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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

| ☒ | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|  | For the quarterly period ended June 30, 2025
| ☐ | Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
|  | For the transition period from __________ to__________
|  | Commission File Number: 001-42644

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:

Title of each class |  | Trading symbol |  | Name of each exchange on which registered
Common Stock |  | IQST |  | The Nasdaq Stock Market LLC (The Nasdaq Capital Market)

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
| ☒ Non-accelerated Filer | ☒ 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: 3,607,267 common shares as of August 14, 2025

| 1 |

Table of Contents

TABLE OF CONTENTS
|  | Page
PART I – FINANCIAL INFORMATION
Item 1: | Financial Statements | 3
Item 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4
Item 3: | Quantitative and Qualitative Disclosures About Market Risk | 13
Item 4: | Controls and Procedures | 13
PART II – OTHER INFORMATION
Item 1: | Legal Proceedings | 15
Item 1A: | Risk Factors | 15
Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds | 15
Item 3: | Defaults Upon Senior Securities | 15
Item 4: | Mine Safety Disclosures | 15
Item 5: | Other Information | 15
Item 6: | Exhibits | 16

| 2 |

Table of Contents

PART I - FINANCIAL INFORMATION

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, 2025 (unaudited) and December 31, 2024;
F-2 | Consolidated Statements of Operations for the three and six months ended June 30, 2025 and 2024 (unaudited);
F-3 | Consolidated Statements of Stockholder’s Equity for the three and six months ended June 30, 2025 and 2024 (unaudited).
F-4 | Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024 (unaudited); and
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, 2025 are not necessarily indicative of the results that can be expected for the full year.

| 3 |

Table of Contents

IQSTEL INC

Consolidated Balance Sheets

(Unaudited)

|  | June 30, |  | December 31,
|  | 2025 |  | 2024
ASSETS |  |  |  |  |  |  |  |
Current Assets |  |  |  |  |  |  |  |
Cash |  | $ | 2,038,288 |  |  | $ | 2,510,357 |
Accounts receivable, net |  |  | 30,627,972 |  |  |  | 57,158,967 |
Inventory, net |  |  | 30,658 |  |  |  | 30,658 |
Due from related parties |  |  | 659,338 |  |  |  | 630,715 |
Deposit for acquisition |  |  | 50,000 |  |  |  | — |
Prepaid and other current assets |  |  | 2,148,774 |  |  |  | 2,684,349 |
Total Current Assets |  |  | 35,555,030 |  |  |  | 63,015,046 |
Property and equipment, net |  |  | 609,393 |  |  |  | 561,802 |
Intangible assets, net |  |  | 7,198,028 |  |  |  | 7,438,654 |
Goodwill |  |  | 6,750,045 |  |  |  | 6,750,045 |
Deferred tax assets |  |  | 243,108 |  |  |  | 243,108 |
Other assets |  |  | 1,052,894 |  |  |  | 999,083 |
TOTAL ASSETS |  | $ | 51,408,498 |  |  | $ | 79,007,738 |
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |  |  |  |  |  |
Current Liabilities |  |  |  |  |  |  |  |
Accounts payable |  | $ | 9,353,772 |  |  | $ | 2,129,241 |
Accrued and other current liabilities |  |  | 20,572,944 |  |  |  | 55,624,784 |
Due to related parties |  |  | 26,613 |  |  |  | 26,613 |
Loans payable - net of discount of $183,693 and $62,898, respectively |  |  | 4,455,875 |  |  |  | 2,455,641 |
Loans payable - related parties |  |  | 352,007 |  |  |  | 720,485 |
Convertible notes - net of discount of $22,590 and $138,654, respectively |  |  | 2,082,673 |  |  |  | 1,864,432 |
Contingent liability for acquisition of subsidiary |  |  | — |  |  |  | 1,000,000 |
Total Current Liabilities |  |  | 36,843,884 |  |  |  | 63,821,196 |
Convertible notes - net of discount of $0 and $210,296, respectively |  |  | — |  |  |  | 3,011,926 |
Employee benefits, non-current |  |  | 276,614 |  |  |  | 274,353 |
TOTAL LIABILITIES |  |  | 37,120,498 |  |  |  | 67,107,475 |
Stockholders' Equity |  |  |  |  |  |  |  |
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 |  |  | 10 |  |  |  | 10 |
Series B Preferred stock: 200,000 designated; $0.001 par value, 42,108 and 35,537 shares issued and outstanding, respectively |  |  | 42 |  |  |  | 36 |
Series C Preferred stock: 200,000 designated; $0.001 par value, No shares issued and outstanding |  |  | — |  |  |  | — |
Series D Preferred stock: 75,000 designated; $0.001 par value, No shares issued and outstanding |  |  | — |  |  |  | — |
Common stock: 3,750,000 authorized; $0.001 par value 3,504,454 and 2,537,209 shares issued and outstanding, respectively |  |  | 3,505 |  |  |  | 2,537 |
Additional paid in capital |  |  | 45,961,191 |  |  |  | 39,943,924 |
Accumulated deficit |  |  | (36,405,475 | ) |  |  | (32,703,410 | )
Accumulated other comprehensive loss |  |  | (25,340 | ) |  |  | (25,340 | )
Equity attributed to stockholders of IQSTEL Inc. |  |  | 9,533,933 |  |  |  | 7,217,757 |
Equity attributable to noncontrolling interests |  |  | 4,754,067 |  |  |  | 4,682,506 |
TOTAL STOCKHOLDERS' EQUITY |  |  | 14,288,000 |  |  |  | 11,900,263 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |  | $ | 51,408,498 |  |  | $ | 79,007,738 |

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

| F-1 |

Table of Contents

IQSTEL INC

Consolidated Statements of Operations

(Unaudited)

|  | Three Months Ended |  | Six Months Ended
|  | June 30, |  | June 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Revenues |  | $ | 72,183,236 |  |  | $ | 78,635,764 |  |  | $ | 129,816,052 |  |  | $ | 130,050,642 |
Cost of revenue |  |  | 70,311,749 |  |  |  | 76,472,140 |  |  |  | 126,009,607 |  |  |  | 126,507,992 |
Gross profit |  |  | 1,871,487 |  |  |  | 2,163,624 |  |  |  | 3,806,445 |  |  |  | 3,542,650 |
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
General and administration |  |  | 2,527,716 |  |  |  | 2,505,727 |  |  |  | 5,066,900 |  |  |  | 4,068,205 |
Total operating expenses |  |  | 2,527,716 |  |  |  | 2,505,727 |  |  |  | 5,066,900 |  |  |  | 4,068,205 |
Operating loss |  |  | (656,229 | ) |  |  | (342,103 | ) |  |  | (1,260,455 | ) |  |  | (525,555 | )
Other income (expense) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other income |  |  | 22,286 |  |  |  | 55,524 |  |  |  | 45,514 |  |  |  | 127,301 |
Other expenses |  |  | (68,584 | ) |  |  | (443 | ) |  |  | (79,746 | ) |  |  | (850 | )
Interest expense |  |  | (459,118 | ) |  |  | (496,080 | ) |  |  | (990,844 | ) |  |  | (861,554 | )
Change in fair value of derivative liabilities |  |  | — |  |  |  | (1,115,510 | ) |  |  | — |  |  |  | (1,115,510 | )
Loss on settlement of debt |  |  | (878,592 | ) |  |  | — |  |  |  | (878,592 | ) |  |  | (102,660 | )
Loss on settlement of salary payable |  |  | (216,981 | ) |  |  |  |  |  |  | (216,981 | ) |  |  |  |
Total other expense |  |  | (1,600,989 | ) |  |  | (1,556,509 | ) |  |  | (2,120,649 | ) |  |  | (1,953,273 | )
Net loss before provision for income taxes |  |  | (2,257,218 | ) |  |  | (1,898,612 | ) |  |  | (3,381,104 | ) |  |  | (2,478,828 | )
Income taxes |  |  | (91,696 | ) |  |  | (65,275 | ) |  |  | (112,271 | ) |  |  | (65,275 | )
Net loss |  |  | (2,348,914 | ) |  |  | (1,963,887 | ) |  |  | (3,493,375 | ) |  |  | (2,544,103 | )
Less: Net income attributable to noncontrolling interests |  |  | 58,064 |  |  |  | 44,265 |  |  |  | 71,561 |  |  |  | 273,816 |
Net loss attributed to IQSTEL Inc. |  | $ | (2,406,978 | ) |  | $ | (2,008,152 | ) |  | $ | (3,564,936 | ) |  | $ | (2,817,919 | )
Comprehensive loss |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | (2,348,914 | ) |  | $ | (1,963,887 | ) |  | $ | (3,493,375 | ) |  | $ | (2,544,103 | )
Total loss |  |  | (2,348,914 | ) |  | $ | (1,963,887 | ) |  | $ | (3,493,375 | ) |  | $ | (2,544,103 | )
Less: Comprehensive income attributable to noncontrolling interests |  |  | 58,064 |  |  |  | 44,265 |  |  |  | 71,561 |  |  |  | 273,816 |
Net comprehensive loss attributed to IQSTEL Inc. |  | $ | (2,406,978 | ) |  | $ | (2,008,152 | ) |  | $ | (3,564,936 | ) |  | $ | (2,817,919 | )
Basic and diluted loss per common share |  | $ | (0.82 | ) |  | $ | (0.90 | ) |  | $ | (1.28 | ) |  | $ | (1.28 | )
Weighted average number of common shares outstanding - Basic and diluted |  |  | 2,952,905 |  |  |  | 2,230,574 |  |  |  | 2,792,279 |  |  |  | 2,209,993 |

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

| F-2 |

Table of Contents

IQSTEL INC

Consolidated Statements of Changes in Stockholders’ Equity

For the three and six months ended June 30, 2025 and 2024

(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 Stockholders' Equity
Balance - December 31, 2024 |  |  | 10,000 |  |  | $ | 10 |  |  |  | 35,537 |  |  | $ | 36 |  |  |  | 2,537,209 |  |  | $ | 2,537 |  |  | $ | 39,943,924 |  |  | $ | (32,703,410 | ) |  | $ | (25,340 | ) |  | $ | 7,217,757 |  |  | $ | 4,682,506 |  |  | $ | 11,900,263 |
Common stock issued for compensation |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,875 |  |  |  | 2 |  |  |  | 32,813 |  |  |  | — |  |  |  | — |  |  |  | 32,815 |  |  |  | — |  |  |  | 32,815 |
Common stock issued for conversion of debt |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 94,981 |  |  |  | 95 |  |  |  | 835,739 |  |  |  | — |  |  |  | — |  |  |  | 835,834 |  |  |  | — |  |  |  | 835,834 |
Common stock issued for common stock payable |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 3,563 |  |  |  | 4 |  |  |  | (4 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Dividend to non-controlling interest |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (68,645 | ) |  |  | — |  |  |  | (68,645 | ) |  |  | — |  |  |  | (68,645 | )
Net income (loss) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,157,958 | ) |  |  | — |  |  |  | (1,157,958 | ) |  |  | 13,497 |  |  |  | (1,144,461 | )
Balance - March 31, 2025 |  |  | 10,000 |  |  | $ | 10 |  |  |  | 35,537 |  |  | $ | 36 |  |  |  | 2,637,628 |  |  | $ | 2,638 |  |  | $ | 40,812,472 |  |  | $ | (33,930,013 | ) |  | $ | (25,340 | ) |  | $ | 6,859,803 |  |  | $ | 4,696,003 |  |  | $ | 11,555,806 |
Series B Preferred stock issued for settlement of salary payable |  |  | — |  |  |  | — |  |  |  | 6,571 |  |  |  | 6 |  |  |  | — |  |  |  | — |  |  |  | 848,475 |  |  |  | — |  |  |  | — |  |  |  | 848,481 |  |  |  | — |  |  |  | 848,481 |
Common stock issued for compensation |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,875 |  |  |  | 2 |  |  |  | 22,381 |  |  |  | — |  |  |  | — |  |  |  | 22,383 |  |  |  | — |  |  |  | 22,383 |
Common stock issued for conversion of debt |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 599,933 |  |  |  | 600 |  |  |  | 2,391,470 |  |  |  | — |  |  |  | — |  |  |  | 2,392,070 |  |  |  | — |  |  |  | 2,392,070 |
Common stock issued for settlement of debt |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 264,980 |  |  |  | 265 |  |  |  | 1,886,393 |  |  |  | — |  |  |  | — |  |  |  | 1,886,658 |  |  |  | — |  |  |  | 1,886,658 |
Reverse split adjustment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 38 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Dividend to non-controlling interest |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (68,484 | ) |  |  | — |  |  |  | (68,484 | ) |  |  | — |  |  |  | (68,484 | )
Net income (loss) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2,406,978 | ) |  |  | — |  |  |  | (2,406,978 | ) |  |  | 58,064 |  |  |  | (2,348,914 | )
Balance - June 30, 2025 |  |  | 10,000 |  |  | $ | 10 |  |  |  | 42,108 |  |  | $ | 42 |  |  |  | 3,504,454 |  |  | $ | 3,505 |  |  | $ | 45,961,191 |  |  | $ | (36,405,475 | ) |  | $ | (25,340 | ) |  | $ | 9,533,933 |  |  | $ | 4,754,067 |  |  | $ | 14,288,000 |

|  | 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 Stockholders' Equity
Balance - December 31, 2023 |  |  | 10,000 |  |  | $ | 10 |  |  |  | 31,080 |  |  | $ | 31 |  |  |  | 2,151,620 |  |  | $ | 2,152 |  |  | $ | 34,530,862 |  |  | $ | (26,084,133 | ) |  | $ | (25,340 | ) |  | $ | 8,423,582 |  |  | $ | (377,710 | ) |  | $ | 8,045,872 |
Common stock issued for compensation |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,875 |  |  |  | 2 |  |  |  | 31,063 |  |  |  | — |  |  |  | — |  |  |  | 31,065 |  |  |  | — |  |  |  | 31,065 |
Common stock issued for settlement of debt |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 22,125 |  |  |  | 22 |  |  |  | 279,638 |  |  |  | — |  |  |  | — |  |  |  | 279,660 |  |  |  | — |  |  |  | 279,660 |
Common stock issued in conjunction with convertible notes |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 44,192 |  |  |  | 44 |  |  |  | 597,733 |  |  |  | — |  |  |  | — |  |  |  | 597,777 |  |  |  | — |  |  |  | 597,777 |
Net income (loss) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (809,767 | ) |  |  | — |  |  |  | (809,767 | ) |  |  | 229,551 |  |  |  | (580,216 | )
Balance - March 31, 2024 |  |  | 10,000 |  |  | $ | 10 |  |  |  | 31,080 |  |  | $ | 31 |  |  |  | 2,219,812 |  |  | $ | 2,220 |  |  | $ | 35,439,296 |  |  | $ | (26,893,900 | ) |  | $ | (25,340 | ) |  | $ | 8,522,317 |  |  | $ | (148,159 | ) |  | $ | 8,374,158 |
Common stock issued for compensation |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,875 |  |  |  | 2 |  |  |  | 46,598 |  |  |  | — |  |  |  | — |  |  |  | 46,600 |  |  |  | — |  |  |  | 46,600 |
Common stock issued for warrant exercises |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 22,778 |  |  |  | 23 |  |  |  | 399,977 |  |  |  | — |  |  |  | — |  |  |  | 400,000 |  |  |  | — |  |  |  | 400,000 |
Resolution of derivative liabilities upon exercise of warrant |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 239,323 |  |  |  | — |  |  |  | — |  |  |  | 239,323 |  |  |  | — |  |  |  | 239,323 |
Acquisition of subsidiary |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 475,685 |  |  |  | 475,685 |
Net income (loss) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2,008,152 | ) |  |  | — |  |  |  | (2,008,152 | ) |  |  | 44,265 |  |  |  | (1,963,887 | )
Balance - June 30, 2024 |  |  | 10,000 |  |  | $ | 10 |  |  |  | 31,080 |  |  | $ | 31 |  |  |  | 2,244,465 |  |  | $ | 2,245 |  |  | $ | 36,125,194 |  |  | $ | (28,902,052 | ) |  | $ | (25,340 | ) |  | $ | 7,200,088 |  |  | $ | 371,791 |  |  | $ | 7,571,879 |

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

| F-3 |

Table of Contents

IQSTEL INC

Consolidated Statements of Cash Flows

(Unaudited)

|  | Six Months Ended
|  | June 30,
|  | 2025 |  | 2024
CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |  |  |  |  |  |
Net loss |  | $ | (3,493,375 | ) |  | $ | (2,544,103 | )
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |  |  |  |  |
Stock based compensation |  |  | 55,198 |  |  |  | 77,665 |
Bad debt expense |  |  | 4,442 |  |  |  | 1,801 |
Depreciation and amortization |  |  | 288,224 |  |  |  | 68,939 |
Amortization of debt discount |  |  | 343,834 |  |  |  | 468,797 |
Change in fair value of derivative liabilities |  |  | — |  |  |  | 1,115,510 |
Loss on settlement of debt |  |  | 878,592 |  |  |  | 102,660 |
Loss on settlement of salary payable |  |  | 216,981 |  |  |  | — |
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |
Accounts receivable |  |  | 33,486,603 |  |  |  | 12,944,081 |
Inventory |  |  | — |  |  |  | 185 |
Prepaid and other assets |  |  | (4,552,575 | ) |  |  | (500,544 | )
Accounts payable |  |  | 1,585,727 |  |  |  | (9,519,447 | )
Accrued and other current liabilities |  |  | (30,462,934 | ) |  |  | (5,367,232 | )
Net cash used in operating activities |  |  | (1,649,283 | ) |  |  | (3,151,688 | )
CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |  |  |  |  |  |
Acquisitions of subsidiary, net of cash received |  |  | (50,000 | ) |  |  | (2,505,121 | )
Purchase of property and equipment |  |  | (95,189 | ) |  |  | (103,474 | )
Payment of loan receivable - related party |  |  | (29,462 | ) |  |  | (111,602 | )
Collection of amounts due from related parties |  |  | 839 |  |  |  | — |
Net cash used in investing activities |  |  | (173,812 | ) |  |  | (2,720,197 | )
CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |  |  |  |  |  |
Proceeds from loans payable |  |  | 3,215,000 |  |  |  | 699,525 |
Repayments of loans payable |  |  | (15,776 | ) |  |  | (147,253 | )
Repayments of note payable issued for acquisition of subsidiary |  |  | (1,244,786 | ) |  |  | — |
Proceeds from loans payable - related parties |  |  | — |  |  |  | 1,000,000 |
Repayment of loans payable - related parties |  |  | (389,514 | ) |  |  | (166,681 | )
Proceeds from exercise of warrants |  |  | — |  |  |  | 400,000 |
Proceeds from stock purchase option |  |  | — |  |  |  | 100,000 |
Proceeds from convertible notes |  |  | 987,500 |  |  |  | 3,722,500 |
Repayment of convertible notes |  |  | (1,064,269 | ) |  |  | (301,647 | )
Dividends paid to non-controlling interest |  |  | (137,129 | ) |  |  | — |
Net cash provided by financing activities |  |  | 1,351,026 |  |  |  | 5,306,444 |
Net change in cash |  |  | (472,069 | ) |  |  | (565,441 | )
Cash, beginning of period |  |  | 2,510,357 |  |  |  | 1,362,668 |
Cash, end of period |  | $ | 2,038,288 |  |  | $ | 797,227 |
Supplemental cash flow information |  |  |  |  |  |  |  |
Cash paid for interest |  | $ | 386,539 |  |  | $ | 289,493 |
Cash paid for taxes |  | $ | 109,870 |  |  | $ | — |
Non-cash transactions: |  |  |  |  |  |  |  |
Series B Preferred stock issued for settlement of salary payable |  | $ | 848,841 |  |  | $ | — |
Common stock issued for settlement of debt |  | $ | 1,886,658 |  |  | $ | 279,660 |
Common stock issued in connection with convertible notes |  | $ | — |  |  | $ | 597,777 |
Common stock issued for conversion of debt |  | $ | 3,227,903 |  |  | $ | — |
Common stock issued for stock payable |  | $ | 4 |  |  | $ | — |
Resolution of derivative liabilities |  | $ | — |  |  | $ | 239,323 |
Note payable issued for acquisition of subsidiary |  | $ | 1,000,000 |  |  | $ | 2,000,000 |
Contingent liability for acquisition of subsidiary |  | $ | — |  |  | $ | 1,000,000 |

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

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IQSTEL INC

Notes to the Unaudited Consolidated Financial Statements

June 30, 2025

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 over 603 active interconnection agreements with mobile companies, fixed line companies and other wholesale carriers.

The Company is a technology company with a presence in 20 countries and approximately 100 employees that is offering leading-edge services through its four business divisions.

The Telecom Division, which represents the majority of current operations and which also represents the source for all of the Company’s revenues, offers VoIP, SMS, proprietary Internet of Things (IoT) solutions, and international fiber-optic connectivity through its subsidiaries: Etelix.com USA, LLC, SwissLink Carrier AG, Smartbiz Telecom LLC, Whisl Telecom LLC, IoT Labs, LLC, QGlobal SMS, LLC, and QXTEL LIMITED.

Also under the Telecom Division, the Company’s developing BlockChain Platform Business Line offers our proprietary Mobile Number Portability Application (MNPA) to serve the in-country portability needs through its subsidiary, ItsBchain, LLC.

The Company’s developing Fintech Business Line offers a complete Fintech ecosystem MasterCard Debit Card, US Bank Account (No SSN Needed), Mobile App/Wallet (Remittances, Mobile Top Up). The Company’s Fintech subsidiary, Global Money One Inc., is to provide immigrants access to reliable financial services that makes it easier to manage their money and stay connected with their families back home.

The Company’s developing Electric Vehicle (EV) Business Line offers electric motorcycles for work and recreational use in the USA, Spain, Portugal, Panama, Colombia, and Venezuela. EVOSS is also working on the development of an EV Mid Speed Car to serve the niche of the 2nd car in the family.

The Company’s developing Artificial Intelligence (AI)-Enhanced Metaverse Division offers a white-label solution designed specifically for corporations, businesses, and the telecommunications industry. Delivering a full suite of immersive content services, creating a comprehensive virtual experience that can be accessed through the Web or our proprietary mobile apps.

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 (“GAAP”) for annual financial statements.

In the opinion of the Company’s management, the accompanying unaudited interim consolidated 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, 2025 and the results of operations and cash flows for the periods presented. The results of operations for the six months ended June 30, 2025 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited consolidated 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, 2024 filed with the SEC on March 31, 2025.

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Consolidation Policy

The consolidated financial statements of the Company include the accounts of the Company and its owned subsidiaries, Etelix.com USA, LLC (“Etelix”), SwissLink Carrier AG (“Swisslink”), ITSBCHAIN, LLC (“ItsBchain”), QGLOBAL SMS, LLC (“QGlobal”), IoT Labs, LLC (“IoT Labs”), Global Money One Inc (“Global Money One”), Whisl Telecom LLC (“Whisl”), Smartbiz Telecom LLC (“Smartbiz”) and QXTEL LIMITED (“QXTEL”). All significant intercompany balances and transactions have been eliminated in consolidation.

Reverse stock split

The Company announced a reverse stock split effective on May 2, 2025 (the “Market Effective Date”). The Board of Directors of the Company approved a reverse stock split of the Company’s authorized, issued and outstanding shares of common stock, par value $0.001 per share (the “Common Stock”), at a ratio of 1-for-80. All issued and outstanding common stock, options and warrants to purchase common stock and per share amounts contained in this Report have been adjusted retroactively to reflect the change in capital structure for all periods presented.

All share and per share information in these financial statements retroactively reflect this reverse stock split.

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.

Cash and Cash Equivalents

Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company had no cash equivalents at June 30, 2025 and December 31, 2024.

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 estimates expected credit losses related to accounts receivable balances based on a review of available and relevant information including current economic conditions, projected economic conditions, historical loss experience, account aging, and other factors that could affect collectability. During the six months ended June 30, 2025 and 2024, the Company recorded bad debt expense of $4,442 and $1,801, respectively.

Net Income (Loss) Per Share of Common Stock

The Company has adopted Accounting Standards Codification 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. Dilutive potential common shares include outstanding Series B Preferred stock and convertible notes, and these were excluded from the computation of diluted net loss per share as the result was anti-dilutive for the six months ended June 30, 2025 and 2024.

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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, accounts receivable, and related party payables. 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. Based on the Federal Deposit Insurance Corporation (FDIC) applicable in the United Sates, Switzerland’s deposit protection system (Esisuisse) and the Financial Services Compensation Scheme (FSCS) applicable in the U.K., 49.13% of our cash and cash equivalent are protected by the applicable government insurance limits.

During the six months ended June 30, 2025, we had 25 customers representing 86.05% of our revenue compared to 19 customers representing 86.41% of our revenue for the six months ended June 30, 2024. This is a significant improvement in the revenue concentration. For the six months ended June 30, 2025 and 2024, 41% and 38% of revenue, respectively, comes from customers under prepayment conditions, which means there are no credit or bad debt risks on that portion of the customers’ portfolio.

Approximately 80% of total accounts receivable are concentrated in balances from the Company’s top 30 customers. The largest customer represented 9.36% of the total. This concentration may expose the Company to a medium-to-low level of credit risk, as most of these customers are bilateral, meaning they also have accounts payable with the Company.

Financial Instruments

The Company follows ASC 820, “Fair Value Measurements and Disclosures,” which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The carrying values of our financial instruments, including, cash; accounts receivable; prepaid and other current assets; accounts payable; accrued liabilities and other current liabilities; and due from/to related parties approximate their fair values due to the short-term maturities of these financial instruments.

Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated. It is not, however, practical to determine the fair value of amounts due to related parties due to their related party nature.

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Revenue Recognition

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 exists, and collection is reasonably assured. Management considers persuasive evidence of a sales arrangement to be a written interconnection agreement. The Company’s payment terms vary by client.

Usage charges refer to the fees that customers are billed based on their actual usage of the services. For voice services, this typically means charges are based on the duration of calls made. For SMS (text messaging), it usually means charges per message sent. Other recurring charges are referred to charges for services such as (1) Global DIDs, (2) Global Toll-Free Numbers, (3) PBX (Private Branch Exchange) for small businesses, and (4) SIP Trunking. The provision of these services usually has set-up fees and are offered on a subscription or month-to-month basis.

Revenue is reported on a gross basis since the Company acts as the principal in the transaction, meaning it has control over the goods or services before they are transferred to the customer. This includes having the primary responsibility for fulfilling the contract and determining the price.

With respect to the specific performance obligations of the Company in its contracts with its customers, our standard service agreement establishes the following:

| • | The Company agrees to furnish to Customer, and Customer agrees to purchase from the Company, International Long Distance telecommunication services and/or SMS services at the rates agreed to in writing by the Parties.
| • | The Company will provide, operate and maintain communications equipment, international links and network administration and support in the United States and other countries as may be agreed upon.
| • | The Company will be responsible for its own expenses and will provide, operate, and maintain transmission facilities required to link its domestic network with the other Party's nearest point of presence (POP).
| • | The Company shall provide Customer all required IP network addresses, Domain Name Server (DNS) information and, if necessary, the associated prefixes used to exchange voice traffic as provided on the provisioning form.
| • | The Company shall take all appropriate security measures to protect its network from fraudulent traffic coming from unknown or unauthorized sources. Any and all IP and network information received by the Company from Customer for the purposes of this agreement shall be strictly confidential, and disclosed only to those employees or personnel with a need to know.

The Company recognizes revenue from telecommunication services in accordance with ASC 606. Topic 606 establishes a comprehensive 5 step framework for determining revenue recognition. Under this framework, the Company considers each service a single performance obligation, since typically, the Company provides a series of distinct services.

The application of the 5 step Topic 606 revenue recognition framework to the Company's operations is depicted as follows:

Topic 606 Conceptual Framework | Related Company Policy & Procedures
Step 1 Identify the contract(s) with customer | A contract is defined as an approved mutual agreement between the Company and a customer setting performance obligation, and criteria that must be met in accordance with the Company's customary commercial business practices and entered into with the probable expectation that all estimated consideration will be realized in the ordinary course of business.
Step 2 Identify the performance obligations | Performance obligations are identified in the customer agreement, and any subsequent amendments stated in per minute, time and message usage criteria. The Company considers each service a single performance obligation, including instances where the Company provides a series of services that are substantially the same and have the same pattern of transfer.
Step 3 Determine the transaction price | The transaction price is determined at contract inception and is subsequently reviewed periodically to reflect applicable rate amendments, trends in regulatory, market conditions and usage of service by a customer. The transaction price excludes amounts collected on behalf of third parties such as sales taxes and regulatory fees.
Step 4 Allocate the transaction price to the performance obligations | The transaction price is allocated to each performance obligation based on the standalone contractual selling price of the time measured service, net of any related discount.
Step 5 Recognize revenue when the entity satisfies a performance obligation | The Company recognizes revenues from contracts with customers when control of the usage of the services has been transferred to the customer, as recorded and measured by the Company's internal information systems. Revenues are recognized at the probable amount of consideration expected in exchange for transferring control of usage.

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Under ASC 606, voice and SMS termination services typically qualify for over time recognition because the customer receives and consumes the benefits as the entity performs

| • | Each call or message is terminated in real time.
| • | The customer cannot "stockpile" the service — it's consumed instantly.
| • | The service is indivisible and recurring, with no alternative use.

Cost of revenue

Costs of revenue represent direct charges from vendors that the Company incurs to deliver services to its customers. These costs primarily consist of usage charges for calls terminated in vendors’ networks.

Recent Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2024-03 Final Standard on Income Statement: Disaggregation of Income Statement Expenses, which requires disaggregated disclosure of income statement expenses for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. This guidance will be effective for us on January 1, 2027. The Company is currently evaluating the impact of adopting ASU 2024-03.

The Company has reviewed all other recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its 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, negative working capital 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, lines of credit, options and secured and unsecured loans from third parties. 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 – PREPAID AND OTHER CURRENT ASSETS

Prepaid and other current assets at June 30, 2025 and December 31, 2024 consisted of the following:

|  | June 30, |  | December 31,
|  | 2025 |  | 2024
Other receivable |  | $ | 110,070 |  |  | $ | 115,685 |
Prepaid expenses |  |  | 1,453,912 |  |  |  | 2,020,288 |
Advance payment |  |  | 21,000 |  |  |  | 21,000 |
Tax receivable |  |  | 77,589 |  |  |  | 42,673 |
Deposit for acquisition of asset |  |  | 357,500 |  |  |  | 356,000 |
Security deposit |  |  | 128,703 |  |  |  | 128,703 |
|  | $ | 2,148,774 |  |  | $ | 2,684,349 |

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NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment at June 30, 2025 and December 31, 2024 consisted of the following:

|  | June 30, |  | December 31,
|  | 2025 |  | 2024
Telecommunication equipment |  | $ | 709,417 |  |  | $ | 709,417 |
Telecommunication software |  |  | 784,425 |  |  |  | 690,742 |
Other equipment |  |  | 157,441 |  |  |  | 155,935 |
Total property and equipment |  |  | 1,651,283 |  |  |  | 1,556,094 |
Accumulated depreciation and amortization |  |  | (1,041,890 | ) |  |  | (994,292 | )
Total property and equipment |  | $ | 609,393 |  |  | $ | 561,802 |

Depreciation expense for the six months ended June 30, 2025 and 2024 amounted to $47,598 and $68,939, respectively.

NOTE 6 – INTANGIBLE ASSETS

Intangible assets at June 30, 2025 and December 31, 2024 consisted of the following:

2025 |  |  |  |  |  |  |  |
NOTE 6 - INTANGIBLE ASSETS - Schedule of Intangible Assets (Details) |  | Useful life |  | Gross carrying amount |  | Accumulated amortization |  | Net carrying amount
New gas regulator intangible |  | Not yet in service |  | $ | 99,592 |  | $ | — |  |  | $ | 99,592
Interconnection agreements |  | 16 years |  |  | 7,700,000 |  |  | (601,564 | ) |  |  | 7,098,436
|  |  |  | $ | 7,799,592 |  | $ | (601,564 | ) |  | $ | 7,198,028

2024 |  |  |  |  |  |  |  |
|  | Useful life |  | Gross carrying amount |  | Accumulated amortization |  | Net carrying amount
New gas regulator intangible |  | Not yet in service |  | $ | 99,592 |  | $ | — |  |  | $ | 99,592
Interconnection agreements |  | 16 years |  |  | 7,700,000 |  |  | (360,938 | ) |  |  | 7,339,062
|  |  |  | $ | 7,799,592 |  | $ | (360,938 | ) |  | $ | 7,438,654

Amortization expense for the six months ended June 30, 2025 and 2024 amounted to $240,626 and $0, respectively.

The following table outlines the estimated future amortization expense as of June 30, 2025:

Years ending December 31

2025 (6 months remaining) |  |  | $ | 240,624 |
2026 |  |  |  | 481,250 |
2027 |  |  |  | 481,250 |
2028 |  |  |  | 481,250 |
2029 |  |  |  | 481,250 |
Thereafter |  |  |  | 4,932,812 |
|  |  | $ | 7,098,436 |

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NOTE 7 – ACCRUED AND OTHER CURRENT LIABILITIES

Accrued and other current liabilities at June 30, 2025 and December 31, 2024 consisted of the following

|  | June 30, |  | December 31,
|  | 2025 |  | 2024
Accrued liabilities |  | $ | 1,329,285 |  |  | $ | 928,858 |
Cost provision |  |  | 18,442,141 |  |  |  | 53,939,336 |
Accrued interest |  |  | 219,844 |  |  |  | 118,204 |
Salary payable - management |  |  | 172,946 |  |  |  | 420,447 |
Salary payable and employee benefit |  |  | 81,449 |  |  |  | 88,357 |
Other current liabilities |  |  | 327,279 |  |  |  | 129,582 |
Total other accrued liabilities |  | $ | 20,572,944 |  |  | $ | 55,624,784 |

NOTE 8 - LOANS PAYABLE

Loans payable at June 30, 2025 and December 31, 2024 consisted of the following:

|  | June 30, |  | December 31, |  |  |  | Interest
|  | 2025 |  | 2024 |  | Term |  | rate
Martus |  | $ | 97,401 |  |  | $ | 103,738 |  |  | Note was issued on October 23, 2018 and due on January 2, 2026 |  |  | 5.0 | %
Darlene Covid19 |  |  | 70,579 |  |  |  | 80,019 |  |  | Note was issued on April 1, 2020 and due on March 31, 2026 |  |  | 0.0 | %
Promissory note payable |  |  | — |  |  |  | 217,391 |  |  | Note was issued June 11, 2024 and due on June 11, 2025 |  |  | 2.0 | %
Promissory note payable - acquisition of QXTEL |  |  | 212,500 |  |  |  | 1,275,000 |  |  | Note was issued April 1, 2024 and due on June 30, 2025 |  |  | 4.9 | %
Promissory note payable |  |  | — |  |  |  | 271,739 |  |  | Note was issued July 16, 2024 and due on July 16, 2025 |  |  | 2.0 | %
Promissory note payable |  |  | — |  |  |  | 271,739 |  |  | Note was issued July 31, 2024 and due on July 31, 2025 |  |  | 2.0 | %
Promissory note payable |  |  | — |  |  |  | 190,217 |  |  | Note was issued September 23, 2024 and due on September 23, 2025 |  |  | 2.0 | %
Promissory note payable |  |  | — |  |  |  | 108,696 |  |  | Note was issued October 4, 2024 and due on September 23, 2025 |  |  | 2.0 | %
Promissory note payable |  |  | 543,478 |  |  |  | — |  |  | Note was issued January 15, 2025 and due on January 15, 2026 |  |  | 2.0 | %
Promissory note payable - acquisition of QXTEL |  |  | 817,714 |  |  |  | — |  |  | Note was issued February 3, 2025 and due on September 30, 2025 |  |  | 4.9 | %
Promissory note payable |  |  | 269,474 |  |  |  | — |  |  | Note was issued April 24, 2025 and due on December 5, 2025 |  |  | 24.0 | %
Promissory note payable |  |  | 269,474 |  |  |  | — |  |  | Note was issued May 9, 2025 and due on December 20, 2025 |  |  | 24.0 | %
Promissory note payable |  |  | 269,474 |  |  |  | — |  |  | Note was issued May 27, 2025 and due on January 7, 2026 |  |  | 24.0 | %
Promissory note payable |  |  | 526,316 |  |  |  | — |  |  | Note was issued June 5, 2025 and due on January 16, 2026 |  |  | 24.0 | %
Promissory note payable |  |  | 768,421 |  |  |  | — |  |  | Note was issued June 9, 2025 and due on January 20, 2026 |  |  | 24.0 | %
Promissory note payable |  |  | 794,737 |  |  |  | — |  |  | Note was issued June 27, 2025 and due on February 7, 2026 |  |  | 24.0 | %
Total |  |  | 4,639,568 |  |  |  | 2,518,539 |  |  |  |  |  |  |
Less: Unamortized debt discount |  |  | (183,693 | ) |  |  | (62,898 | ) |  |  |  |  |  |
Total loans payable |  |  | 4,455,875 |  |  |  | 2,455,641 |  |  |  |  |  |  |
Less: Current portion of loans payable |  |  | (4,455,875 | ) |  |  | (2,455,641 | ) |  |  |  |  |  |
Long-term loans payable |  | $ | — |  |  | $ | — |  |  |  |  |  |  |

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Loans payable - related parties at June 30, 2025 and December 31, 2024 consisted of the following:

|  | June 30, |  | December 31, |  |  |  | Interest
|  | 2025 |  | 2024 |  | Term |  | rate
49% of Shareholder of SwissLink |  | $ | 21,606 |  |  | $ | 21,606 |  |  | Note is due on demand |  |  | 0.0 | %
49% of Shareholder of SwissLink |  |  | 163,712 |  |  |  | 237,841 |  |  | Note is due on demand |  |  | 5.0 | %
Minority Shareholder of QXTEL |  |  | 166,689 |  |  |  | 461,038 |  |  | Note is due on October 1, 2025 |  |  | 4.9 | %
Total |  |  | 352,007 |  |  |  | 720,485 |  |  |  |  |  |  |
Less: Current portion of loans payable - related parties |  |  | 352,007 |  |  |  | 720,485 |  |  |  |  |  |  |
Long-term loans payable - related parties |  | $ | — |  |  | $ | — |  |  |  |  |  |  |

During the six months ended June 30, 2025 and 2024, the Company borrowed from third parties totaling $3,215,000 and $699,525, which includes original issue discount and financing costs of $226,374 and $0 and repaid the principal amount of $1,260,562 and $147,253, respectively.

During the six months ended June 30, 2025, the Company issued a note payable of $1,000,000 for the earn out payment related to the April 1, 2024 acquisition of a subsidiary.

During the six months ended June 30, 2025 and 2024, the Company recorded interest expense of $169,502 and $47,665 and recognized amortization of discount, included in interest expense, of $77,883 and $68,519, respectively.

During the six months ended June 30, 2025, the Company settled the principal amount and accrued interest of notes payable issued in June through October 2024 by issuing 264,980 shares of common stock. As a result, the Company recorded a loss on settlement of debt of $801,255.

During the six months ended June 30, 2024, the Company settled the principal amount and accrued interest of a note payable issued in April 2023 by issuing 22,125 shares of common stock. As a result, the Company recorded a loss on settlement of debt of $102,660.

NOTE 9 - CONVERTIBLE LOANS

Convertible loans at June 30, 2025 and December 31, 2024 consisted of the following:

|  | June 30, |  | December 31,
|  | 2025 |  | 2024
Issued in fiscal year 2024 |  | $ | 1,578,947 |  |  | $ | 5,225,308 |
Issued in fiscal year 2025 |  |  | 526,316 |  |  |  | — |
Total convertible notes payable |  |  | 2,105,263 |  |  |  | 5,225,308 |
Less: Unamortized debt discount |  |  | (22,590 | ) |  |  | (348,950 | )
Total convertible notes |  |  | 2,082,673 |  |  |  | 4,876,358 |
Less: current portion of convertible notes |  |  | 2,082,673 |  |  |  | 1,864,432 |
Long-term convertible notes |  | $ | — |  |  | $ | 3,011,926 |

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During the six months ended June 30, 2025 and 2024, the Company recorded interest expense of $477,508 and $345,092 and recognized amortization of discount, included in interest expense, of $265,951 and $400,278, respectively.

Conversion

During the six months ended June 30, 2025, one note holder converted notes with principal amounts of $3,222,222, debt discount of $127,652, accrued interest of $125,834 and conversion fee of $7,500 into 694,914 shares of common stock.

Settlement

During the six months ended June 30, 2025, the Company settled the principal amount of convertible notes of $671,870, debt discount of $58,573 and accrued interest of $34,366 issued in June 2024 through February 2025 to two notes holders by paying cash of $725,000. As a result, the Company recorded a loss on settlement of debt of $77,337.

Issued in fiscal year 2025

During the six months ended June 30, 2025, the Company borrowed amounts from third parties totaling $1,113,316, which includes original issue discount and financing costs of $125,816.

Principal |  | Issuance |  | Maturity |  | Interest |  | Payment
amount |  | date |  | Date |  | rate |  | schedule
$ | 471,000 |  |  |  | February 26, 2025 |  |  |  | December 30, 2025 |  |  |  | 14% |  |  | 5 payments, one payment of $268,470 and four payments of $67,118, beginning in August 2025
$ | 116,000 |  |  |  | February 26, 2025 |  |  |  | December 30, 2025 |  |  |  | 14% |  |  | 5 payments, one payment of $66,120 and four payments of $16,530, beginning in August 2025
$ | 526,316 |  |  |  | March 4, 2025 |  |  |  | December 5, 2025 |  |  |  | 24% |  |  | The outstanding balance shall be paid on December 5, 2025

The notes are convertible at the option of the holders at any time following an event of default, and the conversion price is 75% multiplied by the lowest trading price of Company’s common stock during the 10 trading days prior to the conversion date. Certain notes allow for the conversion price to be a fixed price of $8.80 per share.

Issued in fiscal year 2024

In January 24, 2024, we entered into a securities purchase agreement (the “SPA”) with M2B Funding Corp., a Florida corporation, for it to purchase up to the principal amount of $3,888,889 in secured convertible promissory notes (the “Notes”) for an aggregate purchase price of $3,500,000 (the “Purchase Price”), which Notes are convertible into shares (“Conversion Shares”) of our common stock with an initial conversion price of $8.80 per share. Each noteholder received shares of common stock (“Kicker Shares”) in an amount equal to ten percent of the principal amount of any Note issued divided by $8.80. The Notes are secured by all of our assets under a Security Agreement signed with the SPA.

The initial tranche was executed in January 2024 for $2,222,222 in face value of Notes and 25,253 Kicker Shares, with an original issue discount of $222,222; second and third tranches were executed in March 2024 for $1,111,111 and $555,556, respectively, in face value of Notes and 12,627 and 6,314 Kicker Shares, with an original issue discount of $111,111 and $55,556, respectively. Each one year note bears interest at 18% per annum.

In October 2024, we entered into a Memorandum of Understanding (the “Agreement”) with M2B Funding Corp. to extend the maturity date on three promissory notes in exchange for stock consideration. Pursuant to the Agreement, the following promissory notes were extended by 12 months from their original date of maturity:

| • | First Note: Originally due January 1, 2025, with an outstanding amount of $1,888,889, extended to January 1, 2026.
| • | Second Note: Originally due March 12, 2025, with an outstanding amount of $1,111,111, extended to March 12, 2026.
| • | Third Note: Originally due March 25, 2025, with an outstanding amount of $555,556, extended to March 25, 2026.

In consideration for this extension, the Company issued 8,081 restricted common shares. As a result of the extension, the Company recognized the loss on debt extinguishment of $297,878 as debt extinguishment and debt discount of $61,818 as debt modification during the year ended December 31, 2024.

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Additionally, during the year ended December 31, 2024, the Company borrowed amounts from a third party totaling $2,413,707, which includes original issue discount and financing costs of $248,707.

Principal |  | Issuance |  | Maturity |  | Interest |  | Payment
amount |  | date |  | Date |  | rate |  | schedule
$ | 146,900 |  |  |  | March 7, 2024 |  |  |  | January 15, 2025 |  |  |  | 12% |  |  | 10 payments each in the amount of $16,453 beginning on April 15, 2024
$ | 177,100 |  |  |  | March 7, 2024 |  |  |  | January 15, 2025 |  |  |  | 14% |  |  | 5 payments, one payment of $100,947 and four payments of $25,237, beginning in September 2024
$ | 179,400 |  |  |  | July 10, 2024 |  |  |  | April 30, 2025 |  |  |  | 14% |  |  | 9 payments each in the amount of $22,724 beginning on August 30, 2024
$ | 151,960 |  |  |  | September 16, 2024 |  |  |  | July 15, 2025 |  |  |  | 14% |  |  | 5 payments, one payment of $86,617 and four payments of $21,654, beginning in March 2025
$ | 179,400 |  |  |  | October 15, 2024 |  |  |  | July 15, 2025 |  |  |  | 14% |  |  | 9 payments each in the amount of $22,724 beginning on November 30, 2024
$ | 1,578,947 |  |  |  | December 6, 2024 |  |  |  | June 4, 2025 |  |  |  | 24% |  |  | Outstanding balance shall be paid on June 4, 2025

The notes are convertible at the option of the holders at any time following an event of default, and the conversion price is 75% multiplied by the lowest trading price of Company’s common stock during the 10 trading days prior to the conversion date. Certain notes allow for the conversion price to be a fixed price of $12.0 per share.

NOTE 10 – STOCK PURCHASE OPTION

On January 14, 2025, the Company issued a Common Stock Purchase Option (the “Option”) to ADI Funding LLC (“ADI Funding”) under a stock purchase agreement for $100,000 that expired on July 14, 2025, for the right to acquire up to 187,500 shares of common stock. The exercise price per share of the common stock under the Option shall be 70% of the VWAP of the common stock during the then 10 Trading Days immediately preceding but not including the date of exercise. The obligation to exercise each specified portion of the Option is subject to the exercise price, being not less than $8.80 per share on the relevant Option exercise date. As of June 30, 2025, the Company did not receive the $100,000 and the options were not in effect, and the Options had no impact to the accompanying financial statements. On July 14, 2025, the stock purchase agreement was terminated.

NOTE 11 – STOCKHOLDERS’ EQUITY

Common Stock

The Board of Directors of the Company approved a reverse stock split of the Company’s authorized, issued and outstanding shares of Common Stock at a ratio of 1-for-80, effective on May 2, 2025.

The Company amended its certificate of incorporation to reduce the number of authorized shares of Common Stock that it may issue from 300,000,000 shares to 3,750,000 shares with a par value of $0.001 per share.

During the six months ended June 30, 2025, the Company issued 967,245 shares of common stock, valued at fair market value on issuance as follows:

• 3,750 shares for compensation to our directors valued at $55,198.

• 694,914 shares for conversion of debt of $3,227,904.

• 264,980 shares for settlement of debt of $1,886,658

• 3,563 shares for common stock payable value at $82,194.

• 38 shares for reverse stock split adjustment

As of June 30, 2025 and December 31, 2024, 3,504,454 and 2,537,209 shares of common stock were issued and outstanding, respectively.

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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 stockholders at a rate of 51% of the total vote of stockholders.

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, 2025 and December 31, 2024, 10,000 shares of Series A Preferred Stock were issued and outstanding.

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 twelve point five (12.5) shares of Common Stock for every one (1) share of Series B Preferred Stock. Upon conversion, the shares are subject to a one-year restriction on sales into the market of no more than 5% previous month’s stock liquidity.

During the six months ended June 30, 2025, the Company issued 6,571 shares of Series B Preferred Stock to settle salary payable for our CEO and CFO of $631,500. As a result, the Company recorded a loss on settlement of salary payable of $216,981.

As of June 30, 2025 and December 31, 2024, 42,108 and 35,537 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 C 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 twelve point five (12.5) shares of Common Stock for every one (1) share of Series C Preferred Stock. Upon conversion, the shares are subject to a one-year 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.

As of June 30, 2025 and December 31, 2024, no Series C Preferred Stock was issued or outstanding.

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Table of Contents

Series D Preferred Stock

On November 3, 2023, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock entitled Series D Preferred Stock, consisting of up 75,000 shares, par value $0.001. Under the Certificate of Designation, in the event of any dissolution, liquidation or winding up of the Corporation, the Holders of Series D Preferred Stock shall be entitled to participate in any distribution out of the assets of the Corporation before the holders of the Common Stock, Series A Preferred Stock and Series C Preferred Stock, but shall be considered on parity to the liquidation rights of the Series B Preferred Stockholders. The holders of shares of Series D 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 D Preferred Stock do not have voting rights but may convert into common stock at a conversion rate of twelve point five (12.5) shares of Common Stock for every one (1) share of Series D Preferred Stock.

The rights of the holders of Series D Preferred Stock are defined in the relevant Certificate of Designation filed with the Nevada Secretary of State on November 3, 2023.

As of June 30, 2025 and December 31, 2024, no Series D Preferred Stock was issued or outstanding.

NOTE 12 - RELATED PARTY TRANSACTIONS

Due from related party

During the six months ended June 30, 2025 and 2024, the Company loaned $29,462 and $111,602 and collected $839 and $0, respectively to a related party.

As of June 30, 2025 and December 31, 2024, the Company had amounts due from related parties of $659,338 and $630,715, respectively. The loans are unsecured, non-interest bearing and due on demand.

Due to related parties

As of June 30, 2025 and December 31, 2024, the Company had amounts due to related parties of $26,613. The amounts are unsecured, non-interest bearing and due on demand.

Employment agreements

On June 23, 2025, the board of directors of the Company approved amended employment agreements in favor of its Chief Executive Officer, Leandro Iglesias, and its Chief Financial Officer, Alvaro Quintana Cardona.

In case the monthly remuneration is not set in full on time , the amended agreements provide that Messrs. Iglesias and Quintana may convert their accrued salary/bonus into shares of common stock or Series B Preferred Stock of the Company. For common stock, the number of shares issuable is determined by considering the average price per share of common stock on the Nasdaq Capital Market during the last 10 days and applying a discount of 25% and then dividing the accrued salary by the average price per share. For Series B Preferred stock, the number of shares issuable is determined by considering the discounted average price per share of common stock on the Nasdaq Capital Market during the last 10 days, dividing the accrued salary by the discounted average price per share, and then dividing that number of shares by 12.5.

During the six months ended June 30, 2025, the Company issued 6,571 shares of Series B Preferred Stock to settle salary payable for our CEO and CFO of $631,500. As a result, the Company recorded a loss on settlement of salary payable of $216,981.

During the six months ended June 30, 2025 and 2024, the Company recorded management salaries of $549,000 and $423,000, and stock-based compensation bonuses of $55,198 and $77,665, respectively.

As of June 30, 2025 and December 31, 2024, the Company recorded and accrued management salaries of $172,946 and $420,447, respectively.

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Table of Contents

NOTE 13 – COMMITMENTS AND CONTINGENCIES

Leases and Long-term Contracts

The Company has not entered into any long-term leases, contracts or commitments. The Company leases facilities which the term is 12 months. For the six months ended June 30, 2025 and 2024, the Company incurred rent expense of $14,324 and $14,028, respectively.

NOTE 14 - SEGMENT

The Company operates in one industry segment, telecommunication services, and three geographic segments, USA, UK and Switzerland, where current assets and equipment are located. The Company's chief operating decision maker ("CODM") is its chief financial officer, who reviews the operating results for the Company as a whole to make decisions about allocating resources and assessing financial performance. The CODM uses operating activities and net assets to assess financial performance and allocate resources. These financial metrics are used by the CODM to make key operating decisions, such as the determination of the rate at which the Company seeks to grow, the allocation of budget between cost of sales and operating expenses and the management of assets.

Operating Activities

The following table shows operating activities information by geographic segment for the three and six months ended June 30, 2025 and 2024:

Three months ended June 30, 2025

NOTE 14 - SEGMENT - Operating Activities by Geographic Segment (Details) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | USA |  | Switzerland |  | UK |  | Elimination |  | Total
Revenues |  | $ | 39,752,753 |  |  | $ | 9,239,899 |  |  | $ | 35,115,087 |  |  | $ | (11,924,503 | ) |  | $ | 72,183,236 |
Cost of revenue |  |  | 38,993,391 |  |  |  | 9,047,464 |  |  |  | 33,984,659 |  |  |  | (11,713,765 | ) |  |  | 70,311,749 |
Gross profit |  |  | 759,362 |  |  |  | 192,435 |  |  |  | 1,130,428 |  |  |  | (210,738 | ) |  |  | 1,871,487 |
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Salaries, wages and benefits |  |  | 544,843 |  |  |  | 100,237 |  |  |  | 466,871 |  |  |  | (72 | ) |  |  | 1,111,879 |
Technology |  |  | 222,368 |  |  |  | 100,599 |  |  |  | 147,431 |  |  |  | (203,483 | ) |  |  | 266,915 |
Professional fees |  |  | 236,207 |  |  |  | 17,577 |  |  |  | — |  |  |  | — |  |  |  | 253,784 |
Legal and regulatory |  |  | 24,821 |  |  |  | 10,197 |  |  |  | — |  |  |  | — |  |  |  | 35,018 |
Travel and events |  |  | 42,560 |  |  |  | 3,708 |  |  |  | 60,377 |  |  |  | (13,184 | ) |  |  | 93,461 |
Public cost |  |  | 52,291 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 52,291 |
Advertising |  |  | 426,744 |  |  |  | (8,357 | ) |  |  | — |  |  |  | — |  |  |  | 418,387 |
Bank services and fees |  |  | 11,057 |  |  |  | (14,776 | ) |  |  | 17,543 |  |  |  | — |  |  |  | 13,824 |
Depreciation and amortization |  |  | 6,681 |  |  |  | 34,235 |  |  |  | — |  |  |  | 120,313 |  |  |  | 161,229 |
Office, facility and other |  |  | 20,906 |  |  |  | 5,345 |  |  |  | 71,389 |  |  |  | — |  |  |  | 97,640 |
Insurance |  |  | 903 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 903 |
Stock-based compensation |  |  | 22,385 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 22,385 |
General and administration |  |  | 1,611,766 |  |  |  | 248,765 |  |  |  | 763,611 |  |  |  | (96,426 | ) |  |  | 2,527,716 |
Operating income (loss) |  |  | (852,404 | ) |  |  | (56,330 | ) |  |  | 366,817 |  |  |  | (114,312 | ) |  |  | (656,229 | )
Other income (expense) |  |  | (1,529,016 | ) |  |  | 4,730 |  |  |  | (6,549 | ) |  |  | (70,154 | ) |  |  | (1,600,989 | )
Income tax expense |  |  | — |  |  |  | — |  |  |  | (91,696 | ) |  |  | — |  |  |  | (91,696 | )
Net income (loss) |  | $ | (2,381,420 | ) |  | $ | (51,600 | ) |  | $ | 268,572 |  |  | $ | (184,466 | ) |  | $ | (2,348,914 | )

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Table of Contents

Three months ended June 30, 2024

|  | USA |  | Switzerland |  | UK |  | Elimination |  | Total
Revenues |  | $ | 46,933,532 |  |  | $ | 1,026,797 |  |  | $ | 31,474,055 |  |  | $ | (798,620 | ) |  | $ | 78,635,764 |
Cost of revenue |  |  | 45,956,484 |  |  |  | 883,919 |  |  |  | 30,430,357 |  |  |  | (798,620 | ) |  |  | 76,472,140 |
Gross profit |  |  | 977,048 |  |  |  | 142,878 |  |  |  | 1,043,698 |  |  |  | — |  |  |  | 2,163,624 |
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Salaries, wages and benefits |  |  | 303,870 |  |  |  | 39,134 |  |  |  | 425,260 |  |  |  | — |  |  |  | 768,264 |
Technology |  |  | 172,739 |  |  |  | 48,795 |  |  |  | 99,143 |  |  |  | — |  |  |  | 320,677 |
Professional fees |  |  | 504,052 |  |  |  | 56,423 |  |  |  | — |  |  |  | — |  |  |  | 560,475 |
Legal and regulatory |  |  | 105,034 |  |  |  | 160 |  |  |  | 14,282 |  |  |  | — |  |  |  | 119,476 |
Travel and events |  |  | 32,742 |  |  |  | 8,347 |  |  |  | 20,664 |  |  |  | — |  |  |  | 61,753 |
Public cost |  |  | 13,448 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 13,448 |
Advertising |  |  | 317,257 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 317,257 |
Bank services and fees |  |  | 17,342 |  |  |  | 49,073 |  |  |  | 35,415 |  |  |  | — |  |  |  | 101,830 |
Depreciation and amortization |  |  | 6,682 |  |  |  | 27,096 |  |  |  | — |  |  |  | — |  |  |  | 33,778 |
Office, facility and other |  |  | 81,109 |  |  |  | 8,047 |  |  |  | 51,015 |  |  |  | — |  |  |  | 140,171 |
Insurance |  |  | 798 |  |  |  | — |  |  |  | 20,124 |  |  |  | — |  |  |  | 20,922 |
Bad debt expense |  |  | 1,076 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,076 |
Stock-based compensation |  |  | 46,600 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 46,600 |
General and administration |  |  | 1,602,749 |  |  |  | 237,075 |  |  |  | 665,903 |  |  |  | — |  |  |  | 2,505,727 |
Operating income (loss) |  |  | (625,701 | ) |  |  | (94,197 | ) |  |  | 377,795 |  |  |  | — |  |  |  | (342,103 | )
Other income (expense) |  |  | (1,597,506 | ) |  |  | 47,525 |  |  |  | (6,528 | ) |  |  | — |  |  |  | (1,556,509 | )
Income tax expense |  |  | — |  |  |  | — |  |  |  | (65,275 | ) |  |  | — |  |  |  | (65,275 | )
Net income (loss) |  | $ | (2,223,207 | ) |  | $ | (46,672 | ) |  | $ | 305,992 |  |  | $ | — |  |  | $ | (1,963,887 | )

Six months ended June 30, 2025

|  | USA |  | Switzerland |  | UK |  | Elimination |  | Total
Revenues |  | $ | 78,290,551 |  |  | $ | 10,589,061 |  |  | $ | 66,270,084 |  |  | $ | (25,333,644 | ) |  | $ | 129,816,052 |
Cost of revenue |  |  | 76,681,706 |  |  |  | 10,128,318 |  |  |  | 64,310,592 |  |  |  | (25,111,009 | ) |  |  | 126,009,607 |
Gross profit |  |  | 1,608,845 |  |  |  | 460,743 |  |  |  | 1,959,492 |  |  |  | (222,635 | ) |  |  | 3,806,445 |
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Salaries, wages and benefits |  |  | 984,236 |  |  |  | 195,686 |  |  |  | 893,154 |  |  |  | (6,038 | ) |  |  | 2,067,038 |
Technology |  |  | 416,484 |  |  |  | 194,853 |  |  |  | 295,585 |  |  |  | (214,413 | ) |  |  | 692,509 |
Professional fees |  |  | 545,257 |  |  |  | 17,577 |  |  |  | — |  |  |  | — |  |  |  | 562,834 |
Legal and regulatory |  |  | 191,259 |  |  |  | 10,197 |  |  |  | — |  |  |  | — |  |  |  | 201,456 |
Travel and events |  |  | 61,065 |  |  |  | 7,999 |  |  |  | 127,978 |  |  |  | (14,531 | ) |  |  | 182,511 |
Public cost |  |  | 118,850 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 118,850 |
Advertising |  |  | 637,267 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 637,267 |
Bank services and fees |  |  | 24,542 |  |  |  | (36,275 | ) |  |  | 46,998 |  |  |  | — |  |  |  | 35,265 |
Depreciation and amortization |  |  | 13,363 |  |  |  | 34,235 |  |  |  | — |  |  |  | 240,626 |  |  |  | 288,224 |
Office, facility and other |  |  | 68,776 |  |  |  | 10,314 |  |  |  | 140,410 |  |  |  | — |  |  |  | 219,500 |
Insurance |  |  | 1,806 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,806 |
Bad debt expense |  |  | 4,442 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 4,442 |
Stock-based compensation |  |  | 55,198 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 55,198 |
General and administration |  |  | 3,122,545 |  |  |  | 434,586 |  |  |  | 1,504,125 |  |  |  | 5,644 |  |  |  | 5,066,900 |
Operating income (loss) |  |  | (1,513,700 | ) |  |  | 26,157 |  |  |  | 455,367 |  |  |  | (228,279 | ) |  |  | (1,260,455 | )
Other income (expense) |  |  | (1,993,405 | ) |  |  | 13,332 |  |  |  | (13,076 | ) |  |  | (127,500 | ) |  |  | (2,120,649 | )
Income tax expense |  |  | — |  |  |  | — |  |  |  | (112,271 | ) |  |  | — |  |  |  | (112,271 | )
Net income (loss) |  | $ | (3,507,105 | ) |  | $ | 39,489 |  |  | $ | 330,020 |  |  | $ | (355,779 | ) |  | $ | (3,493,375 | )

| F-18 |

Table of Contents

Six months ended June 30, 2024

|  | USA |  | Switzerland |  | UK |  | Elimination |  | Total
Revenues |  | $ | 99,044,789 |  |  | $ | 2,062,716 |  |  | $ | 31,474,055 |  |  | $ | (2,530,918 | ) |  | $ | 130,050,642 |
Cost of revenue |  |  | 96,888,310 |  |  |  | 1,720,243 |  |  |  | 30,430,357 |  |  |  | (2,530,918 | ) |  |  | 126,507,992 |
Gross profit |  |  | 2,156,479 |  |  |  | 342,473 |  |  |  | 1,043,698 |  |  |  | — |  |  |  | 3,542,650 |
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Salaries, wages and benefits |  |  | 640,153 |  |  |  | 78,277 |  |  |  | 425,260 |  |  |  | — |  |  |  | 1,143,690 |
Technology |  |  | 335,324 |  |  |  | 107,673 |  |  |  | 99,143 |  |  |  | — |  |  |  | 542,140 |
Professional fees |  |  | 953,271 |  |  |  | 110,776 |  |  |  | — |  |  |  | — |  |  |  | 1,064,047 |
Legal and regulatory |  |  | 135,613 |  |  |  | 1,745 |  |  |  | 14,282 |  |  |  | — |  |  |  | 151,640 |
Travel and events |  |  | 59,004 |  |  |  | 17,821 |  |  |  | 20,664 |  |  |  | — |  |  |  | 97,489 |
Public cost |  |  | 85,378 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 85,378 |
Advertising |  |  | 501,997 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 501,997 |
Bank services and fees |  |  | 30,997 |  |  |  | 55,154 |  |  |  | 35,415 |  |  |  | — |  |  |  | 121,566 |
Depreciation and amortization |  |  | 13,579 |  |  |  | 55,360 |  |  |  | — |  |  |  | — |  |  |  | 68,939 |
Office, facility and other |  |  | 122,379 |  |  |  | 16,739 |  |  |  | 51,015 |  |  |  | — |  |  |  | 190,133 |
Insurance |  |  | 1,596 |  |  |  | — |  |  |  | 20,124 |  |  |  | — |  |  |  | 21,720 |
Bad debt expense |  |  | 1,801 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,801 |
Stock-based compensation |  |  | 77,665 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 77,665 |
General and administration |  |  | 2,958,757 |  |  |  | 443,545 |  |  |  | 665,903 |  |  |  | — |  |  |  | 4,068,205 |
Operating income (loss) |  |  | (802,278 | ) |  |  | (101,072 | ) |  |  | 377,795 |  |  |  | — |  |  |  | (525,555 | )
Other income (expense) |  |  | (2,032,989 | ) |  |  | 86,244 |  |  |  | (6,528 | ) |  |  | — |  |  |  | (1,953,273 | )
Income tax expense |  |  | — |  |  |  | — |  |  |  | (65,275 | ) |  |  | — |  |  |  | (65,275 | )
Net income (loss) |  | $ | (2,835,267 | ) |  | $ | (14,828 | ) |  | $ | 305,992 |  |  | $ | — |  |  | $ | (2,544,103 | )

Asset Information

The following table shows asset information by geographic segment as of June 30, 2025 and December 31, 2024:

June 30, 2025 |  | USA |  | Switzerland |  | UK |  | Elimination |  | Total
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current assets |  | $ | 11,805,321 |  |  | $ | 5,367,596 |  |  | $ | 24,890,505 |  |  | $ | (6,508,392 | ) |  | $ | 35,555,030 |
Non-current assets |  | $ | 19,519,553 |  |  | $ | 628,939 |  |  | $ | 7,889,538 |  |  | $ | (12,184,562 | ) |  | $ | 15,853,468 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities |  | $ | 13,303,731 |  |  | $ | 6,247,839 |  |  | $ | 23,800,707 |  |  | $ | (6,508,393 | ) |  | $ | 36,843,884 |
Non-current liabilities |  | $ | — |  |  | $ | 169,599 |  |  | $ | 107,015 |  |  | $ | — |  |  | $ | 276,614 |

December 31, 2024 |  | USA |  | Switzerland |  | UK |  | Elimination |  | Total
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current assets |  | $ | 19,885,086 |  |  | $ | 8,055,475 |  |  | $ | 48,182,373 |  |  | $ | (13,107,888 | ) |  | $ | 63,015,046 |
Non-current assets |  | $ | 19,447,105 |  |  | $ | 633,491 |  |  | $ | 8,096,658 |  |  | $ | (12,184,562 | ) |  | $ | 15,992,692 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities |  | $ | 21,386,520 |  |  | $ | 8,415,705 |  |  | $ | 47,126,859 |  |  | $ | (13,107,888 | ) |  | $ | 63,821,196 |
Non-current liabilities |  | $ | 3,012,066 |  |  | $ | 169,599 |  |  | $ | 104,614 |  |  | $ | — |  |  | $ | 3,286,279 |

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NOTE 15 – SUBSEQUENT EVENTS.

Subsequent to June 30, 2025 and through the date that these financials were made available, the Company had the following subsequent events:

On March 10, 2025, the Company signed a non-binding memorandum of understanding (“ASII MOU”) with Accredited Solutions, Inc. (“ASII”) to set forth the preliminary terms and mutual understanding between the parties regarding the Company’s potential sale of its 75% equity interest in ItsBchain, LLC (the “Subsidiary”) to ASII, subject to the negotiation and execution of a definitive Purchase Agreement. The parties initially agreed to execute the Purchase Agreement no later than June 1, 2025 but on July 31, 2025, the parties agreed to extend the ASII MOU expiration date to September 30, 2025.

On May 29, 2025, the Company entered into a Unit Purchase Agreement (the “Agreement”) with Craig Span (the “Seller”) and Globetopper, LLC, a Delaware limited liability company (the “Globetopper”), pursuant to which the Company agreed to acquire fifty-one percent (51%) of the membership interests of Globetopper (the “Transferred Membership Interest”) from the Seller.

Pursuant to the Agreement, the Company will acquire the Transferred Membership Interests of Globetopper for a total purchase price consisting of $700,000, payable as follows: $50,000 upon execution of the Agreement; $50,000 in cash on the Closing Date; $50,000 in cash 30 days after the Closing Date, secured by a promissory note and pledge agreement; $50,000 in cash 60 days after the Closing Date, secured by a promissory note and pledge agreement; $500,000 in restricted common shares of the Company, calculated at a 20% discount to the volume weighted average price (VWAP) during the five days preceding the Closing Date.

Additional payments based on Globetopper’s EBITDA growth, payable in common shares of the Company at a 20% discount to the greater of the VWAP during the five days following the applicable period or preceding the payment date, will be payable as follows:

| • | September 30, 2026: 50% of the positive difference between EBITDA at acquisition and EBITDA 12 months post-Closing.
| • | September 30, 2027: 50% of the positive difference between EBITDA 12 months and 24 months post-Closing.

The closing is expected to occur on or before July 1, 2025, subject to the satisfaction of customary closing conditions, including due diligence and the accuracy of representations and warranties. Either party may terminate the Agreement if the closing does not occur by July 10, 2025.

The Company will invest up to $1,200,000 in Globetopper over 24 months post-Closing in monthly installments of $50,000, subject to the achievement of specified quarterly financial targets.

The Seller will remain as Chief Executive Officer of Globetopper for at least two years post-Closing, with a reasonable salary and benefits to be agreed upon.

The operating agreement of Globetopper was amended to reflect a new board of directors consisting of three members, with the Company designating two members and the Seller designating one, with decisions made by majority vote.

Both parties agreed to mutual indemnification for breaches of representations, warranties, or covenants, with the Seller’s indemnification liability capped at 10% of the purchase price received.

On July 3, 2025, the Company executed two separate Debt Exchange Agreements (collectively, the “Exchange Agreements”) with M2B Funding Corp. and ADI Funding LLC (collectively, the “Creditors”). Pursuant to the Exchange Agreements, the Company exchanged an aggregate of $3,546,136 in outstanding debt of the Creditors, consisting of principal and accrued but unpaid interest on certain promissory notes, for a total of 37,110 shares of the Company’s newly amended Series D Preferred Stock.

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The number of shares of Series D Preferred issued to each Creditor was determined by dividing the respective debt amount by the lowest End-of-Day Volume-Weighted Average Price (EOD VWAP) of the Company’s common stock for the 10 trading days prior to July 3, 2025, less a 20% discount, divided by 12.5.

The Company has agreed to file a resale registration statement for the common stock underlying the Series D Preferred Stock within 45 days of July 3, 2025, on a best-efforts basis, pursuant to registration rights agreements with the Creditors.

On July 7, 2025, the Company filed a First Amended and Restated Certificate of Designation for the Series D Preferred Stock (the “Certificate of Designation”) with the Secretary of State of Nevada to amend and restate the terms of its Series D Preferred Stock, originally established on November 3, 2023, increasing the authorized shares from 75,000 to 100,000 and revising the terms as described below. The amended terms govern the 37,110 shares issued to the Creditors and include the following key provisions:

| • | Dividend Rights: 12% cumulative dividend, payable as, when, and if declared by the Board of Directors, calculated on a 360-day year, accruing from the date of issuance and ceasing the day prior to conversion, with pro rata dividends for partial-year holdings.
| • | Conversion Rights: Following three months from the issuance date, the Series D Preferred Stock is convertible into common stock at a rate of 12.5 shares of common stock per share, subject to adjustment for stock splits, dividends, or reorganizations, removing the prior requirement for conversion only upon a note default.
| • | Redemption Provisions: Optional redemption by the Company at 105% of the price paid by the holder, upon not more than three trading days’ notice.
| • | Liquidation Preference: Senior to common stock, Series A Preferred Stock, and Series C Preferred Stock, and on parity with Series B Preferred Stock, in any liquidation, dissolution, or winding up of the Company.
| • | Voting Rights: No voting rights, except as required by law or for amendments to the Certificate of Designation or Articles of Incorporation that would alter the Series D Preferred Stock’s rights.
| • | Leak-Out Restriction: After three months, conversions to common stock and sales are limited to 10% of the average daily trading volume of the Company’s common stock per holder.

On August 7, 2025, the Company entered into a non-binding Memorandum of Understanding (the “MOU”) with Cycurion Inc. (“Cycurion”), a Delaware corporation trading on Nasdaq under the ticker CYCU. The MOU outlines the mutual intention of the parties to explore a potential stock exchange transaction and expand their strategic partnership in AI-powered cybersecurity services and other high-tech initiatives targeting the global telecom industry.

Under the terms of the MOU, subject to satisfactory due diligence, internal approvals, and regulatory compliance, the parties intend to consider a structure whereby each party would issue $1,000,000 worth of its common stock to the other party. The number of shares would be calculated based on the lower of (i) the Nasdaq Official Closing Price on the trading day immediately preceding the signing of a binding agreement or (ii) the average Nasdaq Official Closing Price over the five trading days immediately preceding such signing.

Additionally, subject to board and regulatory approvals, each party intends to distribute up to 50% of the shares received in the exchange to its shareholders as a stock dividend. The parties also plan to continue collaborating on AI-powered cybersecurity services and explore deeper commercial relationships, including joint ventures, shared research and development, and potential structural integrations.

The MOU provides for a 60-day exploration period from the effective date, during which the parties will conduct reviews, negotiate in good faith, and assess feasibility for a definitive agreement. This period may be extended by mutual consent. The MOU is non-binding, except for provisions related to confidentiality, its non-binding nature, and governing law (Nevada law), and does not obligate either party to proceed unless a definitive agreement is executed.

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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. (www.IQSTEL.com) is a technology company with a presence in 20 countries (Argentina, Armenia, Austria, Canada, Colombia, Germany, Greece, Guatemala, India, Italy, Pakistan, Romania, Serbia, Spain, Switzerland, Turkey, UAE, UK, USA and Venezuela) and over 100 employees that offers leading-edge services through its four business divisions in the telecommunications, electric vehicle (EV), fintech, and AI-enhanced metaverse industries. Our presence is global, with offices in USA, Argentina, UK, Switzerland, Turkey, and Dubai, and we target diverse and high-growth markets. We maintain more than 603 high value network interconnections around the world, delivering international voice, SMS, and connectivity services that form the core of our business. The company’s strategy focuses on leveraging synergies between its 9 subsidiaries to drive innovation and capture emerging opportunities.

Our Telecom Division, which represents the majority of current operations and which also represents the source for all of our revenues for the financial periods presented, offers Voice over Internet Protocol (VoIP), SMS, proprietary Internet of Things (IoT) solutions (www.iotsmartgas.com and www.iotsmarttank.com), and international fiber-optic connectivity through its subsidiaries: Etelix (www.etelix.com), SwissLink Carrier (www.swisslink-carrier.com), Smartbiz Telecom (www.smartbiztel.com), Whisl Telecom (www.whisl.com), IoT Labs (www.iotlabs.mx), QGlobal SMS (www.qglobalsms.com), and QXTEL Limited (www.qxtel.com).

Also under the Telecom Division, our developing BlockChain Platform Business Line (www.itsbchain.com) offers our proprietary Mobile Number Portability Application (MNPA) to serve the in-country portability needs through our subsidiary, ItsBchain.

Our developing Fintech Business Line (www.globalmoneyone.com) (www.maxmo.vip) offers a complete Fintech ecosystem MasterCard Debit Card, US Bank Account (No SSN Needed), Mobile App/Wallet (Remittances, Mobile Top Up). Our Fintech subsidiary, Global Money One, is to provide immigrants access to reliable financial services that makes it easier to manage their money and stay connected with their families back home.

Our developing Electric Vehicle (EV) Business Line offers electric motorcycles for work and recreational use in the USA, Spain, Portugal, Panama, Colombia. EVOSS is also working on the development of an EV Mid Speed Car to serve the niche of the 2nd car in the family.

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Our developing Artificial Intelligence (AI)-Enhanced Metaverse Division (information and content) (www.realityborder.com) is currently developing a groundbreaking white-label solution designed specifically for corporations, businesses, and the telecommunications industry. Delivering a full suite of immersive content services, creating a comprehensive virtual experience that can be accessed through the Web or our proprietary mobile apps. The features include up to four simultaneous video screens for versatile content presentation, various virtual halls such as the main hall, home hall, auditorium, exhibition space, shopping center, and meeting rooms. Stands for mobile application downloads, clickable gates for immediate purchasing, and direct communication tools are seamlessly integrated to foster collaboration, engagement, and interactivity. It goes beyond traditional virtual spaces by utilizing cutting-edge AI technology. This ensures video conferencing and real-time communication with other users within the Metaverse, offering our customers a collective and fully immersive experience that caters to diverse needs such as content acquisition, entertainment, and shared virtual experiences. It is a future-ready platform that encourages creativity, connectivity, and collaboration like never before.

Our developing metaverse leverages advanced AI to introduce Non-Player Characters (NPCs) that significantly enhance user engagement and functionality within virtual environments. These NPCs are not mere static elements; rather, they are powered by OpenAI's latest language models, enabling dynamic interaction with users. This AI-driven interaction allows NPCs to serve as sales and brand assistants, guiding users through immersive experiences that can extend to purchasing products from external websites. Furthermore, these intelligent agents can control access to gated spaces within the metaverse based on user interactions, showcasing a personalized approach to user experience.

A key innovation in our AI implementation is the NPCs' ability to autonomously make decisions based on their understanding of user interactions. This is achieved through state-of-the-art natural language processing and understanding capabilities, which are supported in seven languages. Additionally, our NPCs utilize advanced text-to-speech and speech-to-text technologies to facilitate seamless communication with users across diverse linguistic backgrounds. The incorporation of "function call" features further enhances the NPCs' ability to perform complex tasks and interact meaningfully with the environment and the users.

Our reference to our technology as "cutting-edge" is grounded in our commitment to continuous improvement and innovation. We consistently integrate the latest advancements in AI, particularly in the areas of chatbots, language understanding, and user interaction technologies. This ensures that our metaverse remains at the forefront of AI application in virtual spaces, offering an unparalleled user experience that goes beyond traditional virtual environments.

We are currently in an advanced phase of development, with ongoing enhancements to AI functionalities and user interaction models. Our team is dedicated to exploring and implementing the latest AI technologies to ensure that our metaverse remains a leading example of innovation in virtual space technology.

The information contained on our websites is not incorporated by reference into this quarterly report and should not be considered part of this or any other report filed with the SEC.

Methods of Valuation

We use supplemental measures of our performance which are derived from our consolidated financial information but which are not presented in our consolidated financial statements prepared in accordance with GAAP. These non-GAAP financial measures include: Adjusted EBITDA and gross revenue.

The Company derives these financial calculations on the basis of methodologies other than GAAP, primarily by excluding from a comparable GAAP measure certain items the Company does not consider to be representative of its actual operating performance. These financial calculations are “non-GAAP financial measures” as defined under the SEC rules. The Company uses these non-GAAP financial measures in operating its business because management believes they are less susceptible to variances in actual operating performance that can result from the excluded items, other infrequent charges and currency fluctuations. The Company presents these financial measures to investors because management believes they are useful to investors in evaluating the primary factors that drive the Company’s core operating performance and provide greater transparency into the Company’s results of operations. However, items that are excluded and other adjustments and assumptions that are made in calculating these non-GAAP financial measures are significant components in understanding and assessing the Company’s financial performance. These non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, the Company’s GAAP financial measures. Further, because these non-GAAP financial measures are not determined in accordance with GAAP, and are thus susceptible to varying calculations, the non-GAAP financial measures, as presented, may not be comparable to other similarly-titled measures of other companies.

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Adjusted EBITDA is not a recognized accounting measurement under GAAP; it should not be considered as an alternative to net income, as a measure of operating results, or as an alternative to cash flow as a measure of liquidity. It is presented here not as an alternative to net income, but rather as a measure of the Company's operating performance. Adjusted EBITDA excludes, in addition to non-operational expenses like interest expenses, taxes, depreciation and amortization; items that we believe are not indicative of our operating performance, such as:

§ Change in Fair Value of Derivative Liabilities: These adjustments reflect unrealized gains or losses that are non-operational and subject to market volatility.

§ Loss on Settlement of Debt: This represents non-recurring expenses associated with specific financing activities and does not impact ongoing business operations.

§ Stock-Based Compensation: As a non-cash expense, this adjustment eliminates variability caused by equity-based incentives.

The Company believes Adjusted EBITDA offers a clearer view of the cash-generating potential of its business, excluding non-recurring, non-cash, and non-operational impacts. Management believes that Adjusted EBITDA is useful in evaluating the Company's operating performance compared to that of other companies in its industry because the calculation of Adjusted EBITDA generally eliminates the effects of financing, income taxes, non-cash and certain other items that may vary for different companies for reasons unrelated to overall operating performance and also believes this information is useful to investors.

Gross revenue, which equals revenue before intercompany eliminations, represents a key performance metric that management uses to measure the scale of the Company’s operations, monitor revenue trends across reporting segments, and evaluate the effectiveness of sales and marketing initiatives on a consolidated basis prior to the impact of intercompany transactions.

Results of Operations

Revenues

Our total revenue reported for the three months ended June 30, 2025 was $72,183,236, compared with $78,635,764 for the three months ended June 30, 2024. These numbers reflect a decrease of 8.21% quarter over quarter on our consolidated revenues. Our total revenue reported for the six months ended June 30, 2025 was $129,816,052, compared with $130,050,642 for the six months ended June 30, 2024; which reflect a decrease of 0.18%.

When looking at the numbers by companies, we have the following breakout for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024:

|  | Revenue for the Three Months Ended June 30, |  | Revenue for the Six Months Ended June 30,
Company |  | 2025 |  | 2024 |  | 2025 |  | 2024
IQSTEL Inc |  | $ | 101,511 |  |  | $ | — |  |  | $ | 101,511 |  |  | $ | — |
Etelix.com USA, LLC |  |  | 6,749,575 |  |  |  | 14,489,696 |  |  |  | 15,470,276 |  |  |  | 33,342,913 |
SwissLink Carrier AG |  |  | 9,239,899 |  |  |  | 1,026,797 |  |  |  | 10,589,061 |  |  |  | 2,062,716 |
QGlobal LLC |  |  | 363,455 |  |  |  | 443,149 |  |  |  | 1,024,381 |  |  |  | 829,076 |
IoT Labs LLC |  |  | 28,810,175 |  |  |  | 24,448,290 |  |  |  | 53,714,632 |  |  |  | 48,786,489 |
Smartbiz Telecom |  |  | 3,252,005 |  |  |  | 6,503,434 |  |  |  | 6,730,944 |  |  |  | 13,176,313 |
Whisl Telecom |  |  | 476,032 |  |  |  | 1,048,963 |  |  |  | 1,248,807 |  |  |  | 2,909,998 |
QXTEL Limited |  |  | 35,115,087 |  |  |  | 31,474,055 |  |  |  | 66,270,084 |  |  |  | 31,474,055 |
|  | $ | 84,107,739 |  |  | $ | 79,434,384 |  |  | $ | 155,149,696 |  |  | $ | 132,581,560 |
Intercompany eliminations |  |  | (11,924,503 | ) |  |  | (798,620 | ) |  |  | (25,333,644 | ) |  |  | (2,530,918 | )
|  | $ | 72,183,236 |  |  | $ | 78,635,764 |  |  | $ | 129,816,052 |  |  | $ | 130,050,642 |

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For the three months ended June 30, 2025, we recorded an increase of 6% in gross revenues (revenue before intercompany eliminations) compared to the same period in 2024. See Methods of Valuation for a discussion of gross revenue.

Similarly, for the six months period ended June 30, 2025, gross revenues increased by 17% year-over-year. However, due to a higher volume of intercompany transactions during both periods, net consolidated revenue (revenue after eliminations) was lower compared to the prior year.

These intercompany transactions are part of our strategy to optimize operations across subsidiaries by leveraging more efficient routing alternatives for our voice and SMS services, cost reductions, and improved service delivery. This synergy among our entities strengthens our position in the market and contributes to enhanced gross margin results.

The organic growth during the three and six months ended June 30, 2025 was 100% of the total revenue for those periods. This reflects the solid foundation of our revenue and the growth capacity the Company has with its current operations.

We consider organic growth the revenues reported by our existing subsidiaries once fully integrated to our operations. These subsidiaries include Etelix, SwissLink, QGlobal, IoT Labs, Smartbiz, Whisl and QXTEL.

Cost of Revenue

Our total cost of revenue for the three months ended June 30, 2025 decreased to $70,311,749, compared with $76,472,140 for the three months ended June 30, 2024. Our total cost of revenue for the six months ended June 30, 2025 decreased to $126,009,607, compared with $126,507,992 for the six months ended June 30, 2024.

When looking at the numbers by subsidiary, we have the following breakout for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024:

|  | Cost of Revenue for the Three Months Ended June |  | Cost of Revenue for the Six Months Ended June
Subsidiary |  | 2025 |  | 2024 |  | 2025 |  | 2024
Etelix.com USA, LLC |  | $ | 6,585,223 |  |  | $ | 14,339,403 |  |  | $ | 15,159,807 |  |  | $ | 33,062,293 |
SwissLink Carrier AG |  |  | 9,047,464 |  |  |  | 883,919 |  |  |  | 10,128,318 |  |  |  | 1,720,243 |
QGlobal LLC |  |  | 227,441 |  |  |  | 315,568 |  |  |  | 703,771 |  |  |  | 581,382 |
IoT Labs LLC |  |  | 28,722,826 |  |  |  | 24,230,045 |  |  |  | 53,532,758 |  |  |  | 48,026,620 |
Smartbiz Telecom |  |  | 3,068,131 |  |  |  | 6,246,094 |  |  |  | 6,314,472 |  |  |  | 12,727,922 |
Whisl Telecom |  |  | 389,770 |  |  |  | 825,374 |  |  |  | 970,898 |  |  |  | 2,490,093 |
QXTEL Limited |  |  | 33,984,659 |  |  |  | 30,430,357 |  |  |  | 64,310,592 |  |  |  | 30,430,357 |
|  | $ | 82,025,514 |  |  | $ | 77,270,760 |  |  | $ | 151,120,616 |  |  | $ | 129,038,910 |
Intercompany eliminations |  |  | (11,713,765 | ) |  |  | (798,620 | ) |  |  | (25,111,009 | ) |  |  | (2,530,918 | )
|  | $ | 70,311,749 |  |  | $ | 76,472,140 |  |  | $ | 126,009,607 |  |  | $ | 126,507,992 |

Our cost of revenue 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, as each additional unit sold (minutes and SMS) has its corresponding termination cost.

In this sense, the inclusion of QXTEL in the consolidation process, along with the restructuring of the portfolio among subsidiaries, reflects the synergies derived from the commercial and operational integration of all group companies. This integration has resulted in a significant volume of intercompany transactions, which are part of our strategic approach to optimizing routing and cost efficiency. We expect this to positively impact revenues and margins in the future.

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Gross Margin

Our gross margin, which is simply the difference between our revenues and our cost of sales, discussed above, was $3,806,445 for the six months ended June 30, 2025 compared to $3,542,650 for six three months ended June 30, 2024, reflecting an increase of 7.45% quarter over quarter

|  | Gross Margin % Three Months Ended June 30, |  | Gross Margin % Six Months Ended June 30,
Subsidiary |  | 2025 |  | 2024 |  | 2025 |  | 2024
IQSTEL Inc |  |  | 0 | % |  |  | — |  |  |  | 0 | % |  |  | — |
Etelix.com USA, LLC |  |  | 2.43 | % |  |  | 1.04 | % |  |  | 2.01 | % |  |  | 0.84 | %
SwissLink Carrier AG |  |  | 2.08 | % |  |  | 13.91 | % |  |  | 4.35 | % |  |  | 16.60 | %
QGlobal LLC |  |  | 37.42 | % |  |  | 28.79 | % |  |  | 31.30 | % |  |  | 29.88 | %
IoT Labs LLC |  |  | 0.30 | % |  |  | 0.89 | % |  |  | 0.34 | % |  |  | 1.56 | %
Smartbiz Telecom |  |  | 5.65 | % |  |  | 3.96 | % |  |  | 6.19 | % |  |  | 3.40 | %
Whisl Telecom |  |  | 18.12 | % |  |  | 21.32 | % |  |  | 22.25 | % |  |  | 14.43 | %
QXTEL Limited |  |  | 3.22 | % |  |  | 3.32 | % |  |  | 2.96 | % |  |  | 3.32 | %

The Consolidated Percentage of Gross Margin for the six months ended June 30, 2025 was 2.93%, which represents an increase of 7.64% compared to the six months ended June 30, 2024.

For the six months ended June 30, 2025, gross profit increased by 7.45% compared to the same period in 2024. This growth is the result of commercial and operational synergies achieved through intercompany collaboration. We expect this trend to strengthen as we continue aligning internal operations and leveraging our integrated service portfolio.

Operating Expenses

Operating expenses, which consist solely of general and administrative costs, increased slightly by 0.94% for the three months ended June 30, 2025, compared to the same period in 2024. For the six months ended June 30, 2025, general and administrative expenses rose to $5,066,900 from $4,068,205 reported in the same period of 2024, reflecting a 24.55% increase. A detailed breakdown by major category for the three and six months ended June 30, 2025 and 2024 is presented in the table below:

|  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Salaries, wages and benefits |  | $ | 1,111,879 |  |  | $ | 768,264 |  |  | $ | 2,067,038 |  |  | $ | 1,143,692 |
Technology |  |  | 266,915 |  |  |  | 320,677 |  |  |  | 692,509 |  |  |  | 542,140 |
Professional fees |  |  | 253,784 |  |  |  | 560,475 |  |  |  | 562,834 |  |  |  | 1,064,047 |
Legal and regulatory |  |  | 35,018 |  |  |  | 119,476 |  |  |  | 201,456 |  |  |  | 151,639 |
Travel and events |  |  | 93,461 |  |  |  | 61,753 |  |  |  | 182,511 |  |  |  | 97,489 |
Public cost |  |  | 52,291 |  |  |  | 13,448 |  |  |  | 118,850 |  |  |  | 85,378 |
Advertising |  |  | 418,387 |  |  |  | 317,257 |  |  |  | 637,267 |  |  |  | 501,997 |
Bank services and fees |  |  | 13,824 |  |  |  | 101,830 |  |  |  | 35,265 |  |  |  | 121,566 |
Depreciation and amortization |  |  | 161,229 |  |  |  | 33,778 |  |  |  | 288,224 |  |  |  | 68,939 |
Office, facility and other |  |  | 97,640 |  |  |  | 140,171 |  |  |  | 219,500 |  |  |  | 190,132 |
Insurance |  |  | 903 |  |  |  | 20,922 |  |  |  | 1,806 |  |  |  | 21,720 |
Bad debt expense |  |  | — |  |  |  | 1,076 |  |  |  | 4,442 |  |  |  | 1,801 |
|  |  | 2,505,331 |  |  |  | 2,459,127 |  |  |  | 5,011,702 |  |  |  | 3,990,540 |
Stock-based compensation |  |  | 22,385 |  |  |  | 46,600 |  |  |  | 55,198 |  |  |  | 77,665 |
Total Operating Expense |  | $ | 2,527,716 |  |  | $ | 2,505,727 |  |  | $ | 5,066,900 |  |  | $ | 4,068,205 |

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When looking at the numbers by subsidiary, we have the following breakout for the six months ended June 30, 2025 compared to the six months ended June 30, 2024:

|  | Six Months Ended June 30,
|  | 2025 |  | 2024 |  | Difference
IQSTEL Inc |  | $ | 2,092,660 |  |  | $ | 1,420,141 |  |  | $ | 672,519 |
Etelix.com USA, LLC |  |  | 130,954 |  |  |  | 182,516 |  |  |  | -51,562 |
SwissLink Carrier AG |  |  | 423,884 |  |  |  | 443,546 |  |  |  | -19,662 |
Itsbchain |  |  | 1,384 |  |  |  | 14,384 |  |  |  | -13,000 |
QGlobal LLC |  |  | 170,780 |  |  |  | 262,845 |  |  |  | -92,065 |
IoT Labs LLC |  |  | 137,998 |  |  |  | 134,718 |  |  |  | 3,280 |
Global Money One |  |  | 486 |  |  |  | 400 |  |  |  | 86 |
Smartbiz Telecom |  |  | 539,017 |  |  |  | 461,282 |  |  |  | 77,735 |
Whisl Telecom |  |  | 150,611 |  |  |  | 482,470 |  |  |  | -331,859 |
QXTEL Limited |  |  | 1,419,126 |  |  |  | 665,903 |  |  |  | 753,223 |
|  | $ | 5,066,900 |  |  | $ | 4,068,205 |  |  | $ | 998,695 |

The most significant differences are: (1) the increase in technology expenses related to the deployment and upgrade of the Switching platform to allocate all subsidiaries; (2) the increases in other items such as salaries, wages and benefits; depreciation and amortization; and office, facility and other are largely the result of the addition of QXTEL to our consolidated financial statements.

For the six months ended June 30, 2024, QXTEL consolidated only the expenses incurred between April and June 2024. In contrast, for the same period in 2025, expenses from January through June were included. This difference in the reporting periods explains the 113% increase in general and administrative expenses compared to the prior year.

We are continually identifying operational synergies among all of our subsidiaries to be more cost efficient. The investment we are currently making in the development of a unique voice and SMS switching platform that will allow us to reduce costs between fifty and sixty thousand dollars per quarter.

Operating Income/Loss

For the three months ended June 30, 2025, the Company reported an operating loss of $656,229, representing a significant increase compared to the operating loss of $342,103 for the same period in 2024. Similarly, for the six months ended June 30, 2025, the operating loss widened to $1,260,455, up from $525,555 reported during the corresponding period in the prior year. These results reflect an overall rise in operating expenses, largely associated with ongoing investments in development and growth initiatives.

Our Telecom Division, currently the primary source of revenue for the Company, continued to generate positive Operating Income. Meanwhile, our pre-revenue companies are operating with minimal expenses, focused solely on completing product and service development prior to their market launch.

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A comparison of the tables below highlights the significant progress of our Telecom Division, as evidenced by the increase in revenue, gross profit, and operating income for both the three- and six-month periods ended June 30, 2025. As we have previously stated, our strategy remains centered on strengthening the telecommunications segment to serve as a growth engine for the development and expansion of new business lines.

|  | Telecom Division |  | Pre-revenue companies |  | IQSTEL |  | Consolidated
|  | Three Months Ended June 30, 2025 |  | Six Months Ended June 30, 2025 |  | Three Months Ended June 30, 2025 |  | Six Months Ended June 30, 2025 |  | Three Months Ended June 30, 2025 |  | Six Months Ended June 30, 2025 |  | Three Months Ended June 30, 2025 |  | Six Months Ended June 30, 2025
Revenues |  |  | 72,081,725 |  |  |  | 129,714,541 |  |  |  | — |  |  |  | — |  |  |  | 101,511 |  |  |  | 101,511 |  |  |  | 72,183,236 |  |  |  | 129,816,052 |
Cost of revenue |  |  | 70,311,749 |  |  |  | 126,009,607 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 70,311,749 |  |  |  | 126,009,607 |
Gross profit |  |  | 1,769,976 |  |  |  | 3,704,934 |  |  |  | — |  |  |  | — |  |  |  | 101,511 |  |  |  | 101,511 |  |  |  | 1,871,487 |  |  |  | 3,806,445 |
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
General and administration |  |  | 1,304,065 |  |  |  | 2,972,370 |  |  |  | 437 |  |  |  | 1,870 |  |  |  | 1,223,214 |  |  |  | 2,092,660 |  |  |  | 2,527,716 |  |  |  | 5,066,900 |
Total Operating Expenses |  |  | 1,304,065 |  |  |  | 2,972,370 |  |  |  | 437 |  |  |  | 1,870 |  |  |  | 1,223,214 |  |  |  | 2,092,660 |  |  |  | 2,527,716 |  |  |  | 5,066,900 |
Operating income/(loss) |  |  | 465,911 |  |  |  | 732,564 |  |  |  | (437 | ) |  |  | (1,870 | ) |  |  | (1,121,703 | ) |  |  | (1,991,149 | ) |  |  | (656,229 | ) |  |  | (1,260,455 | )

|  | Telecom Division |  | Pre-revenue companies |  | IQSTEL |  | Consolidated
|  | Three Months Ended June 30, 2024 |  | Six Months Ended June 30, 2024 |  | Three Months Ended June 30, 2024 |  | Six Months Ended June 30, 2024 |  | Three Months Ended June 30, 2024 |  | Six Months Ended June 30, 2024 |  | Three Months Ended June 30, 2024 |  | Six Months Ended June 30, 2024
Revenues |  |  | 78,635,764 |  |  |  | 130,050,642 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 78,635,764 |  |  |  | 130,050,642 |
Cost of revenue |  |  | 76,472,140 |  |  |  | 126,507,992 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 76,472,140 |  |  |  | 126,507,992 |
Gross profit |  |  | 2,163,624 |  |  |  | 3,542,650 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,163,624 |  |  |  | 3,542,650 |
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
General and administration |  |  | 1,738,878 |  |  |  | 2,633,280 |  |  |  | 4,118 |  |  |  | 14,784 |  |  |  | 762,731 |  |  |  | 1,420,141 |  |  |  | 2,505,727 |  |  |  | 4,068,205 |
Total Operating Expenses |  |  | 1,738,878 |  |  |  | 2,633,280 |  |  |  | 4,118 |  |  |  | 14,784 |  |  |  | 762,731 |  |  |  | 1,420,141 |  |  |  | 2,505,727 |  |  |  | 4,068,205 |
Operating income/(loss) |  |  | 424,746 |  |  |  | 909,370 |  |  |  | (4,118 | ) |  |  | (14,784 | ) |  |  | (762,731 | ) |  |  | (1,420,141 | ) |  |  | (342,103 | ) |  |  | (525,555 | )

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Other Expenses/Other Income

We had other expenses of $1,600,989 for the three months ended June 30, 2025, as compared with other expenses of $1,556,509 for the same period ended 2024. We had other expenses of $2,120,649 for the six months ended June 30, 2025, as compared with other expenses of $1,953,273 for the same period ended 2024. The increase in other expenses for the six months ended June 30, 2025 is mainly due to the change in the loss on settlement of debt, and increased interest expenses incurred.

Net Loss

We finished the three months ended June 30, 2025 with a loss of $2,348,914, as compared to a loss of $1,963,887 during the three months ended June 30, 2024. We finished the six months ended June 30, 2025 with a loss of $3,493,375, as compared to a loss of $2,544,103 during the six months ended June 30, 2024.

The net results of the periods reported are highly impacted by the expenses in the holding entity (IQSTEL), which has a high component of interest and other financial expenses related to the funds borrowed for the acquisition of QXTEL Limited.

Our Telecom Division, the division presently generating revenue, has a positive operating income when presented separately from the rest of our Company. As we have indicated on several occasions, our strategy is to strengthen our telecommunications division so that it can serve as a lever for the development of new lines of business, such as Fintech and Cybersecurity.

|  | Telecom Division |  | Pre-revenue companies |  | IQSTEL |  | Consolidated
|  | Three Months Ended June 30, 2025 |  | Six Months Ended June 30, 2025 |  | Three Months Ended June 30, 2025 |  | Six Months Ended June 30, 2025 |  | Three Months Ended June 30, 2025 |  | Six Months Ended June 30, 2025 |  | Three Months Ended June 30, 2025 |  | Six Months Ended June 30, 2025
Revenues |  |  | 72,081,725 |  |  |  | 129,714,541 |  |  |  | — |  |  |  | — |  |  |  | 101,511 |  |  |  | 101,511 |  |  |  | 72,183,236 |  |  |  | 129,816,052 |
Cost of revenue |  |  | 70,311,749 |  |  |  | 126,009,607 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 70,311,749 |  |  |  | 126,009,607 |
Gross profit |  |  | 1,769,976 |  |  |  | 3,704,934 |  |  |  | — |  |  |  | — |  |  |  | 101,511 |  |  |  | 101,511 |  |  |  | 1,871,487 |  |  |  | 3,806,445 |
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
General and administration |  |  | 1,304,065 |  |  |  | 2,972,370 |  |  |  | 437 |  |  |  | 1,870 |  |  |  | 1,223,214 |  |  |  | 2,092,660 |  |  |  | 2,527,716 |  |  |  | 5,066,900 |
Total Operating Expenses |  |  | 1,304,065 |  |  |  | 2,972,370 |  |  |  | 437 |  |  |  | 1,870 |  |  |  | 1,223,214 |  |  |  | 2,092,660 |  |  |  | 2,527,716 |  |  |  | 5,066,900 |
Operating income/(loss) |  |  | 465,911 |  |  |  | 732,564 |  |  |  | (437 | ) |  |  | (1,870 | ) |  |  | (1,121,703 | ) |  |  | (1,991,149 | ) |  |  | (656,229 | ) |  |  | (1,260,455 | )
Other income (expense) |  |  | (52,894 | ) |  |  | (51,684 | ) |  |  | — |  |  |  | — |  |  |  | (1,548,095 | ) |  |  | (2,068,965 | ) |  |  | (1,600,989 | ) |  |  | (2,120,649 | )
Net income (loss) before income taxes |  |  | 413,017 |  |  |  | 680,880 |  |  |  | (437 | ) |  |  | (1,870 | ) |  |  | (2,669,798 | ) |  |  | (4,060,114 | ) |  |  | (2,257,218 | ) |  |  | (3,381,104 | )
Income taxes |  |  | (91,696 | ) |  |  | (112,271 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (91,696 | ) |  |  | (112,271 | )
Net income (loss) |  |  | 321,321 |  |  |  | 568,609 |  |  |  | (437 | ) |  |  | (1,870 | ) |  |  | (2,669,798 | ) |  |  | (4,060,114 | ) |  |  | (2,348,914 | ) |  |  | (3,493,375 | )
Depreciation and amortization |  |  | 161,229 |  |  |  | 288,224 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 161,229 |  |  |  | 288,224 |
Interest expense |  |  | 6,569 |  |  |  | 17,421 |  |  |  | — |  |  |  | — |  |  |  | 452,523 |  |  |  | 973,392 |  |  |  | 459,092 |  |  |  | 990,813 |
FX Gains/Losses |  |  | (65,230 | ) |  |  | (33,291 | ) |  |  | — |  |  |  | — |  |  |  | (596 | ) |  |  | (997 | ) |  |  | (65,825 | ) |  |  | (34,287 | )
Loss on settlement of debt |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 878,592 |  |  |  | 878,592 |  |  |  | 878,592 |  |  |  | 878,592 |
Loss on settlement of salary payable |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 216,981 |  |  |  | 216,981 |  |  |  | 216,981 |  |  |  | 216,981 |
Stock-based compensation |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 22,385 |  |  |  | 55,198 |  |  |  | 22,385 |  |  |  | 55,200 |
Other non recurring costs |  |  | (10,000 | ) |  |  | 140,984 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 140,984 |
Taxes |  |  | 98,819 |  |  |  | 124,367 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 98,819 |  |  |  | 124,367 |
Adjusted EBITDA |  |  | 512,708 |  |  |  | 1,106,314 |  |  |  | (437 | ) |  |  | (1,870 | ) |  |  | (1,099,913 | ) |  |  | (1,936,948 | ) |  |  | (577,642 | ) |  |  | (832,502 | )

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In evaluating our financial performance, we utilize Adjusted EBITDA as a supplemental measure to provide insights into the profitability of our core operations. (Please see Adjusted EBITDA, which is reconciled to the Net Income in the table above.) Adjusted EBITDA excludes, in addition to non-operational expenses like interest expenses, taxes, depreciation and amortization; items that we believe are not indicative of our operating performance, such as:

• FX Gains and Losses.

• Stock-Based Compensation: As a non-cash expense, this adjustment eliminates variability caused by equity-based incentives.

• Other non-recurrent expenses: Adjusted EBITDA removes one-time, irregular, or non-recurring expenses to reflect the Company's sustainable earnings.

We believe Adjusted EBITDA offers a clearer view of the cash-generating potential of our business, excluding non-recurring, non-cash, and non-operational impacts.

Based on the analysis of our Adjusted EBITDA our Telecom Division is a high-performing division that generates strong operational profits.

Consolidated figures show a slightly negative Adjusted EBITDA; while this isn’t ideal, in our opinion it implies the Company is close to breaking even and might achieve positive Adjusted EBITDA with small improvements in efficiency or revenue growth. We are in a transitional period, scaling operations and investing heavily in growth initiatives with the execution of our M&A plan. Management has also identified areas for cost-cutting and operational improvements and has acted in that direction.

Liquidity and Capital Resources

As of June 30, 2025, we had total current assets of $35,555,030 and current liabilities of $36,843,884, resulting in a negative working capital of $1,288,854.

Our operating activities used $1,649,283 in the six months ended June 30, 2025 as compared with $3,151,688 used in operating activities in the six months ended June 30, 2024. Our negative operating cash flow for both periods is a result of our net loss and changes in operating assets and liabilities which varies depending on our operating results and the timing of operating cash receipts and payments, specifically trade accounts receivable and trade accounts payable. Despite a larger net loss, operating cash burn decreased due to working capital changes, especially receivables and payables.

Investing activities used $173,812 for the six months ended June 30, 2025 compared to $2,720,197 used during the same period of year 2024. Investing outflows dropped sharply, indicating a pause in our M&A campaign.

Financing activities provided $1,351,026 in the six months ended June 30, 2025 compared with $5,306,444 provided in the six months ended June 30, 2024. Financing inflows dropped significantly, indicating a reduced reliance on equity and convertible debt.

These figures show an improved operating cash flow despite net losses and strategic use of equity for debt settlement.

The Company is shifting from aggressive expansion in 2024 with the acquisition of QXTEL to consolidation and cash preservation in these first six months of 2025, with a heavy reliance on working capital management and non-cash financing tools. The Company’s debt repayments suggest a maturing capital structure.

We intend to fund operations through increased sales and debt and/or equity financing arrangements to strengthen our liquidity and capital resources. We also plan to seek additional financing in public and private equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.

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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, 2025.

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, 2025; however, we consider our critical accounting policies to be those related to allowance for doubtful accounts, valuation of long-lived assets, and income taxes. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. See the Consolidated Financial Statements in this Quarterly Report for a complete discussion of our significant accounting policies.

Off Balance Sheet Arrangements

As of June 30, 2025, there were no off-balance sheet arrangements.

Recent Accounting Pronouncements

We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operation, financial position, or cash flow.

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, 2025. 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.

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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, 2025, 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.

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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

Our business faces many risks, a number of which are described in the section captioned “Risk Factors” in our Annual Report for the year ended December 31, 2024, filed with the SEC on March 31, 2025. The risks described may not be the only risks we face. Other risks of which we are not yet aware, or that we currently believe are not material, may also materially and adversely impact our business operations or financial results. If any of the events or circumstances described in the risk factors contained in our Annual Report occur, our business, financial condition or results of operations could be adversely impacted and the value of an investment in our securities could decline. Investors and prospective investors should consider the risks described in our Annual Report, and the information contained in the section captioned “Forward-Looking Statements” and elsewhere in this Quarterly Report before deciding whether to invest in our securities.

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 in reliance on Section 4(a)(2) of the Securities Act, and/or Regulation D promulgated thereunder.

During the six months ended June 30, 2025, the Company issued 967,245 shares of common stock, valued at fair market value on issuance as follows:

• 3,750 shares for compensation to our directors valued at $55,198.

• 694,914 shares for conversion of debt of $3,227,904.

• 264,980 shares for settlement of debt of $1,886,658

• 3,563 shares for common stock payable value at $82,194.

• 38 shares for reverse stock split adjustment

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

N/A

Item 5. Other Information

None

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Item 6. Exhibits

Exhibit 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, 2025 formatted in Extensible Business Reporting Language (XBRL).
| **Provided herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on August 14, 2025 on its behalf by the undersigned thereunto duly authorized.

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

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