Make a square using four of the sticks.
Make an identical square with the other four sticks.
Place the second square so that it overlaps one quarter of the first square.
The third square is the small square created by the overlap and is 1/4 the size of the bigger squares.
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Is this question supposed to have 12 toothpicks to make 4 squares and then move 3 toothpicks to make 3 equal sized squares? Answer depends on the restrictions. Just move 3 sticks from any square to form a straight vertical or horizontal line up of squares is one option if there is no restrictions other than the three resulting squares are equal sizes.
five
You can make three squares
A triangle only has three sides. If you put three sticks together, you can make a triangle. If you had four sticks, you cannot make a triangle. That is why only three sticks are needed.