NOTE 4 – ACQUISITION (Continued) Unaudited combined proforma results of operations for the nine months ended September 30, 2020 and 2019 as though the Company acquired loT Labs on January 1, 2019, are set forth below: Nine Months Ended September 30, 2020 2019 Revenues $ 40,313,358 $ 32,007,532 Cost of revenues 39,418,379 31,354,143 Gross profit 894,979 653,389 Operating expenses 3,211,867 40,313,358 Operating loss (2,316,888) 39,418,379 Other expense (1,044,813) (4,590,259) Net Loss $ (3,361,701) $ (5,004,853) NOTE 5 – PREPAID AND OTHER CURRENT ASSETS Prepaid and other current assets at September 30, 2020 and December 31, 2019 consist of the following: September 30, December 31, 2020 2019 Advance payment to suppliers $ 6,600 $ 6,600 Other receivable 61,006 78,936 Prepaid expenses 1,221 5,834 Tax receivable 600 600 $ 69,427 $ 91,970 NOTE 6 – PROPERTY AND EQUIPMENT Property and equipment at September 30, 2020 and December 31, 2019 consist of the following: September 30, December 31, 2020 2019 Telecommunication equipment $ 258,790 $ 249,169 Telecommunication software 514,652 436,124 Other equipment 46,371 8,497 Total property and equipment 819,813 693,790 Accumulated depreciation and amortization (465,347) (405,820) Total property and equipment $ 354,466 $ 287,970 Depreciation expense for the nine months ended September 30, 2020 and 2019 amounted to $49,318 and $26,473, respectively. 12 iQSTEL INC Notes to the Unaudited Consolidated Financial Statements September 30, 2020 NOTE 7 –LOANS PAYABLE Loans payable at September 30, 2020 and December 31, 2019 consist of the following: September 30, December 31, Interest 2020 2019 Term rate Unique Funding Solutions_2 $ 2,000 $ 2,000 Note was issued on October 12, 2018 and due on January 17, 2019 28.6% YES LENDER LLC - 25,500 October 17, 2019 and due on March 31, 2020 30.0% Complete Business Solutions_8 - 52,170 December 24, 2010 and due on June 09, 2020 26.0% Nicolas Arvelo 5,000 5,000 Note was issued on November 20, 2019 and due on November 20, 2020 12.0% Martin Mendoza Diaz 5,000 5,000 Note was issued on November 20, 2019 and due on November 20, 2020 12.0% Martus 104,363 99,399 Note was issued on October 23, 2018 and due on January 3, 2022 5.0% Swisspeers AG 56,259 78,623 Note was issued on April 8, 2019 and due on October 4, 2022 7.0% Apollo Management Group, Inc 63,158 - Note was issued on March 18, 2020 and due on December 15, 2020 12.0% Apollo Management Group, Inc 2 68,421 - Note was issued on March 25, 2020 and due on December 15, 2020 12.0% Apollo Management Group, Inc 3 66,316 - Note was issued on April 1, 2020 and due on October 1, 2021 12.0% Apollo Management Group, Inc 4 73,684 - Note was issued on April 2, 2020 and due on October 2, 2021 12.0% Apollo Management Group, Inc 5 36,842 - Note was issued on April 7, 2020 and due on October 7, 2021 12.0% Apollo Management Group, Inc 6 84,211 - Note was issued on April 15, 2020 and due on October 15, 2021 12.0% Apollo Management Group, Inc 7 77,095 - Note was issued on April 20, 2020 and due on December 15, 2020 12.0% Apollo Management Group, Inc 11 21,961 - Note was issued on July 1, 2020 and due on December 15, 2020 12.0% Apollo Management Group, Inc 12 21,053 - Note was issued on August 7, 2020 and due on December 15, 2020 12.0% Labrys Fund 490,000 - Note was issued on June 26, 2020 and due on April 1, 2021 12.0% M2B Funding Corp 300,000 - Note was issued on September 1, 2020 and due on September 1, 2021 12.0% YES LENDER LLC 3 55,313 - Note was issued on August 3, 2020 and due on January 12, 2021 26.0% Darlene Covi19 108,490 - Note was issued on April 1, 2020 and due on March 31, 2025 0.0% Total 1,639,166 267,692 Less: Unamortized debt discount (474) - Total loans payable 1,638,692 267,692 Less: Current portion of loans payable (1,369,580) (89,671) Long-term loans payable $ 269,112 $ 178,021 13 iQSTEL INC Notes to the Unaudited Consolidated Financial Statements September 30, 2020 NOTE 7 –LOANS PAYABLE (Continued) Loans payable to related parties at September 30, 2020 and December 31, 2019 consist of the following: September 30, December 31, 2020 2019 Alonso Van Der Biest $ 80,200 $ 80,200 Alvaro Quintana 10,587 10,587 49% of Shareholder of SwissLink 1,667,575 1,588,261 49% of Shareholder of SwissLink 216,980 206,660 Total 1,975,342 1,885,708 Less: Current portion of loans payable 1,975,342 1,885,708 Long-term loans payable $ - $ - During the nine months ended September 30, 2020 and 2019, the Company borrowed amounts from third parties totaling $933,280 and $446,824, which includes original issue discount and financing costs of $34,316 and $17,953, respectively, and repaid the principal amount of $607,447 and $534,651, respectively. During the nine months ended September 30, 2020 and 2019, the Company recorded interest expense of $180,843 and $154,507 and recognized amortization of discount, included in interest expense, of $33,842 and $17,953, respectively. NOTE 8 – OTHER CURRENT LIABILITIES Other current liabilities at September 30, 2020 and December 31, 2019 consist of the following: September 30, December 31, 2020 2019 Accrued liabilities $ 10,938 $ 2,700 Credit card liabilities - 4,987 Accrued interest 271,560 365,345 Salary payable - management 352,131 268,231 Employee benefits 111,355 192,288 Other current liabilities 15,228 14,933 $ 761,212 $ 848,484 NOTE 9 - CONVERTIBLE NOTES At September 30, 2020 and December 31, 2019, convertible notes consist of the following: September 30, December 31, 2020 2019 Promissory notes – Issued in fiscal year 2019, with variable conversion features $ 5,000 $ 1,908,750 Promissory notes – Issued in fiscal year 2020, with variable conversion features 1,695,327 - Total convertible notes payable 1,700,327 1,908,750 Less: Unamortized debt discount (418,872) (646,212) Total convertible notes 1,281,455 1,262,538 Less: current portion of convertible notes 1,279,011 1,251,096 Long-term convertible notes $ 2,444 $ 11,442 During the nine months ended September 30, 2020 and 2019, the Company recorded interest expense of $689,996 and $349,027 and recognized amortization of discount, included in interest expense, of $1,463,426 and $1,255,815, respectively. During the nine months ended September 30, 2020 and 2019, the Company repaid notes of $492,190 and $660,401 and accrued interest including prepayment penalty of $552,631 and $295,000. 14 iQSTEL INC Notes to the Unaudited Consolidated Financial Statements September 30, 2020 NOTE 9 - CONVERTIBLE NOTES (Continued) Conversion During the nine months ended September 30, 2020, the Company converted notes with principal amounts of $681,118 and accrued interest of $86,313 into 35,813,477 shares of common stock. The corresponding derivative liability at the date of conversion of $3,742,060 was settled through additional paid in capital. Settlement On June 10, 2020, the Company settled a convertible note with accrued interest of $64,230 with a total of 650,000 share issuances. The Company issued 200,000 shares in June, 225,000 shares in July and 503,571 shares in August, which included 278,571 true-up shares. As a result, the Company recognized a loss on settlement of debt of $24,699. 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 July 22, 2020, the Company settled a convertible note with accrued interest of $ 64,363 and an original common stock purchase warrant to purchase 20,000 shares of common stock with a total of 650,000 share issuances. During the period ended September 30, 2020, the Company issued 1,038,375 shares which included 388,375 true-up shares. As a result, the Company recognized a loss on settlement of debt of $9,886. On September 1, 2020, the Company entered into a Multipurpose agreement and issued a new note which a principal balance of $1,045,327 to replace the 15 notes issued from January 2020 to May 2020 which an aggregate principal amount was $985,556 and an aggregate accrued interest was $59,771. The Company also issued another promissory note of $300,000 (Note 7). As a result, the Company recognized a loss on settlement of debt of $300,000. Promissory Notes - Issued in fiscal year 2019 During the year ended December 31, 2019, the Company issued a total of $2,544,250 in notes with the following terms: · Terms ranging from 6 months to 3 years. · Annual interest rates ranging from of 8% to 12%. · Convertible at the option of the holders at issuance or 180 days from issuance. · Conversion prices are typically based on the discounted (39% or 0% discount) lowest trading prices of the Company’s shares during various periods prior to conversion. The convertible notes were also provided with a total of 661,216 common shares and warrant to purchase up to 92,000 shares of common stock at exercise price of $2.5 per share for 3 years. Certain notes allow the Company to redeem the notes at rates ranging from 110% to 150% depending on the redemption date provided that no redemption is allowed after the 180th day. Likewise, the notes include original issue discount and financing costs totaling $278,000 and the Company received cash of $2,266,250. Promissory Notes - Issued in fiscal year 2020 During the nine months ended September 30, 2020, the Company issued a total of $2,708,771 in notes with the following terms: · Terms 12 months. · Annual interest rates 5% or 12%. · Convertible at the option of the holders 90 or 180 days from issuance. · Conversion prices are typically based on the discounted (25% or 60% discount) lowest trading prices of the Company’s shares during 30 trading day periods prior to conversion. Certain note has a capped conversion price of $0.025. 15 iQSTEL INC Notes to the Unaudited Consolidated Financial Statements September 30, 2020 NOTE 9 - CONVERTIBLE NOTES (Continued) Notes allow the Company to redeem the notes at a range from 120% to 125% provided that no redemption is allowed after the 180 th or 185 th day. Likewise, the notes include original issue discount and financing costs totaling $229,444 and the Company received cash of $1,420,000. Certain convertible notes were also provided with a total of 6,500,000 warrants. Derivative liabilities 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 nine months ended September 30, 2020, amounted to $2,047,278. $1,006,642 of the value assigned to the derivative liability was recognized as a debt discount to the notes while the balance of $1,040,636 was recognized as a “day 1” derivative loss. 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. Warrants A summary of activity during the nine months ended September 30, 2020 follows: Warrants Outstanding Weighted Average Shares Exercise Price Outstanding, December 31, 2019 367,343 $ 0.480 Granted 6,500,000 - Reset 10,813,001 0.012 Cashless Exercised (4,097,010) - Forfeited/canceled (7,083,334) - Outstanding, September 30, 2020 6,500,000 $ 0.024 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 September 30, 2020: Warrants Outstanding Warrants Exercisable Number of Shares Weighted Average Remaining Weighted Average Exercise Price Number of Shares Weighted Average Exercise Price Contractual life (in years) 6,500,000 5.70 $ 0.024 6,500,000 $ 0.024 The intrinsic value of the warrants as of September 30, 2020 is $303,250. 16 iQSTEL INC Notes to the Unaudited Consolidated Financial Statements September 30, 2020 NOTE 10 - DERIVATIVE LIABILITIES 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. 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 September 30, 2020 and December 31, 2019. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current 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. The fair value of each convertible note is estimated using the Black-Scholes valuation model. The estimated fair values of the liabilities measured on a recurring basis are as follows: Nine Months Ended Year Ended September 30, December31, 2020 2019 Expected term 0.02 - 6.00 years 0.03 - 5.00 years Expected average volatility 74% - 550% 4% - 639% Expected dividend yield - - Risk-free interest rate 0.05% - 2.56% 1.44% - 2.57% The following table summarizes the changes in the derivative liabilities during the nine months ended September 30, 2020: Fair Value Measurements Using Significant Observable Inputs (Level 3) Balance - December 31, 2019 $ 4,744,134 Addition of new derivatives recognized as debt discounts 1,006,642 Addition of new derivatives recognized as loss on derivatives 1,040,636 Settled on issuance of common stock (3,742,060) Change in fair value of the derivative (2,391,149) Balance - September 30, 2020 $ 658,203 The aggregate (gain) loss on derivatives during the nine months ended September 30, 2020 and 2019 was as follows: Nine Months Ended September 30, 2020 2019 Addition of new derivatives recognized as loss on derivatives $ 1,040,636 $ 3,062,299 (Gain) loss on change in fair value of the derivative (2,391,149) (260,593) $ (1,350,513) $ 2,801,706 17 iQSTEL INC Notes to the Unaudited Consolidated Financial Statements September 30, 2020 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 nine months ended September 30, 2020, the Company issued 60,177,619 shares of common stock, valued at fair market value on issuance as follows; · 8,937,500 shares issued for cash of $715,004 · 6,275,456 shares issued for settlement of debt of $365,678 · 5,867,600 shares issued for services valued at $567,978 · 50,000 shares issued for forbearance of debt of $2,900 · 35,813,477 shares issued for conversion of debt of $767,431 · 3,233,586 shares issued for cashless exercised warrant As of September 30, 2020 and December 31, 2019, 78,186,210 and 18,008,591 shares of common stock were issued and outstanding, respectively. NOTE 12 - RELATED PARTY TRANSACTIONS Due from related party During the nine months ended September 30, 2020, the Company loaned $17,187 to related parties who are a shareholder and a former director, collected $388 and wrote off amounts totaling $43,375. As of September 30, 2020, and December 31, 2019, the Company had due from related parties of $290,284 and $316,860, respectively. The amounts are unsecured, non-interest bearing and due on demand. Due to related parties During the nine months ended September 30, 2020, the Company borrowed $182 from the CFO of the Company and repaid $197 to the CEO and CFO. During the nine months ended September 30, 2020, the Company borrowed $20,000 from Francisco Bunt who owns 49% of loT Labs and repaid $20,000. As of September 30, 2020, and December 31, 2019, the Company had amounts due to related parties of $94,616, which included $60,000 to Francisco Bunt (Note 4) and $34,631, respectively. The amounts are unsecured, non-interest bearing and due on demand. Employment agreements On June 25, 2018, the Company entered into Employment Agreements with the following persons: (i) Leandro Iglesias as President, CEO and Chairperson of the Company’s Board of Directors with an annual salary of $54,000; (ii) Juan Carlos Lopez Silva as Chief Commercial Officer with an annual salary of $54,000; and Alvaro Quintana Cardona as Chief Operating Officer and Chief Financial Officer with an annual salary of $30,000. The Employment Agreements have a term of 36 months, are renewable automatically for 24 month periods, unless the Company gives written notice at least 90 days prior to termination of the initial 36 month term. The Company shall have the right to terminate any of the employment agreements at any time without prior notice, but in that event, the Company shall pay these persons salaries and other benefits they are entitled to receive under their respective agreements for three years. 18 iQSTEL INC Notes to the Unaudited Consolidated Financial Statements September 30, 2020 NOTE 12 - RELATED PARTY TRANSACTIONS (Continued) On May 2, 2019, the Company entered into Employment Agreements with the following persons: (i) Leandro Iglesias as President, CEO and Chairperson of the Company’s Board of Directors with an annual salary of $168,000 with an annual bonus of 3% of our net income; (ii) Juan Carlos Lopez Silva as Chief Commercial Officer with an annual salary of $120,000 with an annual bonus of 3% of our net income; and Alvaro Quintana Cardona as Chief Operating Officer and Chief Financial Officer with an annual salary of $144,000 with an annual bonus of 3% of our net income. The Employment Agreements have a term of 36 months, are renewable automatically for 24-month periods, unless the Company gives written notice at least 90 days prior to termination of the initial 36-month term. The Company shall have the right to terminate any of the employment agreements at any time without prior notice, but in that event, the Company shall pay these persons salaries and other benefits they are entitled to receive under their respective agreements for three years. The above executive officers agreed to two year non-compete and non-solicit restrictive covenants with the Company. If any of the executive officers are terminated for cause they shall forfeit any rights to severance. On March 3, 2020, Oscar Brito resigned as a member of our Board of Directors. There was no known disagreement with Mr. Brito on any matter relating to our operations, policies or practices. The Company provided the severance package as follows; · 2,000,000 shares of common stock valued at $300,000 · Additional 173,000 shares in order to apply the anti-dilution protection, valued at $10,034 · Forgiveness of amounts due to the Company totaling $43,375 · Cash payment of $15,000. 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. On March 16, 2020, our Board of Directors adopted a Director Compensation Plan that applies to members of our Board of Directors. Below are the features of the plan: · All Directors shall receive reimbursement for reasonable travel expenses incurred to attend Board and committee meetings. · All Directors shall be compensated $3,000 monthly for their service as Directors. · 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 nine months ended September 30, 2020 and 2019, the Company recorded management fees of $378,000 and $226,000 and paid $91,600 and $116,200, respectively. During the nine months ended September 30, 2020, the Company settled accrued salary – management of $202,500 and issued 4,308,510 shares. As at September 30, 2020 and December 31, 2019, the Company accrued management salaries of $352,131 and $268,231, respectively. NOTE 13 – COMMITMENTS AND CONTIGENCIES Leases and Long-term Contracts The Company has not entered into any long-term leases, contracts or commitments. Lease The Company leases facilities which the term is 12 months. For the nine months ended September 30, 2020 and 2019, the Company incurred $16,100 and $17,600, respectively. 19 iQSTEL INC Notes to the Unaudited Consolidated Financial Statements September 30, 2020 NOTE 14 – SEGMENT At September 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 and nine months ended September 30, 2020 and 2019: Three months Ended September 30, 2020 USA Switzerland Elimination Total Revenues $ 11,763,153 $ 1,535,881 $ (7,336) $ 13,291,698 Cost of revenue 11,830,752 1,335,269 (7,336) 13,158,685 Gross profit (67,599) 200,612 - 133,013 Operating expenses General and administration 784,662 174,125 - 958,787 Operating income (loss) (852,261) 26,487 - (825,774) Other income (expense) (131,391) (13,060) - (144,451) Net income $ (983,652) $ 13,427 $ - $ (970,225) Three months Ended September 30, 2019 USA Switzerland Elimination Total Revenues $ 3,637,957 $ 534,590 $ - $ 4,172,547 Cost of revenue 3,486,658 442,479 - 3,929,137 Gross profit 151,299 92,111 - 243,410 Operating expenses General and administration 380,146 112,636 - 492,782 Operating income (loss) (228,847) (20,525) - (249,372) Other income (expense) (3,256,348) (12,303) - (3,268,651) Income credit - 852 - 852 Net loss $ (3,485,195) $ (31,976) $ - $ (3,517,171) 20 iQSTEL INC Notes to the Unaudited Consolidated Financial Statements September 30, 2020 NOTE 14 – SEGMENT (Continued) Nine months Ended September 30, 2020 USA Switzerland Elimination Total Revenues $ 25,531,523 $ 3,917,085 $ (9,412) $ 29,439,196 Cost of revenue 25,339,224 3,405,204 (9,412) 28,735,016 Gross profit 192,299 511,881 - 704,180 Operating expenses General and administration 2,658,721 502,609 - 3,161,330 Operating income (loss) (2,466,422) 9,272 - (2,457,150) Other income (expense) (1,022,167) (22,646) - (1,044,813) Net loss $ (3,488,589) $ (13,374) $ - $ (3,501,963) Nine months Ended September 30, 2019 USA Switzerland Elimination Total Revenues $ 12,054,519 $ 534,590 $ - $ 12,589,109 Cost of revenue 11,559,371 442,479 - 12,001,850 Gross profit 495,148 92,111 - 587,259 Operating expenses General and administration 912,206 112,636 - 1,024,842 Operating income (loss) (417,058) (20,525) - (437,583) Other income (expense) (4,577,956) (12,303) - (4,590,259) Income credit - 852 - 852 Net loss $ (4,995,014) $ (31,976) $ - $ (5,026,990) As of August 7, 2019, having completed all conditions under the Purchase Agreement, the Company acquired SwissLink located in Switzerland. 21 iQSTEL INC Notes to the Unaudited Consolidated Financial Statements September 30, 2020 NOTE 14 – SEGMENT (Continued) Asset Information The following table shows asset information by geographic segment at September 30, 2020 and December 31, 2019: September 30, 2020 USA Switzerland Elimination Total Assets Current assets $ 3,146,769 $ 675,725 $ (853,841) $ 2,968,653 Non-current assets $ 3,490,235 $ 534,882 $ (1,669,515) $ 2,355,602 Liabilities Current liabilities $ 6,419,048 $ 2,375,682 $ (853,841) $ 7,940,889 Non-current liabilities $ 2,444 $ 424,192 $ - $ 426,636 December 31, 2019 USA Switzerland Elimination Total Assets Current assets $ 3,073,654 $ 1,174,856 $ (810,013) $ 3,438,497 Non-current assets $ 3,146,894 $ 456,070 $ (1,438,515) $ 2,164,449 Liabilities Current liabilities $ 9,041,421 $ 2,914,237 $ (810,013) $ 11,145,645 Non-current liabilities $ 11,442 $ 216,274 $ - $ 227,716 NOTE 15 - SUBSEQUENT EVENTS Subsequent to September 30, 2020 and through the date that these financials were made available, the Company had the following subsequent events: On November 1, 2020, our board of directors approved amended employments in favor of our Chief Executive Officer, Leandro Iglesias, our Chief Financial Officer, Alvaro Quintana, and our Chief Commercial Officer, Juan Carlos Lopez Silva. The amended employment agreement in favor of Mr. Iglesias extended the term of employment from 36 months to 60 months. The now five year employment agreement with Mr. Iglesias provides that we will compensate him with a salary of $17,000 monthly and he is eligible for quarterly bonus of 250,000 shares of our common stock. If we do not have the cash available, the agreement provides that Mr. Iglesias may convert his accrued salary/bonus into shares of our common stock or newly created Series A Preferred Stock. For common shares, the amount of accrued salary to be converted into shares must be determined by considering the average price per share of the Company’s common stock on the OTC Markets during the last 10 days and applying a discount of 25%.” For Series A Preferred Shares, the amount of accrued salary to be converted into shares is the per share conversion price for common shares multiplied by ten US Dollars ($10). Mr. Iglesias has a further right to convert any common shares under his control into Series A Preferred shares at any time at a rate of ten (10) common shares for each Series A Preferred share. The amended employment agreement in favor of Mr. Quintana extended the term of employment from 36 months to 60 months. The now five year employment agreement with Mr. Quintana provides that he is eligible for quarterly bonus of 200,000 shares of our common stock. If we do not have the cash available, the agreement provides that Mr. Quintana may convert his accrued salary/bonus into shares of our common stock or newly created Series A Preferred Stock. For common shares, the amount of accrued salary to be converted into shares must be determined by considering the average price per share of the Company’s common stock on the OTC Markets during the last 10 days and applying a discount of 25%.” For Series A Preferred Shares, the amount of accrued salary to be converted into shares is the per share conversion price for common shares multiplied by ten US Dollars ($10). Mr. Quintana has a further right to convert any common shares under his control into Series A Preferred shares at any time at a rate of ten (10) common shares for each Series A Preferred share. The amended employment agreement in favor of Mr. Silva extended the term of employment from 36 months to 60 months. Mr. Silva is eligible for quarterly bonuses of 150,000 shares of our common stock. If we do not have the cash available, the agreement provides that Mr. Iglesias may convert his accrued salary/bonus into shares of our common stock at the average price of our common stock during the last 10 days after applying a discount of 25%. 22 iQSTEL INC Notes to the Unaudited Consolidated Financial Statements September 30, 2020 NOTE 15 - SUBSEQUENT EVENTS (Continued) 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. 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 shareholders at a rate of 51% of the total vote of shareholders. 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 23