iQSTEL Inc 10-K

Item 8. Financial Statements and Supplementary Data Index to Financial Statements Required by Article 8 of Regulation S-X: Audited Financial Statements: F-1 Report of Independent Registered Public Accounting Firm Audited Financial Statement for the Year ended December 31, 2020; F-4 Report of Independent Registered Public Accounting Firm Audited Financial Statement for the Year ended December 31, 2019; F-5 Consolidated Balance Sheets as of December 31, 2020 and 2019; F-6 Consolidated Statements of Operations for the years ended December 31, 2020 and 2019; F-7 Consolidated Statement of Stockholders’ Equity for the years ended December 31, 2020 and 2019; F-8 Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019; and F-9 Notes to Consolidated Financial Statements. 17 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors iQSTEL, Inc. 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. F-1 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. F-2 · 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. F-3 Boyle CPA, LLC Certified Public Accountants & Consultants REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of iQSTEL Inc. 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 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. 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 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 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 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 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 served as the Company’s auditor from 2017 to 2020. Bayville, NJ April 15, 2020 361 Hopedale Drive SE P (732) 822-4427 Bayville, NJ 08721 F (732) 510-0665 F-4 iQSTEL INC Consolidated Balance Sheets December 31, December 31, 2020 2019 ASSETS Current Assets Cash and cash equivalents $ 753,316 $ 270,503 Accounts receivable, net 2,528,321 2,759,164 Due from related parties 221,790 316,860 Prepaid and other current assets 78,157 91,970 Total Current Assets 3,581,584 3,438,497 Property and equipment, net 350,530 287,970 Intangible asset 21,875 - Goodwill 1,537,742 1,455,960 Deferred tax assets 460,036 420,519 TOTAL ASSETS $ 5,951,767 $ 5,602,946 LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities Accounts payable 2,737,411 2,291,921 Due to related parties 94,616 34,631 Loans payable - net of discount of $19,221 and $0 1,332,612 89,671 Loans payable - related parties 2,054,379 1,885,708 Current portion of convertible notes - net of discount of $370,106 and $597,654 253,554 1,251,096 Other current liabilities 413,676 848,484 Derivative liabilities 1,025,691 4,744,134 Total Current Liabilities 7,911,939 11,145,645 Convertible notes - net of discount of $2,184 and $48,558 2,816 11,442 Loans payable 270,836 178,021 Employee benefits, non-current 161,212 38,253 TOTAL LIABILITIES 8,346,803 11,373,361 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 10 - 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: 300,000,000 authorized; $0.001 par value 118,133,432 and 18,008,591 shares issued and outstanding, respectively 118,133 18,008 Additional paid in capital 13,267,261 3,240,528 Accumulated deficit (14,699,148) (8,125,257) Accumulated other comprehensive loss (74,831) (181) Deficit attributed to stockholders of iQSTEL Inc. (1,388,575) (4,866,902) Deficit attributable to noncontrolling interests (1,006,461) (903,513) Total stockholders' Deficit (2,395,036) (5,770,415) TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 5,951,767 $ 5,602,946 The accompanying notes are an integral part of these consolidated financial statements. F-5 iQSTEL INC Consolidated Statements of Operations Year Ended December 31, 2020 2019 Revenues $ 44,910,006 $ 18,031,548 Cost of revenue 43,947,654 17,250,623 Gross profit 962,352 780,925 Operating expenses General and administration 4,174,367 1,449,624 Total operating expenses 4,174,367 1,449,624 Operating loss (3,212,015) (668,699) Other income (expense) Other income 38,585 2,631 Other expenses (117,562) (10,891) Interest expense (3,509,323) (2,653,996) Change in fair value of derivative liabilities 255,614 (2,111,783) Loss on settlement of debt (154,629) - Total other expense (3,487,315) (4,774,039) Net loss before provision for income taxes (6,699,330) (5,442,738) Income taxes (152) - Net loss (6,699,482) (5,442,738) Less: Net income (loss) attributable to noncontrolling interests (125,591) 15,131 Net loss attributed to stockholders of iQSTEL Inc. $ (6,573,891) $ (5,457,869) Comprehensive loss Net loss $ (6,699,482) $ (5,442,738) Foreign currency adjustment (146,373) (354) Total comprehensive loss $ (6,845,855) $ (5,443,092) Less: Comprehensive income (loss) attributable to noncontrolling interests (197,314) 14,958 Net comprehensive loss attributed to stockholders of iQSTEL Inc. $ (6,648,541) $ (5,458,050) Basic and diluted loss per common share $ (0.10) $ (0.35) Weighted average number of common shares outstanding - Basic and diluted 63,941,222 15,684,477 The accompanying notes are an integral part of these consolidated financial statements. F-6 iQSTEL INC Consolidated Statements of Changes in Stockholders’ Equity (Deficit) For the years ended December 31, 2020 and 2019 Series A Preferred Stock Common Stock Additional Paid in Accumulated Accumulated Other Comprehensive Non Controlling Total Shareholders' Shares Amount 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 for acquisition - - 343,512 344 449,656 - - 450,000 (918,471) (468,471) Capital Contribution - - - - 10,000 - - 10,000 - 10,000 Common stock issued in conjunction with convertible notes - - 661,216 661 817,238 - - 817,899 - 817,899 Common stock issued for conversion of debt - - 1,169,723 1,169 32,581 - - 33,750 - 33,750 Common stock issued for exercised cashless warrant - - 811,490 811 (811) - - - - - Debt forgiveness - - - - 406,080 - - 406,080 - 406,080 Resolution of derivative liabilities - - - - 471,066 - - 471,066 - 471,066 Foreign currency translation adjustments - - - - - - (181) (181) (173) (354) Net loss - - - - - (5,457,869) - (5,457,869) 15,131 (5,442,738) Balance – December 31, 2019 - $ - 18,008,591 $ 18,008 $ 3,240,528 $ (8,125,257) $ (181) $ (4,866,902) $ (903,513) $ (5,770,415) Preferred stock issued for conversion of common stock 10,000 10 (100,000) (100) 90 - - - - - Common stock issued for cash - - 23,937,500 23,938 1,891,067 - - 1,915,005 - 1,915,005 Common stock issued for settlement of debt - - 12,818,145 12,818 876,275 - - 889,093 - 889,093 Common stock issued for services - - 6,267,600 6,268 641,590 - - 647,858 - 647,858 Common stock issued for forbearance of debt - - 1,150,000 1,150 91,100 - - 92,250 - 92,250 Common stock issued for conversion of debt - - 46,575,378 46,575 1,349,865 - - 1,396,440 - 1,396,440 Common stock issued for exercised cashless warrant - - 9,476,218 9,476 (9,476) - - - - - Common stock issued for acquisition of Itsbchain LLC - - - - 50,000 - - 50,000 - 50,000 Acquisition of IoT Lab - - - - - - - - 94,366 94,366 Resolution of derivative liabilities - - - - 5,136,222 - - 5,136,222 - 5,136,222 Foreign currency translation adjustments - - - - - - (74,650) (74,650) (71,723) (146,373) Net loss - - - - - (6,573,891) - (6,573,891) (125,591) (6,699,482) Balance – December 31, 2020 10,000 $ 10 118,133,432 $ 118,133 $ 13,267,261 $ (14,699,148) $ (74,831) $ (1,388,575) $ (1,006,461) $ (2,395,036) The accompanying notes are an integral part of these consolidated financial statements. F-7 iQSTEL INC Consolidated Statements of Cash Flows Year Ended December 31, 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (6,699,482) $ (5,442,738) Adjustments to reconcile net loss to net cash used in operating activities: Stock based compensation 697,858 - Bad debt 137,749 - Write-off of due from related party 43,375 - Depreciation and amortization 68,602 41,737 Amortization of debt discount 2,221,506 1,939,687 Change in fair value of derivative liabilities (255,614) 2,111,783 Gain on settlement of debt 154,629 - Prepayment and Default penalty 358,046 - Changes in operating assets and liabilities: Accounts receivable 167,077 522,360 Other current assets 21,629 27,075 Accounts payable 432,872 (571,974) Other current liabilities 535,579 128,043 Net cash used in operating activities (2,116,174) (1,244,027) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of subsidiary, net of cash acquired 15,781 239,516 Purchase of property and equipment (90,192) (32,007) Payment of loan receivable - related party (18,888) (129,387) Collection from due from related parties - related party 2,088 73,947 Net cash provided by (used in) investing activities (91,211) 152,069 CASH FLOWS FROM FINANCING ACTIVITIES: Bank overdraft - (82) Proceeds from loans payable 1,239,620 424,960 Repayments of loans payable (969,664) (527,239) 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 1,915,005 - Proceeds from convertible notes 1,420,000 2,266,250 Repayment of convertible notes (942,190) (824,401) Net cash provided by financing activities 2,662,756 1,357,526 Effect of exchange rate changes on cash 27,442 365 Net change in cash and cash equivalents 482,813 265,933 Cash and cash equivalents, beginning of period 270,503 4,570 Cash and cash equivalents, end of period $ 753,316 $ 270,503 Supplemental cash flow information Cash paid for interest $ 976,234 $ 678,663 Cash paid for taxes $ - $ - Non-cash transactions: Derivative liabilities recognized as debt discount $ 1,673,393 $ 1,313,350 Common stock issued in conjunction with convertible notes $ - $ 817,900 Common stock issued for conversion of debt $ 1,396,440 $ 33,750 Common stock issued for cashless warrant exercised $ 9,476 $ 39,760 Resolution of derivative liabilities $ 5,136,222 $ 430,495 Debt forgiveness $ - $ 406,080 Common stock issued for settlement of debt $ 889,093 $ - Amount owing for acquisition of IOT $ 60,000 $ - Common stock issued for forbearance of debt $ 92,250 $ - Replacement of convertible notes to note payable $ 1,000,000 $ - Preferred stock issued for conversion of common stock $ 10 $ - The accompanying notes are an integral part of these consolidated financial statements. F-8 iQSTEL INC Notes to the Consolidated Financial Statements December 31, 2020 and 2019 NOTE 1 -ORGANIZATION AND DESCRIPTION OF BUSINESS Organization and Operations iQSTEL Inc. (“iQSTEL”, “we”, “us”, or the “Company”) was incorporated under the laws of the State of Nevada on June 24, 2011 under the name of B-Maven Inc. The Company changed its name to PureSnax International, Inc. on September 18, 2015; and more recently it changed its name to iQSTEL Inc. on August 7, 2018. The Company has been engaged in the business of telecommunication services as a wholesale carrier of voice, SMS and data for other telecom companies around the World with more than 150 active interconnection agreements with mobile companies, fixed line companies and other wholesale carriers. Acquisition 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: · $50,000 USD shall be paid in cash upon execution of the Purchase Agreement; and · The balance of $450,000 USD shall be paid at Closing in the form of 187,500 shares of common stock in the Company based upon an agreed upon price of $2.40 per share. Additional shares may be payable at Closing, if the Company’s stock is valued at less than $2.40 per share, to account for the full $450,000 USD. On August 7, 2019, having completed all conditions under the Purchase Agreement, the Company closed the transaction with Seller, and paid $50,000 and issued a total of 343,512 shares of common stock at $1.31 per share to the Seller for the 51% equity interest and certain assets in SwissLink, including 51% of the loan in SwissLink. 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 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 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. 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 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. F-9 iQSTEL INC Notes to the Consolidated Financial Statements December 31, 2020 and 2019 NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial statements have been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States. The Company’s fiscal year end is December 31. 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 IoT Labs, LLC. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of the consolidated financial statements in conformity with 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. Business Combinations In accordance with ASC 805-10, “Business Combinations”, the Company accounts for all business combinations using the acquisition method of accounting. Under this method, assets and liabilities, including any remaining non-controlling interests, are recognized at fair value at the date of acquisition. The excess of the purchase price over the fair value of assets acquired, net of liabilities assumed, and non-controlling interests is recognized as goodwill. Certain adjustments to the assessed fair values of the assets, liabilities, or non-controlling interests made subsequent to the acquisition date, but within the measurement period, which is up to one year, are recorded as adjustments to goodwill. Any adjustments subsequent to the measurement period are recorded in income. Any cost or equity method interest that the Company holds in the acquired company prior to the acquisition is re-measured to fair value at acquisition with a resulting gain or loss recognized in income for the difference between fair value and the existing book value. Results of operations of the acquired entity are included in the Company’s results from the date of the acquisition onward and include amortization expense arising from acquired tangible and intangible assets. Foreign Currency Translation and Re-measurement The Company translates its foreign operations to U.S. dollar in accordance with ASC 830, “ Foreign Currency Matters ”. 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”). The Company’s subsidiaries, whose functional currency is not the U.S. dollar, translate their records into U.S. dollar 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 F-10 iQSTEL INC 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. December 31, December 31, 2020 2019 Spot CHF: USD exchange rate $ 1.1304 $ 1.0333 Average CHF: USD exchange rate $ 1.0662 $ 1.0122 Cash and Cash Equivalents Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. 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. During the year ended December 31, 2020 and 2019, the Company had bad debt expense of $137,749 and $0, respectively. Long-Lived Assets Long-lived assets are evaluated for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted future cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value. Fixed Assets Fixed assets, consisting of telecommuting equipment and software, is recorded at cost reduced by accumulated depreciation and amortization. Depreciation and amortization expense is recognized over the assets’ estimated useful lives of 3 years for computers and laptops, 5 years for telecommunications equipment and switches; and 5 years for software using the straight-line method. Major additions and improvements are capitalized as additions to the property and equipment accounts, while replacements, maintenance and repairs that do not improve or extend the life of the respective assets, are expensed as incurred. Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts. Impairment of tangible and intangible assets Tangible and intangible assets (excluding goodwill) are assessed at each reporting date for indications that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset's recoverable amount. The asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs of disposal and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or a group of assets exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. 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. F-11 iQSTEL INC Notes to the Consolidated Financial Statements December 31, 2020 and 2019 NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Goodwill We allocate goodwill to reporting units based on the reporting unit expected to benefit from the business combination. We evaluate our reporting units on an annual basis and, if necessary, reassign goodwill using a relative fair value allocation approach. Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. The fair value of each reporting unit is estimated primarily through the use of a discounted cash flow methodology. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital. The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results, market conditions, and other factors. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for each reporting unit. 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. Net Income (Loss) Per Share of Common Stock The Company has adopted ASC 260, ”Earnings per Share” which requires presentation of basic earnings per share on the face of the statements of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic earnings per share computation. In the accompanying financial statements, basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants unless the result would be antidilutive. There were no potentially dilutive shares of common stock outstanding for the years ended December 31, 2020 and 2019. F-12 iQSTEL INC Notes to the Consolidated Financial Statements December 31, 2020 and 2019 NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. 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 The Company follows ASC 820, “ Fair Value Measurements and Disclosures, ” which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below: Level 1 Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3 Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The carrying values of our financial instruments, including, cash and cash equivalents; accounts receivable; prepaid expenses; accounts payable and other payable and due to related parties approximate their fair values due to the short-term maturities of these financial instruments. Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated. It is not, however, practical to determine the fair value of amounts due to related party’s due to their related party nature. F-13 iQSTEL INC Notes to the Consolidated Financial Statements December 31, 2020 and 2019 NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company used a Black Scholes valuation model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. Income Taxes The Company uses the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on differences between financial reporting and the tax basis of assets, liabilities, the carry forward of operating losses and tax credits, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. An allowance against deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized. Related Parties The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions (see Note 13). 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. Cost of revenue Costs of revenue represent direct charges from vendors that the Company incurs to deliver services to its customers. These costs primarily consist of usage charges for calls terminated in vendor’s network. 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. F-14 iQSTEL INC Notes to the Consolidated Financial Statements December 31, 2020 and 2019 NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Recent Accounting Pronouncements 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 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 in the industry and continuing its marketing efforts. The Company may experience a cash shortfall and be required to raise additional capital. Historically, the Company has relied upon funds from its stockholders. Management may raise additional capital through future public or private offerings of the Company's stock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company's failure to do so could have a material and adverse effect upon its operations and its stockholders. NOTE 4 - ACQUISITION IoT Labs 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. F-15 iQSTEL INC Notes to the Consolidated Financial Statements December 31, 2020 and 2019 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: April 15, 2020 Fair Value of Consideration: Cash $ 180,000 Total Purchase Price $ 180,000 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 $ 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 SwissLink On April 1, 2019, iQSTEL Inc. (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 for a consideration of $500,000. On August 7, 2019, having completed all conditions under the Purchase Agreement, the Company closed the transaction with Seller, and paid $50,000 and issued a total of 343,512 shares of common stock at $1.31 per share to the Seller for the 51% equity interest and certain assets in SwissLink, including 51% of the loan in SwissLink. 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: August 7, Fair Value of Consideration: 2019 Cash $ 50,000 343,512 shares of common stock at $1.31 per share 450,000 Total Purchase Price $ 500,000 Swisslink has been included in our consolidated results of operations since their respective acquisition dates. F-16 iQSTEL INC 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: Total purchase price $ 500,000 Cash 289,516 Accounts receivable, net 1,462,786 Other current assets 101,629 Deferred tax assets 418,932 Property and equipment, net 12,070 Total identifiable assets 2,284,933 Accounts payable (1,479,949) Other current liabilities (84,591) Long term loans (156,441) Long term loans – related party (2,199,907) Employee benefits (238,476) Total liabilities assumed (4,159,364) Net assets (1,874,431) Non-controlling interest 918,471 Total net assets (955,960) Goodwill $ 1,455,960 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: Year Ended December 31, 2020 2019 Revenues $ 55,784,168 $ 50,971,291 Cost of revenues 54,631,017 49,585,229 Gross profit 1,153,151 1,386,062 Operating expenses 4,224,903 1,919,871 Operating loss (3,071,752) (533,809) Other expense (3,487,315) (4,798,447) Net Loss $ (6,559,067) $ (5,332,256) NOTE 5 – PREPAID AND OTHER CURRENT ASSETS Other prepaid and other current assets at December 31, 2020 and 2019 consisted of the following: Year Ended December 31, 2020 2019 Advance payment to suppliers $ - $ 6,600 Other receivable 77,557 78,936 Prepaid expenses - 5,834 Tax receivable 600 600 $ 78,157 $ 91,970 F-17 iQSTEL INC 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: December 31, December 31, 2020 2019 Telecommunication equipment $ 259,000 $ 249,169 Telecommunication software 530,514 436,124 Other equipment 47,206 8,497 Total property and equipment 836,720 693,790 Accumulated depreciation and amortization (486,190) (405,820) Total property and equipment $ 350,530 $ 287,970 Depreciation expense for the year ended December 31, 2020 and 2019 amounted to $68,602 and $41,737, respectively. F-18 iQSTEL INC Notes to the Consolidated Financial Statements December 31, 2020 and 2019 NOTE 7 –LOANS PAYABLE Loans payable at December 31, 2020 and 2019 consisted of the following: December 31, 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% YES LENDER LLC 3 5,403 - Note was issued on August 3, 2020 and due on January 12, 2021 26.0% Complete Business Solutions_8 - 52,170 December 24, 2010 and due on June 09, 2020 26.0% Advance Service Group LLC 12,143 - Note was issued on October 20, 2020 and due on February 19, 2021 29.0% Nicolas Arvelo - 5,000 Note was issued on November 20, 2019 and due on November 20, 2020 12.0% Martin Mendoza Diaz - 5,000 Note was issued on November 20, 2019 and due on November 20, 2020 12.0% 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 55,000 - Note was issued on April 20, 2020 and due on December 15, 2020 12.0% Apollo Management Group, Inc 14 32,432 Note was issued on December 4, 2020 and due on January 4, 2021 12.0% Labrys Fund 280,000 - 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% M2B Funding Corp 1 77,778 - Note was issued on December 10, 2020 and due on January 9, 2021 22.0% M2B Funding Corp 2 27,778 - Note was issued on December 18, 2020 and due on January 17, 2021 22.0% M2B Funding Corp 3 55,556 - Note was issued on December 24, 2020 and due on January 23, 2021 22.0% M2B Funding Corp 4 111,111 - Note was issued on December 30, 2020 and due on January 29, 2021 22.0% Martus 108,609 99,399 Note was issued on October 23, 2018 and due on January 3, 2022 5.0% Swisspeers AG 49,187 78,623 Note was issued on April 8, 2019 and due on October 4, 2022 7.0% Darlene Covi19 113,040 - Note was issued on April 1, 2020 and due on March 31, 2025 0.0% Total 1,622,669 267,692 Less: Unamortized debt discount (19,221) - Total loans payable 1,603,448 267,692 Less: Current portion of loans payable 1,332,612 89,671 Long-term loans payable $ 270,836 $ 178,021 F-19 iQSTEL INC 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: December 31, December 31, Interest 2020 2019 Term rate Alonso Van Der Biest $ 80,200 $ 80,200 Note was issued on June 12, 2015 and due on June 11, 2019 16.5% Alvaro Quintana 10,587 10,587 Note was issue on September 30, 2016 and due on September 29, 2019 0% 49% of Shareholder of Swisslink 1,737,512 1,588,261 Note is due on demand 0% 49% of Shareholder of Swisslink 226,080 206,660 Note is due on demand 5% Total 2,054,379 1,885,708 16.5% Less: Current portion of loans payable 2,054,379 1,885,708 0% 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 Other current liabilities at December 31, 2020 and 2019 consisted of the following: December 31, December 31, 2020 2019 Accrued liabilities $ 6,789 $ 2,700 Credit card liabilities - 4,987 Accrued interest 170,960 365,345 Salary payable - management 28,300 268,231 Employee benefits 181,231 192,288 Other current liabilities 26,396 14,933 $ 413,676 $ 848,484 NOTE 9 - CONVERTIBLE LOANS At December 31, 2020 and 2019, convertible loans consisted of the following: December 31, 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 623,660 - Total convertible notes payable 628,660 1,908,750 Less: Unamortized debt discount (372,290) (646,212) Total convertible notes 256,370 1,262,538 Less: current portion of convertible notes 253,554 1,251,096 Long-term convertible notes $ 2,816 $ 11,442 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. F-20 iQSTEL INC 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, 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. Conversion 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. 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. F-21 iQSTEL INC 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 The Company determined that the conversion option in the note met the definition of a liability in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock. The Company will bifurcate the embedded conversion option in the note once the note becomes convertible and account for it as a derivative liability. The Company valued the conversion features of convertible notes and 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 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. F-22 iQSTEL INC Notes to the Consolidated Financial Statements December 31, 2020 and 2019 NOTE 9 - CONVERTIBLE LOANS (CONTINUED) Warrants A summary of activity during the year ended December 31, 2020 and 2019 follows: Warrants Outstanding Shares Weighted Average Exercise Price Weighted Average Remaining Contractual life (in years) Outstanding, December 31, 2018 - $ - - Granted 92,000 3.00 3.66 Reset 1,115,038 0.066 4.46 Cashless Exercised (839,695) 0.066 4.46 Forfeited/canceled - - - Outstanding, December 31, 2019 367,343 $ 0.480 4.05 Granted 6,500,000 0.024 6.00 Reset 10,813,001 0.014 1.92 Cashless Exercised (10,597,010) 0.023 4.24 Settled (7,083,334) 0.012 1.64 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 The Company analyzed the conversion option for derivative accounting consideration under ASC 815, Derivatives and Hedging, and hedging, and determined that the instrument should be classified as a liability since the conversion option becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. 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 December 31, 2020. 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. For the year ended December 31, 2020 and 2019, the estimated fair values of the liabilities measured on a recurring basis are as follows: Year Ended Year Ended December31, 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% F-23 iQSTEL INC 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: Fair Value Measurements Using Significant Observable Inputs (Level 3) Balance - December 31, 2018 $ 1,790,067 Addition of new derivatives recognized as debt discounts 1,313,350 Addition of new derivatives recognized as loss on derivatives 3,603,121 Settled on issuance of common stock (471,066) Gain on change in fair value of the derivative (1,491,338) Balance - December 31, 2019 $ 4,744,134 Addition of new derivatives recognized as debt discounts 1,673,393 Addition of new derivatives recognized as loss on derivatives 1,040,636 Settled on issuance of common stock (5,136,222) Change in fair value of the derivative (1,296,250) Balance - December 31, 2020 $ 1,025,691 The following table summarizes the change in fair value of derivative liability included in the income statement for the year ended December 31, 2020 and 2019, respectively. Year Ended December 31, 2020 2019 Addition of new derivatives recognized as loss on derivatives $ 1,040,636 $ (1,491,338) Revaluation of derivative liabilities (1,296,250) 2,111,783 (Gain) loss on change in fair value of the derivative $ (255,614) $ 3,603,121 NOTE 11 – SHAREHOLDERS’ EQUITY The Company’s authorized capital consists of 300,000,000 shares of common stock with a par value of $0.001 per share. Series A Preferred Stock On November 3, 2020, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock entitled Series A Preferred Stock, consisting of up 10,000 shares, par value $0.001. 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. F-24 iQSTEL INC Notes to the Consolidated Financial Statements December 31, 2020 and 2019 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. Common Stock 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 F-25 iQSTEL INC 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; · 661,216 shares in conjunction with convertible notes. · 811,490 shares for cashless exercised warrant · 1,169,723 shares for conversion of debt of $33,750 (see Note 9) · 343,512 shares for acquisition of SwissLink As of December 31, 2020 and 2019, 118,133,432 and 18,008,591 shares of common stock were issued and outstanding, respectively. NOTE 12 – PROVISION FOR INCOME TAXES The Company provides for income taxes under ASC 740, “ Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax basis of assets and liabilities and the tax rates in effect when these differences are expected to reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. The components of the Company’s deferred tax asset and reconciliation of income taxes computed at the statutory rate to the income tax amount recorded as of December 31, 2020 and 2019, are as follows: December 31, December 31, 2020 2019 Net Operating loss carryforward $ 8,601,999 $ 4,378,894 Effective tax rate 21% 21% Deferred tax asset 1,806,420 919,568 Foreign taxes (5,112) - Less: valuation allowance (1,341,272) (499,049) Net deferred tax asset $ 460,036 $ 420,519 As of December 31, 2020, the Company has approximately $8,432,000 of net operating losses (“NOL”) generated to December 31, 2020 carried forward to offset taxable income in future years which expire commencing in fiscal 2037. NOLs generated in tax years prior to December 31, 2017, can be carryforward for twenty years, whereas NOLs generated after December 31, 2017 can be carryforward indefinitely. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against all of the deferred tax assets relating to NOLs for every period because it is more likely than not that all of the deferred tax assets will not be realized. Utilization of the NOL carry forwards may be subject to an annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). These ownership changes may limit the amount of the NOL carry forwards that can be utilized annually to offset future taxable income and tax, respectively. 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. F-26 iQSTEL INC Notes to the Consolidated Financial Statements December 31, 2020 and 2019 NOTE 13 - RELATED PARTY TRANSACTIONS Due from related party 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. The loans are unsecured, non-interest bearing and due on demand. Due to related parties 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, the Company recorded debt forgiveness of $406,080 as additional paid in capital. Employment agreements 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 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. F-27 iQSTEL INC 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. 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%. 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. F-28 iQSTEL INC Notes to the Consolidated Financial Statements December 31, 2020 and 2019 NOTE 14 – COMMITMENTS AND CONTINGENCIES 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 years ended December 31, 2020 and 2019, the Company incurred $18,400 and $19,900, respectively. Rent 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. 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: USA Switzerland Elimination Total Revenues $ 39,495,542 5,432,022 $ (17,558) $ 44,910,006 Cost of revenue 39,308,347 4,656,865 (17,558) 43,947,654 Gross profit 187,195 775,157 - 962,352 Operating expenses General and administration 3,359,237 815,130 - 4,174,367 Operating loss (3,172,042) (39,973) - (3,212,015) Other expense (3,356,881) (130,434) - (3,487,315) Net loss $ (6,528,923) $ (170,407) $ - $ (6,699,330) F-29 iQSTEL INC Notes to the Consolidated Financial Statements December 31, 2020 and 2019 NOTE 15 - SEGMENT (CONTINUED) USA Switzerland Elimination Total Revenues $ 16,327,871 1,726,359 $ (22,682) $ 18,031,548 Cost of revenue 15,796,310 1,476,995 (22,682) 17,250,623 Gross profit 531,561 249,364 - 780,925 Operating expenses General and administration 1,189,680 259,944 - 1,449,624 Operating loss (658,119) (10,580) - (668,699) Other expense (4,753,739) (20,300) - (4,774,039) Net loss $ (5,411,858) $ (30,880) $ - $ (5,442,738) Asset Information The following table shows asset information by geographic segment as of December 31, 2020 and 2019: December 31, 2020 USA Switzerland Elimination Total Assets Current assets $ 3,245,725 $ 1,225,399 $ (889,540) $ 3,581,584 Non-current assets $ 3,478,147 $ 561,551 $ (1,669,515) $ 2,370,183 Liabilities Current liabilities $ 5,630,060 $ 3,171,419 $ (889,540) $ 7,911,939 Non-current liabilities $ 2,816 $ 432,048 $ - $ 434,864 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 F-30 iQSTEL INC 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: Shareholders Number of Shares of Common Stock Converting Into Series B Preferred Stock Number of shares of Series B Preferred Stock acquired in Conversion Leandro Iglesias 12,200,000 12,200 Alvaro Cardona 5,300,000 5,300 Juan Carlos Lopez 3,500,000 3,500 Total 21,000,000 21,000 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. F-31 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure There were no changes or disagreements with our accountants on accounting and financial disclosure.