What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-04-15 compared with 2020-04-15 · 491 added, 239 removed, 451 unchanged (62% of the section changed)

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Audited Financial Statements:

Report of Independent Registered Public Accounting Firm;

Report of Independent Registered Public Accounting Firm Audited Financial Statement for the Year ended December 31, 2020;

Report of Independent Registered Public Accounting Firm Audited Financial Statement for the Year ended December 31, 2019;

Consolidated Balance Sheets as of December 31, 2020 and 2019;

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Notes to Consolidated Financial Statements.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

Coral Gables, FL

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of iQSTEL, Inc.

(the “Company”) as of December 31, 2020, the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020, and the results of its operations and its cash flows for the year then ended , in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations, has a working capital deficiency, and does not have an established source of revenues sufficient to cover its operating costs.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 3.

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

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit Company’s board of directors and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition

Critical Audit Matter Description

The Company recognizes revenue upon transfer of control of promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those services.

Significant judgment is exercised by the Company in determining revenue recognition for customer agreements, and include the pattern of delivery (i.e., timing of when revenue is recognized) for each distinct performance obligation.

The related audit effort in evaluating management’s judgments in determining revenue recognition for customer agreements required a high degree of auditor judgment.

How the Critical Audit Matter was Addressed in the Audit

Our principal audit procedures related to the Company’s revenue recognition for customer agreements included the following:

· We gained an understanding of internal controls related to revenue recognition.

· We evaluated management’s significant accounting policies for reasonableness.

· We selected a sample of revenues recognized and performed the following procedures:

· Obtained and read contract source documents for each selection and other documents that were part of the agreement, if applicable.

· Assessed the terms in the customer agreement and evaluated the appropriateness of management’s application of their accounting policies, along with their use of estimates, in the determination of revenue recognition conclusions.

· We tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the financial statements.

Going Concern

Critical Audit Matter Description

As described further in Note 3 to the financial statements, the Company has suffered recurring losses from operations, has a working capital deficiency, and does not have an established source of revenues sufficient to cover its operating costs.

The ability of the Company to continue as a going concern is dependent on executing business plan and ultimately to attain profitable operations.

Accordingly, the Company has determined that these factors raise substantial doubt as to the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.

Management intends to continue to fund its business by way of public or private offerings of the Company’s stock or through loans from private investors, in order satisfy the Company’s obligations as they come due for at least one year from the financial statement issuance date.

However, the Company has not concluded that these plans alleviate the substantial doubt related to its ability to continue as a going concern.

How the Critical Audit Matter was Addressed in the Audit

We determined the Company’s ability to continue as a going concern is a critical audit matter due to the estimation and uncertainty regarding the Company’s available capital and the risk of bias in management’s judgments and assumptions in their determination.

Our audit procedures related to the Company’s assertion on its ability to continue as a going concern included the following, among others:

· We inquired of Company management and reviewed company records to assess whether there are additional factors that contribute to the uncertainties disclosed.

· We assessed whether the Company’s determination that there is substantial doubt about its ability to continue as a going concern was adequately disclosed.

· We performed testing procedures such as analytical procedures to identify conditions and events that indicate there could be substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time.

· We reviewed and evaluated management's plans for dealing with adverse effect of these conditions and event.

Valuation of Derivative Liabilities

Critical Audit Matter Description

As described further in Notes 2, 9, and 10 to the financial statements, the Company determined that the conversion features of its convertible notes and certain warrants issued in conjunction with financing arrangements required to be accounted for as derivative liabilities.

The derivative liabilities are recorded at fair value when issued and subsequently re-measured to fair value each reporting period.

The Company utilized a binomial option pricing model to determine the fair value of the derivative liabilities, which uses certain assumptions related to exercise price, term, expected volatility, and risk-free interest rate.

How the Critical Audit Matter was Addressed in the Audit

We determined the assessment of the fair values of the derivative liabilities as a critical audit matter due to the significant judgements used by the Company in determining the fair value of the derivative liabilities.

Auditing the valuation of the derivative liabilities involved a high degree of auditor judgement and specialized skills and knowledge were needed.

Our audit procedures consisted of the following, among others:

· Testing management’s process for developing the fair value measurement.

· Evaluating the appropriateness of the binomial option model used by the Company to value the derivative liabilities.

· Testing the reasonableness of the assumptions used by the Company in the binomial option model including exercise price, term, expected volatility, and risk-free interest rate.

· Testing the accuracy and completeness of data used by the Company in developing the assumptions use in the binomial option model.

/s/ Urish Popeck & Co., LLC

Pittsburgh, PA

April 15, 2021

We have served as the Company's auditor since 2020.

Boyle CPA, LLC

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Board of Directors of iQSTEL Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of iQSTEL Inc.(the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of operations, stockholder’s equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of iQSTEL Inc.(the “Company”) as of December 31, 2019, the related consolidated statements of operations, stockholder’s equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

As discussed in Note 3 to the consolidated financial statements, the Company’s lack of cash and lack of an established source of revenues raises substantial doubt about its ability to continue as a going concern for one year from the issuance of these financial statements.

Management’s plans are also described in Note 3.

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

Basis of Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States).

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to fraud or error.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States).

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to fraud or error.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing and opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

As discussed in Note 3 to the consolidated financial statements, the Company’s working capital deficiency and lack of an established source of revenues raises substantial doubt about its ability to continue as a going concern for one year from the issuance of these consolidated financial statements.

Management’s plans are also described in Note 3.

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

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Boyle CPA, LLC

We have served as the Company’s auditor since 2017

We served as the Company’s auditor from 2017 to 2020.

April 15, 2020

361 Hopedale Drive SE

P (732) 822-4427

Bayville, NJ 08721

F (732) 510-0665

361 Hopedale Drive SE P (732) 822-4427

Bayville, NJ 08721 F (732) 510-0665

Consolidated Balance Sheets

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Property and equipment, net

Intangible asset

Deferred tax assets

LIABILITIES AND SHAREHOLDERS' DEFICIT

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities

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Due to related parties

Loans payable

Loans payable - net of discount of $19,221 and $0

Loans payable - related parties

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Convertible notes - net of discount of $2,184 and $48,558

Loans payable

Employee benefits, non-current

TOTAL LIABILITIES

Shareholders' Deficit

Stockholders' Deficit

Preferred stock:

1,200,000 authorized;

$0.001 par value

Series A Preferred stock:

10,000 designated;

$0.001 par value,

10,000 and 0 shares issued and outstanding, respectively

Series B Preferred stock:

200,000 designated;

$0.001 par value,

No shares issued and outstanding

Series C Preferred stock:

200,000 designated;

$0.001 par value,

No shares issued and outstanding

Common stock:

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Accumulated deficit

Accumulated other comprehensive income

Deficit Attributed to Shareholders of iQSTEL Inc.

Accumulated other comprehensive loss

Deficit attributed to stockholders of iQSTEL Inc.

Deficit attributable to noncontrolling interests

Total Shareholders' Deficit

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT

Total stockholders' Deficit

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

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

Consolidated Statements of Operations

Cost of goods sold

Cost of revenue

Operating expenses

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Change in fair value of derivative liabilities

Gain on settlement of debt

Loss on settlement of debt

Total other expense

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Net income (loss) attributable to noncontrolling interests

Net Loss Attributed to Shareholders of iQSTEL Inc.

Net loss attributed to stockholders of iQSTEL Inc.

Comprehensive loss

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Total comprehensive loss

Comprehensive income attributable to noncontrolling interests

Net Comprehensive Loss Attributed to Shareholders of iQSTEL Inc.

Basic and dilutive loss per common share

Weighted average number of common shares outstanding

Comprehensive income (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 - Basic and diluted

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

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For the years ended December 31, 2020 and 2019

Preferred Stock

Comprehensive

Shareholders'

Debt forgiveness

Recapitalization

issued for services

conjunction with

convertible notes

conversion of debt

exercised cashless

December 31, 2018

$ (2,667,388)

$ (1,597,647)

Common stock issued for acquisition

Capital Contribution

Common stock issued in conjunction with convertible notes

Common stock issued for conversion of debt

Common stock issued for exercised cashless warrant

Debt forgiveness

Resolution of

Foreign currency

Resolution of derivative liabilities

Foreign currency translation adjustments

December 31, 2019

$ (8,125,257)

$ (4,866,902)

$ (5,770,415)

Preferred stock issued for conversion of common stock

Common stock issued for cash

Common stock issued for settlement of debt

Common stock issued for services

Common stock issued for forbearance of debt

Common stock issued for conversion of debt

Common stock issued for exercised cashless warrant

Common stock issued for acquisition of Itsbchain LLC

Acquisition of IoT Lab

Resolution of derivative liabilities

Foreign currency translation adjustments

December 31, 2020

$ (14,699,148)

$ (1,388,575)

$ (1,006,461)

$ (2,395,036)

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

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Stock based compensation

Allowance for doubtful accounts

Write-off of due from related party

Depreciation and amortization

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Other current assets

Due from related party

Accounts payable

Other current liabilities

Deferred tax asset

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of subsidiary

Purchase of fixed assets

Acquisition of subsidiary, net of cash acquired

Purchase of property and equipment

Payment of loan receivable - related party

Collection from loan receivable - related party

Collection from due from related parties - related party

Net cash provided by (used in) investing activities

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Repayment of loans payable - related parties

Due to related parties

Common stock issued

Subscription receivable

Proceeds from convertible notes

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Derivative liabilities recognized as debt discount

Related party debt forgiveness

Common stock issued in conjunction with convertible notes

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Debt forgiveness

Common stock issued for settlement of debt

Amount owing for acquisition of IOT

Common stock issued for forbearance of debt

Replacement of convertible notes to note payable

Preferred stock issued for conversion of common stock

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

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

Effective May 9, 2018, we effected a 1 for 19,152 reverse stock split of our issued and outstanding common stock (the “Reverse Stock Split”).

All references to shares of our common stock in this report on Form 10-K refers to the number of shares of common stock after giving effect to the Reverse Stock Split (unless otherwise indicated).

Membership Interest Purchase Agreements and Reorganization

On June 25, 2018 (the “Effective Date”), iQSTEL entered into a membership purchase agreement with Etelix.com USA, LLC (“Etelix”) and became a 100% subsidiary of iQSTEL.

Pursuant to the terms of the membership interest purchase agreement, iQSTEL issued 13,751,875 shares of its unregistered common stock to the members of Etelix in exchange for their memberships interests in Etelix and as a result of the Purchase Agreements, Etelix became a wholly owned subsidiary of iQSTEL.

The Company entered into certain ancillary agreements (the “Ancillary Agreements”) noted in the Purchase Agreement, consisting of three Conversion Agreements the Company executed with Carmen Cabell, Patrick Gosselin and Mark Engler.

The Conversion Agreements converted a portion of the Series A Preferred Stock held by these shareholders into shares of the Company’s common stock, and canceled the balance of the Series A Preferred Stock held by these shareholders.

Following the execution of the Conversion Agreements, Mr.

Gosselin owned 250,032 shares of common stock and no shares of preferred stock in the Company;

Cabell owned 250,080 shares of common stock and no shares of preferred stock in the Company;

Engler owned 250,032 shares of common stock and no shares of preferred stock in the Company.

Recapitalization

For financial accounting purposes, this transaction was treated as a reverse acquisition by Etelix, and resulted in a recapitalization with Etelix being the accounting acquirer and iQSTEL as the acquired company.

The consummation of this reverse acquisition resulted in a change of control.

Accordingly, the historical financial statements prior to the acquisition are those of the accounting acquirer, Etelix and have been prepared to give retroactive effect to the reverse acquisition completed on June 25, 2018, and represent the operations of Etelix.

The consolidated financial statements after the acquisition date, June 25, 2018 include the balance sheets of both companies at historical cost, the historical results of Etelix and the results of the Company from the acquisition date.

All share and per share information in the accompanying consolidated financial statements and footnotes has been retroactively restated to reflect the recapitalization.

On April 1, 2019, the Company entered into a Company Purchase Agreement (the “Purchase Agreement”) by and between the Company and the Ralf Kohler (the “Seller”), which agreement provides for the purchase of 51% of the equity and certain assets of SwissLink Carrier AG (“SwissLink”) (www.swisslink-carrier.com), a Swiss corporation, by the Company.

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, fixed line companies and other wholesale carriers.

On April 1, 2019, the Company entered into a Company Purchase Agreement (the “Purchase Agreement”) by and between by Company and the Ralf Kohler (the “Seller”), which agreement provides for the purchase of 51% of the equity and certain assets of SwissLink Carrier AG (“SwissLink”) (www.swisslink-carrier.com), a Swiss corporation, by the Company.

The consideration for the acquisition consists of $500,000 USD, payable as follows:

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

NOTE 1 -ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)

· $50,000 USD shall be paid in cash upon execution of the Purchase Agreement;

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The payment for the acquisition of SwissLink Carrier AG, was agreed to be done with $50,000 in cash and the balance of $450,000 in common shares of iQSTEL with an initial price per share of $2.40;

giving us a number of 187,500 shares ($450,000 / 2.40 $ per shares = 187,500 shares) to be issue;

giving us a number of 187,500 shares ($450,000 / 2.40 $ per shares = 187,500 shares) to be issued;

but the purchase agreement included a clause to adjust the number of shares to be ultimately issued if the price of the shares was less than $2.40 at the closing date.

Since at the closing date the price of the shares was $1.31 the total shares to be issued to the Seller should be 343,512, and this was the total shares finally issue to the Seller.

SwissLink Carrier AG is a provider of international telephone traffic around the globe, which trades international VoIP (voice over IP) telephone minutes through its Software Management platform named VAMP.

SwissLink is a provider of international telephone traffic around the globe, which trades international VoIP (voice over IP) telephone minutes through its Software Management platform named VAMP.

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 IoT Labs, LLC (“IoT Labs”).

The IoT 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 December 31, 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 April 15, 2021, the date of issuance of this Annual Report on Form 10-K.

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

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Consolidation Policy

For December 31, 2018, the consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries, Etelix.com USA, LLC and SwissLink Carrier AG.

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 IoT Labs, LLC.

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

Prior to June 25, 2018, the financial statements presented are those of Etelix.

Use of Estimates

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Results of operations of the acquired entity are included in the Company’s results from the date of the acquisition onward and include amortization expense arising from acquired tangible and intangible assets.

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Foreign Currency Translation and Re-measurement

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

The Company’s and Etelix’s functional currency and reporting currency is the U.S.

The Company’s, Etelix’s, QGlobal’s and IoT Labs’ functional currency and reporting currency is the U.S.

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

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

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

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

As of December 31, 2019 and 2018, the Company had $0 and $313,414, respectively, in valuation allowance for doubtful accounts for the Company’s accounts receivable.

During the year ended December 31, 2020 and 2019, the Company had bad debt expense of $137,749 and $0, respectively.

Long-Lived Assets

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If impairment is indicated, the asset is written down to its estimated fair value.

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fixed assets, consisting of telecommuting equipment and software, is recorded at cost reduced by accumulated depreciation and amortization.

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In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or the group of assets.

An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased.

If such indication exists, the recoverable amount is estimated.

A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognized.

If that is the case the carrying amount of the asset is increased to its recoverable amount.

That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years.

Such reversal is recognized in profit or loss.

After such a reversal the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

We allocate goodwill to reporting units based on the reporting unit expected to benefit from the business combination.

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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.

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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.

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There were no potentially dilutive shares of common stock outstanding for the years ended December 31, 2020 and 2019.

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Concentrations of Credit Risk

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During the year ended December 31, 2020 and 2019, 6 customers represented 70% of our revenues and 8 customers represented 70% of our revenues, respectively.

34% 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.

Financial Instruments

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or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

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It is not, however, practical to determine the fair value of amounts due to related party’s due to their related party nature.

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Derivative Financial Instruments

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Revenue Recognition

The Company recognizes revenue from the sale of products in accordance with ASC 606, “ Revenue from Contracts with Customers.” The Company recognizes revenue only when all of the following criteria have been met:

 Identify the contract(s) with a customer

 Identify the performance obligations in the contract

 Determine the transaction price.

 Allocate the transaction price to the performance obligations in the contract.

 Recognize revenue when (or as) the entity satisfies a performance obligation.

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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.

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.

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These costs primarily consist of usage charges for calls terminated in vendor’s network.

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.

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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.

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes.

This guidance will be effective for entities for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 on a prospective basis, with early adoption permitted.

We will adopt the new standard effective January 1, 2021 and do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt—Debt with “Conversion and Other Options” and ASC subtopic 815-40 “Hedging—Contracts in Entity’s Own Equity”.

The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock.

Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting;

and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital.

The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.

NOTE 3 - GOING CONCERN

The Company's consolidated 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 has a working capital deficiency and it does not have an established source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern.

In addition, as of December 31, 2019, the Company had a net loss of $5,442,738.

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 Company's consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.

The Company has suffered recurring losses from operations, has a working capital deficiency and does not have an established source of revenues sufficient to cover its operating costs.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

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

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish its business plan and eventually attain profitable operations.

During the next year, the Company's foreseeable cash requirements will relate to continual development of the operations of its business, maintaining its good standing and marketing expenses.

During the next year, the Company's foreseeable cash requirements will relate to continual development of the operations of its business, maintaining its good standing in the industry and continuing its marketing efforts.

The Company may experience a cash shortfall and be required to raise additional capital.

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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 IoT 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.

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 4 - ACQUISTION

NOTE 4 – ACQUISITION (CONTINUED)

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

IoT 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

On April 1, 2019, iQSTEL Inc.

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Swisslink has been included in our consolidated results of operations since their respective acquisition dates.

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 4 – ACQUISITION (CONTINUED)

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

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Total net assets

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Unaudited combined proforma results of operations for the year ended December 31, 2020 and 2019 as though the Company acquired IoT Labs and SwissLink on January 1, 2019, are set forth below:

Cost of revenues

Operating expenses

Operating loss

Other expense

NOTE 5 – PREPAID AND OTHER CURRENT ASSETS

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Tax receivable

NOTE 6 – FIXED ASSETS, NET

Fixed assets, net at December 31, 2019 and 2018 consisted of the following:

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 6 – PROPERTY AND EQUIPMENT

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

Telecommunication equipment

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Other equipment

Total fixed assets

Total property and equipment

Accumulated depreciation and amortization

Total Fixed assets

Total property and equipment

Depreciation expense for the year ended December 31, 2020 and 2019 amounted to $68,602 and $41,737, respectively.

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

Complete Business Solutions_3

Note was issued on April 13, 2018 and due on March 9, 2019

Green Capital Funding_2

Note was issued on October 1, 2018 and due on February 27, 2019

Unique Funding Solutions_2

Note was issued on October 12, 2018 and due on January 17, 2019

Green Note Capital Partner

Note was issued on October 22, 2018 and due on February 22, 2019

Queen Funding LLC

Note was issued on November 29, 2018 and due on March 13, 2019

Green Capital Funding_3

Note was issued on December 20, 2018 and due on May 15, 2019

YES LENDER LLC

October 17, 2019 and due on March 31, 2020

YES LENDER LLC 3

Note was issued on August 3, 2020 and due on January 12, 2021

Complete Business Solutions_8

December 24, 2010 and due on June 09, 2020

Advance Service Group LLC

Note was issued on October 20, 2020 and due on February 19, 2021

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 is due on January 3, 2022

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

Apollo Management Group, Inc

Note was issued on March 18, 2020 and due on December 15, 2020

Apollo Management Group, Inc 2

Note was issued on March 25, 2020 and due on December 15, 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 December 15, 2020

Apollo Management Group, Inc 14

Note was issued on December 4, 2020 and due on January 4, 2021

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

M2B Funding Corp

Note was issued on September 1, 2020 and due on September 1, 2021

M2B Funding Corp 1

Note was issued on December 10, 2020 and due on January 9, 2021

M2B Funding Corp 2

Note was issued on December 18, 2020 and due on January 17, 2021

M2B Funding Corp 3

Note was issued on December 24, 2020 and due on January 23, 2021

M2B Funding Corp 4

Note was issued on December 30, 2020 and due on January 29, 2021

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

Swisspeers AG

Note is due on October 4, 2022

Note was issued on April 8, 2019 and due on October 4, 2022

Darlene Covi19

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

Unamortized debt discount

Total loans payable

Current portion of loans payable

Long-term loans payable

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 7 –LOANS PAYABLE (CONTINUED)

Loans payable related parties at December 31, 2020 and 2019 consisted of the following:

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Current portion of loans payable

Long-term loans payable

During the year ended December 31, 2019 and 2018, the Company borrowed from third parties $424,960 and $796,864 and repaid the principal amount of $527,239 and $830,265, respectively.

During the year ended December 31, 2019 and 2018, the Company recorded interest expense of $207,660 and $392,075, respectively.

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

During the year ended December 31, 2020 and 2019, the Company borrowed from third parties totaling $1,239,620 and $424,960, which includes original issue discount and financing costs of $63,970 and $17,953 and repaid the principal amount of $969,664 and $527,239, respectively.

During the year ended December 31, 2020 and 2019, the Company recorded interest expense of $77,101 and $207,660 and recognized amortization of discount, included in interest expense, of $44,749 and $17,953, respectively.

NOTE 8 – OTHER CURRENT LIABILITIES

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Accrued liabilities

Credit card liabilities

Accrued interest

Salary payable - management

Employee benefit

Employee benefits

Other current liabilities

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During the year ended December 31, 2020 and 2019, the Company recorded interest expense of $487,012 and $506,649 and recognized amortization of discount, included in interest expense, of $2,176,757 and $1,921,734, respectively.

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 9 - CONVERTIBLE LOANS (CONTINUED)

During the year ended December 31, 2020 and 2019, the Company repaid notes of $942,190 and $824,401 and accrued interest including prepayment penalty of $675,771 and $365,133, respectively.

Notes in Default

Certain convertible notes held by the company were in default.

During the period ended December 31, 2019, the Company did not maintain the covenant requiring the Company to be current with all financial filings.

As a result of the breach, the company recorded a penalty of $8,151 as principal amount.

During the period ended December 31, 2020 and 2019, the Company did not maintain the covenant requiring the Company to be current with all financial filings.

As a result of the breach, the company recorded a penalty of $0 and $8,151 as principal amount.

During the year ended December 31, 2020, the Company converted notes with principal amounts of $1,302,785 and accrued interest of $93,656 into 46,575,378 shares of common stock.

The corresponding derivative liability at the date of conversion of $4,275,728 was settled through additional paid in capital.

During the year ended December 31, 2019, the Company converted notes with principal amounts and accrued interest of $33,750 into 1,169,723 shares of common stock.

The corresponding derivative liability at the date of conversion of $430,495 was settled through additional paid in capital.

Promissory Notes - Issued in fiscal year 2018

During the year ended December 31, 2018, the Company issued a total of $213,750 notes with the following terms:

 Terms ranging from 9 months to 12 months.

 Annual interest rates ranging from of 10% to 12%.

 Convertible at the option of the holders at issuance.

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

NOTE 9 - CONVERTIBLE LOANS (CONTINUED)

 Conversion prices are typically based on the discounted (50% discount) lowest trading prices of the Company’s shares during various periods prior to conversion.

Certain notes allow the Company to redeem the notes at rates ranging from 130% to 150% depending on the redemption date provided that no redemption is allowed after the 180th day.

Likewise, the notes include financing costs totaling to $12,250 and the Company received cash of $201,500.

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

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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.

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 9 - CONVERTIBLE LOANS (CONTINUED)

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 year ended December 31, 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.

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 with exercise price ranging from $0.02 to $0.03.

Derivative liabilities

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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 using the Black Scholes valuation model.

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 year ended December 31, 2020, amounted to $2,714,029.

$1,673,393 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 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 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.

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NOTE 9 - CONVERTIBLE LOANS (CONTINUED)

A summary of activity during the year ended December 31, 2019 follows:

A summary of activity during the year ended December 31, 2020 and 2019 follows:

Warrants Outstanding

Contractual life

Outstanding, December 31, 2018

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Outstanding, December 31, 2019

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 1,115,038 and the total warrants exercisable into 1,145,038 shares of common stock at $0.0655 per share.

We accounted for the issuance of the warrants as liability and recognize the derivative liability (Note 10).

The following table summarizes information relating to outstanding and exercisable warrants as of December 31, 2019:

Warrants Outstanding

Warrants Exercisable

Weighted Average

Contractual life

Exercise Price

The intrinsic value of the warrants as of December 31, 2019 is $0.

Cashless Exercised

Outstanding, December 31, 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 $0.0014 per share.

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

NOTE 10 – DERIVATIVE LIABILITY

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For the year ended December 31, 2020 and 2019, the estimated fair values of the liabilities measured on a recurring basis are as follows:

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

NOTE 10 – DERIVATIVE LIABILITY (CONTINUED)

Expected term

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0.05% - 2.56%

1.44% - 2.57%

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 10 – DERIVATIVE LIABILITY (CONTINUED)

The following table summarizes the changes in the derivative liabilities during the year ended December 31, 2020 and 2019:

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Addition of new derivatives recognized as loss on derivatives

Settled on issuance of common stock

Gain on change in fair value of the derivative

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Settled on issuance of common stock

Gain on change in fair value of the derivative

Change in fair value of the derivative

Balance - December 31, 2020

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Addition of new derivatives recognized as loss on derivatives

Revaluation of derivative liabilities

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

NOTE 11 – SHAREHOLDERS’ EQUITY

The Company’s authorized capital consists of 100,000,000 shares of common stock with a par value of $0.001 per share as of December 31, 2019 and 2018.

On August 7, 2018, our board of directors and a majority of our shareholders approved an amendment to our Articles of Incorporation for the purpose of decreasing our authorized common stock to 100,000,000 shares, par value $0.001 per share, and cancelling our authorized preferred stock.

On June 25, 2018, pursuant to the Membership Interest Purchase Agreement (see Note 1), the Company issued 13,751,875 shares of common stock to the members of Etelix.com USA LLC in exchange for the Etelix.com USA LLC membership interest.

As a result of the reverse acquisition accounting, these shares issued to the former members of Etelix.com USA LLC are treated as being outstanding from the date of issuance of the Etelix.com USA LLC membership.

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

Series A Preferred Stock

On November 3, 2020, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock entitled Series A Preferred Stock, consisting of up 10,000 shares, par value $0.001.

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

During the year ended December 31, 2020, 100,000 shares of common stock were converted into 10,000 shares of Series A Preferred Stock by our management.

As of December 31, 2020 and 2019, 10,000 and 0 shares of Series A Preferred Stock were issued and outstanding, respectively.

Notes to the Consolidated Financial Statements

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NOTE 11 – SHAREHOLDERS’ EQUITY (CONTINUED)

Series B Preferred Stock

On November 11, 2020, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock entitled Series B Preferred Stock, consisting of up 200,000 shares, par value $0.001.

Under the Certificate of Designation, holders of Series B Preferred Stock will receive a liquidation preference of $81 per share in any distribution upon winding up, dissolution, or liquidation of the Company before junior security holders, as provided in the designation.

Holders of Series B Preferred Stock are entitled to receive as, when, and if declared by the Board of Directors, dividends in kind at an annual rate equal to twenty four percent (24%) of $81 per share for each of the then outstanding shares of Series B Preferred Stock, calculated on the basis of a 360-day year consisting of twelve 30-day months.

Holders of Series B Preferred Stock do not have voting rights but may convert into common stock after twelve months from the issuance date, at a conversion rate of one thousand (1,000) shares of Common Stock for every one (1) share of Series B Preferred Stock.

Upon conversion, the shares are subject to a one-year leak-out restriction on sales into the market of no more than 5% previous month’s stock liquidity.

Series C Preferred Stock

On January 7, 2021, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock entitled Series C Preferred Stock, consisting of up 200,000 shares, par value $0.001.

Under the Certificate of Designation, holders of Series C Preferred Stock will rank junior to the Series B Preferred Stock, but on par with common stock and Series A Preferred Stock in any distribution upon winding up, dissolution, or liquidation of the company, as provided in the designation.

The holders of shares of Series C Preferred Stock have no dividend rights except as may be declared by the Board in its sole and absolute discretion, out of funds legally available for that purpose.

Holders of Series B Preferred Stock do not have voting rights but may convert into common stock after twenty four months from the issuance date, at a conversion rate of one thousand (1,000) shares of Common Stock for every one (1) share of Series C Preferred Stock.

Upon conversion, the shares are subject to a one-year leak-out restriction on sales into the market of no more than 5% previous month’s stock liquidity.

The rights of the holders of Series C Preferred Stock are defined in the relevant Certificate of Designation filed with the Nevada Secretary of State on January 7, 2021.

During the year ended December 31, 2020, the Company issued 100,224,841 shares of common stock, valued at fair market value on issuance as follows;

· 23,937,500 shares issued for cash of $1,915,005

· 12,818,145 shares issued for settlement of debt of $889,093

· 6,267,600 shares issued for services valued at $647,858

· 1,150,000 shares issued for forbearance of debt of $92,250

· 46,575,378 shares issued for conversion of debt of $1,396,440

· 9,476,218 shares issued for cashless exercised warrant

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 11 – SHAREHOLDERS’ EQUITY (CONTINUED)

During the year ended December 31, 2019, the Company issued 2,985,941 shares of common stock as follows;

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· 343,512 shares for acquisition of SwissLink

During the year ended December 31, 2018, the Company issued 95,051 shares as follows,

 75,000 shares valued at $150,000 for the legal services related to the acquisition of Etelix USA LLC.

 20,051 shares valued at $37,500 for the consulting services.

As of December 31, 2020 and 2019, 118,133,432 and 18,008,591 shares of common stock were issued and outstanding, respectively.

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Deferred tax asset

Effect of change in the statutory rate

Foreign taxes

valuation allowance

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In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders.

Tax returns for the years ended 2012 through 2020 are subject to review by the tax authorities.

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 12 – PROVISION FOR INCOME TAXES (CONTINUED)

Tax returns for the years ended 2012 through 2019 are subject to review by the tax authorities.

NOTE 13 - RELATED PARTY TRANSACTIONS

Due from related party

During the year ended December 31, 2019, the Company loaned $129,387 to a related party and collected $73,947.

During the year ended December 31, 2020, the Company loaned $20,182 to related parties who are a shareholder and a former director, collected $20,197 and wrote off amounts totaling $43,375.

During the year ended December 31, 2020 and 2019, the Company loaned $18,888 and $129,387 to a related party and collected $2,088 and $73,947, respectively.

As of December 31, 2020 and 2019, the Company had due from related parties of $221,790 and $316,860, respectively.

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Due to related parties

During the year ended December 31, 2019 and 2018, the Company borrowed $46,438 and $800 from CEO of the Company and repaid $38,400 and $850, respectively.

As of December 31, 2019 and 2018, the Company had due to related parties of $34,631 and $23,193, respectively.

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

During the year ended December 31, 2020 and 2019, the Company borrowed $20,182 and $46,438 from CEO and CFO of the Company, and repaid $20,197 and $38,400 to the CEO and CFO, respectively.

During the year ended December 31, 2020, the Company borrowed $20,000 from Francisco Bunt who owns 49% of loT Labs and repaid $20,000.

As of December 31, 2020 and 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.

Debt forgiveness

During the year ended December 31, 2019 and 2018, the Company recorded debt forgiveness of $406,080 and $45,200 as additional paid in capital.

During the year ended December 31, 2019, the Company recorded debt forgiveness of $406,080 as additional paid in capital.

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.

On May 2, 2019, the Company entered into Employment Agreements with the following persons:

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If any of the executive officers are terminated for cause they shall forfeit any rights to severance.

During the year ended December 31, 2019 and 2018, the Company recorded management fees of $334,000 and $69,000 and paid $126,200 and $13,569, respectively.

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).

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.

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 13 - RELATED PARTY TRANSACTIONS (CONTINUED)

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.

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.

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%.

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 year ended December 31, 2020 and 2019, the Company recorded management fees of $504,000 and $334,000, bonus of $79,880 and $0 and paid $130,400 and $126,200, respectively.

During the year ended December 31, 2020, the Company settled accrued salary – management of $619,531 and issued 10,851,199 shares.

As at December 31, 2020 and 2019, the Company recorded and accrued management salaries of $22,300 and $268,231, respectively.

4 unchanged sentences

The Company has not entered into any long-term leases, contracts or commitments.

The Company leases facilities which the term is 12 months.

For the years ended December 31, 2020 and 2019, the Company incurred $18,400 and $19,900, respectively.

The Company leases office space at $1,200 per month with one-year term, starting July 1, 2018 and ending June 30, 2019.

For the year ended December 31, 2020 and 2019, the Company incurred $0 and $7,200, respectively.

The Company leases facilities which the term is 12 months.

For the year ended December 31, 2019, the Company incurred $19,900.

NOTE 15 - SUBSEQUENT EVENTS

Subsequent to December 31, 2019 and through the date that these financials were made available, the Company had the following subsequent events:

On January 15, 2020, we entered into a Securities Purchase Agreement (“SPA”) with M2B Funding Corp.

a Florida Corporation (“Purchaser”), pursuant to which we issued and sold to the Purchaser a series of convertible promissory notes, in the aggregate principal amount of $366,667 (the “Notes”) executed in several tranches as follow:

January 15 $13,889;

January 21 $33,333;

January 28 $22,222;

January 30 $28,000;

February 04 $33,333;

February 12 $94,444;

February 14 $16,667;

February 19 $27,778;

February 24 $44,444 and February 25 $55,556.

The maturity dates for the Notes are twelve months after the issuance dates and the Notes bear interest at the rate of 12% per annum.

All principal and accrued interest on the Notes are convertible into shares of our common stock at the election of the Purchaser at any time at a conversion price equal to 40% multiplied by the lowest Trading Price (representing a 60% Discount) for the Common Stock during the (30) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.

We have the right to prepay the Notes at any time prior to 180 days following the closing date, which prepayment must include all outstanding principal, accrued and unpaid interest and other amounts as indicated in the Notes.

The Notes contains customary default events which, if triggered and not timely cured, will result in default interest and penalties.

On February 11, 2020, we entered into an amendment (the “Amendment”) to the Note with Purchaser.

Purchaser agreed to waive all existing events of default under the Note with respect to the reservation of shares under the Note in exchange for (i) the reservation of 5,000,000 shares of common stock under the note pursuant to an irrevocable instruction agreement with our transfer agent, (ii) an additional reservation of 5,000,000 shares of our common stock on or before February 25, 2020, (iii) an additional reservation of 5,000,000 shares of our common stock on or before March 17, 2020, and (iv) cash payments of $100,000 on or before March 6, 2020 and subsequent payments of no less than $50,000 on or before the 6th of each month thereafter until the Note is satisfied in its entirety.

On March 02, 2020, we entered into a Securities Purchase Agreement (“SPA”) with M2B Funding Corp.

a Florida Corporation (“Purchaser”), pursuant to which we issued and sold to the Purchaser a convertible promissory note, executed on March 02, 2020 in the principal amount of $233,333 (the “Note”).

The maturity date for the Note is March 02, 2021;

and the Note bears interest at the rate of 12% per annum.

All principal and accrued interest on the Note is convertible into shares of our common stock at the election of the Purchaser at any time at a conversion price equal to 40% multiplied by the lowest Trading Price (representing a 60% Discount) for the Common Stock during the (30) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date

We have the right to prepay the Note at any time prior to 180 days following the closing date, which prepayment must include all outstanding principal, accrued and unpaid interest and other amounts as indicated in the Note.

The Note contains customary default events which, if triggered and not timely cured, will result in default interest and penalties.

NOTE 15 - SEGMENT

At December 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 .

Operating Activities

The following table shows operating activities information by geographic segment for the years ended December 31, 2020 and 2019:

Cost of revenue

Operating expenses

General and administration

Operating loss

Other expense

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 15 - SUBSEQUENT EVENTS (CONTINUED)

On March 05, 2020, we entered into a Securities Purchase Agreement (“SPA”) with M2B Funding Corp.

a Florida Corporation (“Purchaser”), pursuant to which we issued and sold to the Purchaser a convertible promissory note, executed on March 05, 2020 in the principal amount of $211,111 (the “Note”).

The maturity date for the Note is March 05, 2021;

and the Note bears interest at the rate of 12% per annum.

The Note contains customary default events which, if triggered and not timely cured, will result in default interest and penalties.

NOTE 15 - SEGMENT (CONTINUED)

Cost of revenue

Operating expenses

General and administration

Operating loss

Other expense

Asset Information

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

December 31, 2020

Current assets

Non-current assets

Current liabilities

Non-current liabilities

December 31, 2019

Current assets

Non-current assets

Current liabilities

Non-current liabilities

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 16 - SUBSEQUENT EVENTS

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

On January 15, 2021, we entered into Conversion Agreements with Leandro Iglesias, our Chief Executive Officer and director, Alvaro Quintana, Chief Financial Officer and director, and Juan Carlos Lopez, our Chief Commercial Officer, pursuant to which we agreed to convert 21,000,000 shares of common stock from officers into 21,000 shares of our Series B Preferred Stock, as follow:

Number of Shares of Common

Stock Converting Into Series B

Preferred Stock

Number of shares of Series B

Preferred Stock acquired in

Leandro Iglesias

Alvaro Cardona

Juan Carlos Lopez

The features of our Series B Preferred Stock are found in the Certificate of Designation for our Series B Preferred Stock, which is made Exhibit 3.1 in the Current Report on Form 8-K filed with the Securities and Exchange Commission on November 13, 2020.

The Series B Preferred Stock have one (1) year lock-up after the issuance, and 1 year of leak out after the conversion back into a common, and the Shareholder cannot sell more than 5% of the liquidity of the market.

On February 16, 2021, we entered into a Termination Agreement and Release with Apollo Management Group, Inc.

(“Apollo”), pursuant to which we agreed to settle loans amounting to $500,000 with Apollo by issuing to Apollo 735,295 shares of our common stock as full and complete settlement of the aggregate outstanding principal amount and by paying Apollo $1,500 representing the outstanding accrued and unpaid interest on the loans.

In connection with the agreement, the parties entered into a mutual release of claims.

Also on February 16, 2021, we entered into a Termination Agreement and Release with M2B Funding Corp.

(“M2B”), pursuant to which we agreed to settle loans amounting to $716,666.67 with M2B by issuing to M2B 1,053,922 shares of our common stock as full and complete settlement of the aggregate outstanding principal amount and by paying M2B $10,511 representing the outstanding accrued and unpaid interest on the loans.

In connection with the agreement, the parties entered into a mutual release of claims.

Also on February 16, 2021, we entered into a Termination Agreement and Release with M2B, pursuant to which we agreed to settle an “additional loan” amounting to $300,000 with M2B by issuing to M2B 441,177 shares of our common stock as full and complete settlement of the aggregate outstanding principal amount and by paying M2B $789 representing the outstanding accrued and unpaid interest on the loan.

In connection with the agreement, the parties entered into a mutual release of claims.

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

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-K

Item 8. Financial Statements and Supplementary Data