What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-14 compared with 2023-05-15 · 179 added, 146 removed, 43 unchanged (88% of the section changed)

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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.

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

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

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

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 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.

IQST) (www.iqstel.com) is a technology company with presence in 13 countries and 56

employees that is offering leading-edge services through its four business divisions.

Our Telecom Division, which

represents the majority of current operations and which also represents the source for all of our revenues for the financial periods presented

in this Prospectus, offers VoIP, SMS, proprietary Internet of Things (IoT) solutions (www.iotsmartgas.com and www.iotsmarttank.com), and

international fiber-optic connectivity through its subsidiaries:

Etelix (www.etelix.com), SwissLink Carrier (www.swisslink-carrier.com),

Smartbiz Telecom (www.smartbiztel.com), Whisl Telecom (www.whisl.com), IoT Labs (www.iotlabs.mx), and QGlobal SMS (www.qglobalsms.com).

Our developing Fintech Business

Line (www.globalmoneyone.com) (www.maxmo.vip) offers a complete Fintech ecosystem MasterCard Debit Card, US Bank Account (No SSN Needed),

Mobile App/Wallet (Remittances, Mobile Top Up).

Our Fintech subsidiary, Global Money One, is to provide immigrants access to reliable

financial services that makes it easier to manage their money and stay connected with their families back home.

Our developing BlockChain

Platform Business Line (www.itsbchain.com) offers our proprietary Mobile Number Portability Application (MNPA) to serve the in-country

portability needs through its subsidiary, itsBchain.

Our developing Electric Vehicle

(EV) Business Line (www.evoss.net) offers electric motorcycles for work and recreational use in the USA, Spain, Portugal, Panama, Colombia,

and Venezuela.

EVOSS is also working on the development of an EV Mid Speed Car to serve the niche of the 2nd car in the family.

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, 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 three months ended March 31, 2023 compared to the three months ended March 31,

June 30, 2023 was $32,824,829, compared with $23,699,716 for the three months ended June 30, 2022.

These numbers reflect an increase of

38.50% quarter over quarter on our consolidated revenues.

Our total revenue reported for the six months ended June 30, 2023 was $57,491,358,

compared with $43,119,027 for the six months ended June 30, 2022;

an increase of 33.33%.

When looking at the numbers by subsidiary,

we have the following breakout for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022:

Revenue for the Three Months Ended June

Revenue for the Six Months Ended June

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.

Cost of Revenues

Our total cost of revenues for the three months ended

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 three months ended March 31, 2023 compared to the three months ended March 31,

Smartbiz Telecom

Whisl Telecom

The increase in revenue is due to an increment in the commercial efforts

and the result of commercial synergies amongst all companies.

Third-party revenues recognized at Whisl decreased, as this company further

focused its efforts to serve as the platform to develop new business for the other subsidiaries.

Intercompany revenues recognized by Whisl

that were eliminated during the three and six months ended June 30, 2023 were $814,762 and $1,731,700, respectively.

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 Revenue

Our total cost of revenue for the three months ended

June 30, 2023 increased to $32,040,363, compared with $22,853,442 for the three months ended June 30, 2022.

Our total cost of revenue

for the six months ended June 30, 2023 increased to $55,490,156, compared with $41,788,693 for the six months ended June 30, 2022.

When looking at the numbers by subsidiary, we have

the following breakout for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022:

Cost of Revenue for the Three Months Ended June

Cost of Revenue for the Six Months Ended June

Etelix.com USA, LLC

SwissLink Carrier AG

Smartbiz Telecom

Whisl Telecom

Our cost of revenue consists of direct charges from

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SMS) has its corresponding termination cost.

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.

The Consolidated Gross Margin for the six months ended

June 30, 2023 was 3.48%, which compared to 3.09% for the six months ended June 30, 2022 represents an increase in our consolidated Gross

Margin of 12.62%.

Operating Expenses

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

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,

Operating expenses decreased to $1,037,184 for the

three months ended June 30, 2023 from $1,144,452 for the three months ended June 30, 2022.

Operating expenses increased to $2,571,450

for the six months ended June 30, 2023 from $2,133,950 for the six months ended June 30, 2022.

The detail by major category for the six

months ended June 30, 2023 and 2022 is reflected in the table below.

Six Months Ended June 30,

Salaries, Wages and Benefits

Professional Fees

Legal and Regulatory

Travel and Events

Legal & Regulatory

Travel & Events

Bank Services and Fees

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Total Operating Expense

When looking at the numbers

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,

at the numbers by subsidiary, we have the following breakout for the six months ended June 30, 2023 compared to the six months ended June

Six Months Ended June 30,

Global Money One

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.

Smartbiz Telecom

Whisl Telecom

During the six months ended June 30, 2022 we were

consolidating Whisl from May 6 to June 30 and Smartbiz from June 1 to June 30 as a result of the Q2 2022 acquisitions.

Both subsidiaries

were consolidated for the full six-month periods ended June 30, 2023, which explains the significant increase of expenses in those two

subsidiaries and the overall increase in the expenses for the six months ended June 30, 2023 compared to the same period in 2022.

Operating Income

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

The Company showed negative Operating Income for the

three months ended June 30, 2023 of $252,718 compared with a negative result of $298,178 for the three months ended June 30, 2022.

The Company showed negative Operating Income for the

six months ended June 30, 2023 of $570,248 compared with a negative result of $803,616 for the six months ended June 30, 2022.

The decrease of the numbers for the three and the

six-month periods mentioned above shows a positive trend in the operating results, and Company management is forecasting positive operating

income for the year ending December 31, 2023.

Our Telecom Division, the division presently generating

revenue, has 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.

Months Ended June 30, 2023

and administration

Operating Expenses

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We had other income of $91,074 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.

ended June 30, 2023, as compared with other income of $12,721 for the same period ended 2022.

We had other income of $249,782 for the

six months ended June 30, 2023, as compared with other expenses of $6,572 for the same period ended 2022.

The increase in other income

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

We finished the three months ended June 30, 2023 with

a loss of $161,644, as compared to a loss of $285,457 during the three months ended June 30, 2022.

We finished the six months ended June

30, 2023 with a loss of $320,466, as compared to a loss of $810,188 during the six months ended June 30, 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 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.

As of June 30, 2023, we had total current assets of

$7,097,716 and current liabilities of $6,912,490, resulting in a positive working capital of $185,226.

This compares with the negative

working capital of $15,089 at December 31, 2022.

Our operating activities used $721,400 in the six

months ended June 30, 2023 as compared with $1,435,292 used in operating activities in the six months ended June 30, 2022.

operating cash flow for both periods is a result of our net loss and changes in operating assets and liabilities.

Investing activities used $279,086 for

the six months ended June 30, 2023 compared to $1,612,255 used during the same period of year 2022.

For the six months ended June 30,

2023 the uses of funds in investing activities consisted primarily of the purchases of property and equipment for $132,249 and Payment

of loan receivable - related parties for $149,537.

Financing activities provided $790,994 in the six

months ended June 30, 2023 compared with $1,367,982 provided in the six months ended June 30, 2022.

Our positive financing cash flow in

2023 is mainly the result of proceeds from loans, warrant exercises, and proceeds from convertible notes.

Our positive financing cash

flow in 2022 is mainly the result of proceeds from the issuance of common stock and the payment of an option.

Our cash balance as of June 30, 2023 was $1,126,770

compared to $1,329,389 at December 31, 2022.

financial condition has improved significantly with a positive working capital.

However, we intend to fund operations through increased

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

We also plan to seek additional

financing in public and 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 three-month period

ended March 31, 2023.

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, 2023.

Critical Accounting Polices

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 three months ended March 31, 2023;

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

doubtful accounts, valuation of long-lived assets, 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.

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, 2023;

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

valuation of long-lived assets, 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

Off Balance Sheet Arrangements

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

As of June 30, 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

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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