What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-15 compared with 2022-11-14 · 130 added, 159 removed, 59 unchanged (83% of the section changed)

3 unchanged sentences

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.

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

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 four business divisions:

Telecom, Fintech, Electric vehicles and Metaverse.

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 (www.qglobalsms.com/), Smart Gas (www.iotsmartgas.com/) and ItsBChain (www.itsbchain.com/),

Smartbiz Telecom (www.smartbiztel.com) and Whisl Telecom (www.whisl.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.

and its majority-owned subsidiaries SwissLink Carrier AG (www.swisslink-carrier.com), QGlobal SMS (https://www.qglobalsms.com/),

Smart Gas (http://iotsmartgas.com/) and ItsBChain (http://itsbchain.com/), Whisl Telecom LLC (www.whisl.com), and Smartbiz Telecom LLC

(www.smartbiztel.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

September 30, 2022 was $21,936,634, compared with $16,516,739 for the three months ended September 30, 2021.

These numbers reflect an

increase of 32.81% quarter over quarter on our consolidated revenues.

Our total revenue reported for the nine months ended September 30,

2022 was $65,055,661, compared with $46,842,717 for the nine months ended September 30, 2021.

These numbers reflect an increase of 38.88%

year over year on our consolidated revenues.

March 31, 2023 was $24,666,529, compared with $19,419,311 for the three months ended March 31, 2022.

These numbers reflect an increase

of 27.02% quarter over quarter on our consolidated revenues.

When looking at the numbers

by subsidiary, we have the following breakout for the nine months ended September 30, 2022 compared to the nine months ended September

Nine Months Ended

September 30, 2022

Nine Months Ended

September 30, 2021

by subsidiary, we have the following breakout for the three months ended March 31, 2023 compared to the three months ended March 31,

Etelix.com USA, LLC

SwissLink Carrier AG

Smartbiz Telecom

Whisl Telecom

Inter-company sales

The continued growth of our

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Our total cost of revenues for the three months ended

September 30, 2022 increased to $20,621,674, compared with $15,675,687 for the three months ended September 30, 2021.

Our total cost of

revenues for the nine months ended September 30, 2022 increased to $62,410,367, compared with $45,469,730 for the nine months ended September

March 31, 2023 increased to $23,449,793, compared with $18,935,251 for the three months ended March 31, 2022.

When looking at the numbers

by subsidiary, we have the following breakout for the nine months ended September 30, 2022 compared to the nine months ended September

Cost of Revenue

Nine Months Ended

September 30, 2022

Cost of Revenue

Nine Months Ended

September 30, 2021

by subsidiary, we have the following breakout for the three months ended March 31, 2023 compared to the three months ended March 31,

Etelix.com USA, LLC

SwissLink Carrier AG

Smartbiz Telecom

Whisl Telecom

Inter-company sales

Our cost of revenues consists of direct charges from

Our cost of revenue consists of direct charges from

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

5 unchanged sentences

SMS) has its corresponding termination cost.

The gross profit for the three months ended September

30, 2022 increased to $1,314,960 from $841,052 for the same period of year 2021.

For the nine months ended September 30, 2022 the gross

profit increased to $2,645,294 from $1,372,987 for the same period of year 2021.

When we analyze the numbers expressed in percentages,

the gross profit for the nine months ended September 30, 2022 was 4.07%, which compared to 2.93% for the nine months ended September 30,

2021, an increase in the consolidated gross profit of 38.91%.

When looking at the numbers

by subsidiary, we have the following breakout for the nine months ended September 30, 2022 compared to the nine months ended September

Nine Months Ended

September 30, 2022

Nine Months Ended

September 30, 2021

The increase of our consolidated gross margin is the

result of the improvement of the gross margin of Etelix, SwissLink and QGlobal;

combined with the relatively high gross margin of our

most recent acquisitions Smartbiz and Whisl.

Our gross margin, which is simply the difference

between our revenues and our cost of sales, discussed above, was $1,216,736 for the three months ended March 31, 2023 compared to $484,060

for the three months ended March 31, 2022.

This represents an increase of 151.36% in the gross margin quarter over quarter.

But more importantly, the Gross Margin in terms

of percentage of Revenue was 2.49% for the three months ended March 31, 2022 compared to 4.93% for the three months ended March 31, 2023,

representing an increase of 98% quarter over quarter.

Operating Expenses

Operating expenses increased to $1,534,266 for the

three months ended September 30, 2022 from $957,195 for the three months ended September 30, 2021.

Operating expenses decreased to $3,390,097

for the nine months ended September 30, 2022 from $3,664,473 for the nine months ended September 30, 2021.

The detail by major category

for the nine months ended September 30, 2022 and 2021 is reflected in the table below.

Nine Months Ended September 30,

three months ended March 31, 2023 from $989,498 for the three months ended March 31, 2022.

The detail by major category is reflected

in the table below.

Three M onths Ended March 31,

Salaries, Wages and Benefits

1 unchanged sentence

Legal and Regulatory

Bad Debt Expense

Travel and Events

Bank Services and Fees

Financial Expenses

Depreciation and Amortization

Penalties and Settlements

Office, Facility and Other

1 unchanged sentence

Total Operating Expense

The main reasons for the overall decrease in operating

expenses for the nine months ended September 30, 2022 compared to the same period of 2021 is due to the significant decrease in Stock-based

compensation.

When looking at the numbers

by subsidiary, we have the following breakout for the nine months ended September 30, 2022 compared to the nine months ended September

Nine Months Ended September 30,

by subsidiary, we have the following breakout for the three months ended March 31, 2023 compared to the three months ended March 31,

Three Months Ended March 31,

Global Money One

Smartbiz Telecom

Whisl Telecom

The most significant difference is generated by iQSTEL

which is due to the reduction in Stock-based compensation.

The most significant differences are:

(1) the increase

in Salaries, wages and benefits primarily due to an increment in the headcount related to Whisl and Smartbiz;

(2) the increases in technology

expenses related to the deployment and upgrade of the Switching platform;

and (3) the increase in Advertising expenses.

Operating Income

The Company showed positive Operating Income for the

three months ended September 30, 2022 of $58,813 compared with a negative result of $116,143 for the three months ended September 30,

The Company showed negative Operating Income for the

nine months ended September 30, 2022 of $744,803 compared with a negative result of $2,291,486 for the nine months ended September 30,

Despite the operating loss incurred during the nine

months ended September 30, 2022, the numbers compared with the same period of year 2021 reflect a positive evolution process as shown

by the positive operating income during the three months ended September 30, 2022.

The Company showed negative Operating Income for

the three months ended March 31, 2023 of $317,530 compared with a negative result of $505,438 for the three months ended March 31, 2022.

Even though the Company showed a negative Operating

Income, the number shows a trend of significant improvement year over year.

Our Telecom Division, which is the one generating

revenue at the present time, has a positive Operating Income.

The expenses of our Pre-revenue companies are set at the minimum required

to finish the development of the product/services prior to market launch.

Management implemented a process that intends to reduce future

general and administrative expenses of iQSTEL to a maximum of $400,000 per quarter.

Telecom Division

Cost of revenue

Operating expenses

General and administration

operating expenses

Operating income/(loss)

Other Expenses/Other Income

We had other expenses of $38,073 for the nine months

ended September 30, 2022, as compared with other expenses of $820,593 for the same period ended 2021.

The decrease in other expenses is

a consequence of a significant reduction in interest expenses and other expenses related to derivatives.

We finished the three months ended September 30, 2022

with a net income of $27,312, as compared to a loss of $111,218 during the three months ended September 30, 2021.

We also finished the

nine months ended September 30, 2022 with a loss of $782,876, as compared to a loss of $3,112,079 during the nine months ended September

The decreased loss for the nine-month period above

is primarily due to a $1,012,346 year over year reduction in the costs associated with the operation of the public entity (iQSTEL, Inc.).

We had other income of $158,708 for the three months

ended March 31, 2023, as compared with other expenses of $19,293 for the same period ended 2022.

The increase in other income is largely

due to the positive change in fair value of derivative liabilities.

We finished the three months ended March 31, 2023

with a net loss attributable to shareholders of iQSTEL Inc.

of $363,185, as compared to a loss of $554,970 during the three months ended

March 31, 2022.

When comparing the results year over year, these numbers show a significant improvement, as the fundamentals of the Company

are getting stronger quarter after quarter leading to our goal of generating positive net income.

Liquidity and Capital Resources

As of September 30, 2022, we had total current assets

of $6,141,182 and current liabilities of $2,769,981, resulting in a positive working capital of $3,371,201.

This compares with the working

capital of $4,203,509 at December 31, 2021.

This decrease in working capital, as discussed in more detail below, is primarily the result

of the decrease of $2,039,832 in the cash position due to the funds used in the acquisitions of Smartbiz and Whisl.

Our operating activities used $1,488,901 in the nine

months ended September 30, 2022 as compared with $2,486,045 used in operating activities in the nine months ended September 30, 2021.

Investing activities used $1,901,223 for the

nine months ended September 30, 2022.

Uses of funds in investing activities were primarily for the acquisition of subsidiaries of $1,814,132

and the purchase of property and equipment for $86,491.

Financing activities provided $1,367,982 in the nine

months ended September 30, 2022 compared with $3,314,313 provided in the nine months ended September 30, 2021.

Our positive financing

cash flow in 2022 was largely the result of the proceeds from common stock issued of $1,100,000 and the common stock purchase option of

financial condition has improved significantly with a positive working capital of $3,371,201 and

a cash position of $ 1,294,981 as of September 30, 2022.

However, we intend to fund operations

through increased sales and debt and/or equity financing arrangements to strengthen our liquidity and capital resources.

The Company has

received the qualification of a S-1 Offering Statement for the sale of up to 10,000,000 common stocks.

This offering will be conducted

on a “best efforts” basis, which means that there is no guarantee that any minimum amount will be sold from the available

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.

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.

As of March 31, 2023, we had total current assets

of $6,736,967 and current liabilities of $6,301,031, resulting in a positive working capital of $435,936 and a current ratio of approximately

This compares to a negative working capital of $15,089 at December 31, 2022.

Our operating activities provided $197,163 in the

three months ended March 31, 2023 as compared with $447,652 used in operating activities in the three months ended March 31, 2022.

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.

Investing activities used $142,947 for the three

months ended March 31, 2023 compared with $24,918 for the three months ended March 31, 2022.

Uses of funds on investing activities in

2023 were primarily the acquisition of property and equipment and the issuance of a related party loan.

Financing activities provided $390,994 in the three

months ended March 31, 2023 compared with $1,367,982 provided in the three months ended March 31, 2022.

Our positive financing cash flow

in 2023 was largely the result of the net proceeds from the execution of the Option shares in the amount of $400,000.

Our current financial condition has improved

significantly.

However, we intend to fund operations through increased sales and debt and/or equity financing arrangements, to strengthen

our liquidity and capital resources.

The Company has received the qualification of an Offering Statement under Form S-1 for the sale

of up to 10,000,000 shares of common stock.

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.

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 nine-month period

ended September 30, 2022.

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, 2023.

Critical Accounting Polices

“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.

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.

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

for the nine months ended September 30, 2022;

for the three months ended March 31, 2023;

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

7 unchanged sentences

Off Balance Sheet Arrangements

As of September 30, 2022, there were no off-balance

sheet arrangements.

As of March 31, 2023, there were no off-balance sheet

arrangements.

Recent Accounting Pronouncements

We do not expect the adoption of recently issued accounting

pronouncements to have a significant impact on our results of operation, financial position, or cash flow.

We do not expect the adoption of recently issued

accounting pronouncements to have a significant impact on our results of operation, financial position, or cash flow.

Quantitative and Qualitative Disclosures

3 unchanged sentences

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