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Item 1. Financial Statements

2025-11-14 compared with 2025-08-14 · 537 added, 354 removed, 733 unchanged (55% of the section changed)

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in this Form 10-Q are as follows:

Consolidated Balance Sheets as of June 30, 2025 (unaudited) and December 31, 2024;

Consolidated Statements of Operations for the three and six months ended June 30, 2025 and 2024 (unaudited);

Consolidated Statements of Stockholder’s Equity for the three and six months ended June 30, 2025 and 2024 (unaudited).

Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024 (unaudited);

Consolidated Balance Sheets as of September 30, 2025 (unaudited) and December 31, 2024;

Consolidated Statements of Operations for the three and nine months ended September 30, 2025 and 2024 (unaudited);

Consolidated Statements of Stockholder’s Equity for nine months ended September 30, 2025 and 2024 (unaudited).

Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 (unaudited);

Notes to Consolidated Financial Statements (unaudited).

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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

Operating results for the interim period ended September 30, 2025 are not necessarily indicative of the results that can be expected for

the full year.

Consolidated Balance Sheets

September 30,

Current Assets

Accounts receivable, net

Inventory, net

Due from related parties

Deposit for acquisition

Prepaid and other current assets

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Accrued and other current liabilities

Contract liabilities

Due to related parties

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Contingent liability for acquisition of subsidiary

Stock payable for acquisition of subsidiary

Total Current Liabilities

Convertible notes - net of discount of $ 0 and $ 210,296 , respectively

Convertible notes - net of discount of $ 0 and $ 210,296

Loans payable, non-current

Employee benefits, non-current

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100,000 designated;

$ 0.001 par value, No shares issued and outstanding

$ 0.001 par value,

37,110 and 0 shares issued and outstanding, respectively

Common stock:

3,750,000 authorized;

26,000,000 and 3,750,000 authorized;

$ 0.001 par value 3,832,470 and 2,537,209 shares issued and outstanding, respectively

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

$ 102,867,553

$ 232,683,605

$ 184,346,412

Cost of revenue

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Interest expense

Change in fair value of derivative liabilities

( 1,333,503 )

( 1,533,820 )

Change in fair value of derivative liabilities

( 1,063,789 )

Loss on settlement of debt

( 1,345,889 )

( 2,224,481 )

Loss on settlement of salary payable

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( 2,646,275 )

( 1,953,273 )

Net loss before provision for income taxes

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( 3,317,107 )

( 3,493,375 )

( 2,544,103 )

Net income attributable to noncontrolling interests

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Consolidated Statements of Changes in Stockholders’

For the three and six months ended June 30,

For the three and nine months ended September

30, 2025 and 2024

A Preferred Stock

B Preferred Stock

Paid in Capital

Comprehensive Loss

Non Controlling

Stockholders' Equity

December 31, 2024

Series A Preferred Stock

Series B Preferred Stock

Series D Preferred Stock

Additional Paid in Capital

Accumulated Deficit

Accumulated Comprehensive Loss

Non Controlling Interest

Total Stockholders' Equity

Balance - December 31, 2024

$ ( 32,703,410 )

issued for compensation

issued for conversion of debt

issued for common stock payable

to non-controlling interest

income (loss)

Common stock issued for compensation

Common stock issued for conversion of debt

Common stock issued for common stock payable

Dividend to non-controlling interest

Net income (loss)

( 1,157,958 )

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$ ( 33,930,013 )

Preferred stock issued for settlement of salary payable

issued for compensation

issued for conversion of debt

issued for settlement of debt

split adjustment

to non-controlling interest

income (loss)

Series B Preferred stock issued for settlement of salary payable

Common stock issued for compensation

Common stock issued for conversion of debt

Common stock issued for settlement of debt

Reverse split adjustment

Dividend to non-controlling interest

Net income (loss)

( 2,406,978 )

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( 2,348,914 )

- June 30, 2025

Balance - June 30, 2025

$ ( 36,405,475 )

Series D Preferred stock issued for settlement of debt

Common stock issued for conversion of debt

Common stock issued for compensation

Common stock issued for service

Dividend to non-controlling interest

Acquisition of subsidiary

Net income (loss)

( 2,466,830 )

( 2,325,869 )

Balance - September 30, 2025

$ ( 38,945,805 )

Series A Preferred Stock

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$ ( 28,902,052 )

Common stock issued for conversion of debt

Common stock issued for compensation

Common stock issued for warrant exercises

Common stock payable

Resolution of derivative liabilities upon exercise of warrant

Net income (loss)

Balance - September 30, 2024

$ ( 29,825,840 )

The accompanying notes are an integral part of

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Consolidated Statements of Cash Flows

Six Months Ended

Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Prepaid and other assets

( 4,552,575 )

Accounts payable

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CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisitions of subsidiary, net of cash received

Acquisitions of subsidiary, net of cash received of $129,531 and $769,879, respectively

( 2,730,121 )

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Payment of loan receivable - related party

of amounts due from related parties

Collection of amounts due from related parties

Net cash used in investing activities

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Repayment of loans payable - related parties

Proceeds from common stock payable

Proceeds from exercise of warrants

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( 1,064,269 )

Dividends paid to non-controlling interest

Dividend paid to non-controlling interest

Net cash provided by financing activities

Effect of exchange rate changes on cash

Net change in cash

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Series B Preferred stock issued for settlement of salary payable

Series D Preferred stock issued for settlement of debt

Common stock issued for settlement of debt

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Common stock issued for conversion of debt

Common stock issued

for stock payable

Cashless warrant exercised

Common stock issued for common stock payable

Resolution of derivative liabilities

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Contingent liability for acquisition of subsidiary

Stock payable for acquisition of subsidiary

Purchase of vehicle with financing loan and a related party advance

The accompanying notes are an integral part of

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Notes to the Unaudited Consolidated Financial

June 30, 2025

September 30, 2025

NOTE 1 -ORGANIZATION AND DESCRIPTION OF BUSINESS

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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.

of current operations and which also represents 94% of 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

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that makes it easier to manage their money and stay connected with their families back home.

Additionally, Globetopper LLC (www.globetopper.com)

our most recent acquisitions, plays a strategic role in supporting the expansion and integration of our business divisions.

operations, the Company continues to strengthen its global presence and enhance the synergy in Fintech segments through its solution for

gift card programs, currently representing 6% of our revenues for the nine months ended September 30, 2025.

The Company’s developing Electric Vehicle

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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

recurring accruals) to present the financial position of the Company as of September 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.

The results of operations for the three and nine months ended September 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.

Consolidation Policy

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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.

QXTEL LIMITED (“QXTEL”) and Globetopper LLC (“Globetopper”).

All significant intercompany balances and transactions

have been eliminated in consolidation.

Business Combinations

In accordance with Accounting Standards Codification

(ASC) 805-10, “ Business Combinations ”, the Company accounts for all business combinations using the acquisition method

of accounting.

Under this method, assets and liabilities, including any remaining non-controlling interests, are recognized at fair value

at the date of acquisition.

The excess of the purchase price over the fair value of assets acquired, net of liabilities assumed and non-controlling

interests is recognized as goodwill.

Certain adjustments to the assessed fair values of the assets, liabilities, or non-controlling interests

made subsequent to the acquisition date, but within the measurement period, which is up to one year, are recorded as adjustments to goodwill.

Any adjustments subsequent to the measurement period are recorded in income.

Any cost or equity method interest that the Company holds

in the acquired company prior to the acquisition is re-measured to fair value at acquisition with a resulting gain or loss recognized

in income for the difference between fair value and the existing book value.

Results of operations of the acquired entity are included

in the Company’s results from the date of the acquisition onward and include amortization expense arising from acquired tangible

and intangible assets.

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.

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

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The Company had no cash

equivalents at June 30, 2025 and December 31, 2024.

equivalents at September 30, 2025 and December 31, 2024.

Accounts Receivable and Allowance for Uncollectible

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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.

During the nine months ended September 30, 2025 and 2024, the Company recorded bad debt

expense of $ 4,536 and $ 1,801 , respectively.

Net Income (Loss) Per Share of Common Stock

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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.

was anti-dilutive for the three and nine months ended September 30, 2025 and 2024.

The following represents a reconciliation of

the numerators of the basic and diluted earnings per share computation for the three and nine months ended September 30, 2025 and 2024:

Net loss attributed

to common stockholders of IQSTEL Inc.

Three Months Ended

Nine Months Ended

Net loss attributed to IQSTEL Inc.

$ ( 2,466,830 )

$ ( 923,788 )

$ ( 6,031,766 )

$ ( 3,741,707 )

Undeclared divided on Series D Preferred Stock

Net loss attributed to common stockholders of IQSTEL Inc.

$ ( 2,480,746 )

$ ( 923,788 )

$ ( 6,045,682 )

$ ( 3,741,707 )

Weighted average number of common shares outstanding - Basic and diluted

Basic and diluted loss per common share

Concentrations of Credit Risk

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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.

During the nine months ended September 30, 2025,

we had 31 customers representing 87.4 % of our revenue compared to 22 customers representing 87.7 % of our revenue for

the nine months ended September 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.

For the nine months ended September

30, 2025 and 2024, 37.6 % and 38.3 % 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 25 customers as of September 30, 2025 compared to the same percentage

concentrated in 11 companies as of December 31, 2024.

The largest customer as of September 30, 2025 represented 8.75 % of the

total compared to 40.39 % as of December 31, 2024.

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

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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.

this framework, the Company considers each service a single performance obligation, since typically, the Company provides a series of

distinct services.

The Company recognizes revenue from

telecommunication services in accordance with ASC 606.

Topic 606 establishes a comprehensive 5 step framework for determining revenue

Under this framework, the Company considers each service a single performance obligation, since typically, the Company provides

a series of distinct services.

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.

In the case of the services provided by Globetopper,

the Company recognizes revenue in accordance with ASC 606, "Revenue from Contracts with Customers."

Under this standard, revenue is recognized when control of the promised goods or services is transferred to the customer in an amount

that reflects the consideration to which the Company expects to be entitled.

The Company’s primary performance obligation

is the transfer of digital prepaid products to customers upon purchase.

Revenue is recognized at a point

in time when the digital prepaid products are made available to the customer, as this is when the customer obtains control and can benefit

from the use of the products.

The Company has evaluated additional services, including API integration

and technical support, and determined that these services are not distinct performance obligations.

These services are highly interdependent

and integrated with the primary obligation to deliver digital prepaid products.

As such, revenue recognition for these services is bundled

with the primary performance obligation and recognized at the same point in time.

The transaction price is determined based on

the pricing appendix provided to customers at the time of contract signing, with the Company reserving the right to adjust prices with

a three-day notice.

Since the Company has only one primary performance obligation, there is no allocation

of the transaction price across multiple obligations.

The application of the 5 step Topic 606 revenue

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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.

and digital prepaid products.

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

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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

usage of service and products 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

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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

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.

The Company recognizes revenues from contracts with customers when control of the usage of the services and digital prepaid products 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.

Cost of revenue

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NOTE 4 – PREPAID AND OTHER CURRENT

Prepaid and other current assets at June 30,

Prepaid and other current assets at September

30, 2025 and December 31, 2024 consisted of the following:

September 30,

Other receivable

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NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment at June 30, 2025 and December

31, 2024 consisted of the following:

Property and equipment at September 30, 2025

and December 31, 2024 consisted of the following:

September 30,

Telecommunication equipment

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Total property and equipment

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:

Depreciation expense for the nine months ended

September 30, 2025 and 2024 amounted to $ 89,204 and $ 104,061 , respectively.

NOTE 6 – INTANGIBLE ASSETS

- Schedule of Intangible Assets (Details)

carrying amount

gas regulator intangible

yet in service

Interconnection

Intangible assets at September 30, 2025

and December 31, 2024 consisted of the following:

Gross carrying

New gas regulator intangible

Not yet in service

Interconnection agreements

$ ( 721,877 )

carrying amount

New gas regulator

Interconnection

Gross carrying

New gas regulator intangible

Not yet in service

Interconnection agreements

$ ( 360,938 )

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

Amortization expense for the nine months ended

September 30, 2025 and 2024 amounted to $360,938 and $0, respectively.

The following table outlines the estimated

future amortization expense as of September 30, 2025:

2025 (3 months remaining)

NOTE 7 – ACCRUED AND OTHER CURRENT LIABILITIES

Accrued and other current liabilities at June

Accrued and other current liabilities at September

30, 2025 and December 31, 2024 consisted of the following

September 30,

Accrued liabilities

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Other current liabilities

other accrued liabilities

NOTE 8 - LOANS PAYABLE

Loans payable at June 30, 2025 and December 31,

Loans payable at September 30, 2025 and December

31, 2024 consisted of the following:

September 30,

Note was issued on October 23, 2018 and due on January 2, 2026

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Note was issued October 4, 2024 and due on September 23, 2025

Promissory note payable

Note was issued January 15, 2025 and due on January 15, 2026

Promissory note payable - acquisition of QXTEL

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Promissory note payable

Note was issued April 24, 2025 and due on December 5, 2025

Promissory note payable

Note was issued May 9, 2025 and due on December 20, 2025

Promissory note payable

Note was issued May 27, 2025 and due on January 7, 2026

Promissory note payable

Note was issued June 5, 2025 and due on January 16, 2026

Note was issued July 16, 2025 and due on February 26, 2026

Promissory note payable

Note was issued June 9, 2025 and due on January 20, 2026

Note was issued August 8, 2025 and due on March 21, 2026

Promissory note payable

Note was issued June 27, 2025 and due on February 7, 2026

Note was issued September 11, 2025 and due on April 24, 2026

was issued in July 2025 and the monthly payment amount is $ 1,149 for 48 months

Unamortized debt discount

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Long-term loans payable

Loans payable - related parties at June 30, 2025

Loans payable - related parties at September

30, 2025 and December 31, 2024 consisted of the following:

September 30,

49% of Shareholder of SwissLink

Note is due on demand

49% of Shareholder of SwissLink

Note is due on demand

Minority Shareholder of QXTEL

Note is due on October 1, 2025

Current portion of loans payable - related parties

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

During the nine months ended September 30, 2025

and 2024, the Company borrowed from third parties totaling $ 5,825,583 and $ 2,011,100 , which includes original issue discount

and financing costs of $ 360,583 and $ 0 and repaid the principal amount of $ 2,076,404 and $ 669,121 ,

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

During the nine months ended September 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 nine months ended September 30, 2025, the Company issued a note payable of $ 100,000 for the consideration related

to the July 1, 2025 acquisition of a subsidiary.

These notes were fully repaid during the nine months ended September 30, 2025.

During the nine months ended September 30, 2025

and 2024, the Company recorded interest expense of $ 353,964 and $ 121,806 and recognized amortization of discount, included

in interest expense, of $ 106,770 and $ 163,406 , 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.

During the nine months ended September 30, 2025,

the Company settled loans as follows;

amount and accrued interest of 5 notes payable issued in June through October 2024 by issuing 264,980 shares of common

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.

amount and accrued interest of 3 notes payable issued in June 2025 by issuing 22,131 shares of Series D Preferred Stock.

As a result, the Company recorded a loss on settlement of debt of $ 804,599 .

Principal amount and accrued interest of 4 notes payable

issued in January through May 2025 by issuing 14,979 shares of common stock.

As a result, the Company recorded a loss on settlement

of debt of $ 541,290 .

During the nine months ended September

30, 2024, the Company settled 2 loans as follows:

Principal amount and accrued interest of a note payable

issued in April 2023 by issuing 1,770,000 shares of common stock.

As a result, the Company recorded a loss on settlement of debt of $ 102,660 .

Principal amount of future receipts loan issued in April

2024 by early settlement.

As a result, the Company recorded a loss on settlement of debt of $ 27,537 .

NOTE 9 - CONVERTIBLE LOANS

Convertible loans at June 30, 2025 and

December 31, 2024 consisted of the following:

Convertible loans at September 30,

2025 and December 31, 2024 consisted of the following:

September 30,

Issued in fiscal year 2024

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Long-term convertible notes

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.

During the six months ended June 30, 2025,

During the nine months ended September 30, 2025

and 2024, the Company recorded interest expense of $ 593,818 and $ 555,092 and recognized amortization of discount,

included in interest expense, of $ 278,951 and $ 693,516 , respectively.

During the nine months ended September 30,

2025, one note holder converted notes with principal amounts of $ 4,153,343 , debt discount of $ 129,570 , accrued interest of $ 420,919 and

conversion fee of $ 15,000 into 988,655 shares of common stock.

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 .

During the three months ended September 30, 2025,

one note holder converted notes with principal amounts of $ 931,121 , debt discount of $ 1,918 , accrued interest of $ 302,586 and

conversion fee of $ 7,500 into 293,742 shares of common stock.

During the nine months ended September 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 .

During the nine months ended September 30, 2025,

the Company borrowed amounts from third parties totaling $ 1,113,316 , which includes original issue discount and financing costs of $ 125,816 .

February 26, 202 5

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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 10 – STOCKHOLDERS’ EQUITY

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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 .

and subsequently to 26,000,000 shares with a par value of $ 0.001 per share.

During the nine months ended September 30, 2025,

the Company issued 1,295,261 shares of common stock, valued at fair market value on issuance as follows:

5,625 shares for compensation to our directors valued at $ 71,143 .

988,655 shares for conversion of debt of $ 4,459,692 .

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

• 3,563 shares

for common stock payable value at $ 82,194 .

32,400 shares for service valued at $ 223,200 .

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

At September 30, 2025 and December 31, 2024, 3,832,470 and 2,537,209 shares

of common stock were issued and outstanding, respectively.

10 unchanged sentences

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

At September 30, 2025 and December 31, 2024, 10,000 shares

of Series A Preferred Stock were issued and outstanding.

15 unchanged sentences

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.

During the nine months ended September 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 .

a result, the Company recorded a loss on settlement of salary payable of $ 216,981 .

At September 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

2 unchanged sentences

consisting of up 200,000 shares, par value $ 0.001 .

U nder the Certificate of Designation, holders of Series C

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

10 unchanged sentences

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

At September 30, 2025 and December 31, 2024, no Series

C Preferred Stock was issued or outstanding.

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.

On July 7, 2025, the Company filed a First

Amended and Restated Certificate of Designation for the Series D Preferred Stock 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.

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

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.

During the nine months ended September

30, 2025, the Company issued 37,110 shares of Series D Preferred Stock for settlement of debt of $ 4,708,332 .

At September 30, 2025 and December 31, 2024, 37,110

and 0 shares of Series D Preferred Stock were issued or outstanding, respectively.

NOTE 11 - 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.

During the nine months ended September 30, 2025

and 2024, the Company loaned $ 39,462 and $ 119,832 and collected $ 2,000 and $ 0 , respectively to a related party.

At September 30, 2025 and December 31, 2024,

the Company had amounts due from related parties of $ 668,177 and $ 630,715 , respectively.

The loans are unsecured, non-interest

1 unchanged sentence

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.

At September 30, 2025 and December 31, 2024,

the Company had amounts due to related parties of $ 65,829 and $ 26,613 , respectively.

For the nine months ended September 30, 2025,

a related party paid $ 39,216 to purchase a vehicle on behalf of the Company.

The amounts are unsecured, non-interest bearing and due on

Employment agreements

2 unchanged sentences

Alvaro Quintana Cardona.

In case the monthly remuneration is not set

in full on time , the amended agreements provide that Messrs.

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

4 unchanged sentences

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 ,

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 nine months ended September 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 .

a result, the Company recorded a loss on settlement of salary payable of $ 216,981 .

During the nine months ended September 30, 2025

and 2024, the Company recorded management salaries of $ 760,500 and $ 634,500 , and stock-based compensation bonuses of $ 71,145 and $ 109,485 ,

respectively.

As of June 30, 2025 and December 31, 2024, the

Company recorded and accrued management salaries of $ 172,946 and $ 420,447 , respectively.

During the three months ended September 30, 2025 and 2024, the Company recorded management salaries of $ 211,500 and $ 211,500 ,

and stock-based compensation bonuses of $ 15,945 and $ 31,820 , respectively.

At September 30, 2025 and December 31, 2024,

the Company recorded and accrued management salaries of $ 73,365 and $ 420,447 , respectively.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

The Company leases facilities which the term is 12 months .

For the six months ended June 30, 2025

For the nine months ended September

30, 2025 and 2024, the Company incurred rent expense of $ 24,328 and $ 21,335 , respectively.

NOTE 13 – ACQUISITION

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 ( “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

acquired the Transferred Membership Interests of Globetopper for a total purchase price consisting of $ 700,000 ,

$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 acquisition was closed on July 1, 2025.

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

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

The following table summarizes the fair value

of the consideration paid by the Company:

Fair Value of Consideration:

Promissory note

IQSTEL common stock

Contingent liability

Total Purchase Price

The following table summarizes the preliminary

identifiable assets acquired and liabilities assumed upon acquisition of Globetopper and the calculation of goodwill:

Total purchase price

Assets Acquired:

Prepaid expenses and other current assets

Total identifiable assets

Liabilities Assumed:

Other current liabilities

Contract liabilities

Line of credit

Total liabilities assumed

Non-controlling interest - 49%

Total net assets

Unaudited combined proforma results of

operations for the three and nine months ended September 30, 2025 and 2024 as though the Company acquired Globetopper on January 1, 2024,

are set forth below:

Three Months Ended

Nine Months Ended

September 30,

$ 102,867,553

$ 258,349,274

$ 212,841,207

Cost of revenues

Operating expenses

Operating loss

( 1,606,874 )

Other expense

( 1,694,867 )

( 3,819,843 )

( 2,648,705 )

$ ( 2,325,869 )

$ ( 761,437 )

$ ( 5,610,907 )

$ ( 3,213,146 )

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 Company operates in two industry segments, telecommunication services and fintech 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

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.

The following table shows reportable operating

activities information by industrial segment for the three and nine months ended September 30, 2025.

The Company has two industrial segments

since the Company acquired Globetopper LLC in July 2025:

Three months ended September 30, 2025

14 - SEGMENT - Operating Activities by Industrial and Geographic Segment (Details)

$ 104,223,026

$ ( 15,697,167 )

$ 102,867,553

Cost of revenue

( 15,539,311 )

Operating expenses

Operating income (loss)

( 1,389,837 )

Other expense

( 1,600,257 )

( 1,694,867 )

Income tax expense

Net income (loss)

$ ( 2,990,094 )

$ ( 2,325,869 )

Nine months ended September 30, 2025

$ 259,271,211

$ ( 41,030,811 )

$ 232,683,605

Cost of revenue

( 40,650,320 )

Operating expenses

Operating income (loss)

( 3,380,989 )

( 1,819,538 )

Other expense

( 3,541,722 )

( 3,815,516 )

Income tax expense

Net income (loss)

$ ( 6,922,711 )

$ ( 204,000 )

$ ( 5,819,244 )

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)

information by geographic segment for the three and nine months ended September 30, 2025 and 2024:

Three months ended September 30, 2025

$ ( 15,697,167 )

$ 102,867,553

wages and benefits

and regulatory

services and fees

and amortization

facility and other

and administration

income (loss)

income (expense)

Cost of revenue

( 15,539,311 )

Operating expenses

Salaries, wages and benefits

Professional fees

Legal and regulatory

Travel and events

Bank services and fees

Depreciation and amortization

Office, facility and other

Stock-based compensation

General and administration

Operating income (loss)

Other expense

( 1,601,625 )

income (loss)

( 1,694,867 )

Income tax expense

Net income (loss)

$ ( 2,312,222 )

$ ( 2,325,869 )

Three months ended June 30, 2024

Three months ended September 30, 2024

$ ( 605,513 )

wages and benefits

and regulatory

services and fees

and amortization

facility and other

and administration

income (loss)

income (expense)

Cost of revenue

Operating expenses

Salaries, wages and benefits

Professional fees

Legal and regulatory

Travel and events

Bank services and fees

Depreciation and amortization

Office, facility and other

Stock-based compensation

General and administration

Operating income (loss)

Other income (expense)

Income tax expense

Net income (loss)

$ ( 946,652 )

$ ( 773,004 )

income (loss)

Nine months ended September 30, 2025

$ 141,511,086

$ 110,921,436

months ended June 30, 2025

$ ( 41,030,811 )

24 unchanged sentences

$ ( 5,819,244 )

months ended June 30, 2024

Nine months ended September 30, 2024

$ 135,649,542

$ ( 3,136,431 )

$ 184,346,412

Cost of revenue

12 unchanged sentences

Operating income (loss)

( 1,115,156 )

Other income (expense)

5 unchanged sentences

$ ( 3,317,107 )

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

June 30, 2025

Asset Information

The following table shows asset information

by industrial segment at September 30, 2025:

September 30, 2025

Current assets

13 unchanged sentences

Non-current liabilities

The following table shows asset information

by geographic segment at September 30, 2025 and December 31, 2024:

September 30, 2025

Current assets

$ ( 2,189,360 )

Non-current assets

$ ( 13,319,737 )

Current liabilities

$ ( 2,189,360 )

Non-current liabilities

December 31, 2024

Current assets

$ ( 13,107,888 )

Non-current assets

$ ( 12,184,562 )

Current liabilities

$ ( 13,107,888

Non-current liabilities

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:

upon execution of the Agreement;

$50,000 in cash on the Closing Date;

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.

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:

50% of the positive difference between EBITDA at acquisition and EBITDA 12 months post-Closing.

50% of the positive difference between EBITDA 12 months and 24 months post-Closing.

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,

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.

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.

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:

Subsequent to September 30, 2025 and through

the date that these financials were made available, the Company had the following subsequent events:

On October 10, 2025, the Company filed a Second

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,

and first amended on July 7, 2025.

The Second Amended and Restated Certificate of Designation maintains the number of authorized shares

at 100,000 and revises the terms by introducing a True-Up Adjustment mechanism to the conversion rate, as described below.

terms 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.

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.

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 (the

“Base Shares”), subject to adjustment for stock splits, dividends, or reorganizations.

Additionally, a True-Up Adjustment

mechanism applies, whereby the conversion may include additional shares based on a comparison of the original conversion price (based

on the 10-day VWAP with a 20% discount at the time of issuance) to the lowest daily VWAP during the five trading days preceding the conversion

date with a further 20% discount applied to such lowest daily VWAP (the “Adjusted Conversion Price”), with a floor of $1.00

and a maximum True-Up Ratio of 2.5.

Redemption Provisions:

Optional redemption by the Company at 105% of the price paid by the holder, upon not more than three trading days’ notice.

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.

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.

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

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

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

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.

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.

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 1. Financial Statements