What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-15 compared with 2023-11-14 · 196 added, 161 removed, 68 unchanged (84% of the section changed)

2 unchanged sentences

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.

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 with presence in 19 countries and 70 employees that is offering leading-edge services through

its business divisions.

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.

(www.iqstel.com) is a technology company

with a presence in 19 countries and 70 employees that is offering leading-edge services through its business divisions.

Our Telecom Division, which

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Our Artificial Intelligence

(AI)-Enhanced Metaverse Division (information and content) is currently developing a groundbreaking white-label solution designed specifically

for corporations, businesses, and the telecommunications industry.

Delivering a full suite of immersive content services, creating a

comprehensive virtual experience that can be accessed through the Web or our proprietary mobile apps.

The features include up to four

simultaneous video screens for versatile content presentation, various virtual halls such as the main hall, home hall, auditorium, exhibition

space, shopping center, and meeting rooms.

Stands for mobile application downloads, clickable gates for immediate purchasing, and direct

communication tools are seamlessly integrated to foster collaboration, engagement, and interactivity.

It goes beyond traditional virtual

spaces by utilizing cutting-edge AI technology.

This ensures video conferencing and real-time communication with other users within the

Metaverse, offering our customers a collective and fully immersive experience that caters to diverse needs such as content acquisition,

entertainment, and shared virtual experiences.

It is a future-ready platform that encourages creativity, connectivity, and collaboration

like never before.

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.

(AI)-Enhanced Metaverse Division (information and content) (www.realityborder.com) is currently developing a groundbreaking white-label

solution designed specifically for corporations, businesses, and the telecommunications industry.

Delivering a full suite of immersive

content services, creating a comprehensive virtual experience that can be accessed through the Web or our proprietary mobile apps.

features include up to four simultaneous video screens for versatile content presentation, various virtual halls such as the main hall,

home hall, auditorium, exhibition space, shopping center, and meeting rooms.

Stands for mobile application downloads, clickable gates

for immediate purchasing, and direct communication tools are seamlessly integrated to foster collaboration, engagement, and interactivity.

It goes beyond traditional virtual spaces by utilizing cutting-edge AI technology.

This ensures video conferencing and real-time communication

with other users within the Metaverse, offering our customers a collective and fully immersive experience that caters to diverse needs

such as content acquisition, entertainment, and shared virtual experiences.

It is a future-ready platform that encourages creativity,

connectivity, and collaboration like never before.

Our metaverse leverages advanced

AI to introduce Non-Player Characters (NPCs) that significantly enhance user engagement and functionality within virtual environments.

These NPCs are not mere static elements;

rather, they are powered by OpenAI's latest language models, enabling dynamic interaction with

This AI-driven interaction allows NPCs to serve as sales and brand assistants, guiding users through immersive experiences that

can extend to purchasing products from external websites.

Furthermore, these intelligent agents can control access to gated spaces within

the metaverse based on user interactions, showcasing a personalized approach to user experience.

A key innovation in our AI

implementation is the NPCs' ability to autonomously make decisions based on their understanding of user interactions.

This is achieved

through state-of-the-art natural language processing and understanding capabilities, which are supported in seven languages.

Additionally,

our NPCs utilize advanced text-to-speech and speech-to-text technologies to facilitate seamless communication with users across diverse

linguistic backgrounds.

The incorporation of "function call" features further enhances the NPCs' ability to perform complex

tasks and interact meaningfully with the environment and the users.

Our reference to our technology

as "cutting-edge" is grounded in our commitment to continuous improvement and innovation.

We consistently integrate the latest

advancements in AI, particularly in the areas of chatbots, language understanding, and user interaction technologies.

This ensures that

our metaverse remains at the forefront of AI application in virtual spaces, offering an unparalleled user experience that goes beyond

traditional virtual environments.

We are currently in an advanced

phase of development, with ongoing enhancements to AI functionalities and user interaction models.

Our team is dedicated to exploring

and implementing the latest AI technologies to ensure that our metaverse remains a leading example of innovation in virtual space technology.

The information

contained on our websites is not incorporated by reference into this prospectus 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, 2023 was $39,757,203, compared with $21,936,634 for the three months ended September 30, 2022.

These numbers reflect an

increase of 81.24% quarter over quarter on our consolidated revenues.

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

2023 was $97,248,561, compared with $65,055,661 for the nine months ended September 30, 2022.

These numbers reflect an increase of 49.49%

year over year on our consolidated revenues.

When looking at the numbers by subsidiary, we have

the following breakout for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022:

Nine Months Ended

September 30, 2023

September 30, 2022

March 31, 2024 was $51,414,878, compared with $24,666,529 for the three months ended March 31, 2023.

These numbers reflect an increase

of 108% 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, 2024 compared to the three months ended March 31,

Three Months Ended

March 31, 2024

Three Months Ended

March 31, 2023

Etelix.com USA, LLC

SwissLink Carrier AG

Smartbiz Telecom

Whisl Telecom

$ 101,377,905

Inter-company sales

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 the synergies

among all our subsidiaries.

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 expanding the synergies among our subsidiaries.

We expect that our revenue will continue to grow consistently

over the coming quarters until reaching a projected total of +$250,000,000 by the end of 2024.

Cost of Revenues

Our total cost of revenues for the three months ended

September 30, 2023 increased to $38,728,682, compared with $20,621,674 for the three months ended September 30, 2022.

Our total cost of

revenues for the nine months ended September 30, 2023 increased to $94,218,838, compared with $62,410,367 for the nine months ended September

When looking at the numbers by subsidiary, we have

the following breakout for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022:

March 31, 2024 increased to $50,035,852, compared with $23,449,793 for the three months ended March 31, 2023.

When looking at the numbers

by subsidiary, we have the following breakout for the three months ended March 31, 2024 compared to the three months ended March 31, 2023:

Cost of Revenue

Nine Months Ended

September 30, 2023

September 30, 2022

Three Months Ended

March 31, 2024

Cost of Revenue

Three Months Ended

March 31, 2023

Etelix.com USA, LLC

SwissLink Carrier AG

Smartbiz Telecom

Whisl Telecom

Inter-company sales

Our cost of revenues consists of direct charges from

1 unchanged sentence

These costs primarily consist of usage charges for calls and SMS

terminated in vendor’s network.

terminated in vendor networks.

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.

The gross profit for the three months ended September

30, 2023 decreased to $1,028,521 from $1,314,960 for the same period of year 2022.

However, for the nine months ended September 30, 2023

the gross profit increased to $3,029,723 from $2,645,294 for the same period of year 2022.

When looking at the numbers by subsidiary,

we have the following breakout for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022:

Nine Months Ended

September 30, 2023

September 30, 2022

Etelix.com USA, LLC

SwissLink Carrier AG

Smartbiz Telecom

Whisl Telecom

with the behavior of the revenue commented on 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, was $1,379,026 for the three months ended March 31, 2024 compared to $1,216,736 for

the three months ended March 31, 2023.

This represents an increase of 13.34% in the gross margin quarter over quarter.

We expect our gross margin will increase through the increment in the revenue

associated with the SMS businesses offered by QGlobal SMS, whose margin is greater than 25%, compared to the margins of the wholesale

voice business of 3% average.

While our revenue associated with voice services grew 187% when comparing the three months ended on March

31, 2024 to the three months ended on March 31, 2023, the revenue of QGlobal SMS grew 332% in the same period.

Operating Expenses

Operating expenses decreased to $957,768 for the three

months ended September 30, 2023 from $1,256,147 for the three months ended September 30, 2022.

But more importantly than comparing year

2023 with year 2022, we must highlight how the Operating Expenses have been decreasing every quarter during 2023, from $1,534,266 in the

first quarter, to $1,037,184 in the second quarter and to $957,768 in this third quarter.

Operating expenses increased to $1,562,478 for the

nine months ended September 30, 2023 from $3,390,097 for the nine months ended September 30, 2022.

The details by major category for the

nine months ended September 30, 2023 and 2022 is reflected in the table below:

Nine Months Ended September 30,

three months ended March 31, 2024 from $1,534,266 for the three months ended March 31, 2023.

The detail by major category is reflected

in the table below.

Three Months Ended

Salaries, Wages and Benefits

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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

Bad debt expense

Stock-based compensation

Total Operating Expense

The main reasons for the overall increase in operating

expenses for the nine months ended September 30, 2023 compared to the same period of 2022 is due to the increase in the professional fees.

When looking at the numbers by subsidiary,

we have the following breakout for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022:

Nine Months Ended September 30,

Total Operating Expenses

When looking at the numbers

by subsidiary, we have the following breakout for the three months ended March 31, 2024 compared to the three months ended March 31, 2023:

Three Months Ended

Global Money One

Smartbiz Telecom

Whisl Telecom

The most significant differences are:

(1) the increase

in Professional Fees;

(2) the increases in technology expenses related to the deployment and upgrade of the Switching platform to allocate

This platform is currently used by SwissLink and Etelix;

and (3) the increase in Public Cost.

We are continually identifying operational synergies

among all of our subsidiaries to be more cost efficient.

We are currently making investments in the development of a unique voice switching

platform that will allow us to reduce costs between fifty and sixty thousand dollars per quarter.

Operating Income

The Operating Income increased to $70,753 for the

three months ended September 30, 2023 from $58,813 for the three months ended September 30, 2022.

When comparing these values for the nine months ended

September 30, 2023 with the same period in 2022, we also see an improvement going from a negative result of $744,803 in 2022, to a much

smaller loss in 2023 of $499,495.

Despite the operating loss incurred during the nine

months ended September 30, 2023, the Company has shown a positive evolution during year 2023 from an Operating loss of $317,530 in the

first quarter, to a loss of $252,718 in the second quarter, to a third quarter Operating Income of $70,753.

The Company showed negative Operating Income for the

three months ended March 31, 2024 of $183,452 compared with a negative result of $317,530 for the three months ended March 31, 2023.

Even though the Company showed 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, generated 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.

Telecom Division

Cost of revenues

Operating expenses

General and administration

Total operating expenses

Operating income/(loss)

The reason why there are practically no operating

expenses associated with the Fintech project is because the product development has already been completed.

The Company is working on

the design of the marketing and sales strategy for the start of commercial activities.

Other Expenses/Other Income

We had other income of $224,938 for the nine months

ended September 30, 2023, as compared with other expenses of $38,073 for the same period ended 2022.

The difference between the compared

periods in due to a positive change in fair value of derivative liabilities of $381,848.

Net Income/Loss

We finished the three months ended September 30, 2023

with a net income of $45,909, as compared to $27,312 during the three months ended September 30, 2022, which represent an increase of

We also finished the nine months ended September 30, 2023 with a smaller loss of $274,557, as compared to a loss of $782,876 during

the nine months ended September 30, 2022.

We had other expenses of $396,764 for the three months

ended March 31, 2024, as compared with other income of $158,708 for the same period ended 2023.

The other expenses in 2024 are largely

due to $365,474 in Interest Expense associated with the financing for the acquisition of QXTEL, which allows us to drive the organic growth

of the company.

Our other income in 2023 was largely due to the positive change in fair value of derivative liabilities.

finished the three months ended March 31, 2024 with a net loss of $580,216, as compared to a loss of $158,822 during the three months

ended March 31, 2023.

The net loss as of March 31, 2024 is highly impacted by interest expense incurred in the acquisition of QXTEL;

the increase in the Company's value and the beneficial effects of this acquisition could be observed in the consolidated proformas that

were presented in conjunction with the acquisition of QXTEL .

QXTEL is expecting to add over eighty million dollars

in annual revenues and net income around one million dollars per year.

Liquidity and Capital Resources

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

of $11,788,194 and current liabilities of $9,914,097, resulting in a positive working capital of $1,874,097.

This compares with a negative

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

Our operating activities used $434,701 in the nine

months ended September 30, 2023 as compared with $1,488,901 used in operating activities in the nine months ended September 30, 2022.

Investing activities used $340,583 for the nine

months ended September 30, 2023.

Uses of funds in investing activities were primarily for the advances of amounts due from related parties

of $189,767 and the purchase of property and equipment for $164,715.

Financing activities provided $1,454,756 in the nine

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

Our positive financing

cash flow in 2023 was largely the result of the proceeds from the exercise of warrants of $1,150,000.

financial condition has improved significantly with a positive working capital of $1,874,097 and

a cash position of $ 2,001,320 as of September 30, 2023.

However, we intend to fund operations

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

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

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

As of March 31, 2024, we had total current assets

of $15,619,755 and current liabilities of $13,484,660, resulting in a positive working capital of $2,135,095 and a current ratio of approximately

This compares to working capital of $1,878,228 at December 31, 2023.

The positive evolution of our working capital is an

indicator that the company's capital resources allow us to cover operating costs more easily every day and finance organic growth.

Our operating activities used $536,888 for the three

months ended March 31, 2024 as compared with $197,163 provided in operating activities in the three months ended March 31, 2023.

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 $1,622,892 for the

three months ended March 31, 2024 as compared with $142,947 for the three months ended March 31, 2023.

Uses of funds in investing activities

in 2024 consisted primarily of the first payment of $1,500,000 for the acquisition of QXTEL in January 2024.

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 $3,522,683 in the three

months ended March 31, 2024 compared with $390,994 provided in the three months ended March 31, 2023.

Our positive financing cash flow

in 2024 was largely the result of the financing secured to complete the acquisition of QXTEL.

Our positive financing cash flow in 2023

was largely the result of the net proceeds from the exercise of an option 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.

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, 2023.

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, 2024.

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, 2023;

for the three months ended March 31, 2024;

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, 2023, there were no off-balance

sheet arrangements.

As of March 31, 2024, there were no off-balance sheet

arrangements.

Recent Accounting Pronouncements

6 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