What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-18 compared with 2026-05-20 · 161 added, 118 removed, 279 unchanged (50% of the section changed)

36 unchanged sentences

Our Telecom Division, which represents the majority

of current operations and accounted for 87% of our revenues for the three months ended March 31, 2026, offers Voice over Internet Protocol

of current operations and accounted for 87% of our revenues for the six months ended June 30, 2026, offers Voice over Internet Protocol

(VoIP), SMS, proprietary Internet of Things (IoT) solutions, and international fiber-optic connectivity through its subsidiaries:

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our most recent acquisition, supports expansion and integration of our business divisions through its B2B digital gift card and incentives

platform, which represented 13% of our revenues for the three months ended March 31, 2026.

platform, which represented 13% of our revenues for the six months ended June 30, 2026.

Our Artificial Intelligence (AI) division, Reality

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Building on that early development

work—including conversational interfaces, multilingual models, and AI-driven workflows—Reality Border now develops practical

AI software solutions for enterprise and telecommunications applications.

work—including conversational interfaces, multilingual models, and AI-driven workflows, Reality Border now develops practical AI

software solutions for enterprise and telecommunications applications.

Reality Border currently serves as IQSTEL’s AI innovation and product development platform.

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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.

in Fair Value of Derivative Liabilities:

These adjustments reflect unrealized gains or losses that are non-operational and subject to

market volatility.

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.

As a non-cash expense, this adjustment eliminates variability caused by

equity-based incentives.

The Company believes Adjusted EBITDA offers a clearer

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Our total revenue reported for the three months ended

March 31, 2026 was $97,919,836, compared with $57,632,816 for the three months ended March 31, 2025.

June 30, 2026 was $109,068,246, compared with $72,183,236 for the three months ended June 30, 2025.

These numbers reflect an increase

of 70% year over year on our consolidated revenues.

When looking at the numbers by subsidiary, we have

the following breakout for the three months ended March 31, 2026 compared to the three months ended March 31, 2025:

Revenue for the Three Months Ended March 31,

of 51.10% quarter over quarter on our consolidated revenues.

Our total revenue reported for the six months ended June 30, 2026 was $206,988,082,

compared with $129,816,052 for the six months ended June 30, 2025;

which reflect an increase of 59.45%.

When looking at the numbers by subsidiary,

we have the following breakout for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025:

Revenue for the Three Months Ended June 30,

Revenue for the Six Months Ended

Etelix.com USA, LLC

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GlobeTopper LLC

$ 109,711,135

$ 208,323,779

$ 155,149,696

Intercompany eliminations

(11,924,503 )

(25,333,644 )

$ 109,068,246

$ 206,988,082

$ 129,816,052

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, particularly those engaged in VOIP Telecom services, due to a higher volume of intercompany transactions.

The increase also includes the contribution from a newly acquired subsidiary, GlobeTopper LLC, which closed on July 1, 2025.

the synergies among our subsidiaries, particularly those engaged in VOIP Telecom services.

The increase also includes the contribution

from a newly acquired subsidiary, GlobeTopper LLC, which closed on July 1, 2025.

A significant reduction in intercompany transactions

is also observed for the quarter ended March 31, 2026 compared to the quarter ended March 31, 2025, which did not impact the overall position.

This reflects the joint efforts of the companies to strengthen their position with third parties through new commercial agreements.

The organic growth during the three months ended March

31, 2026 was 87% 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, QXTEL.

is also observed for the three and six months ended June 30, 2026 compared to the quarter ended June 30, 2025, which did not impact the

overall position.

This reflects the joint efforts of the companies to strengthen their position with third parties through new commercial

The organic growth during the three and six months

ended June 30, 2026 was 65% and 65% respectively, of the total revenue increase 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, QXTEL.

GlobeTopper, acquired on July 1st, 2025, represented

the rest of the increment increase, showing the potential this subsidiary has of creating value to the organization.

the rest of the increase, showing the potential this subsidiary has of creating value to the organization.

Cost of Revenues

Our total cost of revenues for the three months ended

March 31, 2026 increased to $95,839,138, compared with $55,697,858 for the three months ended March 31, 2025.

Our total cost of revenue for the three months ended

June 30, 2026 increased to $106,321,441, compared with $70,311,749 for the three months ended June 30, 2025.

Our total cost of revenue

for the six months ended June 30, 2026 increased to $202,160,579, compared with $126,009,607 for the six months ended June 30, 2025.

When looking at the numbers by subsidiary,

we have the following breakout for the three months ended March 31, 2026 compared to the three months ended March 31, 2025:

Cost of Revenue for the Three Months Ended March 31,

we have the following breakout for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025:

Cost of Revenue for the Three Months Ended June 30,

Cost of Revenue for the Six Months Ended June 30,

Etelix.com USA, LLC

4 unchanged sentences

GlobeTopper LLC

$ 106,775,781

$ 203,162,478

$ 151,120,616

Intercompany eliminations

(11,713,765 )

(25,111,009 )

$ 106,321,441

$ 202,160,579

$ 126,009,607

Our cost of revenue consists of direct charges from

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the synergies derived from the commercial and operational integration of all group companies.

This quarter, compared to 2025, reflects the positive

impact of the portfolio restructuring.

This quarter, compared to same period of 2025, reflects

the positive impact of the portfolio restructuring.

While intercompany transactions decreased, traffic shifted toward third parties, strengthening

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This transition helped maintain growth and is expected to continue supporting revenue and margins going forward.

Our gross margin, which is simply the difference

between our revenues and our cost of sales, discussed above, was $2,080,698 for the three months ended March 31, 2026 compared to $1,934,958

for the three months ended March 31, 2025.

This represents an increase of 8% in the gross margin year over year.

Gross Margin % for the Three Months Ended March 31,

Our gross margin, which is simply the difference between

our revenues and cost of sales, was $4,827,503 for the six months ended June 30, 2026, compared to $3,806,445 for the six months ended

June 30, 2025, representing an increase of 26.82%.

For the three months ended June 30, 2026, our gross margin was $2,746,805, compared

to $1,871,487 for the three months ended June 30, 2025, representing an increase of 46.77%.

Gross Margin % for the Three Months Ended June 30,

Gross Margin % for the Six Months Ended June 30,

Etelix.com USA, LLC

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GlobeTopper LLC

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 $3,038,707 for the

three months ended March 31, 2026 from $2,539,184 for the three months ended March 31, 2025.

The detail by major category is reflected

Operating expenses, which consist solely of general

and administrative costs, increased by 53% for the three months ended June 30, 2026, compared to the same period in 2025.

months ended June 30, 2026, general and administrative expenses rose to $6,906,331 from $5,066,900 reported in the same period of 2025,

reflecting a 36.30% increase.

A detailed breakdown by major category for the three and six months ended June 30, 2026 and 2025 is presented

in the table below:

Operating Expenses for the Three Months Ended

Operating Expenses for the Three Months Ended June 30,

Operating Expenses for the Six Months Ended June 30,

Salaries, Wages and Benefits

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Bad debt expense

Stock-based compensation

Stock-based management compensation

The most significant differences are:

1 unchanged sentence

in technology expenses related to the deployment and upgrade of the Switching platform to allocate all subsidiaries, which will result

in tremendous cost reduction once all companies are migrated to the new platform;

(2) the increases in other items such as technology;

depreciation and amortization;

and office, facility and other are largely the result of the addition of QXTEL and GlobeTopper to our consolidated

financial statements.

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

for the three months ended March 31, 2026 compared to the three months ended March 31, 2025:

Operating Expenses for the Three Months Ended

in significant cost reductions once all companies are migrated to the new platform;

(2) the increase in advertising expenses, mainly related

to marketing and promotional activities;

and (3) the increases in other items such as depreciation and amortization, office, facility

and other expenses are largely the result of the addition of QXTEL and GlobeTopper to our consolidated financial statements.

When looking at the numbers by subsidiary, we have

the following breakout for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025:

Operating Expenses for the Three Months Ended June 30,

Operating Expenses for the Six Months Ended June 30,

Etelix.com USA, LLC

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Operating Income

The Company showed negative Operating Income for the

three months ended March 31, 2026 of $958,009 compared with $604,226 for the three months ended March 31, 2025.

These results reflect

an overall rise in operating expenses, largely associated with ongoing investments in development and growth initiatives.

For the three months ended June 30, 2026, the Company

reported an operating loss of $1,120,819, representing a significant increase compared to the operating loss of $656,229 for the same

period in 2025.

Similarly, for the six months ended June 30, 2026, the operating loss widened to $2,078,828, up from $1,260,455 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, shows continued progress, as evidenced by the increase in revenue and gross profit.

However, it reported a

negative operating income for the three months ended March 30, 2026, mainly driven by the increase in general and administrative expenses.

This contrasts with the period ended March 31, 2025, which showed a positive operating income.

The Fintech Division also reflects its

current position following the inclusion of Globetopper.

In addition, our pre-revenue companies continue to

operate with minimal expenses, focused solely on completing product and service development prior to market launch.

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.

Our Telecom Division is making significant progress,

as evidenced by the increase in revenue, gross profit, and operating income for both the three- and six-month periods ended June 30, 2026.

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.

Other Expenses/Other Income

We had total other expenses of $412,424 for the three

months ended March 31, 2026, as compared with other expenses of $519,660 for the same period ended 2025.

The other expenses are largely

due to $350,998 and $531,726 of Interest Expense for the three months ended March 31, 2026 and 2025, respectively.

We had other expenses of $1,222,693 for the three

months ended June 30, 2026, as compared with other expenses of $1,600,989 for the same period ended 2025.

We had other expenses of $1,635,117

for the six months ended June 30, 2026, as compared with other expenses of $2,120,649 for the same period ended 2025.

A significant portion

of the 2026 interest expense was associated with the financing for the acquisition of Globetopper, which allowed us to drive the organic

growth of the Company.

We finished the three months ended March 31, 2026

with a net loss of $1,385,936, as compared to a loss of $1,144,461 during the three months ended March 31, 2025.

The 2026 net loss is

highly impacted by interest expense incurred in the acquisition of Globetopper;

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

of the 2026 interest expense was associated with the financing for the acquisition of GlobeTopper, which allowed us to drive the growth

of the Company.

We finished the three months ended June 30, 2026 with

a loss of $2,405,621, as compared to a loss of $2,348,914 during the three months ended June 30, 2025.

We finished the six months ended

June 30, 2026 with a loss of $3,791,557, as compared to a loss of $3,493,375 during the six months ended June 30, 2025.

The 2026 net loss is highly impacted by interest expense

incurred in the last acquisitions (QXTEL and GlobeTopper);

however, the increase in the Company's value and the beneficial effects of

these acquisitions could be observed in the $2,872,337 of gross profit added to our operations for the six months ended June 30, 2026,

which represents 59.50% of the total consolidated gross profit.

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improvements and has acted in that direction.

Months Ended March 31, 2026

Months Ended March 31, 2025

Months Ended March 31, 2026

Months Ended March 31, 2025

Months Ended March 31, 2026

Months Ended March 31, 2025

Months Ended March 31, 2026

Months Ended March 31, 2025

Months Ended March 31, 2026

Months Ended March 31, 2025

and administration

Total Operating

Telecom Division

Fintech Division

Three Months Ended June 30, 2026

Six Months Ended June 30, 2026

Three Months Ended June 30, 2026

Six Months Ended June 30, 2026

Three Months Ended June 30, 2026

Six Months Ended June 30, 2026

Three Months Ended June 30, 2026

Six Months Ended June 30, 2026

Cost of revenue

Operating expenses

General and administration

Total Operating Expenses

Operating income/(loss)

income (expense)

(loss) before income taxes

income (loss)

and Amortization

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

Stock-based management compensation

Other non recurring

Adjusted EBITDA

Liquidity and Capital Resources

As of March 31, 2026, we had total current assets

of $29,726,482 and current liabilities of $30,028,395, resulting in a negative working capital of $301,913.

As of June 30, 2026, we had total current assets of $33,525,038 and current

liabilities of $30,816,253, resulting in a positive working capital of $2,708,785.

Our operating activities used $1,667,174 in the

three months ended March 31, 2026 as compared with $1,906,969 used in operating activities in the three months ended March 31, 2025.

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.

six months ended June 30, 2026 as compared with $1,649,283 used in operating activities in the six months ended June 30, 2025.

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

This is due to substantial non-cash adjustments and working capital changes:

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negative, but the gap between net loss and cash used is bridged by non-cash charges and working capital management.

Investing activities used $8,400 for the three

months ended March 31, 2026, compared to $58,645 in the same period of 2025.

The higher outflows in 2025 were mainly driven by the acquisition

of QXTEL and Globetopper.

The decrease in 2026 reflects lower investment activity compared to the prior period.

Investing activities used $22,584 for the six

months ended June 30, 2026, compared to $173,812 in the same period of 2025.

The decrease in 2026 reflects lower investment activity compared

to the prior period.

Financing activities provided $1,626,281 in the

current period, compared to $540,304 in the prior period.

current period, compared to $1,351,026 in the prior year.

The increase reflects higher net inflows from financing activities.

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The Company is transitioning from an expansion phase

in 2026, marked by the acquisition of Globetopper, to a more consolidated approach during the first nine months of 2026, with a greater

in 2025, marked by the acquisition of GlobeTopper, to a more consolidated approach during the first six months of 2026, with a greater

focus on cash preservation, working capital management, and non-cash financing tools.

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These conditions, including our recurring losses from

operations, negative working capital, and negative operating cash flows, raise substantial doubt about the Company’s ability to

continue as a going concern.

operations, and negative operating cash flows, raise substantial doubt about the Company’s ability to continue as a going concern.

See Note 3 to the consolidated financial statements for additional discussion.

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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, 2026.

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, 2026.

Critical Accounting Polices

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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, 2026;

however, we consider our critical accounting policies to be those related to the allowance

for doubtful accounts, valuation of assets, significant estimates in the valuation of financial instruments and income taxes.

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.

for the six months ended June 30, 2026;

however, we consider our critical accounting policies to be those related to the allowance for

doubtful accounts, valuation of assets, significant estimates in the valuation of financial instruments and income taxes.

Management bases

its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances.

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 March 31, 2026, there were no off-balance sheet

As of June 30, 2026, there were no off-balance sheet

arrangements.

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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