Item 1. Financial Statements
Our unaudited consolidated financial statements included
in this Form 10-Q are as follows:
F-1
|
Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020;
|
F-2
|
Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (unaudited);
|
F-3
|
Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (unaudited); and
|
F-4
|
Consolidated Statements of Stockholder’s Equity as of June 30, 2021; and 2020.
|
F-5
|
Notes to Consolidated Financial Statements (unaudited).
|
These interim consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States of America for interim financial information and the
SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included.
Operating results for the interim period ended June 30, 2021 are not necessarily indicative of the results that can be expected for the
full year.
iQSTEL INC
Consolidated
Balance Sheets
(Unaudited)
|
|
June 30,
2021
|
|
December
31, 2020
|
ASSETS
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,849,470
|
|
|
$
|
753,316
|
Accounts receivable, net
|
|
|
3,262,974
|
|
|
|
2,528,321
|
Due from related parties
|
|
|
245,810
|
|
|
|
221,790
|
Prepaid and other current assets
|
|
|
205,195
|
|
|
|
78,157
|
Total Current Assets
|
|
|
5,563,449
|
|
|
|
3,581,584
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
359,198
|
|
|
|
350,530
|
Intangible asset
|
|
|
35,070
|
|
|
|
21,875
|
Goodwill
|
|
|
1,537,742
|
|
|
|
1,537,742
|
Deferred tax assets
|
|
|
439,769
|
|
|
|
460,036
|
TOTAL ASSETS
|
|
$
|
7,935,228
|
|
|
$
|
5,951,767
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
2,648,123
|
|
|
|
2,737,411
|
Due to related parties
|
|
|
34,616
|
|
|
|
94,616
|
Loans payable - net of discount of $0 and $19,221
|
|
|
103,824
|
|
|
|
1,332,612
|
Loans payable - related parties
|
|
|
1,129,188
|
|
|
|
2,054,379
|
Current portion of convertible notes - net of discount of $0 and $370,106
|
|
|
—
|
|
|
|
253,554
|
Other current liabilities
|
|
|
272,156
|
|
|
|
413,676
|
Derivative liabilities
|
|
|
—
|
|
|
|
1,025,691
|
Total Current Liabilities
|
|
|
4,187,907
|
|
|
|
7,911,939
|
|
|
|
|
|
|
|
|
Convertible notes - net of discount of $0 and $2,184
|
|
|
—
|
|
|
|
2,816
|
Loans payable, non-current
|
|
|
136,606
|
|
|
|
270,836
|
Employee benefits, non-current
|
|
|
154,110
|
|
|
|
161,212
|
TOTAL LIABILITIES
|
|
|
4,478,623
|
|
|
|
8,346,803
|
|
|
|
|
|
|
|
|
Stockholders' Equity (Deficit)
|
|
|
|
|
|
|
|
Preferred stock: 1,200,000 authorized; $0.001 par value
|
|
|
|
|
|
|
|
Series A Preferred stock: 10,000 designated; $0.001 par value,
10,000 shares issued and outstanding, respectively
|
|
|
10
|
|
|
|
10
|
Series B Preferred stock: 200,000 designated; $0.001 par value,
21,000 and 0 shares issued and outstanding
|
|
|
21
|
|
|
|
—
|
Series C Preferred stock: 200,000 designated; $0.001 par value, No shares issued and outstanding
|
|
|
—
|
|
|
|
—
|
Common stock: 300,000,000 authorized; $0.001 par value
141,657,358 and 118,133,432 shares issued and outstanding, respectively
|
|
|
141,657
|
|
|
|
118,133
|
Additional paid in capital
|
|
|
22,045,226
|
|
|
|
13,267,261
|
Accumulated deficit
|
|
|
(17,628,915
|
)
|
|
|
(14,699,148)
|
Accumulated other comprehensive loss
|
|
|
(48,825
|
)
|
|
|
(74,831)
|
Equity (Deficit) attributed to stockholders of iQSTEL Inc.
|
|
|
4,509,174
|
|
|
|
(1,388,575)
|
Deficit attributable to noncontrolling interests
|
|
|
(1,052,569
|
)
|
|
|
(1,006,461)
|
Total Stockholders' Equity (Deficit)
|
|
|
3,456,605
|
|
|
|
(2,395,036)
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
$
|
7,935,228
|
|
|
$
|
5,951,767
|
The accompanying
notes are an integral part of these unaudited consolidated financial statements.
iQSTEL INC
Consolidated
Statements of Operations
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
16,128,367
|
|
|
$
|
11,130,086
|
|
|
$
|
30,325,978
|
|
|
$
|
16,147,498
|
Cost of revenues
|
|
|
16,083,802
|
|
|
|
10,397,778
|
|
|
|
29,794,043
|
|
|
|
15,576,331
|
Gross profit
|
|
|
44,565
|
|
|
|
732,308
|
|
|
|
531,935
|
|
|
|
571,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administration
|
|
|
1,209,167
|
|
|
|
905,016
|
|
|
|
2,707,278
|
|
|
|
2,202,543
|
Total operating expenses
|
|
|
1,209,167
|
|
|
|
905,016
|
|
|
|
2,707,278
|
|
|
|
2,202,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(1,164,602
|
)
|
|
|
(172,708
|
)
|
|
|
(2,175,343
|
)
|
|
|
(1,631,376)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
4,145
|
|
|
|
8,815
|
|
|
|
29,179
|
|
|
|
24,732
|
Other expenses
|
|
|
(427
|
)
|
|
|
(3,002
|
)
|
|
|
(896
|
)
|
|
|
(8,057)
|
Interest expense
|
|
|
(12,062
|
)
|
|
|
(653,141
|
)
|
|
|
(642,087
|
)
|
|
|
(1,454,515)
|
Change in fair value of derivative liabilities
|
|
|
39,505
|
|
|
|
1,914,271
|
|
|
|
317,080
|
|
|
|
254,248
|
Gain (loss) on settlement of debt
|
|
|
11,069
|
|
|
|
283,230
|
|
|
|
(528,794
|
)
|
|
|
283,230
|
Total other income (expense)
|
|
|
42,230
|
|
|
|
1,550,173
|
|
|
|
(825,518
|
)
|
|
|
(900,362)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
Net income (loss)
|
|
|
(1,122,372
|
)
|
|
|
1,377,465
|
|
|
|
(3,000,861
|
)
|
|
|
(2,531,738)
|
Less: Net income (loss) attributable to noncontrolling interests
|
|
|
(134,996
|
)
|
|
|
91,446
|
|
|
|
(71,094
|
)
|
|
|
72,733
|
Net income (loss) attributed to stockholders of iQSTEL Inc.
|
|
$
|
(987,376
|
)
|
|
$
|
1,286,019
|
|
|
$
|
(2,929,767
|
)
|
|
$
|
(2,604,471)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(1,122,372
|
)
|
|
$
|
1,377,465
|
|
|
$
|
(3,000,861
|
)
|
|
$
|
(2,531,738)
|
Foreign currency adjustment
|
|
|
(56,664
|
)
|
|
|
(30,310
|
)
|
|
|
50,992
|
|
|
|
(33,588)
|
Total comprehensive income (loss)
|
|
|
(1,179,036
|
)
|
|
$
|
1,347,155
|
|
|
$
|
(2,949,869
|
)
|
|
$
|
(2,565,326)
|
Less: Comprehensive income (loss) attributable to noncontrolling interests
|
|
|
(162,761
|
)
|
|
|
76,594
|
|
|
|
(46,108
|
)
|
|
|
56,275
|
Net comprehensive income (loss) attributed to stockholders of iQSTEL Inc.
|
|
$
|
(1,016,275
|
)
|
|
$
|
1,270,561
|
|
|
$
|
(2,903,761
|
)
|
|
$
|
(2,621,601)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share
|
|
$
|
(0.01
|
)
|
|
$
|
0.02
|
|
|
$
|
(0.02
|
)
|
|
$
|
(0.06)
|
Diluted loss per common share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.06)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding - Basic
|
|
|
139,078,656
|
|
|
|
57,019,993
|
|
|
|
128,840,922
|
|
|
|
43,928,994
|
Weighted average number of common shares outstanding - Diluted
|
|
|
139,078,656
|
|
|
|
68,551,209
|
|
|
|
128,840,922
|
|
|
|
43,928,994
|
The accompanying
notes are an integral part of these unaudited consolidated financial statements.
iQSTEL INC
Consolidated
Statements of Changes in Stockholders’ Equity (Deficit)
For the three
and six months ended June 30, 2021 and 2020
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A Preferred Stock
|
|
|
|
Series B Preferred Stock
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
|
Additional
Paid in Capital
|
|
|
|
Accumulated
Deficit
|
|
|
|
Accumulated
Comprehensive Loss
|
|
|
|
Total
|
|
|
|
Non
Controlling Interest
|
|
|
|
Total
Shareholders’ Deficit
|
Balance - December 31, 2020
|
|
|
10,000
|
|
|
$
|
10
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
118,133,432
|
|
|
$
|
118,133
|
|
|
$
|
13,267,261
|
|
|
$
|
(14,699,148
|
)
|
|
$
|
(74,831
|
)
|
|
$
|
(1,388,575
|
)
|
|
$
|
(1,006,461
|
)
|
|
$
|
(2,395,036)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock issued for conversion
of common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
21,000
|
|
|
|
21
|
|
|
|
(21,000,000
|
)
|
|
|
(21,000
|
)
|
|
|
20,979
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
Common stock issued for cash
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
35,862,500
|
|
|
|
35,863
|
|
|
|
3,550,387
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,586,250
|
|
|
|
—
|
|
|
|
3,586,250
|
Common stock issued for service
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
195,000
|
|
|
|
195
|
|
|
|
284,505
|
|
|
|
—
|
|
|
|
—
|
|
|
|
284,700
|
|
|
|
—
|
|
|
|
284,700
|
Common stock issued for compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
600,000
|
|
|
|
600
|
|
|
|
563,400
|
|
|
|
—
|
|
|
|
—
|
|
|
|
564,000
|
|
|
|
—
|
|
|
|
564,000
|
Common stock issued for forbearance
of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
250,000
|
|
|
|
250
|
|
|
|
49,675
|
|
|
|
—
|
|
|
|
—
|
|
|
|
49,925
|
|
|
|
—
|
|
|
|
49,925
|
Common stock issued for conversion
of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,080,632
|
|
|
|
6,081
|
|
|
|
416,214
|
|
|
|
—
|
|
|
|
—
|
|
|
|
422,295
|
|
|
|
—
|
|
|
|
422,295
|
Cancellation of common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,294,600
|
)
|
|
|
(1,295
|
)
|
|
|
(88,809
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(90,104
|
)
|
|
|
—
|
|
|
|
(90,104)
|
Resolution of derivative liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
708,611
|
|
|
|
—
|
|
|
|
—
|
|
|
|
708,611
|
|
|
|
—
|
|
|
|
708,611
|
Foreign currency translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
54,905
|
|
|
|
54,905
|
|
|
|
52,751
|
|
|
|
107,656
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,942,391
|
)
|
|
|
—
|
|
|
|
(1,942,391
|
)
|
|
|
63,902
|
|
|
|
(1,878,489)
|
Balance - March 31, 2021
|
|
|
10,000
|
|
|
$
|
10
|
|
|
|
21,000
|
|
|
$
|
21
|
|
|
|
138,826,964
|
|
|
$
|
138,827
|
|
|
$
|
18,772,223
|
|
|
$
|
(16,641,539
|
)
|
|
$
|
(19,926
|
)
|
|
$
|
2,249,616
|
|
|
$
|
(889,808
|
)
|
|
$
|
1,359,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
600,000
|
|
|
|
600
|
|
|
|
411,600
|
|
|
|
—
|
|
|
|
—
|
|
|
|
412,200
|
|
|
|
—
|
|
|
|
412,200
|
Common stock issued for settlement
of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,230,394
|
|
|
|
2,230
|
|
|
|
2,054,300
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,056,530
|
|
|
|
—
|
|
|
|
2,056,530
|
Debt forgiveness
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
807,103
|
|
|
|
—
|
|
|
|
—
|
|
|
|
807,103
|
|
|
|
—
|
|
|
|
807,103
|
Foreign currency
translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(28,899
|
)
|
|
|
(28,899
|
)
|
|
|
(27,765
|
)
|
|
|
(56,664)
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(987,376
|
)
|
|
|
—
|
|
|
|
(987,376
|
)
|
|
|
(134,996
|
)
|
|
|
(1,122,372)
|
Balance - June 30, 2021
|
|
|
10,000
|
|
|
$
|
10
|
|
|
|
21,000
|
|
|
$
|
21
|
|
|
|
141,657,358
|
|
|
$
|
141,657
|
|
|
$
|
22,045,226
|
|
|
$
|
(17,628,915
|
)
|
|
$
|
(48,825
|
)
|
|
$
|
4,509,174
|
|
|
$
|
(1,052,569
|
)
|
|
$
|
3,456,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Class A
|
|
|
|
|
|
|
|
Preferred Class B
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
|
Additional
Paid in Capital
|
|
|
|
Accumulated
Deficit
|
|
|
|
Accumulated
Comprehensive Loss
|
|
|
|
Total
|
|
|
|
Non
Controlling Interest
|
|
|
|
Total
Shareholders' Deficit
|
Balance - December 31, 2019
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
18,008,591
|
|
|
$
|
18,008
|
|
|
$
|
3,240,528
|
|
|
$
|
(8,125,257
|
)
|
|
$
|
(181
|
)
|
|
$
|
(4,866,902
|
)
|
|
$
|
(903,513
|
)
|
|
$
|
(5,770,415)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for settlement of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,308,510
|
|
|
|
4,309
|
|
|
|
198,191
|
|
|
|
—
|
|
|
|
—
|
|
|
|
202,500
|
|
|
|
—
|
|
|
|
202,500
|
Common stock issued for services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,173,000
|
|
|
|
4,173
|
|
|
|
445,861
|
|
|
|
—
|
|
|
|
—
|
|
|
|
450,034
|
|
|
|
—
|
|
|
|
450,034
|
Common stock issued for forbearance of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
50
|
|
|
|
2,850
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,900
|
|
|
|
—
|
|
|
|
2,900
|
Common stock issued for conversion of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,208,350
|
|
|
|
17,208
|
|
|
|
256,760
|
|
|
|
—
|
|
|
|
—
|
|
|
|
273,968
|
|
|
|
—
|
|
|
|
273,968
|
Common stock issued for exercised cashless warrant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,235,697
|
|
|
|
2,235
|
|
|
|
(2,235
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
Common stock to be issued for acquisition of Itsbchain LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
50,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
50,000
|
|
|
|
—
|
|
|
|
50,000
|
Resolution of derivative liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,567,348
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,567,348
|
|
|
|
—
|
|
|
|
2,567,348
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,672
|
)
|
|
|
(1,672
|
)
|
|
|
(1,606
|
)
|
|
|
(3,278)
|
Net loss
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,890,490
|
)
|
|
|
—
|
|
|
|
(3,890,490
|
)
|
|
|
(18,713
|
)
|
|
|
(3,909,203)
|
Balance - March 31, 2020
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
45,984,148
|
|
|
$
|
45,983
|
|
|
$
|
6,759,303
|
|
|
$
|
(12,015,747
|
)
|
|
$
|
(1,853
|
)
|
|
$
|
(5,212,314
|
)
|
|
$
|
(923,832
|
)
|
|
$
|
(6,136,146)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,500,000
|
|
|
|
4,500
|
|
|
|
355,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
360,000
|
|
|
|
—
|
|
|
|
360,000
|
Common stock issued for conversion of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,613,263
|
|
|
|
16,614
|
|
|
|
410,918
|
|
|
|
—
|
|
|
|
—
|
|
|
|
427,532
|
|
|
|
—
|
|
|
|
427,532
|
Common stock issued for exercised cashless warrant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
997,889
|
|
|
|
998
|
|
|
|
(998
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
Common stock issued for settlement of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
200
|
|
|
|
67,140
|
|
|
|
—
|
|
|
|
—
|
|
|
|
67,340
|
|
|
|
—
|
|
|
|
67,340
|
Resolution of derivative liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,094,240
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,094,240
|
|
|
|
—
|
|
|
|
1,094,240
|
Acquisition of loT Labs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
94,366
|
|
|
|
94,366
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(15,458
|
)
|
|
|
(15,458
|
)
|
|
|
(14,852
|
)
|
|
|
(30,310)
|
Net income
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,286,019
|
|
|
|
—
|
|
|
|
1,286,019
|
|
|
|
91,446
|
|
|
|
1,377,465
|
Balance - June 30, 2020
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
68,295,300
|
|
|
$
|
68,295
|
|
|
$
|
8,686,103
|
|
|
$
|
(10,729,728
|
)
|
|
$
|
(17,311
|
)
|
|
$
|
(1,992,641
|
)
|
|
$
|
(752,872
|
)
|
|
$
|
(2,745,513)
|
The accompanying
notes are an integral part of these unaudited consolidated financial statements.
iQSTEL INC
Consolidated
Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
June 30,
|
|
|
2021
|
|
2020
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,000,861
|
)
|
|
$
|
(2,531,738)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
Stock based compensation
|
|
|
1,170,796
|
|
|
|
500,034
|
Write-off of due from related party
|
|
|
—
|
|
|
|
43,375
|
Depreciation and amortization
|
|
|
42,421
|
|
|
|
31,140
|
Amortization of debt discount
|
|
|
435,956
|
|
|
|
725,650
|
Change in fair value of derivative liabilities
|
|
|
(317,080
|
)
|
|
|
(254,248)
|
(Gain) loss on settlement of debt
|
|
|
528,794
|
|
|
|
(283,230)
|
Prepayment and Default penalty
|
|
|
122,020
|
|
|
|
239,271
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(784,128
|
)
|
|
|
71,727
|
Prepaid and other current assets
|
|
|
(130,278
|
)
|
|
|
14,930
|
Accounts payable
|
|
|
(31,917
|
)
|
|
|
(30,404)
|
Other current liabilities
|
|
|
(129,121
|
)
|
|
|
347,186
|
Net cash used in operating activities
|
|
|
(2,093,398
|
)
|
|
|
(1,126,307)
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Acquisition of subsidiary, net of cash acquired
|
|
|
(60,000
|
)
|
|
|
75,781
|
Purchase of property and equipment
|
|
|
(68,844
|
)
|
|
|
(58,832)
|
Payment of loan receivable - related party
|
|
|
(24,220
|
)
|
|
|
(14,787)
|
Collection from due from related parties - related party
|
|
|
200
|
|
|
|
388
|
Net cash provided by (used in) investing activities
|
|
|
(152,864
|
)
|
|
|
2,550
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Proceeds from loans payable
|
|
|
400,000
|
|
|
|
731,560
|
Repayments of loans payable
|
|
|
(321,609
|
)
|
|
|
(247,855)
|
Proceeds from loans payable - related parties
|
|
|
—
|
|
|
|
182
|
Repayment of loans payable - related parties
|
|
|
(60,787
|
)
|
|
|
(197)
|
Common stock issued
|
|
|
3,586,250
|
|
|
|
360,000
|
Proceeds from convertible notes
|
|
|
—
|
|
|
|
1,260,000
|
Repayment of convertible notes
|
|
|
(250,000
|
)
|
|
|
(477,190)
|
Net cash provided by financing activities
|
|
|
3,353,854
|
|
|
|
1,626,500
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
(11,438
|
)
|
|
|
6,307
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
1,096,154
|
|
|
|
509,050
|
Cash and cash equivalents, beginning of period
|
|
|
753,316
|
|
|
|
270,503
|
Cash and cash equivalents, end of period
|
|
$
|
1,849,470
|
|
|
$
|
779,553
|
|
|
|
|
|
|
|
|
Supplemental cash flow information
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
117,198
|
|
|
$
|
353,517
|
Cash paid for taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
Non-cash transactions:
|
|
|
|
|
|
|
|
Derivative liabilities recognized as debt discount
|
|
$
|
—
|
|
|
$
|
331,499
|
Common stock issued for conversion of debt
|
|
$
|
422,295
|
|
|
$
|
701,500
|
Cashless warrant exercised
|
|
$
|
—
|
|
|
$
|
3,233
|
Resolution of derivative liabilities
|
|
$
|
708,611
|
|
|
$
|
3,661,588
|
Related party debt forgiveness
|
|
$
|
807,103
|
|
|
$
|
—
|
Common stock issued for settlement of debt
|
|
$
|
2,056,530
|
|
|
$
|
269,840
|
Amount owing for
acquisition of IOT
|
|
$
|
—
|
|
|
$
|
120,000
|
Common stock issued for forbearance of debt
|
|
$
|
—
|
|
|
$
|
2,900
|
Replacement of convertible notes to note payable
|
|
$
|
—
|
|
|
$
|
700,000
|
Preferred stock issued for conversion of common stock
|
|
$
|
21
|
|
|
$
|
—
|
The accompanying
notes are an integral part of these unaudited consolidated financial statements.
iQSTEL INC
Notes to the Unaudited Consolidated
Financial Statements
June 30, 2021
NOTE 1 -ORGANIZATION
AND DESCRIPTION OF BUSINESS
Organization
and Operations
iQSTEL Inc.
(“iQSTEL”, “we”, “us”, or the “Company”) was incorporated under the laws of the State
of Nevada on June 24, 2011 under the name of B-Maven Inc. The Company changed its name to PureSnax International, Inc. on September 18,
2015; and more recently it changed its name to iQSTEL Inc. on August 7, 2018.
The Company
has been engaged in the business of telecommunication services as a wholesale carrier of voice, SMS and data for other telecom companies
around the World with more than 150 active interconnection agreements with mobile companies, fixed line companies and other wholesale
carriers.
The Company
incorporated a 75% owned subsidiary, Global Money One Inc. under the laws of the state of Delaware, on November 16, 2020.
COVID-19
A novel strain
of coronavirus (COVID-19) was first identified in December 2019, and subsequently declared a global pandemic by the World Health Organization
on March 11, 2020. As a result of the outbreak, many companies have experienced disruptions in their operations and in markets served.
The Company has instituted some and may take additional temporary precautionary measures intended to help ensure the well-being of its
employees and minimize business disruption. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined
that there were no material adverse impacts on the Company’s results of operations and financial position at June 30, 2021. The
full extent of the future impacts of COVID-19 on the Company’s operations is uncertain. A prolonged outbreak could have a material
adverse impact on financial results and business operations of the Company, including the timing and ability of the Company to collect
accounts receivable and the ability of the Company to continue to provide high quality services to its clients. The Company is not aware
of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of
its assets or liabilities as of May 14, 2021, the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change,
as new events occur and additional information is obtained.
NOTE 2 -SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The accompanying
unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America for interim financial statements and with the instructions to Form 10-Q and Regulation S-X of the United States Securities
and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles
generally accepted in the United States of America for annual financial statements.
In the opinion
of the Company’s management, the accompanying unaudited interim financial statements contain all the adjustments necessary (consisting
only of normal recurring accruals) to present the financial position of the Company as of June 30, 2021 and the results of operations
and cash flows for the periods presented. The results of operations for the six months ended June 30, 2021 are not necessarily indicative
of the operating results for the full fiscal year or any future period. These unaudited financial statements should be read in conjunction
with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2020 filed with the SEC on April 15, 2021.
Consolidation
Policy
The consolidated
financial statements of the Company include the accounts of the Company and its owned subsidiaries, Etelix.com USA, LLC, SwissLink Carrier
AG, ITSBCHAIN, LLC, QGLOBAL SMS, LLC, IoT Labs, LLC and Global Money one Inc.. All significant intercompany balances and transactions
have been eliminated in consolidation.
Use of
Estimates
The preparation
of the consolidated financial statements in conformity with GAAP in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses
during the reporting period. Actual results could differ from these good faith estimates and judgments.
Foreign
Currency Translation and Re-measurement
The Company
translates its foreign operations to U.S. dollar in accordance with ASC 830, “Foreign Currency Matters”.
The Company’s,
Etelix’s, QGlobal’s, Itsbchain, IoT Labs and Global Money One’s functional currency and reporting currency is the U.S.
dollar, SwissLink’s functional currency is the Swiss Franc (“CHF”).
The Company’s
subsidiaries, whose functional currency is not the U.S. dollar, translate their records into U.S. dollar as follows:
•
Assets and liabilities at the rate of exchange in effect at the balance sheet date
•
Equities at historical rate
•
Revenue and expense items at the average rate of exchange prevailing during the period
Adjustments
arising from such translations are included in accumulated other comprehensive income in shareholders’ equity.
Accounts
Receivable and Allowance for Uncollectible Accounts
Substantially
all of the Company’s accounts receivable balance is related to trade receivables. Trade accounts receivable are recorded at the
invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable
credit losses in its existing accounts receivable. The Company reviews its allowance for doubtful accounts daily, past due balances over
60 days and a specified amount are reviewed individually for collectability. Account balances are charged off after all means of collection
have been exhausted and the potential for recovery is considered remote. During the six months ended June 30, 2021 and 2020, the Company
did not record bad debt expense.
Net Income
(Loss) Per Share of Common Stock
The Company
has adopted ASC 260, ”Earnings per Share” which requires presentation of basic earnings per share on the
face of the statements of operations for all entities with complex capital structures and requires a reconciliation of the numerator and
denominator of the basic earnings per share computation. In the accompanying financial statements, basic loss per share is computed by
dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share is
computed by dividing net income by the weighted average number of shares of common stock and potentially dilutive outstanding shares of
common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share
arrangements, stock options and warrants unless the result would be antidilutive. There were no potentially dilutive shares of common
stock outstanding for the six months ended June 30, 2021 and 2020.
Concentrations
of Credit Risk
The Company’s
financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related
party payables that it will likely incur in the near future. The Company places its cash and cash equivalents with financial institutions
of high creditworthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government
insurance limits.
During the six
months ended June 30, 2021 and 2020, 5 customers represented 87% of our revenues and 4 customers represented 86% of our revenues, respectively.
Revenue
Recognition
The Company
recognizes revenue from telecommunication services in accordance with ASC 606, “Revenue from Contracts with Customers.”
The Company
recognizes revenue related to monthly usage charges and other recurring charges during the period in which the telecommunication services
are rendered, provided that persuasive evidence of a sales arrangement existed, and collection was reasonably assured. Management considers
persuasive evidence of a sales arrangement to be a written interconnection agreement. The Company’s payment terms vary by clients.
Retirement
Benefit Costs
Payments to
defined contribution retirement benefit schemes are charged as an expense as they fall due. Payments made to state-managed retirement
benefit schemes are dealt with as payments to defined contribution schemes where the Company’s obligations under the schemes are
equivalent to those arising in a defined contribution retirement benefit scheme.
For defined
benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being
carried out at each balance sheet date. Actuarial gains and losses are recognized in full in the period in which they occur. They are
recognized outside the income statement and are presented in other comprehensive income. Past service cost is recognized immediately in
the income statement in the period in which it occurs.
The retirement
benefit obligation recognized in the balance sheet represents the present value of the defined obligation as adjusted for unrecognized
past service cost, and as reduced by the fair value of the scheme assets. Any asset resulting from this calculation is limited to past
service cost, plus the present value of available refunds and reductions in future contributions to the scheme.
Recent
Accounting Pronouncements
Management has
considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company’s management
believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
NOTE 3 -
GOING CONCERN
The
Company's consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates
the realization of assets and liquidation of liabilities in the normal course of business. The Company has suffered recurring losses
from operations, has negative stockholder’s equity and does not have an established source of revenues sufficient to cover its operating
costs. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
The ability
of the Company to continue as a going concern is dependent upon its ability to successfully accomplish its business plan and eventually
attain profitable operations.
During the next
year, the Company's foreseeable cash requirements will relate to continual development of the operations of its business, maintaining
its good standing in the industry and continuing its marketing efforts. The Company may experience a cash shortfall and be required to
raise additional capital.
Historically,
the Company has relied upon funds from its stockholders. Management may raise additional capital through future public or private offerings
of the Company's stock or through loans from private investors, although there can be no assurance that it will be able to obtain such
financing. The Company's failure to do so could have a material and adverse effect upon its operations and its stockholders.
NOTE 4 – PROPERTY
AND EQUIPMENT
Property and
equipment at June 30, 2021 and December 31, 2020 consisted of the following:
|
|
June 30,
|
|
December 31,
|
|
|
2021
|
|
2020
|
Telecommunication equipment
|
|
$
|
258,809
|
|
|
$
|
259,000
|
|
Telecommunication software
|
|
|
547,446
|
|
|
|
530,514
|
|
Other equipment
|
|
|
79,350
|
|
|
|
47,206
|
|
Total property and equipment
|
|
|
885,605
|
|
|
|
836,720
|
|
Accumulated depreciation and amortization
|
|
|
(526,407
|
)
|
|
|
(486,190
|
)
|
Total property and equipment
|
|
$
|
359,198
|
|
|
$
|
350,530
|
|
Depreciation
and amortization expense for the six months ended June 30, 2021 and 2020 amounted to $42,421 and $31,140, respectively.
NOTE 5 –LOANS
PAYABLE
Loans payable
at June 30, 2021 and December 31, 2020 consisted of the following:
|
June
30,
2021
|
|
December
31,
2020
|
|
Term
|
|
Interest
rate
|
Unique Funding Solutions_2
|
$
|
—
|
|
|
$
|
2,000
|
|
|
Note was issued on October 12, 2018 and due on January 17, 2019
|
|
|
28.6%
|
YES LENDER LLC 3
|
|
—
|
|
|
|
5,403
|
|
|
Note was issued on August 3, 2020 and due on January 12, 2021
|
|
|
26.0%
|
Advance Service Group LLC
|
|
—
|
|
|
|
12,143
|
|
|
Note
was issued on October 20, 2020, 2020 and due on February 19, 2021
|
|
|
29.0%
|
Apollo Management Group, Inc
|
|
—
|
|
|
|
63,158
|
|
|
Note was issued on March 18, 2020 and due on December 15, 2020
|
|
|
12.0%
|
Apollo Management Group, Inc 2
|
|
—
|
|
|
|
68,421
|
|
|
Note was issued on March 25, 2020 and due on December 15, 2020
|
|
|
12.0%
|
Apollo Management Group, Inc 3
|
|
—
|
|
|
|
66,316
|
|
|
Note was issued on April 1, 2020 and due on October 1, 2021
|
|
|
12.0%
|
Apollo Management Group, Inc 4
|
|
—
|
|
|
|
73,684
|
|
|
Note was issued on April 2, 2020 and due on October 2, 2021
|
|
|
12.0%
|
Apollo Management Group, Inc 5
|
|
—
|
|
|
|
36,842
|
|
|
Note was issued on April 7, 2020 and due on October 7, 2021
|
|
|
12.0%
|
Apollo Management Group, Inc 6
|
|
—
|
|
|
|
84,211
|
|
|
Note was issued on April 15, 2020 and due on October 15, 2021
|
|
|
12.0%
|
Apollo Management Group, Inc 7
|
|
—
|
|
|
|
55,000
|
|
|
Note was issued on April 20, 2020 and due on December 15, 2020
|
|
|
12.0%
|
Apollo Management Group, Inc 14
|
|
—
|
|
|
|
32,432
|
|
|
Note was issued on December 4, 2020 and due on January 4, 2021
|
|
|
12.0%
|
Labrys Fund
|
|
—
|
|
|
|
280,000
|
|
|
Note was issued on June 26, 2020 and due on April 1, 2021
|
|
|
12.0%
|
M2B Funding Corp
|
|
—
|
|
|
|
300,000
|
|
|
Note was issued on September 1, 2020 and due on September 1, 2021
|
|
|
12.0%
|
M2B Funding Corp 1
|
|
—
|
|
|
|
77,778
|
|
|
Note was issued on December 10, 2020 and due on January 9, 2021
|
|
|
22.0%
|
M2B Funding Corp 2
|
|
—
|
|
|
|
27,778
|
|
|
Note was issued on December 18, 2020 and due on January 17, 2021
|
|
|
22.0%
|
M2B Funding Corp 3
|
|
—
|
|
|
|
55,556
|
|
|
Note was issued on December 24, 2020 and due on January 23, 2021
|
|
|
22.0%
|
M2B Funding Corp 4
|
|
—
|
|
|
|
111,111
|
|
|
Note was issued on December 30, 2020 and due on January 29, 2021
|
|
|
22.0%
|
Martus
|
|
103,824
|
|
|
|
108,609
|
|
|
Note was issued on October 23, 2018 and due on January 3, 2022
|
|
|
5.0%
|
Swisspeers AG
|
|
28,546
|
|
|
|
49,187
|
|
|
Note was issued on April 8, 2019 and due on October 4, 2022
|
|
|
7.0%
|
Darlene Covid19
|
|
108,060
|
|
|
|
113,040
|
|
|
Note was issued on April 1, 2020 and due on March 31, 2025
|
|
|
0.0%
|
Total
|
|
240,430
|
|
|
|
1,622,669
|
|
|
|
|
|
|
Less: Unamortized debt discount
|
|
—
|
|
|
|
(19,221
|
)
|
|
|
|
|
|
Total loans payable
|
|
240,430
|
|
|
|
1,603,448
|
|
|
|
|
|
|
Less: Current portion of loans payable
|
|
(103,824
|
)
|
|
|
(1,332,612
|
)
|
|
|
|
|
|
Long-term loans payable
|
$
|
136,606
|
|
|
$
|
270,836
|
|
|
|
|
|
|
Loans payable to related parties
at June 30, 2021 and December 31, 2020 consisted of the following:
|
June 30,
|
|
December 31,
|
|
|
|
Interest
|
|
2021
|
|
2020
|
|
Term
|
|
rate
|
Alonso Van Der Biest
|
$
|
30,000
|
|
|
$
|
80,200
|
|
|
Note was issued on June 12, 2015 and due on July 31, 2021
|
|
|
16.5%
|
Alvaro Quintana
|
|
—
|
|
|
|
10,587
|
|
|
Note was issue on September 30, 2016 and due on September 29, 2019
|
|
|
0%
|
49% of Shareholder of SwissLink
|
|
883,068
|
|
|
|
1,737,512
|
|
|
Note is due on demand
|
|
|
0%
|
49% of Shareholder of SwissLink
|
|
216,120
|
|
|
|
226,080
|
|
|
Note is due on demand
|
|
|
5%
|
Total
|
|
1,129,188
|
|
|
|
2,054,379
|
|
|
|
|
|
|
Less: Current portion of loans payable
|
|
1,129,188
|
|
|
|
2,054,379
|
|
|
|
|
|
|
Long-term loans payable
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
During the six months ended June 30, 2021, the related
party loan of $807,103
(Euro 735,000) was forgiven and the Company recorded it as additional paid in capital.
During the six
months ended June 30, 2021 and 2020, the Company borrowed from third parties totaling $444,444 and $760,139, which includes original issue
discount and financing costs of $44,444 and $28,579 and repaid the principal amount of $321,609 and $321,609, respectively.
During the six
months ended June 30, 2021 and 2020, the Company recorded interest expense of $172,701 and $85,172 and recognized amortization of discount,
included in interest expense, of $63,666 and $18,877, respectively.
During the six
months ended June 30, 2021, the Company settled loans payable of $1,516,667 by 2,230,394 shares of common stock valued at $2,056,530.
As a result, the Company recorded loss on settlement of debt of $539,863.
NOTE
6 - CONVERTIBLE LOANS
At June 30,
2021 and December 31, 2020, convertible loans consisted of the following:
|
|
June 30,
|
|
December 31,
|
|
|
2021
|
|
2020
|
Promissory notes – Issued in fiscal year 2019, with variable conversion features
|
|
$
|
—
|
|
|
$
|
5,000
|
Promissory notes – Issued in fiscal year 2020, with variable conversion features
|
|
|
—
|
|
|
|
623,660
|
Total convertible notes payable
|
|
|
—
|
|
|
|
628,660
|
Less: Unamortized debt discount
|
|
|
—
|
|
|
|
(372,290)
|
Total convertible notes
|
|
|
—
|
|
|
|
256,370
|
|
|
|
|
|
|
|
|
Less: current portion of convertible notes
|
|
|
—
|
|
|
|
253,554
|
Long-term convertible notes
|
|
$
|
—
|
|
|
$
|
2,816
|
During the six
months ended June 30, 2021 and 2020, the Company recorded interest expense of $33,430 and $643,693 and recognized amortization of discount,
included in interest expense, of $372,290 and $706,773, respectively.
During the six
months ended June 30, 2021 and 2020, the Company repaid notes of $250,000 and $477,190 and accrued interest including prepayment penalty
of $6,027 and $138,415, respectively.
During the six
months ended June 30, 2021, the Company recorded gain on settlement of debt of $11,069.
Conversion
During the six
months ended June 30, 2021, the Company converted notes with principal amounts and accrued interest of $422,295 into 6,080,632 shares
of common stock. The corresponding derivative liability at the date of conversion of $708,611 was settled through additional paid in capital.
NOTE 7 – DERIVATIVE
LIABILITY
The Company
analyzed the conversion option for derivative accounting consideration under ASC 815, Derivatives and Hedging, and determined
that the instrument should be classified as a liability since the conversion option becomes effective at issuance resulting in there being
no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.
Fair Value
Assumptions Used in Accounting for Derivative Liabilities
ASC 815 requires
we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market
value as other income or expense item.
The Company
determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the
fair value as of June 30, 2021. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration,
the risk free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate.
Changes to these inputs could produce a significantly higher or lower fair value measurement.
For the six
months ended June 30, 2021 and the year ended December 31, 2020, the estimated fair values of the liabilities measured on a recurring
basis are as follows:
|
|
|
Six months Ended
|
|
|
|
Year ended
|
|
|
|
June 30,
|
|
|
|
December 31,
|
|
|
|
2021
|
|
|
|
2020
|
Expected term
|
|
|
0.16 - 1.18 years
|
|
|
|
0.02 - 6.00 years
|
Expected average volatility
|
|
|
145% - 241%
|
|
|
|
74% - 550%
|
Expected dividend yield
|
|
|
—
|
|
|
|
—
|
Risk-free interest rate
|
|
|
0.07% - 0.09%
|
|
|
|
0.05% - 2.56%
|
The following
table summarizes the changes in the derivative liabilities during the six months ended June 30, 2021:
Fair Value Measurements Using Significant Observable Inputs (Level 3)
|
|
|
|
|
Balance - December 31, 2020
|
|
$
|
1,025,691
|
|
|
|
|
Settled on issuance of common stock
|
|
|
(708,611)
|
Change in fair value of the derivative
|
|
|
(317,080)
|
Balance - June 30, 2021
|
|
$
|
—
|
The following
table summarizes the change in fair value of derivative liability included in the income statement for the six months ended June 30, 2021
and 2020, respectively.
|
|
|
|
|
|
|
|
|
|
Six months Ended
|
|
|
June 30,
|
|
|
2021
|
|
2020
|
Addition of new derivatives recognized as loss on derivatives
|
|
$
|
—
|
|
|
$
|
94,891
|
Revaluation of derivative liabilities
|
|
|
(317,080
|
)
|
|
|
(349,139)
|
(Gain) on change in fair value of the derivative
|
|
$
|
(317,080
|
)
|
|
$
|
(254,248)
|
NOTE 8 – SHAREHOLDERS’
EQUITY
The Company’s
authorized capital consists of 1,200,000 shares of preferred stock and 300,000,000 shares of common stock with a par value of $0.001 per
share.
Common Stock
During the six
months ended June 30, 2021, the Company issued 45,818,526 shares of common stock, valued at fair market value on issuance as follows;
|
·
|
35,862,500
shares issued for cash of $3,586,250
|
|
·
|
2,230,394
shares, valued at $2,056,530, issued for settlement of debt of $1,516,667
|
|
·
|
1,200,000
shares issued to our management for compensation valued at $976,200
|
|
·
|
6,080,632
shares issued for conversion of debt of $422,295
|
|
·
|
195,000
shares for services valued at $284,700
|
|
·
|
250,000
shares for forbearance of debt valued at $49,925
|
During the six
months ended June 30, 2021, the Company terminated a placement agent and advisory services agreement with a FINRA member dated September
22, 2020, and cancelled 1,294,600 shares of common stock, which was issued for those services. The termination agreement allowed the FINRA
member to retain 400,000 shares of the Company’s common stock in connection with the services.
As of June 30,
2021 and December 31, 2020, 141,657,358 and 118,133,432 shares of common stock were issued and outstanding, respectively.
Series A
Preferred Stock
On November
3, 2020, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock
entitled Series A Preferred Stock, consisting of up 10,000 shares, par value $0.001. Under the Certificate of Designation, holders of
Series A Preferred Stock will participate on an equal basis per-share with holders of our common stock in any distribution upon winding
up, dissolution, or liquidation. Holders of Series A Preferred Stock are entitled to vote together with the holders of our common stock
on all matters submitted to shareholders at a rate of 51% of the total vote of shareholders.
The rights of
the holders of Series A Preferred Stock are defined in the relevant Certificate of Designation filed with the Nevada Secretary of State
on November 3, 2020
As of June 30,
2021 and December 31, 2020, 10,000 shares of Series A Preferred Stock were issued and outstanding, respectively.
Series B
Preferred Stock
On November
11, 2020, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock
entitled Series B Preferred Stock, consisting of up 200,000 shares, par value $0.001. Under the Certificate of Designation, holders of
Series B Preferred Stock will receive a liquidation preference of $81 per share in any distribution upon winding up, dissolution, or liquidation
of the Company before junior security holders, as provided in the designation. Holders of Series B Preferred Stock are entitled to receive
as, when, and if declared by the Board of Directors, dividends in kind at an annual rate equal to twenty four percent (24%) of $81 per
share for each of the then outstanding shares of Series B Preferred Stock, calculated on the basis of a 360-day year consisting of twelve
30-day months. Holders of Series B Preferred Stock do not have voting rights but may convert into common stock after twelve months from
the issuance date, at a conversion rate of one thousand (1,000) shares of Common Stock for every one (1) share of Series B Preferred Stock.
Upon conversion, the shares are subject to a one-year leak-out restriction on sales into the market of no more than 5% previous month’s
stock liquidity.
During the six
months ended June 30, 2021, 21,000,000 shares of common stock were converted into 21,000 shares of Series B Preferred Stock by our management.
As of June 30,
2021 and December 31, 2020, 21,000 and 0 shares of Series B Preferred Stock were issued and outstanding, respectively.
Series C
Preferred Stock
On January 7,
2021, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock entitled
Series C Preferred Stock, consisting of up 200,000 shares, par value $0.001. Under the Certificate of Designation, holders of Series C
Preferred Stock will rank junior to the Series B Preferred Stock, but on par with common stock and Series A Preferred Stock in any distribution
upon winding up, dissolution, or liquidation of the company, as provided in the designation. The holders of shares of Series C Preferred
Stock have no dividend rights except as may be declared by the Board in its sole and absolute discretion, out of funds legally available
for that purpose. Holders of Series B Preferred Stock do not have voting rights but may convert into common stock after twenty four months
from the issuance date, at a conversion rate of one thousand (1,000) shares of Common Stock for every one (1) share of Series C Preferred
Stock. Upon conversion, the shares are subject to a one-year leak-out restriction on sales into the market of no more than 5% previous
month’s stock liquidity.
The rights of
the holders of Series C Preferred Stock are defined in the relevant Certificate of Designation filed with the Nevada Secretary of State
on January 7, 2021.
NOTE 9 -
RELATED PARTY TRANSACTIONS
Due from
related parties
During the six months ended June
30, 2021 and 2020, the Company loaned $24,220 and $14,787 to a related party who are a shareholder and a former director, and
collected $200 and $388, respectively.
As of June 30,
2021 and December 31, 2020, the Company had due from related parties of $245,810 and $221,790. The loans are unsecured, non-interest bearing
and due on demand.
Due to related
parties
During the six months ended June 30, 2021 and 2020,
the Company borrowed $0 and $182
from CEO and CFO of the Company, and repaid $0
and $197
to the CEO and CFO, respectively.
As of June 30,
2021 and December 31, 2020, the Company had amounts due to related parties of $34,616 and $94,616, respectively. During the six months
ended June 30, 2021, the Company paid $60,000 for the rest of consideration of acquisition of IoT Labs in 2020 The amounts are unsecured,
non-interest bearing and due on demand.
Employment
agreements
During
the six months ended June 30, 2021 and 2020, the Company recorded management fees of $270,000 and $252,000, bonus of $976,200 and $0 and
paid $301,300 and $62,300, respectively.
NOTE 10 – COMMITMENTS
AND CONTINGENCIES
Leases and
Long-term Contracts
The Company
has not entered into any long-term leases, contracts or commitments.
Advisory
service
On March 3,
2020, we appointed Oscar Brito as an advisor to our Board of Directors and agreed to pay him $5,000 per month for such services. Mr. Brito
acted as an advisor to our Board of Directors.
On January 4,
2021, the Company terminated a placement agent and advisory services agreement with a FINRA member dated September 22, 2020, and cancelled
1,294,600 shares of common stock, which was issued for those services. The termination agreement allowed the FINRA member to retain 400,000
shares of the Company’s common stock in connection with the services.
NOTE 11 -
SEGMENT
At June 30,
2021, the Company operates in one industry segment, telecommunication services, and two geographic segments, USA and Switzerland, where
current assets and equipment are located.
Operating
Activities
The following
table shows operating activities information by geographic segment for the three and six months ended June 30, 2021 and 2020:
Three months
ended June 30, 2021
NOTE
11 - SEGMENT - Schedule of Operating Activities by Geographic Segment (Details)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA
|
|
Switzerland
|
|
Elimination
|
|
Total
|
Revenues
|
|
$
|
14,990,382
|
|
|
|
1,149,183
|
|
|
$
|
(11,198
|
)
|
|
$
|
16,128,367
|
|
Cost of revenue
|
|
|
15,074,899
|
|
|
|
1,020,101
|
|
|
|
(11,198
|
)
|
|
|
16,083,802
|
|
Gross profit
|
|
|
(84,517
|
)
|
|
|
129,082
|
|
|
|
—
|
|
|
|
44,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administration
|
|
|
1,022,625
|
|
|
|
186,542
|
|
|
|
—
|
|
|
|
1,209,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(1,107,142
|
)
|
|
|
(57,460
|
)
|
|
|
—
|
|
|
|
(1,164,602
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
47,030
|
|
|
|
(4,800
|
)
|
|
|
—
|
|
|
|
42,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,060,112
|
)
|
|
$
|
(62,260
|
)
|
|
$
|
—
|
|
|
$
|
(1,122,372
|
)
|
Three months Ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA
|
|
Switzerland
|
|
Elimination
|
|
Total
|
Revenues
|
|
$
|
9,947,837
|
|
|
$
|
1,183,087
|
|
|
$
|
(838
|
)
|
|
$
|
11,130,086
|
|
Cost of revenue
|
|
|
9,387,289
|
|
|
|
1,011,327
|
|
|
|
(838
|
)
|
|
|
10,397,778
|
|
Gross profit
|
|
|
560,548
|
|
|
|
171,760
|
|
|
|
—
|
|
|
|
732,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administration
|
|
|
741,967
|
|
|
|
163,049
|
|
|
|
—
|
|
|
|
905,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(181,419
|
)
|
|
|
8,711
|
|
|
|
—
|
|
|
|
(172,708
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
1,547,495
|
|
|
|
2,678
|
|
|
|
—
|
|
|
|
1,550,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,366,076
|
|
|
$
|
11,389
|
|
|
$
|
—
|
|
|
$
|
1,377,465
|
|
Six months
ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA
|
|
Switzerland
|
|
Elimination
|
|
Total
|
Revenues
|
|
$
|
28,057,392
|
|
|
|
2,284,985
|
|
|
$
|
(16,399
|
)
|
|
$
|
30,325,978
|
|
Cost of revenue
|
|
|
27,780,959
|
|
|
|
2,029,483
|
|
|
|
(16,399
|
)
|
|
|
29,794,043
|
|
Gross profit
|
|
|
276,433
|
|
|
|
255,502
|
|
|
|
—
|
|
|
|
531,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administration
|
|
|
2,338,741
|
|
|
|
368,537
|
|
|
|
—
|
|
|
|
2,707,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(2,062,308
|
)
|
|
|
(113,035
|
)
|
|
|
—
|
|
|
|
(2,175,343
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
(840,841
|
)
|
|
|
15,323
|
|
|
|
—
|
|
|
|
(825,518
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,903,149
|
)
|
|
$
|
(97,712
|
)
|
|
$
|
—
|
|
|
$
|
(3,000,861
|
)
|
Six months
ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA
|
|
Switzerland
|
|
Elimination
|
|
Total
|
Revenues
|
|
$
|
13,768,370
|
|
|
$
|
2,381,204
|
|
|
$
|
(2,076
|
)
|
|
$
|
16,147,498
|
|
Cost of revenue
|
|
|
13,508,472
|
|
|
|
2,069,935
|
|
|
|
(2,076
|
)
|
|
|
15,576,331
|
|
Gross profit
|
|
|
259,898
|
|
|
|
311,269
|
|
|
|
—
|
|
|
|
571,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administration
|
|
|
1,874,059
|
|
|
|
328,484
|
|
|
|
—
|
|
|
|
2,202,543
|
|
Operating income (loss)
|
|
|
(1,614,161
|
)
|
|
|
(17,215
|
)
|
|
|
—
|
|
|
|
(1,631,376
|
)
|
Other income (expense)
|
|
|
(890,776
|
)
|
|
|
(9,586
|
)
|
|
|
—
|
|
|
|
(900,362
|
)
|
Net loss
|
|
$
|
(2,504,937
|
)
|
|
$
|
(26,801
|
)
|
|
$
|
—
|
|
|
$
|
(2,531,738
|
)
|
Asset
Information
The following
table shows asset information by geographic segment as of June 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
USA
|
|
Switzerland
|
|
Elimination
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
3,761,686
|
|
|
$
|
2,025,461
|
|
|
$
|
(223,698
|
)
|
|
$
|
5,563,449
|
Non-current assets
|
|
$
|
4,339,837
|
|
|
$
|
541,504
|
|
|
$
|
(2,509,562
|
)
|
|
$
|
2,371,779
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
1,919,269
|
|
|
$
|
2,492,336
|
|
|
$
|
(223,698
|
)
|
|
$
|
4,187,907
|
Non-current liabilities
|
|
$
|
—
|
|
|
$
|
290,716
|
|
|
$
|
—
|
|
|
$
|
290,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
USA
|
|
Switzerland
|
|
Elimination
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
3,245,725
|
|
|
$
|
1,225,399
|
|
|
$
|
(889,540
|
)
|
|
$
|
3,581,584
|
Non-current assets
|
|
$
|
3,478,147
|
|
|
$
|
561,551
|
|
|
$
|
(1,669,515
|
)
|
|
$
|
2,370,183
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
5,630,060
|
|
|
$
|
3,171,419
|
|
|
$
|
(889,540
|
)
|
|
$
|
7,911,939
|
Non-current liabilities
|
|
$
|
2,816
|
|
|
$
|
432,048
|
|
|
$
|
—
|
|
|
$
|
434,864
|
NOTE 12 – EARNING PER SHARE
Basic
net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the
periods. Diluted net income per common share is computed using the weighted average number of common and dilutive common equivalent shares
outstanding during the periods. Common equivalent shares consist of stock options, unvested restricted shares, and outstanding warrants
that are computed using the treasury stock method. Antidilutive stock awards consist of stock options that would have been antidilutive
in the application of the treasury stock method.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Numerator:
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(1,122,372
|
)
|
|
$
|
1,377,465
|
|
|
$
|
(3,000,861
|
)
|
|
$
|
(2,531,738)
|
Change in fair value of derivatives
|
|
|
—
|
|
|
|
(1,914,271
|
)
|
|
|
—
|
|
|
|
—
|
Interest on convertible debt
|
|
|
—
|
|
|
|
111,518
|
|
|
|
—
|
|
|
|
—
|
Net Loss - diluted
|
|
$
|
(1,122,372
|
)
|
|
$
|
(425,288
|
)
|
|
$
|
(3,000,861
|
)
|
|
$
|
(2,531,738)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
139,078,656
|
|
|
|
57,019,993
|
|
|
|
128,840,922
|
|
|
|
43,928,994
|
Effect of dilutive shares
|
|
|
—
|
|
|
|
11,531,216
|
|
|
|
—
|
|
|
|
—
|
Diluted
|
|
|
139,078,656
|
|
|
|
68,551,209
|
|
|
|
128,840,922
|
|
|
|
43,928,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.01
|
)
|
|
$
|
0.02
|
|
|
$
|
(0.02
|
)
|
|
$
|
(0.06)
|
Diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.06)
|
For the three and six months
ended June 30, 2021 and six months ended June 30, 2020, the convertible instruments are anti-dilutive and therefore, have been excluded
from earnings (loss) per share.
NOTE
13 – SUBSEQUENT EVENT
Subsequent to June 30, 2021 and through the date that
these financials were made available, the Company had the following subsequent events:
On July 13, 2021 the Company filed a Post-Qualification
Offering Circular Amendment No. 5 (the “Amendment”) amending the Offering Circular of the Company, dated February 19, 2019,
as qualified on December 9, 2019; amended by Amendment No. 4, dated January 11, 2021, as qualified on January 14, 2021. This Amendment
relates to the offer and sale of up to an additional 56,000,000 shares of common stock onto the original 24,000,000 shares originally
offered by the Company, for a revised maximum of 80,000,000 shares. We have sold a total of 59,800,000 shares of common stock so far in
the offering and we plan to sell 20,200,000 additional common shares according to this Amendment. This Amendment also excludes from this
offering the 900,000 shares of our common stock from our selling shareholder, which were unsold in the offering.
On August 4, 2021 the Company filed Supplement No.
1 to the offering circular dated July 13, 2021 establishing the price of the shares being registered of $0.50 per share.
Item 2. 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.
Overview
iQSTEL Inc. (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. 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.
Results of Operations
Revenues
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:
Subsidiary
|
|
Revenue
Six
Months Ended
June
30, 2021
|
|
Revenue
Six
Months Ended
June
30, 2020
|
Etelix.com USA, LLC
|
|
$
|
7,481,915
|
|
|
$
|
7,221,345
|
|
SwissLink Carrier AG
|
|
|
2,284,985
|
|
|
|
2,381,204
|
|
QGlobal LLC
|
|
|
502,431
|
|
|
|
163,546
|
|
IoT Labs LLC
|
|
|
20,056,647
|
|
|
|
6,381,403
|
|
|
|
$
|
30,325,978
|
|
|
$
|
16,147,498
|
|
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
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:
Subsidiary
|
|
Cost of Revenue
Six Months Ended
June 30, 2021
|
|
Cost of Revenue
Six Months Ended
June 30, 2020
|
Etelix.com USA, LLC
|
|
$
|
7,338,609
|
|
|
$
|
7,217,330
|
|
SwissLink Carrier AG
|
|
|
2,029,483
|
|
|
|
2,069,935
|
|
QGlobal LLC
|
|
|
419,810
|
|
|
|
102,231
|
|
IoT Labs LLC
|
|
|
20,006,141
|
|
|
|
6,186,835
|
|
|
|
$
|
29,794,043
|
|
|
$
|
15,576,331
|
|
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 $1,209,167 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,
|
|
|
2021
|
|
2020
|
Salaries, Wages and Benefits
|
|
$
|
560,618
|
|
|
$
|
562,427
|
Technology
|
|
|
216,428
|
|
|
|
28,100
|
Professional Fees
|
|
|
232,216
|
|
|
|
214,853
|
Legal & Regulatory
|
|
|
50,627
|
|
|
|
3,224
|
Bad debts
|
|
|
—
|
|
|
|
76,375
|
Travel & Events
|
|
|
5,430
|
|
|
|
1,341
|
Public Cost
|
|
|
24,331
|
|
|
|
49,732
|
Advertising
|
|
|
487,825
|
|
|
|
583,079
|
Bank Services and Fees
|
|
|
58,309
|
|
|
|
35,926
|
Depreciation and Amortization
|
|
|
42,421
|
|
|
|
31,140
|
Office, Facility and Other
|
|
|
142,977
|
|
|
|
116,312
|
|
|
|
|
|
|
|
|
Sub Total
|
|
|
1,821,182
|
|
|
|
1,702,509
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
886,096
|
|
|
|
500,034
|
Total Operating Expense
|
|
$
|
2,707,278
|
|
|
$
|
2,202,543
|
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,
|
|
|
2021
|
|
2020
|
|
Difference
|
iQSTEL
|
|
$
|
1,993,964
|
|
|
$
|
1,587,992
|
|
|
$
|
405,972
|
|
Etelix
|
|
|
162,674
|
|
|
|
184,100
|
|
|
|
(21,426
|
)
|
Swisslink
|
|
|
368,537
|
|
|
|
328,483
|
|
|
|
40,054
|
|
ItsBchain
|
|
|
1,450
|
|
|
|
52,684
|
|
|
|
(51,234
|
)
|
QGlobal
|
|
|
56,138
|
|
|
|
29,952
|
|
|
|
26,186
|
|
IoT Labs
|
|
|
70,142
|
|
|
|
19,332
|
|
|
|
50,810
|
|
Global Money One
|
|
|
54,373
|
|
|
|
—
|
|
|
|
54,373
|
|
|
|
$
|
2,707,278
|
|
|
$
|
2,202,543
|
|
|
$
|
504,735
|
|
Operating Income
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
over year.
Other Expenses/Other Income
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.
Net Income
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
above. 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 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
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.
Inflation
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 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 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. 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 adopted
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.