IQST 10-Q 2020 - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2020

[ ] Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to__________

Commission File Number: 000-55984

iQSTEL Inc.

(Exact name of registrant as specified in its charter)

Nevada	45-2808620
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
300 Aragon Avenue, Suite 375
Coral Gables, FL 33134
(Address of principal executive offices)
(954) 951-8191
(Registrant’s telephone number)
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). [X] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

[ ] Large accelerated filer	[ ] Accelerated filer
[X] Non-accelerated filer	[X] Smaller reporting company
	[ ] Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 72,598,774 common shares as of August 11, 2020

TABLE OF CONTENTS

	PART I – FINANCIAL INFORMATION	Page
Item 1:	Financial Statements	4
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4:	Controls and Procedures	26
	PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	28
Item 1A:	Risk Factors	28
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3:	Defaults Upon Senior Securities	28
Item 4:	Mine Safety Disclosures	28
Item 5:	Other Information	28
Item 6:	Exhibits	28

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our unaudited consolidated financial statements included in this Form 10-Q are as follows:

4	Consolidated Balance Sheets as of June 30, 2020 (unaudited) and December 31, 2019;
5	Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019 (unaudited);
6	Consolidated Statements of Stockholder’s Equity as of June 30, 2020; and 2019; and
7	Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019 (unaudited)
8	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 31, 2020 are not necessarily indicative of the results that can be expected for the full year.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

iQSTEL INC

Consolidated Balance Sheets

(Unaudited)

	June 30,		December 31,
	2020		2019
ASSETS
Current Assets
Cash and cash equivalents	779,553	$	270,503
Accounts receivable, net	2,706,733		2,759,164
Due from related parties	287,884		316,860
Prepaid and other current assets	79,132		91,970
Total Current Assets	3,853,302		3,438,497
Property and equipment, net	351,411		287,970
Intangible asset	21,875		-
Goodwill	1,537,742		1,455,960
Deferred tax assets	429,757		420,519
TOTAL ASSETS	6,194,087	$	5,602,946
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable	2,280,050		2,291,921
Due to related parties	154,616		34,631
Loans payable - net of discount of 9,702 and 0	1,205,288		89,671
Loans payable - related parties	1,925,141		1,885,708
Current portion of convertible notes - net of discount of 457,454 and 597,654	1,115,852		1,251,096
Other current liabilities	675,225		848,484
Derivative liabilities	1,159,797		4,744,134
Total Current Liabilities	8,515,969		11,145,645
Convertible notes - net of discount of 2,929 and 48,558	2,071		11,442
Loans payable	270,611		178,021
Employee benefits, non-current	150,949		38,253
TOTAL LIABILITIES	8,939,600		11,373,361
Stockholders' Deficit
Preferred stock: 1,200,000 authorized; 0.0001 par value - no shares issued and outstanding	-		-
Common stock: 300,000,000 authorized; 0.001 par value 68,295,300 and 18,008,591 shares issued and outstanding, respectively	68,295		18,008
Additional paid in capital	8,686,103		3,240,528
Accumulated deficit	(10,729,728)		(8,125,257)
Accumulated other comprehensive income	(17,311)		(181)
Deficit attributed to stockholders of iQSTEL Inc.	(1,992,641)		(4,866,902)
Deficit attributable to noncontrolling interests	(752,872)		(903,513)
Total stockholders' Deficit	(2,745,513)		(5,770,415)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	6,194,087	$	5,602,946

All values are in US Dollars. 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,
		2020		2019		2020		2019
Revenues	$	11,130,086	$	4,253,359	$	16,147,498	$	8,416,562
Cost of revenue		10,397,778		4,345,087		15,576,331		8,072,713
Gross profit		732,308		(91,728)		571,167		343,849
Operating expenses
General and administration		905,016		341,553		2,202,543		532,060
Total operating expenses		905,016		341,553		2,202,543		532,060
Operating loss		(172,708)		(433,281)		(1,631,376)		(188,211)
Other income (expense)
Other income		8,815		-		24,732		2,600
Other expenses		(3,002)		(233)		(8,057)		(375)
Interest expense		(653,141)		(511,125)		(1,454,515)		(776,162)
Change in fair value of derivative liabilities		1,914,271		460,398		254,248		(547,671)
Gain on settlement of debt		283,230		-		283,230		-
Total other income (expense)		1,550,173		(50,960)		(900,362)		(1,321,608)
Net Income (loss) before provision for income taxes		1,377,465		(484,241)		(2,531,738)		(1,509,819)
Income taxes		-		-		-		-
Net income (loss)		1,377,465		(484,241)		(2,531,738)		(1,509,819)
Less: Net income attributable to noncontrolling interests		91,446		-		72,733		-
Net income (loss) attributed to stockholders of iQSTEL Inc.	$	1,286,019	$	(484,241)	$	(2,604,471)	$	(1,509,819)
Comprehensive income (loss)
Net income (loss)	$	1,377,465	$	(484,241)	$	(2,531,738)	$	(1,509,819)
Foreign currency adjustment		(30,310)		-		(33,588)		-
Total comprehensive income (loss)		1,347,155	$	(484,241)	$	(2,565,326)	$	(1,509,819)
Less: Comprehensive income attributable to noncontrolling interests		76,594		-		56,275		-
Net comprehensive income (loss)<br><br><br>attributed to stockholders of iQSTEL Inc.	$	1,270,561	$	(484,241)	$	(2,621,601)	$	(1,509,819)
Basic income (loss) per common share	$	0.02	$	(0.03)	$	(0.06)	$	(0.1)
Diluted loss per common share	$	(0.01)	$	(0.03)	$	(0.06)	$	(0.1)
Weighted average number of common shares outstanding - Basic		57,019,993		15,357,689		43,928,994		15,199,517
Weighted average number of common shares outstanding - Diluted		68,551,209		15,357,689		43,928,994		15,199,517

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, 2020 and 2019

(Unaudited)

	Common Stock
					Additional				Accumulated				Non		Total
					Paid in		Accumulated		Comprehensive				Controlling		Shareholders'
	Shares		Amount		Capital		Deficit		Loss		Total		Interest		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)
	Common Stock
---	---	---	---	---	---	---	---	---	---
					Additional				Total
					Paid in		Accumulated		Stockholders'
	Shares		Amount		Capital		Deficit		Total
Balance - December 31, 2018	15,022,650	$	15,023	$	1,054,718	$	(2,667,388)	$	(1,597,647)
Common stock issued in conjunction with convertible notes	254,074		254		249,746		-		250,000
Capital contribution	-		-		10,000		-		10,000
Net loss	-		-		-		(1,025,578)		(1,025,578)
Balance - March 31, 2019	15,276,724	$	15,277	$	1,314,464	$	(3,692,966)	$	(2,363,225)
Common stock issued for conversion of debt	76,335		76		4,924		-		5,000
Resolution of derivative liabilities	-		-		181,326		-		181,326
Common stock issued in conjunction with convertible notes	122,857		123		244,577		-		244,700
Net loss	-		-		-		(484,241)		(484,241)
Balance - June 30, 2019	15,475,916	$	15,476	$	1,745,291	$	(4,177,207)	$	(2,416,440)

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,
		2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2,531,738)	$	(1,509,819)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		500,034		-
Write-off of due from related party		43,375		-
Depreciation and amortization		31,140		19,281
Amortization of debt discount		725,650		541,894
Change in fair value of derivative liabilities		(254,248)		547,671
Gain on settlement of debt		(283,230)		-
Prepayment and default penalty		239,271		-
Changes in operating assets and liabilities:
Accounts receivable		71,727		228,929
Accounts receivable - related party		-		(10,701)
Other current assets		14,930		(91,576)
Accounts payable		(30,404)		(351,267)
Other current liabilities		347,186		(42,149)
Net cash used in operating activities		(1,126,307)		(667,737)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of subsidiary, net of cash acquired		75,781		-
Purchase of property and equipment		(58,832)		-
Payment of loan receivable - related party		(14,787)		(10,000)
Collection from due from related parties - related party		388		10,000
Net cash provided by (used in) investing activities		2,550		-
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft		-		(82)
Proceeds from loans payable		731,560		64,400
Repayments of loans payable		(247,855)		(171,302)
Proceeds from loans payable - related parties		182		46,438
Repayment of loans payable - related parties		(197)		(32,400)
Contribution		-		10,000
Common stock issued		360,000		-
Proceeds from convertible notes		1,260,000		1,048,500
Repayment of convertible notes		(477,190)		(221,901)
Net cash provided by financing activities		1,626,500		743,653
Effect of exchange rate changes on cash		6,307		-
Net change in cash and cash equivalents		509,050		75,916
Cash and cash equivalents, beginning of period		270,503		4,570
Cash and cash equivalents, end of period	$	779,553	$	80,486
Supplemental cash flow information
Cash paid for interest	$	353,517	$	208,557
Cash paid for taxes	$	-	$	-
Non-cash transactions:
Derivative liabilities recognized as debt discount	$	331,499	$	403,800
Common stock issued in conjunction with convertible notes	$	-	$	494,700
Common stock issued for conversion of debt	$	701,500	$	5,000
Common stock issued for cashless warrant exercised	$	3,233	$	-
Resolution of derivative liabilities	$	3,661,588	$	-
Common stock issued for settlement of debt	$	269,840	$	-
Amounts due for acquisition of IOT Labs	$	120,000	$	-
Common stock issued for forbearance of debt	$	2,900	$	-
Replacement of convertible notes to note payable	$	700,000	$	-

The accompanying notes are an integral part of these unaudited consolidated financial statements.

iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

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 PureSnax International, Inc. and 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, fix line companies and other wholesale carriers.

Acquisition

On April 15, 2020, we entered into a Company Acquisition Agreement (the “Agreement”) with Francisco Bunt regarding the acquisition of 51% of the shares in loT Labs, LLC (“loT Labs”). The loT Labs’ principal business activity is the sale of Short Messages (SMS) between USA and Mexico.

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, 2020. 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 August 13, 2020, 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

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, 2020 and the results of operations and cash flows for the periods presented. The results of operations for the six months ended June 30, 2020 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, 2019 filed with the SEC on April 15, 2020.

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 and loT Labs, LLC. All significant intercompany balances and transactions have been eliminated in consolidation.

iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Use of Estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“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. dollars in accordance with ASC 830, “Foreign Currency Matters”.

The Company’s, Etelix’s, ITSBCHAIN, LLC’s, QGLOBAL SMS, LLC’s and loT Labs LLC’s functional currency and reporting currency is the U.S. dollar, SwissLink’s functional currency is the Swiss Franc (“CHF”).

SwissLink translates their records into U.S. dollars 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 stockholders’ equity.

		June 30,		December 31,
		2020		2019
Spot CHF: USD exchange rate	$	1.0560	$	1.0333
Average CHF: USD exchange rate	$	1.0379	$	1.0122

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. As of June 30, 2020 and December 31, 2019, the Company had no valuation allowance for doubtful accounts for the Company’s accounts receivable and recorded no bad debt expense for the six months ended June 30, 2020 and 2019.

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; however, management believes that there is no unusual risk present, as the Company places its cash with financial institutions which management considers being of high quality.

During the six months ended June 30, 2020, twelve customers represented 83% of our consolidated revenues. During the six months ended June 30, 2019, eight customers represented 81% of our consolidated revenues.

iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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.

Lease

The Company leases office space for corporate and network monitoring activities and to house telecommunications equipment.

In accordance with ASC 842, “Leases”, we determine if an arrangement is a lease at inception.

The office lease meets the definition of a short-term lease because the lease term is 12 months or less. Consequently, consistent with Company’s accounting policy election, the Company does not recognize the right-of-use asset and the lease liability arising from this lease.

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.

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

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 financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company does not have significant cash, nor does it have an established source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern. In addition, the Company incurred a net loss of $2,531,738 for the six months ended June 30, 2020 and has negative working capital as of June 30, 2020. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 3 - GOING CONCERN (CONTINUED)

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 and marketing expenses. 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 - ACQUISITION

On April 15, 2020, we entered into a Company Acquisition Agreement (the “Agreement”) with Francisco Bunt regarding the acquisition of 51% of the shares in loT Labs. The Company’s principal business activity is the sale of Short Messages (SMS) between USA and Mexico.

We have agreed to pay a total of $180,000 for the 51% interest in the Company. The consideration shall occur with an installment of $60,000 on the date of the execution of the Agreement, followed by a second payment of $60,000 at closing and a final payment of $60,000 that is set to occur 60 days following the closing date. Under the Agreement, Mr. Bunt has the right to request that any of the aforementioned payments be made in shares of our common stock, which the parties have agreed to value at $2.00 per share. The shares are subject to adjustment after 180 days and up to 360 days after issuance if our stock trades at less than $2.00 per share. The Agreement provides for a right of return to Mr. Bunt of the shares in the Company if we fail to make timely payments.

The following table summarizes the fair value of the consideration paid by the Company and the fair value amounts assigned to the assets acquired on the acquisition date:

		April 15,
		2020
Fair Value of Consideration:
Cash	$	180,000
Total Purchase Price	$	180,000

loT Labs has been included in our consolidated results of operations since the acquisition date.

The following table summarizes the identifiable assets acquired and liabilities assumed upon acquisition of IoT Labs and the calculation of goodwill:

Total purchase price	$	180,000
Cash		135,781
Other current assets		953
Property and equipment		34,075
Intangible asset		21,875
Total identifiable assets		192,684
Accounts payable		(100)
Total liabilities assumed		(100)
Net assets		192,584
Non-controlling interest		94,366
Total net assets		98,218
Goodwill	$	81,782

iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 4 - ACQUISITION

Unaudited combined proforma results of operations for the six months ended June 30, 2020 and 2019 as though the Company acquired loT Labs on January 1, 2019, are set forth below:

		Six Months Ended
		June 30,
		2020		2019
Revenues	$	27,021,660	$	18,326,320
Cost of revenues		26,259,694		17,807,759
Gross profit		761,966		518,561
Operating expenses		2,253,079		563,347
Operating loss		(1,491,113)		(44,786)
Other expense		(900,362)		(1,321,608)
Net Loss	$	(2,391,475)	$	(1,366,394)

NOTE 5 – PREPAID AND OTHER CURRENT ASSETS

Prepaid and other current assets at June 30, 2020 and December 31, 2019 consist of the following:

		June 30,		December 31,
		2020		2019
Advance payment to suppliers	$	6,600	$	6,600
Other receivable		50,824		78,936
Prepaid expenses		21,108		5,834
Tax receivable		600		600
	$	79,132	$	91,970

NOTE 6 – PROPERTY AND EQUIPMENT

Property and equipment at June 30, 2020 and December 31, 2019 consist of the following:

		June 30,		December 31,
		2020		2019
Telecommunication equipment	$	258,246	$	249,169
Telecommunication software		496,822		436,124
Other equipment		42,758		8,497
Total property and equipment		797,826		693,790
Accumulated depreciation and amortization		(446,415)		(405,820)
Total property and equipment	$	351,411	$	287,970

Depreciation expense for the six months ended June 30, 2020 and 2019 amounted to $31,140 and $19,281, respectively.

iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 7 –LOANS PAYABLE

Loans payable at June 30, 2020 and December 31, 2019 consist of the following:

		June 30,		December 31,		Interest
		2020		2019	Term	rate
Unique Funding Solutions_2	$	2,000	$	2,000	Note was issued on October 12, 2018 and due on January 17, 2019	28.60%
YES LENDER LLC		-		25,500	October 17, 2019 and due on March 31, 2020	30.00%
Complete Business Solutions_8		9,170		52,170	December 24, 2010 and due on August 20, 2020	26.00%
Nicolas Arvelo		5,000		5,000	Note was issued on November 20, 2019 and due on November 20, 2020	12.00%
Martin Mendoza Diaz		5,000		5,000	Note was issued on November 20, 2019 and due on November 20, 2020	12.00%
Martus		101,582		99,399	Note was issued on October 23, 2018 and due on January 3, 2022	5.00%
Swisspeers AG		63,429		78,623	Note was issued on April 8, 2019 and due on October 4, 2022	7.00%
Apollo Management Group, Inc		63,158		-	Note was issued on March 18, 2020 and due on August 18, 2020	12.00%
Apollo Management Group, Inc 2		68,421		-	Note was issued on March 25, 2020 and due on August 25, 2020	12.00%
Apollo Management Group, Inc 3		66,316		-	Note was issued on April 1, 2020 and due on October 1, 2021	12.00%
Apollo Management Group, Inc 4		73,684		-	Note was issued on April 2, 2020 and due on October 2, 2021	12.00%
Apollo Management Group, Inc 5		36,842		-	Note was issued on April 7, 2020 and due on October 7, 2021	12.00%
Apollo Management Group, Inc 6		84,211		-	Note was issued on April 15, 2020 and due on October 15, 2021	12.00%
Apollo Management Group, Inc 7		77,095		-	Note was issued on April 20, 2020 and due on May 20, 2021	12.00%
Labrys Fund		700,000		-	Note was issued on June 26, 2020 and due on April 1, 2021	12.00%
YES LENDER LLC 2		24,093		-	Note was issued on January 8, 2020 and due on August 12, 2020	29.00%
Darlene Covi19		105,600		-	Note was issued on April 1, 2020 and due on March 31, 2025	0.00%
Total		1,485,601		267,692
Less: Unamortized debt discount		(9,702)		-
Total loans payable		1,475,899		267,692
Less: Current portion of loans payable		(1,205,288)		(89,671)
Long-term loans payable	$	270,611	$	178,021

Loans payable to related parties at June 30, 2020 and December 31, 2019 consist of the following:

		June 30,		December 31,
		2020		2019
Alonso Van Der Biest	$	80,200	$	80,200
Alvaro Quintana		10,587		10,587
49% of Shareholder of Swisslink		1,623,154		1,588,261
49% of Shareholder of Swisslink		211,200		206,660
Total		1,925,141		1,885,708
Less: Current portion of loans payable		1,925,141		1,885,708
Long-term loans payable	$	-	$	-

iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 7 –LOANS PAYABLE (CONTINUED)

During the six months ended June 30, 2020 and 2019, the Company borrowed amounts from third parties totaling $760,139 and $82,353, which includes original issue discount and financing costs of $28,579 and $17,953, respectively, and repaid the principal amount of $247,855 and $171,302, respectively.

During the six months ended June 30, 2020 and 2019, the Company recorded interest expense of $85,172 and $90,096 and recognized amortization of discount, included in interest expense, of $18,877 and $17,953, respectively.

NOTE 8 – OTHER CURRENT LIABILITIES

Other current liabilities at June 30, 2020 and December 31, 2019 consist of the following:

		June 30,		December 31,
		2020		2019
Accrued liabilities	$	14,284	$	2,700
Credit card liabilities		-		4,987
Accrued interest		276,921		365,345
Salary payable - management		255,431		268,231
Employee benefits		106,648		192,288
Other current liabilities		21,941		14,933
	$	675,225	$	848,484

NOTE 9 - CONVERTIBLE NOTES

At June 30, 2020 and December 31, 2019, convertible notes consist of the following:

		June 30,		December 31,
		2020		2019
Promissory notes – Issued in fiscal year 2019, with variable conversion features	$	142,750	$	1,908,750
Promissory notes – Issued in fiscal year 2020, with variable conversion features		1,435,556		-
Total convertible notes payable		1,578,306		1,908,750
Less: Unamortized debt discount		(460,383)		(646,212)
Total convertible notes		1,117,923		1,262,538
Less: current portion of convertible notes		1,115,852		1,251,096
Long-term convertible notes	$	2,071	$	11,442

During the six months ended June 30, 2020 and 2019, the Company recorded interest expense of $643,693 and $144,172 and recognized amortization of discount, included in interest expense, of $706,773 and $523,941, respectively.

During the six months ended June 30, 2020 and 2019, the Company repaid notes of $477,190 and $221,901 and accrued interest including prepayment penalty of $138,415 and $120,006.

Conversion

During the six months ended June 30, 2020, the Company converted notes with principal amounts of $616,118 and accrued interest of $85,383 into 33,821,613 shares of common stock. The corresponding derivative liability at the date of conversion of $3,661,588 was settled through additional paid in capital.

iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 9 - CONVERTIBLE NOTES (CONTINUED)

Settlement

On June 26, 2020, the Company issued a loan payable of $700,000 to Labrys Fund to settle the previously-outstanding convertible notes with accrued interest of $986,340. As a result, the Company recognized a gain on settlement of debt of $286,340 (Note 7).

On June 10, 2020, the Company settled a convertible note with accrued interest of $64,230 with a total of 650,000 share issuances. As of June 30, 2020, the Company issued 200,000 shares and shall issue 225,000 shares each in July and August 2020. As a result, the Company recognized a loss on settlement of debt of $3,110.

Promissory Notes - Issued in fiscal year 2019

During the year ended December 31, 2019, the Company issued a total of $2,544,250 in notes with the following terms:

·Terms ranging from 6 months to 3 years.

·Annual interest rates ranging from of 8% to 12%.

·Convertible at the option of the holders at issuance or 180 days from issuance.

·Conversion prices are typically based on the discounted (39% or 0% discount) lowest trading prices of the Company’s shares during various periods prior to conversion.

The convertible notes were also provided with a total of 661,216 common shares and warrant to purchase up to 92,000 shares of common stock at exercise price of $2.5 per share for 3 years.

Certain notes allow the Company to redeem the notes at rates ranging from 110% to 150% depending on the redemption date provided that no redemption is allowed after the 180th day. Likewise, the notes include original issue discount and financing costs totaling $278,000 and the Company received cash of $2,266,250.

Promissory Notes - Issued in fiscal year 2020

During the six months ended June 30, 2020, the Company issued a total of $1,449,444 in notes with the following terms:

·Terms 12 months.

·Annual interest rates 5% or 12%.

·Convertible at the option of the holders 180 days from issuance.

·Conversion prices are typically based on the discounted (60% discount) lowest trading prices of the Company’s shares during 30 trading day periods prior to conversion. Certain note has a capped conversion price of $0.025.

Notes allow the Company to redeem the notes at 125% provided that no redemption is allowed after the 180th day. Likewise, the notes include original issue discount and financing costs totaling $189,444 and the Company received cash of $1,260,000. Certain convertible notes were also provided with a total of 4,500,000 warrants.

Derivative liabilities

The Company determined that the conversion option in the notes met the definition of liabilities in accordance with ASC Topic No. 815 - 40, “Derivatives and Hedging - Contracts in Entity’s Own Stock.” The Company will bifurcate the embedded conversion options in the notes once the notes become convertible and account for them as derivative liabilities.

The Company valued the conversion features of convertible notes and warrants using the Black Scholes valuation model. The fair value of the derivative liability for all the note and warrants that became convertible for the six months ended June 30, 2020, amounted to $426,390. $331,499 of the value assigned to the derivative liability was recognized as a debt discount to the notes while the balance of $94,891 was recognized as a “day 1” derivative loss.

The fair value of the derivative liability for all the notes and warrants that became convertible for the year ended December 31, 2019 amounted to $4,916,471. $1,313,350 of the value assigned to the derivative liability was recognized as a debt discount to the notes while the balance of $3,603,121 was recognized as a “day 1” derivative loss.

iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 9 - CONVERTIBLE NOTES (CONTINUED)

Warrants

A summary of activity during the six months ended June 30, 2020 follows:

	Warrants Outstanding
			Weighted Average
	Shares		Exercise Price
Outstanding, December 31, 2019	367,343	$	0.48
Granted	4,500,000		-
Reset	10,813,001		0.012
Cashless Exercised	(7,013,677)		-
Forfeited/canceled	-		-
Outstanding, June 30, 2020	8,666,667	$	0.006

The reset feature of warrants associated with the convertible notes was effective at the time that a separate convertible note with lower exercise price was issued. As a result of the reset features for warrants, the warrants increased by 10,813,001 at $0.0012 per share. We accounted for the issuance of the warrants as a liability and recognized the derivative liability.

The following table summarizes information relating to outstanding and exercisable warrants as of June 30, 2020:

Warrants Outstanding				Warrants Exercisable
Number of<br><br><br>Shares	Weighted Average<br><br><br>Remaining<br><br><br>Contractual life<br><br><br>(in years)		Weighted Average<br><br><br>Exercise Price	Number of<br><br><br>Shares		Weighted Average<br><br><br>Exercise Price
8,666,667	0.79	$	0.006	8,666,667	$	0.006

The intrinsic value of the warrants as of June 30, 2020 is $667,600.

NOTE 10 - DERIVATIVE LIABILITIES

The Company analyzed the conversion options for derivative accounting consideration under ASC 815, “Derivatives and Hedging,” and determined that the instrument should be classified as a liability since the conversion options become 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, 2020 and December 31, 2019. 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. The fair value of each convertible note is estimated using the Black-Scholes valuation model.

iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 10 - DERIVATIVE LIABILITIES (CONTINUED)

The estimated fair values of the liabilities measured on a recurring basis are as follows:

	Six Months Ended	Year Ended
	June 30,	December31,
	2020	2019
Expected term	0.06 - 6.00 years	0.03 - 5.00 years
Expected average volatility	139% - 550%	4% - 639%
Expected dividend yield	-	-
Risk-free interest rate	0.05% - 2.56%	1.44% - 2.57%

The following table summarizes the changes in the derivative liabilities during the six months ended June 30, 2020:

Fair Value Measurements Using Significant Observable Inputs (Level 3)
Balance - December 31, 2019	$	4,744,134
Addition of new derivatives recognized as debt discounts		331,499
Addition of new derivatives recognized as loss on derivatives		94,891
Settled on issuance of common stock		(3,661,588)
Change in fair value of the derivative		(349,139)
Balance - June 30, 2020	$	1,159,797

The aggregate (gain) loss on derivatives during the six months ended June 30, 2020 and 2019 was as follows:

		Six Months Ended
		June 30,
		2020		2019
Addition of new derivatives recognized as loss on derivatives	$	94,891	$	2,180,190
Change in fair value of derivatives		(349,139)		(1,632,519)
	$	(254,248)	$	547,671

NOTE 11 – STOCKHOLDERS’ EQUITY The Company’s authorized capital consists of 300,000,000 shares of common stock with a par value of $0.001 per share. During the six months ended June 30, 2020, the Company issued 50,286,709 shares of common stock, valued at fair market value on issuance as follows;

·4,500,000 shares issued for cash of $360,000

·4,508,510 shares issued for settlement of debt of $269,840

·4,173,000 shares issued for services valued at $450,034

·50,000 shares issued for forbearance of debt of $2,900

·33,821,613 shares issued for conversion of debt of $701,500

·3,233,586 shares issued for cashless exercised warrant

As of June 30, 2020 and December 31, 2019, 68,295,300 and 18,008,591 shares of common stock were issued and outstanding, respectively.

iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020 NOTE 12 - RELATED PARTY TRANSACTIONS Due from related party

During the six months ended June 30, 2020, the Company loaned $14,787 to related parties who are a shareholder and a former director, collected $388 and wrote off amounts totaling $43,375.

As of June 30, 2020 and December 31, 2019, the Company had due from related parties of $287,884 and $316,860, respectively. The amounts are unsecured, non-interest bearing and due on demand.

Due to related parties

During the six months ended June 30, 2020, the Company borrowed $182 from the CFO of the Company and repaid $197 to the CEO and CFO.

As of June 30, 2020, the Company owed $120,000 to Francisco Bunt who owns 49% of loT Labs (Note 4).

As of June 30, 2020 and December 31, 2019, the Company had amounts due to related parties of $154,616 and $34,631, respectively. The amounts are unsecured, non-interest bearing and due on demand.

Employment agreements

On June 25, 2018, the Company entered into Employment Agreements with the following persons: (i) Leandro Iglesias as President, CEO and Chairperson of the Company’s Board of Directors with an annual salary of $54,000; (ii) Juan Carlos Lopez Silva as Chief Commercial Officer with an annual salary of $54,000; and Alvaro Quintana Cardona as Chief Operating Officer and Chief Financial Officer with an annual salary of $30,000. The Employment Agreements have a term of 36 months, are renewable automatically for 24 month periods, unless the Company gives written notice at least 90 days prior to termination of the initial 36 month term. The Company shall have the right to terminate any of the employment agreements at any time without prior notice, but in that event, the Company shall pay these persons salaries and other benefits they are entitled to receive under their respective agreements for three years.

On May 2, 2019, the Company entered into Employment Agreements with the following persons: (i) Leandro Iglesias as President, CEO and Chairperson of the Company’s Board of Directors with an annual salary of $168,000 with an annual bonus of 3% of our net income; (ii) Juan Carlos Lopez Silva as Chief Commercial Officer with an annual salary of $120,000 with an annual bonus of 3% of our net income; and Alvaro Quintana Cardona as Chief Operating Officer and Chief Financial Officer with an annual salary of $144,000 with an annual bonus of 3% of our net income. The Employment Agreements have a term of 36 months, are renewable automatically for 24-month periods, unless the Company gives written notice at least 90 days prior to termination of the initial 36-month term. The Company shall have the right to terminate any of the employment agreements at any time without prior notice, but in that event, the Company shall pay these persons salaries and other benefits they are entitled to receive under their respective agreements for three years. The above executive officers agreed to two year non-compete and non-solicit restrictive covenants with the Company. If any of the executive officers are terminated for cause they shall forfeit any rights to severance. On March 3, 2020, Oscar Brito resigned as a member of our Board of Directors. There was no known disagreement with Mr. Brito on any matter relating to our operations, policies or practices. The Company provided the severance package as follows; ·2,000,000 shares of common stock valued at $300,000

·Additional 173,000 shares in order to apply the anti-dilution protection, valued at $10,034

·Forgiveness of amounts due to the Company totaling $43,375

·Cash payment of $15,000.

We also appointed Mr. Brito as an advisor to our Board of Directors and agreed to pay him $5,000 per month for such services.

iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 12 - RELATED PARTY TRANSACTIONS (CONTINUED)

On March 16, 2020, our Board of Directors adopted a Director Compensation Plan that applies to members of our Board of Directors. Below are the features of the plan:

·All Directors shall receive reimbursement for reasonable travel expenses incurred to attend Board and committee meetings.

·All Directors shall be compensated $3,000 monthly for their service as Directors.

·In lieu of the cash compensation set forth above, each Director may elect to receive shares of the Corporation's Common Stock equal to the total cash compensation divided by the average market value of the Company's Common Stock during the last 10 trading days and applying a discount of 10%.

·Directors Alvaro Cardona and Leandro Iglesias shall each receive 1,000,000 shares of the Company’s Common Stock, valued at $70,000 each, for their service as members of the Board of Directors for the period from June 2018 to December 2019.

During the six months ended June 30, 2020 and 2019, the Company recorded management fees of $252,000 and $118,000 and paid $62,300 and $62,200, respectively. During the six months ended June 30, 2020, the Company settled accrued salary – management of $202,500 and issued 4,308,510 shares. As at June 30, 2020 and December 31, 2019, the Company accrued management salaries of $255,431 and $268,231, respectively.

NOTE 13 – COMMITMENTS AND CONTIGENCIES

Leases and Long-term Contracts

The Company has not entered into any long-term leases, contracts or commitments.

Lease

The Company leases facilities which the term is 12 months. For the six months ended June 30, 2020 and 2019, the Company incurred $16,100 and $0, respectively.

iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 14 – 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,
		2020		2019		2020		2019
Numerator:
Net Income (Loss)	$	1,377,465	$	(484,241)	$	(2,531,738)	$	(1,509,819)
Change in fair value of derivatives		(1,914,271)		-		-		-
Interest on convertible debt		111,518		-		-		-
Net Loss - diluted	$	(425,288)	$	(484,241)	$	(2,531,738)	$	(1,509,819)
Denominator:
Weighted average common shares outstanding		57,019,993		15,357,689		43,928,994		15,199,517
Effect of dilutive shares		11,531,215		-		-		-
Diluted		68,551,208		15,357,689		43,928,994		15,199,517
Net income per common share:
Basic	$	0.02	$	(0.03)	$	(0.06)	$	(0.1)
Diluted	$	(0.01)	$	(0.03)	$	(0.06)	$	(0.1)

For the six months ended June 30, 2020 and three and six months ended June 30, 2019, the convertible instruments are anti-dilutive and therefore, have been excluded from earnings (loss) per share.

NOTE 15 – SEGMENT

At June 30, 2020, 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, 2020 and 2019:

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

iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 15 – SEGMENT (CONTINUED)

Three months Ended June 30, 2019

		USA		Switzerland		Elimination		Total
Revenues	$	4,253,359	$	-	$	-	$	4,253,359
Cost of revenue		4,345,087		-		-		4,345,087
Gross profit		(91,728)		-		-		(91,728)
Operating expenses
General and administration		341,553		-		-		341,553
Operating income (loss)		(433,281)		-		-		(433,281)
Other income (expense)		(50,960)		-		-		(50,960)
Net income	$	(484,241)	$	-	$	-	$	(484,241)

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 income	$	(2,504,937)	$	(26,801)	$	-	$	(2,531,738)

Six months Ended June 30, 2019

		USA		Switzerland		Elimination		Total
Revenues	$	8,416,562	$	-	$	-	$	8,416,562
Cost of revenue		8,072,713		-		-		8,072,713
Gross profit		343,849		-		-		343,849
Operating expenses
General and administration		532,060		-		-		532,060
Operating income (loss)		(188,211)		-		-		(188,211)
Other income (expense)		(1,321,608)		-		-		(1,321,608)
Net income	$	(1,509,819)	$	-	$	-	$	(1,509,819)

As of August 7, 2019,having completed all conditions under the Purchase Agreement, the Company acquired SwissLink located in Switzerland.

iQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

June 30, 2020

NOTE 15 – SEGMENT (CONTINUED)

Asset Information

The following table shows asset information by geographic segment at June 30, 2020 and December 31, 2019:

June 30, 2020		USA		Switzerland		Elimination		Total
Assets
Current assets	$	3,410,729	$	1,270,688	$	(828,115)	$	3,853,302
Non-current assets	$	3,497,963	$	512,337	$	(1,669,515)	$	2,340,785
Liabilities
Current liabilities	$	6,422,646	$	2,921,438	$	(828,115)	$	8,515,969
Non-current liabilities	$	2,071	$	421,560	$	-	$	423,631
December 31, 2019		USA		Switzerland		Elimination		Total
---	---	---	---	---	---	---	---	---
Assets
Current assets	$	3,073,654	$	1,174,856	$	(810,013)	$	3,438,497
Non-current assets	$	3,146,894	$	456,070	$	(1,438,515)	$	2,164,449
Liabilities
Current liabilities	$	9,041,421	$	2,914,237	$	(810,013)	$	11,145,645
Non-current liabilities	$	11,442	$	216,274	$	-	$	227,716

NOTE 15 - SUBSEQUENT EVENTS

Subsequent to June 30, 2020 and through the date that these financials were made available, the Company had the following subsequent events:

On July 14, 2020, we entered into a Subscription Agreement with Alpha Capital Anstalt (“Purchaser”), pursuant to which we issued and sold to the Purchaser 2,000,000 shares of our common stock (the “Shares”) for total proceeds of $160,000. The Shares were sold at $0.08 per share, after applying a 20% discount to the purchase price of $0.10 per share.

The Shares were offered and sold pursuant to qualified offering circular on Form 1-A (File No. 024-10950) and related supplement, in each case filed with the Securities and Exchange Commission. A copy of the form of Subscription Agreement used in the offer and sale is attached as Exhibit 13.1 to the Form 1-A/A filed with the SEC on June 3, 2019.

Also on July 14, 2020, we entered into a Securities Purchase Agreement (“SPA”) with Purchaser for the sale of a convertible promissory note, executed on July 15, 2019, in the principal amount of $200,000 (the “Note”). We received $160,000 after paying a $40,000 original issue discount on the Note. The Note bears interest at 5% per annum and matures one year from the date of issuance. After 180 days from issuance, the Note may be converted by purchaser into shares of our common stock at a conversion price of the lesser of (i) $0.025 or (ii) 40% of the lowest trading price of our common stock in the 20 days preceding the issuance date of the Note.

As additional consideration for the Note, we issued to Purchaser a warrant (the “Warrant”) to purchase 2,000,000 shares of common stock at an exercise price of $0.02 per share (subject to adjustment as set forth in the Warrant) expiring six months from the date of issuance.

On July 01, 2020, we entered into a 60-day term bridge loan with Apollo Management Group for the principal amount of $73,684.21 bearing interest at the rate of Twelve (12%) percent per annum, commencing on the date such Loan is funded until the date the Loan is paid in full. On July 22, 2020, we entered into an Exchange Agreement with Jefferson Street Capital LLC, whereby we agreed to exchange a February 22, 2019 Common Stock Purchase Warrant and June 27, 2019 Convertible Promissory Note in the principal amount of $35,000 into a total of 650,000 shares of our common stock.

**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) is a leading-edge 21st Century Enhanced Telecommunications Service Provider offering a wide range of cloud-based enhanced services to the Tier-1 and Tier-2 carriers, enterprise market, as well as the retail market. iQSTEL offers international and domestic VoIP services, SMS exchange for A2P and P2P, Internet of Things (IoT) applications, 4G & 5G international infrastructure connectivity, as well as blockchain-based payment and phone number mobility platforms to international and domestic Tier-1 carrier for VoIP, SMS, and Data.

Our principal place of business is located at 300 Aragon Avenue, Suite 375 Coral Gables, FL 33134. General information about us can be found at www.iqstel.com. The information contained on or connected to our website 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, 2020 was $11,130,086, compared with $4,253,359 for the three months ended June 30, 2019. These numbers reflect an increase of 161.68% quarter over quarter on our consolidated revenues. Our total revenue reported for the six months ended June 30, 2020 was $16,147,498, compared with $8,416,562 for the six months ended June 30, 2019.

When looking at the numbers by subsidiary, we have the following breakout for the six months ended June 30, 2020:

Subsidiary		Revenue<br><br><br>Six Months Ended<br><br><br>June 30, 2020
Etelix.com USA, LLC	$	7,221,344
Swisslink Carrier AG		2,381,204
QGlobal LLC		163,546
IoT Labs LLC		6,381,404
	$	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, 2020 increased to $10,397,778, compared with $4,345,087 for the three months ended June 30, 2019. Our total cost of revenues for the six months ended June 30, 2020 increased to $15,576,331, compared with $8,072,713 for the six months ended June 30, 2019.

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 reac-hed a higher volume of sales and every additional unit sold (minutes and SMS) has its corresponding termination cost.

Operating Expenses

Operating expenses increased to $905,016 for the three months ended June 30, 2020 from $341,553 for the three months ended June 30, 2019. Operating expenses increased to $2,202,543 for the six months ended June 30, 2020 from $532,060 for the six months ended June 30, 2019. The detail by major category for the six months ended June 30, 2020 and 2019 is reflected in the table below.

		Six Months Ended June 30,
		2020		2019
Salaries, Wages and Benefits	$	562,427	$	162,242
Technology		28,100		94,847
Professional Fees		214,853		162,662
Legal & Regulatory		3,224		-
Bad debts		76,375		-
Travel & Events		1,341		3,375
Public Cost		49,732		19,432
Advertising		583,079		50,000
Bank Services and Fees		35,926		-
Depreciation and Amortization		31,140		19,281
Office, Facility and Other		116,312		20,221
Sub Total		1,702,509		532,060
Stock-based compensation		500,034		-
Total Operating Expense	$	2,202,543	$	532,060

The main reasons for the overall increase in operating expenses for the six months ended June 30, 2020 compared to the same period of 2019 is that in 2020 we are reflecting the costs corresponding to 5 operating subsidiaries (Etelix.com, Swisslink, ItsBchain, QGlobal and IoT Labs) plus the corporate costs corresponding to iQSTEL itself; while in 2019 operating expenses corresponded only to one subsidiary and corporate costs of iQSTEL; as shown in the table below.

		Six Months Ended June 30,
		2020	****	2019	****	Difference
iQSTEL	$	1,587,992	$	315,638	$	1,272,354
Etelix		184,100		216,422		-32,322
Swisslink		328,483		-		328,483
ItsBchain		52,684		-		52,684
QGlobal		29,952		-		29,952
IoT Labs		19,332		-		19,332
	$	2,202,543	$	532,060	$	1,670,483

The most significant difference is generated by iQSTEL which is due to the following: (1) the Salaries, Wages and Benefits as a result of the new employment agreements with the Management Team members valid from May 2019, where the aggregated monthly salaries varied from $11,500 to $36,000, and the implementation starting on January 2020 of a compensation for Board Members of 3,000 monthly; (2) Advertising corresponds to the third-party consultancy for the design and implementation of a Social Media communication strategy oriented to build and enhance our companies and brand image; and (3) Stock-based compensation.

Operating Income

The Company showed negative Operating Income for the three months ended June 30, 2020 of $172,708 compared with a negative result of $433,281 for the three months ended June 30, 2019; which is a positive variation quarter over quarter.

The Company showed negative Operating Income for the six months ended June 30, 2020 of $1,627,117 compared with a negative result of $188,211 for the six months ended June 30, 2019.

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.) estimated in the amount of $1,587,992.

When looking at the results of our operating subsidiaries, we notice a very good performance of each of them, particularly in the three months ended in June 30, 2020.

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2020	****	2019		2020	****	2019
Revenues
Etelix	$	3,402,049	$	4,253,359	$	7,221,344	$	8,416,562
Swisslink		1,183,088		-		2,381,204		-
ItsBChain		-		-		-		-
QGlobal		163,546		-		163,546		-
IoT Labs		6,381,403		-		6,381,404		-
Total Revenue	$	11,130,086	$	4,253,359	$	16,147,498	$	8,416,562
Cost of revenue
Etelix	$	3,096,146	$	4,345,087	$	7,217,330	$	8,072,713
Swisslink		1,012,566		-		2,069,935		-
ItsBChain		-		-		-		-
QGlobal		102,231		-		102,231		-
IoT Labs		6,186,835		-		6,186,835		-
Total Cost of Revenue	$	10,397,778	$	4,345,087	$	15,576,331	$	8,072,713
Gross profit	$	732,308	$	(91,728)	$	571,167	$	343,849
Operating Expenses
Etelix	$	85,889	$	127,957	$	184,100	$	216,422
Swisslink		163,049		-		328,483		-
ItsBChain		-		-		52,684		-
QGlobal		25,602		-		29,952		-
IoT Labs		19,332		-		19,332		-
Total Operating Expenses	$	293,872	$	127,957	$	614,551	$	216,422
Operating Income (Loss)	$	438,436	$	(219,685)	$	(43,384)	$	127,427

Other Expenses/Other Income

We had other income of $1,550,173 for the three months ended June 30, 2020, as compared with other expenses of $50,960 for the same period ended 2019. We had other expenses of $900,362 for the six months ended June 30, 2020, as compared with other expenses of $1,321,608 for the same period ended 2019. The decrease in other expenses is a result of the positive change in fair value of derivative liabilities, and the gain on settlement of debts of $283,230.

Net Income

We finished the three months ended June 30, 2020 with a net income of $1,377,465, as compared to a loss of $484,241 during the three months ended June 30, 2019. We finished the six months ended June 30, 2020 with a loss of $2,531,738, as compared to a loss of $1,509,819 during the six months ended June 30, 2019.

The reasons for specific components are discussed above. Overall, these are the main concepts impacting the net result: (1) an increment in interest expenses of $678,353 year over year to total $1,454,515; and (2) the Operating Expenses of the public entity of $1,587,992.

Liquidity and Capital Resources

As of June 30, 2020, we had total current assets of $3,853,302 and current liabilities of $8,515,969, resulting in a working capital deficit of $4,662,667‬. This compares with the working capital deficit of $7,707,148‬ at December 31, 2019. This decrease in working capital deficit, as discussed in more detail below, is primarily the result of the increase of $509,050 in the cash position and a reduction of $3,584,337 in the derivative liabilities.‬ ‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬

Our operating activities used $1,126,307 in the six months ended June 30, 2020 as compared with $667,737 used in operating activities in the six months ended June 30, 2019.

Investing activities provided $2,550 for the six months ended June 30, 2020. Uses of funds on investing activities were the purchase of property and equipment for value of $58,832 and net payment of loans between related parties of $14,399. Main source of funds in the Investing activities was resulting from the acquisition of subsidiary IoT Labs of $75,781.

Financing activities provided $1,626,500 in the six months ended June 30, 2020 compared with $743,653 provided in the six months ended June 30, 2019. Our positive financing cash flow in 2020 was largely the result of the net proceeds from loans $483,690, net proceeds from convertible notes $782,810; and proceed from the subscription of new common stocks under our Regulation A offering $360,000.

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 24,000,000 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, 2020.

Critical Accounting Polices

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that 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 critical accounting policies are disclosed in Note 2 of our audited consolidated financial statements included in the Form 10-K filed with the Securities and Exchange Commission.

Off Balance Sheet Arrangements

As of June 30, 2020, there were no off-balance sheet arrangements.

Recent Accounting Pronouncements

The recent accounting pronouncements that are material to our financial statements are disclosed in Note 2 of our consolidated audited financial statements included in the Form 10-K filed with the Securities and Exchange Commission and in Note 2 of our unaudited consolidated financial statements included herein.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures

Disclosure Controls and Procedures -Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report.

These controls are designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Based on this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were ineffective as of June 30, 2020. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

We believe that our financial statements presented in this quarterly report on Form 10-Q fairly present, in all material respects, our financial position, results of operations, and cash flows for all periods presented herein.

Inherent Limitations - **** Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.

Changes in Internal Control over Financial Reporting - There were no changes in our internal control over financial reporting during the six month period ended June 30, 2020, which were identified in conjunction with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any material pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

Item 1A: Risk Factors

See Risk Factors contained in our Form 10-K filed with the SEC on April 15, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933.

During the six months ended June 30, 2019, we issued:

·4,500,000 shares issued for cash of $360,000

·4,508,510 shares issued for settlement of debt of $269,840

·4,173,000 shares issued for services valued at $450,034

·50,000 shares issued for forbearance of debt of $2,900

·33,821,613 shares issued for conversion of debt of $701,500

·3,233,586 shares issued for cashless exercised warrant

These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

N/A

Item 5. Other Information

None

Item 6. Exhibits

Exhibit<br><br><br>Number	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101**	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 formatted in Extensible Business Reporting Language (XBRL).
	**Provided herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on August 13, 2020 on its behalf by the undersigned thereunto duly authorized.

IQSTEL INC.
/s/ Leandro Iglesias
Leandro Iglesias<br><br><br>Principal Executive Officer
/s/ Alvaro Quintana Cardona
Alvaro Quintana Cardona<br><br><br>Principal Financial and Accounting Officer

29 Exhibit 31.1 Section 302 Certification

CERTIFICATIONS

I, Leandro Iglesias, certify that;

1.I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2020 of iQSTEL Inc. (the “registrant”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2020

/s/ Le a ndro Iglesias

By: Leandro Iglesias

Title: Chief Executive Officer

Exhibit 31.2 Section 302 Certification

CERTIFICATIONS

I, Alvaro Quintana Cardona, certify that;

1.I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2020 of iQSTEL Inc. (the “registrant”);

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2020

/ s/ Alvaro Quintana Cardona

By: Alvaro Quintana Cardona

Title: Chief Financial Officer

Exhibit 32.1 Section 906 Certification

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND

CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly Report of iQSTEL, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2020 filed with the Securities and Exchange Commission (the “Report”), I, Leandro Iglesias, Chief Executive Office, and I, Alvaro Quintana Cardona, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations of the Company for the periods presented.

By:	/s/ Leandro Iglesias
Name:	Leandro Iglesias
Title:	Principal Executive Officer
Date:	August 13, 2020
By:	/s/ Alvaro Quintana Cardona
Name:	Alvaro Quintana Cardona
Title:	Principal Financial Officer
Date:	August 13, 2020

This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.