iQSTEL Inc 10-Q

Item 1. Financial Statements Our unaudited consolidated financial statements included in this Form 10-Q are as follows: F-1 Consolidated Balance Sheets as of June 30, 2026 (unaudited) and December 31, 2025; F-2 Consolidated Statements of Operations for the three and six months ended June 30, 2026 and 2025 (unaudited); F-3 Consolidated Statements of Stockholder’s Equity for the three and six months ended June 30, 2026 and 2025 (unaudited). F-4 Consolidated Statements of Cash Flows for the six months ended June 30, 2026 and 2025 (unaudited); and F-5 Notes to Consolidated Financial Statements (unaudited). These interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended June 30, 2026 are not necessarily indicative of the results that can be expected for the full year. 3 Table of Contents IQSTEL INC Consolidated Balance Sheets (Unaudited) June 30, December 31, 2026 2025 ASSETS Current Assets Cash $ 2,091,882 $ 2,155,359 Accounts receivable, net 27,693,581 30,259,020 Inventory 30,658 30,658 Due from related parties 509,020 639,519 Prepaid and other current assets 3,199,897 3,077,868 Total Current Assets 33,525,038 36,162,424 Property and equipment, net 500,021 615,048 Intangible assets, net 6,716,779 6,957,404 Goodwill 5,790,049 5,790,049 Deferred tax assets 459,472 459,472 Other assets 1,200,537 1,103,538 TOTAL ASSETS $ 48,191,896 $ 51,087,935 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 12,130,024 $ 9,167,288 Accrued and other current liabilities 13,705,659 19,050,496 Contract liabilities 1,040,597 1,391,377 Due to related parties 65,829 65,829 Loans payable - net of discount of $80,934 and $127,170, respectively 2,524,408 4,020,833 Loans payable - related parties 64,561 125,409 Contingent liability for acquisition of subsidiary 285,175 285,175 Stock payable 1,000,000 500,000 Total Current Liabilities 30,816,253 34,606,407 Loans payable, non-current 26,488 31,302 Employee benefits, non-current 169,599 169,599 TOTAL LIABILITIES 31,012,340 34,807,308 Stockholders' Equity Preferred stock: 1,200,000 authorized; $0.001 par value Series A Preferred stock: 10,000 designated; $ 0.001 par value, 10,000 shares issued and outstanding 10 10 Series B Preferred stock: 200,000 designated; $ 0.001 par value, 59,276 shares issued and outstanding, respectively 59 59 Series C Preferred stock: 200,000 designated; $ 0.001 par value, no shares issued and outstanding — — Series D Preferred stock: 100,000 designated; $ 0.001 par value, 16,865 and 18,020 shares issued and outstanding, respectively 17 18 Common stock: 26,000,000 authorized; $ 0.001 par value 10,052,672 and 4,668,017 shares issued and outstanding, respectively 10,052 4,668 Additional paid in capital 59,778,311 54,455,615 Accumulated deficit ( 47,010,050 ) ( 42,991,879 ) Accumulated other comprehensive loss ( 25,340 ) ( 25,340 ) Equity attributed to stockholders of IQSTEL Inc. 12,753,059 11,443,151 Equity attributable to noncontrolling interests 4,426,497 4,837,476 TOTAL STOCKHOLDERS' EQUITY 17,179,556 16,280,627 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 48,191,896 $ 51,087,935 The accompanying notes are an integral part of these unaudited consolidated financial statements. F- 1 Table of Contents IQSTEL INC Consolidated Statements of Operations (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Revenues $ 109,068,246 $ 72,183,236 $ 206,988,082 $ 129,816,052 Cost of revenue 106,321,441 70,311,749 202,160,579 126,009,607 Gross profit 2,746,805 1,871,487 4,827,503 3,806,445 Operating expenses General and administration 3,867,624 2,527,716 6,906,331 5,066,900 Total operating expenses 3,867,624 2,527,716 6,906,331 5,066,900 Operating loss ( 1,120,819 ) ( 656,229 ) ( 2,078,828 ) ( 1,260,455 ) Other income (expense) Other income 17,059 22,286 42,408 45,514 Other expenses — ( 68,584 ) ( 86,775 ) ( 79,746 ) Interest expense ( 313,626 ) ( 459,118 ) ( 664,624 ) ( 990,844 ) Loss on settlement of debt ( 926,126 ) ( 878,592 ) ( 926,126 ) ( 878,592 ) Loss on settlement of salary payable — ( 216,981 ) — ( 216,981 ) Total other expense ( 1,222,693 ) ( 1,600,989 ) ( 1,635,117 ) ( 2,120,649 ) Net loss before provision for income taxes ( 2,343,512 ) ( 2,257,218 ) ( 3,713,945 ) ( 3,381,104 ) Income taxes ( 62,109 ) ( 91,696 ) ( 77,612 ) ( 112,271 ) Net loss ( 2,405,621 ) ( 2,348,914 ) ( 3,791,557 ) ( 3,493,375 ) Less: Net income attributable to noncontrolling interests 218,237 58,064 189,894 71,561 Net loss attributed to IQSTEL Inc. $ ( 2,623,858 ) $ ( 2,406,978 ) $ ( 3,981,451 ) $ ( 3,564,936 ) Dividend on Series D Preferred Stock ( 36,720 ) — ( 36,720 ) — Undeclared dividend on Series D Preferred Stock — — ( 16,567 ) — Net loss attributed to stockholders of IQSTEL Inc. $ ( 2,660,578 ) $ ( 2,406,978 ) $ ( 4,034,738 ) $ ( 3,564,936 ) Comprehensive loss Net loss $ ( 2,405,621 ) $ ( 2,348,914 ) $ ( 3,791,557 ) $ ( 3,493,375 ) Less: Comprehensive income attributable to noncontrolling interests 218,237 58,064 189,894 71,561 Net comprehensive loss attributed to IQSTEL Inc. $ ( 2,623,858 ) $ ( 2,406,978 ) $ ( 3,981,451 ) $ ( 3,564,936 ) Basic and diluted loss per common share $ ( 0.38 ) $ ( 0.82 ) $ ( 0.68 ) $ ( 1.28 ) Weighted average number of common shares outstanding - Basic and diluted 6,936,634 2,952,905 5,913,074 2,792,279 The accompanying notes are an integral part of these unaudited consolidated financial statements. F- 2 Table of Contents IQSTEL INC Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) For the Three and Six Months ended June 30, 2026 Series A Preferred Stock Series B Preferred Stock Series D Preferred Stock Common Stock Shares Amount Shares Amount Shares Amount Shares Amount Additional Paid in Capital Accumulated Deficit Accumulated Comprehensive Loss Total Non Controlling Interest Total Stockholders' Equity Balance - December 31, 2025 10,000 $ 10 59,276 $ 59 18,020 $ 18 4,668,017 $ 4,668 $ 54,455,615 $ ( 42,991,879 ) $ ( 25,340 ) $ 11,443,151 $ 4,837,476 $ 16,280,627 Common stock issued for conversion of series D preferred stock — — — — ( 8,631 ) ( 9 ) 406,476 406 ( 397 ) — — — — — Common stock issued for compensation — — — — — — 1,875 2 4,918 — — 4,920 — 4,920 Dividend to non-controlling interest — — — — — — — — — — — — ( 600,873 ) ( 600,873 ) Net income (loss) — — — — — — — — — ( 1,357,593 ) — ( 1,357,593 ) ( 28,343 ) ( 1,385,936 ) Balance - March 31, 2026 10,000 $ 10 59,276 $ 59 9,389 $ 9 5,076,368 $ 5,076 $ 54,460,136 $ ( 44,349,472 ) $ ( 25,340 ) $ 10,090,478 $ 4,208,260 $ 14,298,738 Common stock issued for conversion of series D preferred stock — — — — ( 241,287 ) ( 241 ) 3,576,577 3,577 ( 3,336 ) — — — — — Series D Preferred stock issued for settlement of debt — — — — 247,140 247 — — 4,426,290 — — 4,426,537 — 4,426,537 Series D Preferred stock issued as dividend — — — — 1,623 2 — — 36,718 ( 36,720 ) — — — — Common stock issued for cash and receivable — — — — — — 895,000 895 821,041 — — 821,936 — 821,936 Common stock issued for compensation — — — — — — 1,875 2 2,675 — — 2,677 — 2,677 Common stock issued for service — — — — — — 129,717 129 535,160 — — 535,289 — 535,289 Common stock issued for financing commitment — — — — — — 373,135 373 ( 373 ) — — — — Common stock payable for financing commitment — — — — — — — — ( 500,000 ) — — ( 500,000 ) — ( 500,000 ) Net loss — — — — — — — — — ( 2,623,858 ) — ( 2,623,858 ) 218,237 ( 2,405,621 ) Balance - June 30, 2026 10,000 $ 10 59,276 $ 59 16,865 $ 17 10,052,672 $ 10,052 $ 59,778,311 $ ( 47,010,050 ) $ ( 25,340 ) $ 12,753,059 $ 4,426,497 $ 17,179,556 For the Three and Six Months ended June 30, 2025 Series A Preferred Stock Series B Preferred Stock Common Stock Shares Amount Shares Amount Shares Amount Additional Paid in Capital Accumulated Deficit Accumulated Comprehensive Loss Total Non-Controlling Interest Total Stockholders' Equity Balance - December 31, 2024 10,000 $ 10 35,537 $ 36 — — 2,537,209 $ 2,537 $ 39,943,924 $ ( 32,703,410 ) $ ( 25,340 ) $ 7,217,757 $ 4,682,506 $ 11,900,263 Common stock issued for compensation — — — — — — 1,875 2 32,813 — — 32,815 — 32,815 Common stock issued for conversion of debt — — — — — — 94,981 95 835,739 — — 835,834 — 835,834 Common stock issued for common stock payable — — — — — — 3,563 4 ( 4 ) — — — — — Dividend to non-controlling interest — — — — — — — — — ( 68,645 ) — ( 68,645 ) — ( 68,645 ) Net income (loss) — — — — — — — — — ( 1,157,958 ) — ( 1,157,958 ) 13,497 ( 1,144,461 ) Balance - March 31, 2025 10,000 $ 10 35,537 $ 36 — — 2,637,628 $ 2,638 $ 40,812,472 $ ( 33,930,013 ) $ ( 25,340 ) $ 6,859,803 $ 4,696,003 $ 11,555,806 Series B Preferred stock issued for settlement of salary payable — — 6,571 6 — — — — 848,475 — — 848,481 — 848,481 Common stock issued for compensation — — — — — — 1,875 2 22,381 — — 22,383 — 22,383 Common stock issued for conversion of debt — — — — — — 599,933 600 2,391,470 — — 2,392,070 — 2,392,070 Common stock issued for settlement of debt — — — — — — 264,980 265 1,886,393 — — 1,886,658 — 1,886,658 Reverse split adjustment — — — — — — 38 — — — — — — — Dividend to non-controlling interest — — — — — — — — — ( 68,484 ) — ( 68,484 ) — ( 68,484 ) Net income (loss) — — — — — — — — — ( 2,406,978 ) — ( 2,406,978 ) 58,064 ( 2,348,914 ) Balance - June 30, 2025 10,000 $ 10 42,108 $ 42 — — 3,504,454 $ 3,505 $ 45,961,191 $ ( 36,405,475 ) $ ( 25,340 ) $ 9,533,933 $ 4,754,067 $ 14,288,000 The accompanying notes are an integral part of these unaudited consolidated financial statements. F- 3 Table of Contents IQSTEL INC Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, 2026 2025 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 3,791,557 ) $ ( 3,493,375 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock based compensation 542,886 55,198 Bad debt expense 14,364 4,442 Depreciation and amortization 326,736 288,224 Amortization of debt discount 162,026 343,834 Loss on settlement of debt 926,126 878,592 Loss on settlement of salary payable — 216,981 Changes in operating assets and liabilities: Accounts receivable 3,564,196 33,486,603 Prepaid and other assets 434,048 ( 4,552,575 ) Accounts payable 1,241,794 1,585,727 Accrued and other current liabilities ( 4,737,013 ) ( 30,462,934 ) Contract liability ( 350,780 ) — Net cash used in operating activities ( 1,667,174 ) ( 1,649,283 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 3,083 ) ( 95,189 ) Payment of loan receivable - related party ( 26,201 ) ( 29,462 ) Collection of amounts due from related parties 6,700 839 Net cash used in investing activities ( 22,584 ) ( 173,812 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from loans payable 1,800,000 3,215,000 Repayments of loans payable ( 15,934 ) ( 15,776 ) Repayments of note payable issued for acquisition of subsidiary — ( 1,244,786 ) Repayment of loans payable - related parties ( 60,848 ) ( 389,514 ) Proceeds from common stock issued 168,860 — Proceeds from convertible notes — 987,500 Repayment of convertible notes — ( 1,064,269 ) Dividend paid to non-controlling interest ( 265,797 ) ( 137,129 ) Net cash provided by financing activities 1,626,281 1,351,026 Net change in cash ( 63,477 ) ( 472,069 ) Cash, beginning of period 2,155,359 2,510,357 Cash, end of period $ 2,091,882 $ 2,038,288 Supplemental cash flow information Cash paid for interest $ 473,406 $ 386,539 Cash paid for taxes $ 93,528 $ 109,870 Non-cash transactions: Series B Preferred stock issued for settlement of salary payable $ — $ 848,481 Series D Preferred stock issued as dividend $ 36,720 $ — Series D Preferred stock issued for settlement of debt $ 4,426,537 $ 1,886,658 Common stock issued for conversion of debt $ — $ 3,227,903 Common stock issued for common stock payable $ — $ 4 Common stock issued for conversion of Series D preferred stock $ 3,983 $ — Note payable issued for acquisition of subsidiary $ — $ 1,000,000 Common stock issued for commitment fee $ 500,000 $ — Common stock payable for commitment fee $ 500,000 $ — The accompanying notes are an integral part of these unaudited consolidated financial statements. F- 4 Table of Contents IQSTEL INC Notes to the Unaudited Consolidated Financial Statements June 30, 2026 NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS Organization and Operations IQSTEL Inc. (“IQSTEL”, “we”, “us”, or the “Company”) was incorporated under the laws of the State of Nevada on June 24, 2011 , under the name of B-Maven Inc. The Company changed its name to PureSnax International, Inc. on September 18, 2015, and more recently it changed its name to IQSTEL Inc. on August 7, 2018. The Company has been engaged in the business of telecommunication services as a wholesale carrier of voice, SMS and data for other telecom companies around the World with over 603 active interconnection agreements with mobile companies, fixed line companies and other wholesale carriers. The Company is a technology company with a presence in 20 countries and over 100 employees that is offering leading-edge services through its three business divisions. The Telecom Division, which represents the majority of current operations and which also represents 87% of all of the Company’s revenues for the six months ended June 30, 2026, offers VoIP, SMS, proprietary Internet of Things (IoT) solutions, and international fiber-optic connectivity through its subsidiaries: Etelix.com USA, LLC, SwissLink Carrier AG, Smartbiz Telecom LLC, Whisl Telecom LLC, IoT Labs, LLC, QGlobal SMS, LLC, and QXTEL LIMITED. Also under the Telecom Division, the Company’s developing Blockchain Platform Business Line offers our proprietary Mobile Number Portability Application (MNPA) to serve the in-country portability needs through its subsidiary, ItsBchain, LLC. The Company’s developing Fintech Business Line offers a complete Fintech ecosystem MasterCard Debit Card, US Bank Account (No SSN Needed), Mobile App/Wallet (Remittances, Mobile Top Up). The Company’s Fintech subsidiary, Global Money One Inc., is to provide immigrants access to reliable financial services that makes it easier to manage their money and stay connected with their families back home. Additionally, GlobeTopper LLC (www.GlobeTopper.com), our most recent acquisition, plays a strategic role in supporting the expansion and integration of our business divisions. Through its operations, the Company continues to strengthen its global presence and enhance the synergy in Fintech segments through its solution for gift card programs, representing 13% of our revenues for the six months ended June 30, 2026. Our developing Artificial Intelligence (AI) division, Reality Border (www.realityborder.com), was initially developed as an AI-enhanced immersive digital experience platform intended to support customer interaction and content presentation in virtual environments. Building on that early development work, including conversational interfaces, multilingual interaction models, and AI-driven workflow design, Reality Border now develops practical AI software solutions for enterprise and telecommunications applications. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited interim consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of June 30, 2026, and the results of operations and cash flows for the periods presented. The results of operations for the six months ended June 30, 2026, 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, 2025, filed with the SEC on April 6, 2026, and amended on April 23, 2026. F- 5 Table of Contents Consolidation Policy The consolidated financial statements of the Company include the accounts of the Company and its owned subsidiaries, Etelix.com USA, LLC (“Etelix”), SwissLink Carrier AG (“Swisslink”), ITSBCHAIN, LLC (“ItsBchain”), QGLOBAL SMS, LLC (“QGlobal”), IoT Labs, LLC (“IoT Labs”), Global Money One Inc (“Global Money One”), Whisl Telecom LLC (“Whisl”), Smartbiz Telecom LLC (“Smartbiz”), QXTEL LIMITED (“QXTEL”) and GlobeTopper LLC (“GlobeTopper”). All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments. Cash and Cash Equivalents Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company had no cash equivalents at June 30, 2026, and December 31, 2025. Accounts Receivable and Allowance for Uncollectible Accounts Substantially all of the Company’s accounts receivable balance is related to trade receivables. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company estimates expected credit losses related to accounts receivable balances based on a review of available and relevant information including current economic conditions, projected economic conditions, historical loss experience, account aging, and other factors that could affect collectability. No allowance for doubtful accounts was recorded as of June 30, 2026, and December 31, 2025. The following table shows the rollforward of the allowance for credit losses for the six months ended June 30, 2026 and 2025: Six months ended June 30, 2026 2025 Balance , at beginning of period $ — $ — Provision for credit losses 14,364 4,442 Deductions ( 14,364 ) ( 4,442 ) Balance at end of period $ — $ — During the three and six months ended June 30, 2026 and 2025, the Company recorded bad debt expense as follows: Three Months Ended Six Months Ended June 30, June 30, 2026 2025 2026 2025 Bad debt expense $ — $ 4,442 $ 14,364 $ 4,442 F- 6 Table of Contents Net Income (Loss) Per Share of Common Stock The Company has adopted Accounting Standards Codification (ASC) 260, ” Earnings per Share ” which requires presentation of basic earnings per share on the face of the statements of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic earnings per share computation. In the accompanying financial statements, basic loss per share is computed by dividing net loss to common stockholders less the cumulative undeclared preferred stock dividend by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants unless the result would be antidilutive. Dilutive potential common shares include outstanding Series B Preferred stock and Series D Preferred stock and they were excluded from the computation of diluted net loss per share as the result was anti-dilutive for the six months ended June 30, 2026, and 2025. Concentrations of Credit Risk The Company’s financial instruments subject to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable and related party payables. The Company maintains its cash and cash equivalents with financial institutions that management believes to be of high credit quality. At times, balances maintained with a single financial institution may exceed applicable governmental insurance limits. Based on Federal Deposit Insurance Corporation coverage in the United States, Switzerland’s deposit protection system (Esisuisse), and the Financial Services Compensation Scheme applicable in the United Kingdom, 58% and 59% of cash and cash equivalents as of June 30, 2026 and December 31, 2025, respectively, were covered by applicable governmental insurance limits. As of June 30, 2026, approximately 80 % of total accounts receivable was concentrated among the Company’s top 13 customers, compared with the same percentage concentrated among 20 customers as of December 31, 2025. The largest customer represented 18 % of total accounts receivable as of June 30, 2026, compared with 15 % as of December 31, 2025. In each such period, 12 of these customers were repeat customers and accounted for 80 % and 73 % of total accounts receivable as of June 30, 2026, and December 31, 2025, respectively. This concentration may expose the Company to a moderate to low level of credit risk, as most of these customers are bilateral counterparties that also maintain accounts payable with the Company. During the six months ended June 30, 2026, we had 22 customers representing 87 % of our revenue compared to 25 customers representing 86 % of our revenue for the six months ended June 30, 2025. For the six months ended June 30, 2026, and 2025, 28 % and 41 % 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. Financial Instruments The Company follows ASC 820, “ Fair Value Measurements and Disclosures, ” which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below: Level 1 Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. F- 7 Table of Contents Level 2 Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3 Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The carrying values of our financial instruments, including, cash; accounts receivable; prepaid and other current assets; goodwill; accounts payable; accrued liabilities and other current liabilities; and due from/to related parties approximate their fair values due to the short-term maturities of these financial instruments. Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated. It is not, however, practical to determine the fair value of amounts due to related parties due to their related party nature. Revenue Recognition Telecommunications The Company recognizes revenue related to monthly usage charges and other recurring charges during the period in which the telecommunication services are rendered, provided that persuasive evidence of a sales arrangement exists, and collection is reasonably assured. Management considers persuasive evidence of a sales arrangement to be a written interconnection agreement. The Company’s payment terms vary by client. Usage charges refer to the fees that customers are billed based on their actual usage of the services. For voice services, this typically means charges are based on the duration of calls made. For SMS (text messaging), it usually means charges per message sent. Other recurring charges are referred to charges for services such as (1) Global DIDs, (2) Global Toll-Free Numbers, (3) PBX (Private Branch Exchange) for small businesses, and (4) SIP Trunking. The provision of these services usually has set-up fees and are offered on a subscription or month-to-month basis. Revenue is reported on a gross basis since the Company acts as the principal in the transaction, meaning it has control over the goods or services before they are transferred to the customer. This includes having the primary responsibility for fulfilling the contract and determining the price. With respect to the specific performance obligations of the Company in its contracts with its customers, our standard service agreement establishes the following: • The Company agrees to furnish to Customer, and Customer agrees to purchase from the Company, International Long Distance telecommunication services and/or SMS services at the rates agreed to in writing by the Parties. • The Company will provide, operate and maintain communications equipment, international links and network administration and support in the United States and other countries as may be agreed upon. • The Company will be responsible for its own expenses and will provide, operate, and maintain transmission facilities required to link its domestic network with the other Party's nearest point of presence (POP). • The Company shall provide Customer all required IP network addresses, Domain Name Server (DNS) information and, if necessary, the associated prefixes used to exchange voice traffic as provided on the provisioning form. • The Company shall take all appropriate security measures to protect its network from fraudulent traffic coming from unknown or unauthorized sources. Any and all IP and network information received by the Company from Customer for the purposes of this agreement shall be strictly confidential, and disclosed only to those employees or personnel with a need to know. F- 8 Table of Contents The Company recognizes revenue from telecommunication services in accordance with ASC 606. Topic 606 establishes a comprehensive 5 step framework for determining revenue recognition. Under this framework, the Company considers each service a single performance obligation, since typically, the Company provides a series of distinct services. 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. Fintech 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 recognition framework to the Company's operations is depicted as follows: Topic 606 Conceptual Framework Related Company Policy & Procedures Step 1 Identify the contract(s) with customer A contract is defined as an approved mutual agreement between the Company and a customer setting performance obligation, and criteria that must be met in accordance with the Company's customary commercial business practices and entered into with the probable expectation that all estimated consideration will be realized in the ordinary course of business. Step 2 Identify the performance obligations Performance obligations are identified in the customer agreement, and any subsequent amendments stated in per minute, time and message usage criteria; 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 The transaction price is determined at contract inception and is subsequently reviewed periodically to reflect applicable rate amendments, trends in regulatory, market conditions and usage of service 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 The transaction price is allocated to each performance obligation based on the standalone contractual selling price of the time measured service, net of any related discount. Step 5 Recognize revenue when the entity satisfies a performance obligation The Company recognizes revenues from contracts with customers when control of the usage of the services 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. F- 9 Table of Contents Cost of revenue Costs of revenue represent direct charges from vendors that the Company incurs to deliver services to its customers. These costs include usage charges for voice and SMS termination services, which are recognized over time consistent with the Company’s revenue-recognition pattern for these services, as well as the acquisition cost of digital prepaid products purchased from issuing partners for resale, which is recognized at a point in time when the products are made available to customers. Recently Issued Accounting Pronouncements In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03, “ Final Standard on Income Statement: Disaggregation of Income Statement Expenses” , which requires disaggregated disclosure of income statement expenses for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. This guidance will be effective for us on January 1, 2027. The Company is currently evaluating the impact of adopting ASU 2024-03. In December 2025, the FASB issued ASU 2025-11, “ Interim Reporting (Topic 270): Narrow-Scope Improvements” , which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-11. In December 2025, the FASB issued ASU No. 2025-12, “ Codification Improvements” . The ASU addresses thirty-three items, representing the changes to the Codification that (1) clarify, (2) correct errors, or (3) make minor improvements. Generally, the amendments in this Update are not intended to result in significant changes for most entities. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2026. The adoption method of this ASU may vary, on an issue-by-issue basis. Early adoption is permitted. We are currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on our consolidated financial statements. The Company has reviewed all other recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial statements. NOTE 3 - GOING CONCERN The Company's consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has suffered recurring losses from operations, has negative cash flows from operating activities and does not have an established source of revenues sufficient to cover its operating costs. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish its business plan and eventually attain profitable operations. During the next year, the Company’s foreseeable cash requirements will relate primarily to the continued development and expansion of its operating segments, the maintenance of its standing within the industry, and the ongoing execution of its commercial and marketing initiatives. Although management expects to continue strengthening its liquidity position, the Company may experience periods of cash shortfall and could be required to raise additional capital. During the current year, the Company successfully accessed external financing through the implementation and utilization of an Equity Line of Credit , which has provided incremental funding to support operations and strategic initiatives. Management intends to continue evaluating similar capital-raising alternatives as needed to ensure adequate liquidity. . Historically, the Company has relied upon funds from its stockholders and loans from third parties. Management may raise additional capital through future public or private offerings of the Company's stock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company's failure to do so could have a material and adverse effect upon its operations and its stockholders. F- 10 Table of Contents NOTE 4 – PREPAID AND OTHER CURRENT ASSETS Prepaid and other current assets at June 30, 2026, and December 31, 2025, consisted of the following: June 30, December 31, 2026 2025 Other receivable $ 82,390 $ 298,461 Prepaid expenses 1,839,778 2,192,508 Advance payment 21,000 21,000 Tax receivable 53,305 63,284 Deposit for acquisition of asset 357,500 356,000 Security deposit 192,848 146,615 Subscription receivable 653,076 — Prepaid Expenses $ 3,199,897 $ 3,077,868 NOTE 5 – PROPERTY AND EQUIPMENT Property and equipment at June 30, 2026, and December 31, 2025, consisted of the following: June 30, December 31, 2026 2025 Telecommunication equipment $ 700,417 $ 700,417 Telecommunication software 768,247 800,247 Vehicle 86,643 86,643 Other equipment 164,169 159,451 Total property and equipment 1,719,476 1,746,758 Accumulated depreciation and amortization ( 1,219,455 ) ( 1,131,710 ) Total property and equipment $ 500,021 $ 615,048 During the three and six months ended June 30, 2026 and 2025, the Company recognized depreciation expenses as following: Three Months Ended Six Months Ended June 30, June 30, 2026 2025 2026 2025 Depreciation expenses $ 33,778 $ 40,916 $ 86,111 $ 47,598 NOTE 6 – INTANGIBLE ASSETS Intangible assets at June 30, 2026, and December 31, 2025, consisted of the following: June 30, 2026 NOTE 6 - INTANGIBLE ASSETS - Intangible Assets (Details) Useful life Gross carrying amount Accumulated amortization Net carrying amount New gas regulator intangible Not yet in service $ 99,592 $ — 99,592 Interconnection agreements 16 years 7,700,000 ( 1,082,813 ) 6,617,187 $ 7,799,592 $ ( 1,082,813 ) $ 6,716,779 F- 11 Table of Contents December 31, 2025 Useful life Gross carrying amount Accumulated amortization Net carrying amount New gas regulator intangible Not yet in service $ 99,592 $ — $ 99,592 Interconnection agreements 16 years 7,700,000 ( 842,188 ) 6,857,812 $ 7,799,592 $ ( 842,188 ) $ 6,957,404 The following table outlines the estimated future amortization expense at June 30, 2026: 2026 (6 months remaining) $ 240,625 2027 481,250 2028 481,250 2029 481,250 2030 481,250 Thereafter 4,451,562 $ 6,617,187 During the three and six months ended June 30, 2026 and 2025, the Company recognized amortization expenses as following: Three Months Ended Six Months Ended June 30, June 30, 2026 2025 2026 2025 Amortization expenses $ 120,312 $ 120,312 $ 240,625 $ 240,625 NOTE 7 – ACCRUED AND OTHER CURRENT LIABILITIES Accrued and other current liabilities at June 30, 2026, and December 31, 2025, consisted of the following June 30, December 31, 2026 2025 Accrued liabilities $ 1,738,083 $ 1,242,848 Cost provision 11,287,211 17,190,827 Accrued interest 54,316 84,174 Salary payable - management 42,728 68,364 Salary payable and employee benefit 65,579 71,956 Other current liabilities 197,747 241,492 Income tax payable 134,919 150,835 Dividend payable 185,076 — Total accrued and other current liabilities $ 13,705,659 $ 19,050,496 F- 12 Table of Contents NOTE 8 - LOANS PAYABLE Loans payable at June 30, 2026, and December 31, 2025, consisted of the following: June 30, December 31, Interest 2026 2025 Term rate Martus $ 97,401 $ 97,401 Note was issued on October 23, 2018 and due on January 2, 2027 5.0 % Darlene Covid19 50,179 60,703 Note was issued on April 1, 2020 and due on March 31, 2027 0.0 % Promissory note payable — 794,737 Note was issued July 16, 2025 and due on February 26, 2026 24.0 % Promissory note payable — 794,737 Note was issued August 8, 2025 and due on March 21, 2026 24.0 % Promissory note payable — 794,737 Note was issued September 16, 2025 and due on April 24, 2026 24.0 % Promissory note payable — 531,579 Note was issued October 14, 2025 and due on May 27, 2026 24.0 % Promissory note payable — 531,579 Note was issued November 10, 2025 and due on June 23, 2026 24.0 % Promissory note payable 531,579 531,579 Note was issued December 22, 2025 and due on August 4, 2026 24.0 % Promissory note payable 531,579 — Note was issued February 9, 2026 and due on September 22, 2026 24.0 % Promissory note payable 265,789 — Note was issued March 26, 2026 and due on November 6, 2026 24.0 % Financing loan 36,882 42,253 $1,148.94 monthly payment for 48 months 7.87 % Promissory note payable 531,579 — Note was issued April 2, 2026 and due on November 13, 2026 24.0 % Promissory note payable 265,789 — Note was issued May 12, 2026 and due on December 23, 2026 24.0 % Promissory note payable 321,053 — Note was issued June 8, 2026 and due on January 19, 2027 24.0 % Total 2,631,830 4,179,305 Less: Unamortized debt discount ( 80,934 ) ( 127,170 ) Total loans payable 2,550,896 4,052,135 Less: Current portion of loans payable ( 2,524,408 ) ( 4,020,833 ) Long-term loans payable $ 26,488 $ 31,302 F- 13 Table of Contents Loans payable - related parties at June 30, 2026, and December 31, 2025, consisted of the following: June 30, December 31, Interest 2026 2025 Term rate 49% of Shareholder of SwissLink $ 21,606 $ 21,606 Note is due on demand 0.0 % 49% of Shareholder of SwissLink 42,955 103,803 Note is due on demand 5.0 % Total 64,561 125,409 Less: Current portion of loans payable - related parties ( 64,561 ) ( 125,409 ) Long-term loans payable - related parties $ — $ — During the six months ended June 30, 2026 and 2025, the Company borrowed from third parties totaling $ 1,915,789 and $ 3,215,000 , respectively, which includes original issue discount and financing costs of $ 115,789 and $ 226,374 , respectively, and repaid the principal amount of $ 15,934 and $ 1,260,562 (consisting of $15,776 of payments on loans payable and $1,244,786 of payments on a note payable issued for the acquisition of a subsidiary), respectively. Additionally, during the six months ended June 30, 2026, and 2025, the Company repaid the principal amount of notes payable to related parties totaling $ 60,848 and $ 389,514 , respectively. During the six months ended June 30, 2026, the Company settled five (5) promissory notes with an aggregate principal amount of $ 3,447,368 and accrued interest of $ 397,348 by issuing 247,140 shares of Series D Preferred Stock valued at $ 4,426,537 . As a result, the Company recorded a loss on settlement of debt of $581,821. . During the three and six months ended June 30, 2026 and 2025, the Company recognized interest expenses and amortization debt discount as follows: Three Months Ended Six Months Ended June 30, June 30, 2026 2025 2026 2025 Interest expenses $ 243,086 $ 69,827 $ 502,598 $ 169,502 Amortization of debt discount $ 70,540 $ 41,778 $ 162,026 $ 77,883 NOTE 9 – STOCK PAYABLE At June 30, 2026, and December 31, 2025, stock payable recorded as liabilities are as follows; June 30, December 31, 2026 2025 Stock payable for acquisition in July 2025 $ 500,000 $ 500,000 Stock payable for commitment under equity purchase agreement 500,000 — Total $ 1,000,000 $ 500,000 F- 14 Table of Contents NOTE 10 – STOCKHOLDERS’ EQUITY Common Stock The Company’s authorized common stock consists of 26,000,000 shares of common stock with a par value of $ 0.001 per share. During the six months ended June 30, 2026, the Company issued 5,384,655 shares of common stock, valued at fair market value on issuance as follows: · 3,983,053 shares upon conversion of Series D Preferred Stock · 895,000 shares for cash proceeds of $ 168,860 and receivable of $ 653,076 under equity purchase agreement, which the Company received in July 2026. · 3,750 shares issued as compensation to our directors valued at $ 7,596 · 129,717 shares for service from third parties valued at $ 535,290 · 373,135 shares issued in connection with a financing agreement, valued at $ 500,000 At June 30, 2026, and December 31, 2025, 10,052,672 and 4,668,017 shares of common stock were issued and outstanding, respectively. Dividend Declaration In January 2026, QXTEL, a subsidiary of the Company, paid cash dividend of $ 9,873 and non-cash dividend of $ 150,000 to QXTEL’s minority (non-controlling) shareholders for fiscal year 2025. In addition, QXTEL declared a dividend of $ 900,000 for fiscal year 2026 to its shareholders, of which $ 459,000 to IQSTEL was eliminated on consolidation. During the three and six months ended June 30, 2026, the Company paid $ 174,339 and $ 265,797 , respectively, to QXTEL’s minority (non-controlling) shareholders, and as of June 30, 2026, $ 185,076 was recorded as dividend payable to minority shareholders under accrued and other current liabilities. Equity Purchase Agreement On April 30, 2026, the Company entered into (i) an Equity Purchase Agreement (the “Purchase Agreement”) and (ii) a Registration Rights Agreement (the “Registration Rights Agreement”) with M2B Funding Corp. (the “Investor”). Pursuant to the Purchase Agreement, the Company may, from time to time during the Commitment Period, require the Investor to purchase up to $ 50,000,000 of the Company’s common stock, at a per-share price equal to 94 % of the lowest daily volume-weighted average price during the six Trading Days following delivery of a Put Notice, subject to volume-based caps, a daily maximum of $ 500,000 The Commitment Period began on the date the Registration Statement was declared effective by the SEC (the “Effective Date”) and ends on the earlier of: (i) the date the Investor has purchased the full $ 50,000,000 , (ii) the date that is sixty ( 60 ) months after the Effective Date, (iii) written termination notice by the Company, or (iv) termination by the Investor as provided in the Purchase Agreement. As consideration for the commitment, the Company will issue Commitment Shares valued at $ 1,000,000 (half of which was issued on the Execution Date; half on the 12-month anniversary or earlier termination), subject to a 20 % daily volume leak-out restriction. Preferred Stock The Company’s authorized preferred stock consists of 1,200,000 shares of preferred stock with a par value of $ 0.001 per share. F- 15 Table of Contents Series A Preferred Stock On November 3, 2020, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock entitled Series A Preferred Stock, consisting of up 10,000 shares, par value $ 0.001 . Under the Certificate of Designation, holders of Series A Preferred Stock will participate on an equal basis per-share with holders of our common stock in any distribution upon winding up, dissolution, or liquidation. Holders of Series A Preferred Stock are entitled to vote together with the holders of our common stock on all matters submitted to stockholders at a rate of 51% of the total vote of stockholders. The rights of the holders of Series A Preferred Stock are defined in the relevant Certificate of Designation filed with the Nevada Secretary of State on November 3, 2020 At June 30, 2026, and December 31, 2025, 10,000 shares of Series A Preferred Stock were issued and outstanding. Series B Preferred Stock On November 11, 2020, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock entitled Series B Preferred Stock, consisting of up 200,000 shares, par value $ 0.001 . Under the Certificate of Designation, holders of Series B Preferred Stock will receive a liquidation preference of $81 per share in any distribution upon winding up, dissolution, or liquidation of the Company before junior security holders, as provided in the designation . Holders of Series B Preferred Stock are entitled to receive as, when, and if declared by the Board of Directors, dividends in kind at an annual rate equal to twenty four percent (24%) of $81 per share for each of the then outstanding shares of Series B Preferred Stock, calculated on the basis of a 360-day year consisting of twelve 30-day months . Holders of Series B Preferred Stock do not have voting rights but may convert into common stock after twelve months from the issuance date, at a conversion rate of one thousand (1,000) shares of Common Stock for every one (1) share of Series B Preferred Stock. Upon conversion, the shares are subject to a one-year restriction on sales into the market of no more than 5% previous month’s stock liquidity. At June 30, 2026, and December 31, 2025, 59,276 shares of Series B Preferred Stock were issued and outstanding. Series C Preferred Stock On January 7, 2021, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock entitled Series C Preferred Stock, consisting of up 200,000 shares, par value $ 0.001 . Under the Certificate of Designation, holders of Series C Preferred Stock will rank junior to the Series B Preferred Stock, but on par with common stock and Series A Preferred Stock in any distribution upon winding up, dissolution, or liquidation of the Company, as provided in the designation . The holders of shares of Series C Preferred Stock have no dividend rights except as may be declared by the Board in its sole and absolute discretion, out of funds legally available for that purpose . Holders of Series C Preferred Stock do not have voting rights but may convert into common stock after twenty four months from the issuance date, at a conversion rate of twelve point five (12.5) shares of Common Stock for every one (1) share of Series C Preferred Stock. Upon conversion, the shares are subject to a one-year restriction on sales into the market of no more than 5% previous month’s stock liquidity. The rights of the holders of Series C Preferred Stock are defined in the relevant Certificate of Designation filed with the Nevada Secretary of State on January 7, 2021. At June 30, 2026, and December 31, 2025, 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 one thousand (1,000) shares of Common Stock for every one (1) share of Series D Preferred Stock . F- 16 Table of Contents 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. On October 10, 2025, the Company filed a Second 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, and first amended on July 7, 2025. On February 3, 2026, the Company filed a Third Amended and Restated Certificate of Designation, which includes the following key terms. 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 (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 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. Liquidation Preference: Senior to common stock, Series A Preferred Stock, and Series C Preferred Stock, and on parity with Series B Preferred Stock, in any liquidation, dissolution, or winding up of the Company. Voting Rights: No voting rights, except as required by law or for amendments to the Certificate of Designation or Articles of Incorporation that would alter the Series D Preferred Stock’s rights. Leak-Out Restriction: After three months, conversions to common stock and sales are limited to 10% of the average daily trading volume of the Company’s common stock per holder. During the six months ended June 30, 2026, the Company issued 248,763 shares of Series D Preferred Stock as follows, · 1,623 shares as dividend of Series D Preferred Stock, valued at $ 36,720 · 247,140 shares for settlement of debt, valued at $ 4,426,537 During the six months ended June 30, 2026, 249,918 shares of Series D Preferred Stock were converted into 3,983,053 shares of common stock. At June 30, 2026 and December 31, 2025, 16,865 shares and 18,020 shares Series D Preferred Stock were issued and outstanding, respectively. NOTE 11 - RELATED PARTY TRANSACTIONS Due from related parties During the six months ended June 30, 2026 and 2025, the Company loaned $ 26,201 and $ 29,462 to a related party and collected $ 6,700 and $ 839 , respectively. At June 30, 2026, and December 31, 2025, the Company had amounts due from related parties of $ 509,020 and $ 639,519 , respectively. The loans are unsecured, non-interest bearing and due on demand. Due to related parties At June 30, 2026, and December 31, 2025, the Company had amounts due to related parties of $ 65,829 . The amounts are unsecured, non-interest bearing and due on demand. F- 17 Table of Contents Employment agreements 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, 2026, and 2025, the Company recorded management salaries of $ 423,000 and $ 549,000 , stock-based compensation bonuses of $ 7,596 and $ 55,198 , respectively. At June 30, 2026, and December 31, 2025, the Company recorded and accrued management salaries of $ 42,728 and $ 68,364 , respectively. NOTE 12 – COMMITMENTS AND CONTINGENCIES Leases and Long-term Contracts The Company has not entered into any long-term leases, contracts or commitments. The Company leases facilities, the term of which is 12 months . The Company incurred rent expenses as follows: Three Months Ended Six Months Ended June 30, June 30, 2026 2025 2026 2025 Rent expenses $ 11,255 $ 7,350 $ 22,579 $ 14,324 NOTE 13 - SEGMENTS 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. The following tables show operating activities information by geographic segment for the three and six months ended June 30, 2026, and 2025: Three months ended June 30, 2026 NOTE 13 - SEGMENTS - Operating Activities by Geographic Segment (Details) USA Switzerland UK Elimination Total Revenues $ 73,512,900 $ 1,052,995 $ 35,145,240 $ ( 642,889 ) $ 109,068,246 Cost of revenue 72,291,196 840,056 33,644,529 ( 454,340 ) 106,321,441 Gross profit 1,221,704 212,939 1,500,711 ( 188,549 ) 2,746,805 Operating expenses Salaries, wages and benefits 442,951 — 649,672 — 1,092,623 Technology 501,455 118,246 166,074 ( 91,861 ) 693,914 Professional fees 285,426 9,469 — — 294,895 Legal and regulatory 44,104 7,243 — — 51,347 Travel and events 53,408 5,698 61,164 ( 1,121 ) 119,149 Public cost 7,032 — — — 7,032 Advertising 865,694 — — — 865,694 Bank services and fees 69,340 6,031 20,165 — 95,536 Depreciation and amortization 12,992 20,786 120,312 — 154,090 Office, facility and other 286,885 101,072 68,453 ( 353 ) 456,057 Insurance 10,581 — 24,029 — 34,610 Stock-based management compensation 2,677 — — — 2,677 General and administration 2,582,545 268,545 1,109,869 ( 93,335 ) 3,867,624 Operating income (loss) ( 1,360,841 ) ( 55,606 ) 390,842 ( 95,214 ) ( 1,120,819 ) Other expense ( 990,437 ) ( 6,233 ) — ( 226,023 ) ( 1,222,693 ) Income tax expense — — ( 62,109 ) — ( 62,109 ) Net income (loss) $ ( 2,351,278 ) $ ( 61,839 ) $ 328,733 $ ( 321,237 ) $ ( 2,405,621 ) F- 18 Table of Contents Three months ended June 30, 2025 USA Switzerland UK Elimination Total Revenues $ 39,752,753 $ 9,239,899 $ 35,115,087 $ ( 11,924,503 ) $ 72,183,236 Cost of revenue 38,993,391 9,047,464 33,984,659 ( 11,713,765 ) 70,311,749 Gross profit 759,362 192,435 1,130,428 ( 210,738 ) 1,871,487 Operating expenses Salaries, wages and benefits 544,843 100,237 466,871 ( 72 ) 1,111,879 Technology 222,368 100,599 147,431 ( 203,483 ) 266,915 Professional fees 236,207 17,577 — — 253,784 Legal and regulatory 24,821 10,197 — — 35,018 Travel and events 42,560 3,708 60,377 ( 13,184 ) 93,461 Public cost 52,291 — — — 52,291 Advertising 426,744 ( 8,357 ) — — 418,387 Bank services and fees 11,057 ( 14,776 ) 17,543 — 13,824 Depreciation and amortization 6,681 34,235 120,313 — 161,229 Office, facility and other 20,908 5,345 71,389 — 97,642 Insurance 903 — — — 903 Stock-based management compensation 22,383 — — — 22,383 General and administration 1,611,766 248,765 883,924 ( 216,739 ) 2,527,716 Operating income (loss) ( 852,404 ) ( 56,330 ) 246,504 6,001 ( 656,229 ) Other income (expense) ( 1,529,016 ) 4,730 ( 6,549 ) ( 70,154 ) ( 1,600,989 ) Income tax expense — — ( 91,696 ) — ( 91,696 ) Net income (loss) $ ( 2,381,420 ) $ ( 51,600 ) $ 148,259 $ ( 64,153 ) $ ( 2,348,914 ) Six months ended June 30, 2026 USA Switzerland UK Elimination Total Revenues $ 141,912,684 $ 2,042,028 $ 64,369,067 $ ( 1,335,697 ) $ 206,988,082 Cost of revenue 139,629,247 1,537,064 61,996,167 ( 1,001,899 ) 202,160,579 Gross profit 2,283,437 504,964 2,372,900 ( 333,798 ) 4,827,503 Operating expenses Salaries, wages and benefits 889,661 — 1,136,081 — 2,025,742 Technology 915,006 235,130 329,788 ( 233,222 ) 1,246,702 Professional fees 601,776 19,086 — — 620,862 Legal and regulatory 143,140 19,066 — — 162,206 Travel and events 76,715 7,142 152,102 ( 1,121 ) 234,838 Public cost 67,325 — — — 67,325 Advertising 1,132,786 — — — 1,132,786 Bank services and fees 111,476 3,674 42,455 — 157,605 Depreciation and amortization 25,985 55,407 245,344 — 326,736 Office, facility and other 495,043 200,254 149,730 ( 4,241 ) 840,786 Insurance 21,160 — 47,622 — 68,782 Bad debt expense 14,364 — — — 14,364 Stock-based management compensation 7,597 — — — 7,597 General and administration 4,502,034 539,759 2,103,122 ( 238,584 ) 6,906,331 Operating income (loss) ( 2,218,597 ) ( 34,795 ) 269,778 ( 95,214 ) ( 2,078,828 ) Other expense ( 1,327,174 ) ( 14,693 ) — ( 293,250 ) ( 1,635,117 ) Income tax expense — — ( 77,612 ) — ( 77,612 ) Net income (loss) $ ( 3,545,771 ) $ ( 49,488 ) $ 192,166 $ ( 388,464 ) $ ( 3,791,557 ) F- 19 Table of Contents Six months ended June 30, 2025 USA Switzerland UK Elimination Total Revenues $ 78,290,551 $ 10,589,061 $ 66,270,084 $ ( 25,333,644 ) $ 129,816,052 Cost of revenue 76,681,706 10,128,318 64,310,592 ( 25,111,009 ) 126,009,607 Gross profit 1,608,845 460,743 1,959,492 ( 222,635 ) 3,806,445 Operating expenses Salaries, wages and benefits 984,236 195,686 893,154 ( 6,038 ) 2,067,038 Technology 416,484 194,853 295,585 ( 214,413 ) 692,509 Professional fees 545,257 17,577 — — 562,834 Legal and regulatory 191,259 10,197 — — 201,456 Travel and events 61,065 7,999 127,978 ( 14,530 ) 182,512 Public cost 118,850 — — — 118,850 Advertising 637,267 — — — 637,267 Bank services and fees 24,542 ( 36,275 ) 46,998 — 35,265 Depreciation and amortization 13,363 34,235 240,625 — 288,223 Office, facility and other 68,776 10,314 140,410 — 219,500 Insurance 1,806 — — — 1,806 Bad debt expense 4,442 — — — 4,442 Stock-based management compensation 55,198 — — — 55,198 General and administration 3,122,545 434,586 1,744,750 ( 234,981 ) 5,066,900 Operating income (loss) ( 1,513,700 ) 26,157 214,742 12,346 ( 1,260,455 ) Other income (expense) ( 1,993,405 ) 13,332 ( 13,076 ) ( 127,500 ) ( 2,120,649 ) Income tax expense — — ( 112,271 ) — ( 112,271 ) Net income (loss) $ ( 3,507,105 ) $ 39,489 $ 89,395 $ ( 115,154 ) $ ( 3,493,375 ) The following tables show reportable operating activities information by industrial segment for the three and six months ended June 30, 2026 and 2025. The Company has two industrial segments since the Company acquired GlobeTopper LLC in July 2025: Three months ended June 30, 2026 Telecom Fintech Corporate Elimination Total Revenues $ 96,759,251 $ 12,951,884 $ — $ ( 642,889 ) $ 109,068,246 Cost of revenue 94,064,884 12,710,897 — ( 454,340 ) 106,321,441 Gross profit 2,694,367 240,987 — ( 188,549 ) 2,746,805 Operating expenses 2,103,923 261,096 1,595,940 (93,335 ) 3,867,624 Operating income (loss) 590,444 ( 20,109 ) ( 1,595,940 ) ( 95,214 ) ( 1,120,819 ) Other expense 9,086 ( 486 ) ( 1,005,270 ) ( 226,023 ) ( 1,222,693 ) Income tax expense ( 62,109 ) — — — ( 62,109 Net income (loss) $ 537,421 $ ( 20,595 ) $ ( 2,601,210 ) $ ( 321,237 ) $ ( 2,405,621 ) F- 20 Table of Contents Three months ended June 30, 2025 Telecom Corporate Elimination Total Revenues $ 84,107,739 $ — $ ( 11,924,503 ) $ 72,183,236 Cost of revenue 82,025,514 — ( 11,713,765 ) 70,311,749 Gross profit 2,082,225 — ( 210,738 ) 1,871,487 Operating expenses 1,521,238 1,102,904 (96,426 ) 2,527,716 Operating income (loss) 560,987 ( 1,102,904 ) ( 114,312 ) ( 656,229 ) Other income (expense) ( 46,893 ) ( 1,471,596 ) ( 82,500 ) ( 1,600,989 ) Income tax expense ( 91,696 ) — — ( 91,696 ) Net income (loss) $ 422,398 $ ( 2,574,500 ) $ ( 196,812 ) $ ( 2,348,914 ) Six months ended June 30, 2026 Telecom Fintech Corporate Elimination Total Revenues $ 182,378,487 $ 25,945,292 $ — $ ( 1,335,697 ) $ 206,988,082 Cost of revenue 177,716,623 25,445,855 — ( 1,001,899 ) 202,160,579 Gross profit 4,661,864 499,437 — ( 333,798 ) 4,827,503 Operating expenses 4,011,214 530,402 2,603,299 (238,584 ) 6,906,331 Operating income (loss) 650,650 ( 30,965 ) ( 2,603,299 ) ( 95,214 ) ( 2,078,828 ) Other expense ( 53,641 ) ( 582 ) ( 1,287,644 ) ( 293,250 ) ( 1,635,117 ) Income tax expense ( 77,612 ) — — — ( 77,612 ) Net income (loss) $ 519,397 $ ( 31,547 ) $ ( 3,890,943 ) $ ( 388,464 ) $ ( 3,791,557 ) Six months ended June 30, 2025 Telecom Corporate Elimination Total Revenues $ 155,149,696 $ — $ ( 25,333,644 ) $ 129,816,052 Cost of revenue 151,120,616 — ( 25,111,009 ) 126,009,607 Gross profit 4,029,080 — ( 222,635 ) 3,806,445 Operating expenses 3,209,220 1,852,036 5,644 5,066,900 Operating income (loss) 819,860 ( 1,852,036 ) ( 228,279 ) ( 1,260,455 ) Other expense ( 39,338 ) ( 1,941,465 ) ( 139,846 ) ( 2,120,649 ) Income tax expense ( 112,271 ) — — ( 112,271 ) Net income (loss) $ 668,251 $ ( 3,793,501 ) $ ( 368,125 ) $ ( 3,493,375 ) F- 21 Table of Contents Asset Information The following table shows asset and liability information by industrial segment at June 30, 2026 and December 31, 2025: June 30, 2026 Telecom Fintech Corporate Elimination Total Assets Current assets $ 31,729,976 $ 803,682 $ 5,402,289 $ ( 4,410,909 ) $ 33,525,038 Non-current assets $ 8,388,560 $ 140,607 $ 19,571,428 $ ( 13,433,737 ) $ 14,666,858 Liabilities Current liabilities $ 29,851,592 $ 1,475,324 $ 4,060,282 $ ( 4,570,945 ) $ 30,816,253 Non-current liabilities $ 169,599 $ 26,488 $ — $ — $ 196,087 December 31, 2025 Telecom Fintech Corporate Elimination Total Assets Current assets $ 34,685,859 $ 1,203,613 $ 4,913,268 $ ( 4,640,316 ) $ 36,162,424 Non-current assets $ 8,676,244 $ 153,229 $ 19,465,775 $ ( 13,369,737 ) $ 14,925,511 Liabilities Current liabilities $ 32,336,073 $ 1,851,514 $ 5,059,136 $ ( 4,640,316 ) $ 34,606,407 Non-current liabilities $ 169,599 $ 31,302 $ — $ — $ 200,901 The following table shows asset and liability information by geographic segment at June 30, 2026 and December 31, 2025: June 30, 2026 USA Switzerland UK Elimination Total Assets Current assets $ 14,596,939 $ 1,122,305 $ 19,352,095 $ ( 1,546,301 ) $ 33,525,038 Non-current assets $ 20,447,160 $ 276,506 $ 7,312,929 $ ( 13,369,737 ) $ 14,666,858 Liabilities Current liabilities $ 11,586,374 $ 2,141,294 $ 18,794,922 $ ( 1,706,337 ) $ 30,816,253 Non-current liabilities $ 26,488 $ 169,599 $ — $ — $ 196,087 December 31, 2025 USA Switzerland UK Elimination Total Assets Current assets $ 15,281,322 $ 1,538,421 $ 21,638,782 $ ( 2,296,101 ) $ 36,162,424 Non-current assets $ 20,377,490 $ 331,914 $ 7,585,844 $ ( 13,369,737 ) $ 14,925,511 Liabilities Current liabilities $ 13,941,863 $ 2,563,328 $ 20,397,317 $ ( 2,296,101 ) $ 34,606,407 Non-current liabilities $ 31,302 $ 169,599 $ — $ — $ 200,901 NOTE 14 – INCOME TAX The Company regularly evaluates the realizability of its deferred tax assets by considering all available positive and negative evidence, including consideration of future taxable income. Primarily due to the Company’s history of incurred net losses, the Company maintains a full valuation allowance against its US deferred tax assets, as it is not more likely than not that these assets will be realized. Thus, the Company has not recognized material provisions or benefits for income taxes. The Company’s tax provision and resulting effective tax rate for interim periods are determined using the estimated annual effective tax rate (“AETR”), which is updated each quarter and adjusted for discrete items recognized in the period. For the six months ended June 30, 2026, the AETR reflects expected taxable income of UK, and select US entities. The forecast is consistent with year-to-date actual results through June 30, 2026, and excludes any mark-to-market adjustments. While the overall tax provision remains immaterial due to the Company’s partial valuation allowance, the tax effect of the expected taxable entity income has been reflected in the AETR. F- 22 Table of Contents Income Taxes The Company's income tax provision reflects an estimate of federal, state, and foreign income taxes based on enacted tax rates in the jurisdictions in which we operate. The provision is adjusted for the impact of allowable tax credits and deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in tax law. On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law in the United States. The OBBBA introduces various corporate and international tax law changes with staggered effective dates through 2027. Key provisions include immediate R&D expensing, permanent bonus depreciation, modifications to interest expense limitations, and changes to certain international tax rules. While the Company continues to evaluate the potential impact of the OBBBA on its consolidated financial statements, due to its partial valuation allowance position on U.S. and Swiss deferred tax assets, immaterial current tax liabilities, and insignificant foreign earnings from the UK, the Company does not expect the OBBBA to have a material impact on its financial position, results of operations, or effective tax rate. NOTE 15 – SUBSEQUENT EVENTS . Subsequent to June 30, 2026, and through the date that these financials were made available, the Company had the following subsequent events: On July 7, 2026, the Board of Directors of IQSTEL Inc. (the “Company”) approved certain amendments (the “Amendments”) to the Employment Agreements of Leandro Jose Iglesias, Chief Executive Officer, and Álvaro Quintana Cardona, Chief Financial Officer. The Amendments include both cash and equity compensation changes, as summarized below: Cash Compensation Changes (Effective Immediately) Base Salary Increase – Leandro Jose Iglesias: Mr. Iglesias’ monthly base salary was increased from $31,000 to $37,800, effective immediately. This increase incorporates the previously approved monthly relocation allowance of $6,800 related to his relocation to Cyprus. Two-Month Cash Performance Bonus – Leandro Jose Iglesias: The Board approved a two-month cash performance bonus for Mr. Iglesias in recognition of relocation expenses incurred in connection with his move to Cyprus. The amount and payment terms are governed by the terms of his existing Employment Agreement. Annual Bonus Payment Timing Flexibility: The Employment Agreements of both Mr. Iglesias and Mr. Quintana Cardona were amended to provide that any annual performance bonus may be paid at any time beginning fifteen (15) days following the filing of the Company’s Annual Report on Form 10-K with the Securities and Exchange Commission. Equity Compensation Changes (Subject to Shareholder Approval) The Board also approved material amendments to the equity compensation provisions of both Employment Agreements. These changes are subject to and will only become effective upon receipt of stockholder approval under Nasdaq Listing Rule 5635(c). Replacement of Annual Equity Incentive: The existing annual equity incentive provisions (up to 1,000,000 shares of Common Stock for Mr. Iglesias and up to 800,000 shares of Common Stock for Mr. Quintana Cardona) were replaced with an annual equity performance incentive of up to 50,000 Series B Preferred Shares per year for each executive. FY-2025 Equity Grants: Subject to stockholder approval, the Board approved the following grants for Fiscal Year 2025: Leandro Jose Iglesias: 20,000 Series B Preferred Shares Álvaro Quintana Cardona: 14,000 Series B Preferred Shares The Company intends to seek stockholder approval of the equity-related amendments and grants through the filing of a Schedule 14C Information Statement. No shares of Series B Preferred Stock will be issued, and the equity amendments will not become effective, unless and until such stockholder approval is obtained. F- 23 Table of Contents On July 8, 2026, IQSTEL Inc. (the “Company”) entered into a Contribution Agreement (the “Contribution Agreement”) with certain of its subsidiaries as part of an internal corporate realignment (the “Realignment”). Pursuant to the Contribution Agreement, the Company and certain subsidiaries contributed specified assets, equity interests, and operations into newly formed or existing subsidiaries. The Realignment is intended to streamline the Company’s corporate structure, improve operational efficiency, and better align its legal entities with its business lines, including its fintech, AI, and digital services operations. The Contribution Agreement contains customary representations, warranties, covenants, and indemnification provisions. The Realignment does not involve any change in the Company’s management, Board of Directors, or overall business operations and is not expected to have a material impact on the Company’s consolidated financial statements. The foregoing description of the Contribution Agreement is qualified in its entirety by reference to the full text of the Contribution Agreement, which are filed as an exhibit to this Quarterly Report on Form 10-Q for the quarter ending June 30, 2026. F- 24 Table of Contents