What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-16 compared with 2021-05-14 · 186 added, 89 removed, 28 unchanged (91% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.

We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions.

Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements.

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.

Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to:

changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles.

These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

(the “Company”) (OTC Pink:

IQST) (www.iqstel.com) is a technology company offering a wide array of services to global telecommunications and technology industries with presence in 13 countries.

The Company has an extensive portfolio of products and services for its clients such as:

SMS, VoIP, 4G & 5G international infrastructure connectivity, Cloud-PBX, OmniChannel Marketing, IoT services, blockchain and payment solutions.

Certain statements, other than

purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating

results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of

the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities

Exchange Act of 1934.

These forward-looking statements generally are identified by the words “believes,” “project,”

“expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,”

“may,” “will,” “would,” “will be,” “will continue,” “will likely result,”

and similar expressions.

We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements

contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those

safe-harbor provisions.

Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties

which may cause actual results to differ materially from the forward-looking statements.

Our ability to predict results or the actual

effect of future plans or strategies is inherently uncertain.

Factors which could have a material adverse effect on our operations and

future prospects on a consolidated basis include, but are not limited to:

changes in economic conditions, legislative/regulatory changes,

availability of capital, interest rates, competition, and generally accepted accounting principles.

These risks and uncertainties should

also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

We undertake no

obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Further information concerning our business, including additional factors that could materially affect our financial results, is included

herein and in our other filings with the SEC.

(the “Company”)

IQST) (www.iqstel.com) is a technology company offering a wide array of services to global telecommunications and technology

industries with presence in 13 countries.

The Company has an extensive portfolio

of products and services for its clients such as:

SMS, VoIP, 4G & 5G international infrastructure connectivity, Cloud-PBX, OmniChannel

Marketing, IoT services, blockchain and payment solutions.

These services are grouped within three business divisions:

Telecom, Technology and Fintech.

The company operates its business through its wholly-owned subsidiary Etelix.com USA, LLC (“Etelix”) (www.etelix.com);

and its majority-owned subsidiaries SwissLink Carrier AG (www.swisslink-carrier.com), QGlobal SMA (https://www.qglobalsms.com/), Smart Gas (http://iotsmartgas.com/) and ItsBChain (http://itsbchain.com/).

The information contained on our websites is not incorporated by reference into this Quarterly Report on Form 10-Q and should not be considered part of this or any other report filed with the SEC.

Telecom, Technology

company operates its business through its wholly-owned subsidiary Etelix.com USA, LLC (“Etelix”) (www.etelix.com);

majority-owned subsidiaries SwissLink Carrier AG ( www.swisslink-carrier.com ),

QGlobal SMA (https://www.qglobalsms.com/), Smart Gas (http://iotsmartgas.com/) and ItsBChain (http://itsbchain.com/).

The information

contained on our websites is not incorporated by reference into this Quarterly Report on Form 10-Q and should not be considered part of

this or any other report filed with the SEC.

Results of Operations

Our total revenue reported for the three months ended March 31, 2021 was $14,197,611, compared with $5,017,412 for the three months ended March 31, 2020.

These numbers reflect an increase of 182.97% quarter over quarter on our consolidated revenues.

When looking at the numbers by subsidiary, we have the following breakout for the three months ended March 31, 2021 compared to the three months ended March 31, 2020:

March 31, 2021

March 31, 2020

Our total revenue reported for the three months ended

June 30, 2021 was $16,128,367, compared with $11,130,086 for the three months ended June 30, 2020.

These numbers reflect an increase of

44.91% quarter over quarter on our consolidated revenues.

Our total revenue reported for the six months ended June 30, 2021 was $30,325,978,

compared with $16,147,498 for the six months ended June 30, 2020.

When looking at the numbers

by subsidiary, we have the following breakout for the six months ended June 30, 2021 compared to the six months ended June 30, 2020:

Etelix.com USA, LLC

SwissLink Carrier AG

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

The continued growth of our

revenue is the result of the development of our business strategy, which includes the strengthening of our commercial and operating activities

and new acquisitions.

Cost of Revenues

Our total cost of revenues for the three months ended March 31, 2021 increased to $13,710,241, compared with $5,178,553 for the three months ended March 31, 2020.

When looking at the numbers by subsidiary, we have the following breakout for the three months ended March 31, 2021 compared to the three months ended March 31, 2020:

Our total cost of revenues for the three months ended

June 30, 2021 increased to $16,083,802, compared with $10,397,778 for the three months ended June 30, 2020.

Our total cost of revenues

for the six months ended June 30, 2021 increased to $29,794,043, compared with $15,576,331 for the six months ended June 30, 2020.

When looking at the numbers

by subsidiary, we have the following breakout for the six months ended June 30, 2021 compared to the six months ended June 30, 2020:

Cost of Revenue

Six Months Ended

June 30, 2021

Cost of Revenue

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2020

Etelix.com USA, LLC

SwissLink Carrier AG

Our cost of revenues consists of direct charges from vendors that the Company incurs to deliver services to its customers.

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

The behavior in the costs shows a logical correlation with the behavior of the revenue commented above.

We have reached a higher volume of sales and every additional unit sold (minutes and SMS) has its corresponding termination cost.

Our gross margin, which is simply the difference between our revenues and our cost of sales, discussed above, increased from a negative result of $161,141 for the three months ended March 31, 2020 to a positive result of $487,370 for the three months ended March 31,2021.

We expect an increase in the gross margin for the next twelve months as a result of having better termination costs.

Our cost of revenues consists of direct charges from

vendors that the Company incurs to deliver services to its customers.

These costs primarily consist of usage charges for calls and SMS

terminated in vendor’s network.

The behavior in the costs shows a logical correlation

with the behavior of the revenue commented above.

We have reached a higher volume of sales and every additional unit sold (minutes and

SMS) has its corresponding termination cost.

Operating Expenses

Operating expenses increased to $1,498,111 for the three months ended March 31, 2021 from $1,297,527 for the three months ended March 31, 2020.

The detail by major category is reflected in the table below.

Three Months Ended

Operating expenses increased to $1,209,167 for the

three months ended June 30, 2021 from $905,016 for the three months ended June 30, 2020.

Operating expenses increased to $2,707,278 for

the six months ended June 30, 2021 from $2,202,543 for the six months ended June 30, 2020.

The detail by major category for the six months

ended June 30, 2021 and 2020 is reflected in the table below.

Six Months Ended June 30,

Salaries, Wages and Benefits

1 unchanged sentence

Legal & Regulatory

Write-off of due from related party

Travel & Events

4 unchanged sentences

Total Operating Expense

When looking at the numbers by subsidiary, we have the following breakout for the three months ended March 31, 2021 compared to the three months ended March 31, 2020:

Three Months Ended March 31,

The most significant difference is generated by iQSTEL which is due to the following:

(1) the Professional Fees, including the Audit and Accounting expenses related to the audit of year 2020, which covered iQSTEL and all its operating subsidiaries;

and (2) Advertising corresponds to the third-party consultancy for the design and implementation of a Social Media communication strategy oriented to build and enhance our companies and brand image.

The main reasons for the overall increase in operating

expenses for the six months ended June 30, 2021 compared to the same period of 2020 is due to the following:

(1) Technology as a result

of the development of the blockchain solutions, the IoT devices, and the fintech platform;

(2) Legal & Regulatory expenses due to

the IoT devices certification process;

and (3) Stock-based compensation.

Six Months Ended June 30,

Global Money One

Operating Income

The Company showed negative Operating Income for the three months ended March 31, 2021 of $1,010,741 compared with a negative result of $1,458,668 for the three months ended March 31, 2020.

Even though the Company increased its Operating Expenses in $200,584 comparing the three months ended March 31, 2021 to the same period of 2020;

the Operating Loss was reduced in $447,927 due to a Gross Margin increase of $648,511 when comparing the three months ended March 31, 2021 to the same period of 2020.

The Company showed negative Operating Income for the

three months ended June 30, 2021 of $1,164,602 compared with a negative result of $172,708 for the three months ended June 30, 2020.

The Company showed negative Operating Income for the

six months ended June 30, 2021 of $2,175,343 compared with a negative result of $1,631,376 for the six months ended June 30, 2020.

The increase of the numbers for the six month period

above is primarily due to the costs associated with the operation of the public entity (iQSTEL, Inc.) that increases in $405,972 year

Other Expenses/Other Income

We had other expenses of $867,748 for the three months ended March 31, 2021, as compared with other expenses of $2,450,535 for the same period ended 2020.

The decrease in other expenses is a result of the change in fair value of derivative liabilities in $1,937,598 for the three months ended March 31, 2021 compared to the same period ended 2020, and the decrease of interest expenses in $171,349 for the three months ended March 31, 2021 compared to the same period ended 2020.

We finished the three months ended March 31, 2021 with a net comprehensive loss attributed to shareholders of iQSTEL Inc.

of $1,942,391, as compared to a loss of $3,890,490 during the three months ended March 31, 2020.

We had other income of $42,230 for the three months

ended June 30, 2021, as compared with other income of $1,550,173 for the same period ended 2020.

We had other expenses of $825,518 for

the six months ended June 30, 2021, as compared with other expenses of $900,362 for the same period ended 2020.

The decrease in other

expenses is mainly due to the reduction in the interest expenses.

We finished the three months ended June 30, 2021 with

a loss of $1,122,372, as compared to a net income of $1,377,465 during the three months ended June 30, 2020.

We finished the six months

ended June 30, 2021 with a loss of $3,000,861, as compared to a loss of $2,531,738 during the six months ended June 30, 2020.

The reasons for specific components are discussed

Overall, these are the main concepts impacting the net result:

(1) a reduction in the gross profit during the three months ended

June 30, 2021;

and (2) the increase of the Operating Expenses of the public entity.

Liquidity and Capital Resources

As of March 31, 2021, we had total current assets of $5,834,649 and current liabilities of $6,408,601, resulting in a working capital deficit of $573,952‬.

This compares with the working capital deficit of $4,330,355‬ at December 31, 2020.

This decrease in working capital deficit, as discussed in more detail below, is primarily the result of the increase of $2,279,321 in the cash position and a reduction of $1,239,736 in the derivative liabilities and convertible notes.‬ ‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬

Our operating activities used $1,042,192 in the three months ended March 31, 2021 as compared with $541,884 used in operating activities in the three months ended March 31, 2020.

Our cash flow from operations varies depending on our operating results and the timing of operating cash receipts and payments, specifically trade accounts receivable and trade accounts payable.

Our negative operating cash flows in 2021 and 2020 is largely the result of our net loss for the years.

Investing activities used $78,346 for the three months ended March 31, 2021.

Uses of funds on investing activities were the acquisition of subsidiary IoT Labs of $60,000 and the acquisition of property and equipment of $18,346.

Financing activities provided $3,416,581 in the three months ended March 31, 2021 compared with $586,874 provided in the three months ended March 31, 2020.

Our positive financing cash flow in 2021 was largely the result of the net proceeds from the subscription of new common stocks under our Regulation A offering $3,586,250.

Based upon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next twelve months.

We intend to fund operations through increased sales and debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements.

The Company has received the qualification of an Offering Statement under Regulation A for the sale of up to 80,000,000 common stocks.

This offering is being conducted on a “best efforts” basis, which means that there is no guarantee that any minimum amount will be sold.

We also plan to seek additional financing in a private equity offering to secure funding for operations.

There can be no assurance that we will be successful in raising additional funding.

As of June 30, 2021, we had total current assets of

$5,563,449 and current liabilities of $4,187,907, resulting in a positive working capital of $1,375,542.

This compares with the working

capital deficit of $4,330,355 at December 31, 2020.

This increase in working capital, as discussed in more detail below, is primarily

the result of the increase of $1,096,154 in the cash position and a reduction of $3,433,224 in the liabilities (loans, convertible notes

and derivatives).

Our operating activities used $2,093,398 in the six

months ended June 30, 2021 as compared with $1,126,307 used in operating activities in the six months ended June 30, 2020.

Investing activities used $152,864 for

the six months ended June 30, 2021.

Uses of funds on investing activities were the purchase of property and equipment for value of $68,844

and net payment of loans between related parties of $24,220, and acquisition of subsidiary of $60,000.

Financing activities provided $3,353,854 in the six

months ended June 30, 2021 compared with $1,626,500 provided in the six months ended June 30, 2020.

Our positive financing cash flow in

2021 was largely the result of the proceed from the subscription of new common stocks under our Regulation A offering of $3,586,250.

The working capital and the cash position

of the company has improved significantly;

but based upon our current financial condition, we do not have sufficient cash to operate our

business at the current level for the next twelve months.

We intend to fund operations through increased sales and debt and/or equity

financing arrangements, which may be insufficient to fund expenditures or other cash requirements.

The Company has received the qualification

of an Offering Statement under Regulation A for the sale of up to 20,200,000 common shares.

This offering is being conducted on a “best

efforts” basis, which means that there is no guarantee that any minimum amount will be sold.

We also plan to seek additional financing

in a private equity offering to secure funding for operations.

There can be no assurance that we will be successful in raising additional

If we are not able to secure additional funding, the implementation of our business plan will be impaired.

There can be no assurance that such additional financing will be available to us on acceptable terms or at all.

Although our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the three month period ended March 31, 2021.

There can be no assurance

that such additional financing will be available to us on acceptable terms or at all.

Although our operations are influenced by general

economic conditions, we do not believe that inflation had a material effect on our results of operations during the six-month period ended

June 30, 2021.

Critical Accounting Polices

A “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Our accounting policies are discussed in detail in the footnotes to our financial statements included in this Quarterly Report on Form 10-Q for the three months ended March 31, 2021;

however, we consider our critical accounting policies to be those related to allowance for doubtful accounts, valuation of assets, significant estimates in the valuation of convertible debt and income taxes.

Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances.

Actual results may differ from these estimates under different assumptions or conditions.

See the Consolidated Financial Statements in this Quarterly Report for a complete discussion of our significant accounting policies.

accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires

management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of

matters that are inherently uncertain.

Our accounting

policies are discussed in detail in the footnotes to our financial statements included in this Quarterly Report on Form 10-Q for the six

months ended June 30, 2021;

however, we consider our critical accounting policies to be those related to allowance for doubtful accounts,

valuation of assets, significant estimates in the valuation of convertible debt and income taxes.

Management bases its estimates and judgments

on historical experience and other factors that are believed to be reasonable under the circumstances.

Actual results may differ from

these estimates under different assumptions or conditions.

See the Consolidated Financial Statements in this Quarterly Report for a complete

discussion of our significant accounting policies.

Off Balance Sheet Arrangements

As of March 31, 2021, there were no off-balance sheet arrangements.

As of June 30, 2021, there were no off-balance sheet

arrangements.

Recent Accounting Pronouncements

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

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.

Quantitative and Qualitative Disclosures About Market Risk

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

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.

the new standard effective January 1, 2021 and did not 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.

Quantitative and Qualitative Disclosures

About Market Risk

We are a smaller reporting company and are not required

to provide the information under this item pursuant to Regulation S-K.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis