What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-14 compared with 2025-05-15 · 277 added, 154 removed, 179 unchanged (71% of the section changed)

101 unchanged sentences

not incorporated by reference into this quarterly report and should not be considered part of this or any other report filed with the

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

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.

Adjusted EBITDA is not a recognized accounting measurement

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

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:

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

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

Our total revenue reported for the three months ended

March 31, 2025 was $57,632,816, compared with $51,414,878 for the three months ended March 31, 2024.

These numbers reflect an increase

of 12% quarter over quarter on our consolidated revenues.

When looking at the numbers by subsidiary, we have

the following breakout for the three months ended March 31, 2025 compared to the three months ended March 31, 2024:

Three Months Ended

March 31, 2025

Three Months Ended

March 31, 2024

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,

Etelix.com USA, LLC

SwissLink Carrier AG

Smartbiz Telecom

Whisl Telecom

QXTEL Limited

$ 155,149,696

$ 132,581,560

Intercompany eliminations

(11,924,503 )

The continued growth of our revenue is the result

of the development of our business strategy, which includes the strengthening of our commercial and operating activities and expanding

the synergies among our subsidiaries.

We expect that our revenue will continue to grow consistently

over the coming quarters providing a projected total of $340 million for the year ending December 31, 2025.

Cost of Revenues

Our total cost of revenues for the three months ended

March 31, 2025 increased to $55,697,858, compared with $50,035,852 for the three months ended March 31, 2024.

When looking at the numbers by subsidiary,

we have the following breakout for the three months ended March 31, 2025 compared to the three months ended March 31, 2024:

Cost of Revenue

Three Months Ended

March 31, 2025

(25,333,644 )

$ 129,816,052

$ 130,050,642

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

Three Months Ended

March 31, 2024

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

Etelix.com USA, LLC

SwissLink Carrier AG

Smartbiz Telecom

Whisl Telecom

QXTEL Limited

$ 151,120,616

$ 129,038,910

Intercompany eliminations

(11,713,765 )

Our cost of revenues consists of direct charges from

(25,111,009 )

$ 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 networks.

terminated in vendor’s network.

The behavior in the costs shows a logical correlation

with the behavior of the revenue commented on above.

We have reached a higher volume of sales and every additional unit sold (minutes

and SMS) has its corresponding termination cost.

As can be noticed in the analysis of the Gross Margin

in the section below, there is an important increase in the margins of Etelix, Whisl and Smartbiz.

This increase in the gross margins

of Etelix, Whisl and Smartbiz is related to the lower revenue reported by those subsidiaries.

These three subsidiaries eliminated routes

and destinations of low margins;

while the inclusion of QXTEL compensates for the revenue of those low-margin routes in Etelix, Whisl

and Smartbiz.

This portfolio restructuring is the result of the

synergies achieved through the commercial and operational integration of all subsidiaries.

This can also be noticed in the high volume

of intercompany business.

We expect this to impact positively the revenues and the margins in the future.

Our gross margin, which is simply the difference between our revenues

and our cost of sales, discussed above, was $1,934,958 for the three months ended March 31, 2025 compared to $1,379,026 for the three

months ended March 31, 2024.

This represents an increase of 40% in the gross margin quarter over quarter.

Gross Margin %

Three Months Ended

March 31, 2025

Gross Margin %

Three Months Ended

March 31, 2024

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.

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,

Etelix.com USA, LLC

SwissLink Carrier AG

Consolidated Gross Margin % for the three months ended March 31, 2025 was

3.36% compared to 2.68% for the same period of 2024.

This represents an increase of 25.37% quarter over quarter.

As mentioned before, this increment in the gross margin is the result of

the commercial and operational synergies implemented among all subsidiaries.

Smartbiz Telecom

Whisl Telecom

QXTEL Limited

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 increased to $2,539,184 for the

three months ended March 31, 2025 from $1,562,478 for the three months ended March 31, 2024.

The detail by major category is reflected

in the table below.

Three Months Ended

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.

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,

Salaries, wages and benefits

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Stock-based compensation

Total Operating Expenses

When looking at the numbers by subsidiary, we have the following breakout

for the three months ended March 31, 2025 compared to the three months ended March 31, 2024:

Three Months Ended

Total Operating Expense

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,

Etelix.com USA, LLC

SwissLink Carrier AG

Global Money One

Smartbiz Telecom

Whisl Telecom

QXTEL Limited

The most significant differences are:

2 unchanged sentences

(2) the increases

in other items such as salaries, wages and benefits, or depreciation and amortization, or office, facility and other are the result of

the addition of QXTEL to our consolidated financial statements.

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

This difference in the reporting periods explains the 113% increase in general and administrative expenses compared to the prior

We are continually identifying operational synergies

2 unchanged sentences

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

Operating Income

The Company showed negative Operating Income for the

three months ended March 31, 2025 of $604,226 compared with a negative result of $183,452 for the three months ended March 31, 2024.

Our Telecom Division, which is the one generating

revenue at the present time, generated positive Operating Income.

The expenses of our Pre-revenue companies are set at the minimum required

to finish the development of the product/services prior to market launch.

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

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.

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 develo pment and

expansion of new business lines.

Telecom Division

Pre Revenue Subsidiaries

Cost of revenues

Pre-revenue companies

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

Cost of revenue

Operating expenses

2 unchanged sentences

Operating income/(loss)

Other Expenses/Other Income

We had total other expenses, net of $519,660 for the

three months ended March 31, 2025, as compared with other expenses of $396,764 for the same period ended 2024.

The other expenses in 2025

are largely due to $531,726 in Interest Expense associated with the financing for the acquisition of QXTEL, which allows us to drive the

organic growth of the Company.

We finished the three months ended March 31, 2025

with a net loss of $1,144,461, as compared to a loss of $580,216 during the three months ended March 31, 2024.

The net loss as of March

31, 2025 is highly impacted by increased operating expenses and interest expense incurred in the acquisition of QXTEL;

however, the increase

in the Company's value and the beneficial effects of this acquisition could be observed in the $829,064 of gross profit added to our operations

for the three months ended March 31, 2025 which represents 43% of the total consolidated gross profit.

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.

Ended March 31, 2025

Months Ended June 30, 2024

and administration

1 unchanged sentence

Operating income/(loss)

income (expense)

income (loss) before income taxes

income (loss)

and Amortization

non-recurrent

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;

Expenses/Other Income

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.

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

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

Cost of revenue

Operating expenses

General and administration

Total Operating Expenses

Operating income/(loss)

Other income (expense)

Net income (loss) before income taxes

Net income (loss)

Depreciation and amortization

Interest expense

FX Gains/Losses

Loss on settlement of debt

Loss on settlement of salary payable

Stock-based compensation

Other non recurring costs

Adjusted EBITDA

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:

18 unchanged sentences

Liquidity and Capital Resources

As of March 31, 2025, we had total current assets

of $26,043,799 and current liabilities of $30,279,641, resulting in a negative working capital of $4,235,842.

Our operating activities used $1,906,969 for the three

months ended March 31, 2025 as compared with $536,888 used in operating activities in the three months ended March 31, 2024.

flow from operations varies depending on our operating results and the timing of operating cash receipts and payments, specifically trade

accounts receivable and trade accounts payable.

Investing activities used $58,645 for the three

months ended March 31, 2025 as compared with $1,622,892 for the three months ended March 31, 2024.

Uses of funds in investing activities

in 2025 consisted primarily of the purchase of property and equipment.

Uses of funds on investing activities in 2024 were primarily the

acquisition of QXTEL.

Financing activities provided $540,303 in the three

months ended March 31, 2025 compared with $3,522,683 provided in the three months ended March 31, 2024.

Our positive financing cash flow

in 2025 and 2024 was largely the result of the financing secured to complete the acquisition of QXTEL.

We intend to fund operations through increased

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

There can be no assurance that

we will be successful in raising additional funding.

If we are not able to secure additional funding, the implementation of our business

plan will be impaired.

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

We have an outstanding Option with ADI Funding under

a stock purchase agreement for $100,000 that expires on July 14, 2025, for the right to acquire up to 187,500 shares of common stock upon

an effective registration statement.

As of March 31, 2025, the Company did not receive payment of $100,000 and the Option was not in effect,

but we anticipate completing the registration statement and receiving the $100,000 from ADI Funding at some point in the near future.

If activated, 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

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, 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.

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

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.

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

Although our operations are influenced by general

economic conditions, we do not believe that inflation had a material effect on our results of operations during the three-month period

ended March 31, 2025.

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

2 unchanged sentences

matters that are inherently uncertain.

accounting policies are discussed in detail in the footnotes to our financial statements included in this Quarterly Report on Form 10-Q

for the three months ended March 31, 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.

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

Off Balance Sheet Arrangements

As of March 31, 2025, there were no off-balance sheet

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

arrangements.

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis