UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
|
| SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended June 30, 2024
OR
☐
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
|
| SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from ________ to ________
Commission File No. 000-50274
Spectral Capital Corporation
(Exact name of Registrant as specified in its charter)
Nevada
| 51-0520296
|
(State or other jurisdiction of
incorporation or organization)
| (I.R.S. Employer Identification Number)
|
4500 9th Avenue NE, Seattle, WA
| 98105
|
(Address of principal executive offices)
| (Zip/Postal Code)
|
(206) 385-6490
|
(Telephone Number)
___________
|
(Former name or former address if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
| ¨
| Accelerated filer
| ¨
|
Non-accelerated filer
| ¨
| Smaller reporting company
| ☒
|
| Emerging growth company
| ☐
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report to its management’s assessment of the effectiveness of its internal control over financial reporting under section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ¨
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x
As of August 13, 2024, there are issued and outstanding only common equity shares in the amount of 107,649,516 shares, par value $0.0001, of which there is only a single class. There are 5,000,000 preferred shares authorized and none issued and outstanding.
SPECTRAL CAPITAL CORPORATION
TABLE OF CONTENTS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q, press releases and certain information provided periodically in writing or verbally by our officers or our agents contain statements which constitute forward-looking statements. The words “may”, “would”, “could”, “will”, “expect”, “estimate”, “anticipate”, “believe”, “intend”, “plan”, “goal”, and similar expressions and variations thereof are intended to specifically identify forward-looking statements. These statements appear in a number of places in this Form 10-Q and include all statements that are not statements of historical fact regarding the intent, belief or current expectations of us, our directors or our officers, with respect to, among other things: (i) our liquidity and capital resources; (ii) our financing opportunities and plans; (iii) our ability to generate revenues; (iv) competition in our business segments; (v) market and other trends affecting our future financial condition or results of operations; (vi) our growth strategy and operating strategy and ; (vii) the declaration and/or payment of dividends.
Investors and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as the result of various factors. The factors that might cause such differences include, among others, those set forth in Part II, Item 7 of this annual report on Form 10-Q, entitled Management’s Discussion and Analysis or Plan of Operation, including without limitation the risk factors contained therein. Except as required by law, we undertake no obligation to update any of the forward-looking statements in this Form 10-Q after the date of this report.
Item 1: Financial Statements
Our unaudited interim financial statements for the three and six months ended June 30, 2024 and 2023 are part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.
F-1
SPECTRAL CAPITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2024 AND DECEMBER 31, 2023
(UNAUDITED)
|
| June 30,
2024
|
| December 31,
2023
|
Assets:
|
|
|
|
|
Cash and cash equivalents
|
| $102,687
|
| $240
|
Current assets
|
| 102,687
|
| 240
|
|
|
|
|
|
Total assets
|
| $102,687
|
| $240
|
|
|
|
|
|
Liabilities and Stockholders' Deficit:
|
|
|
|
|
Current liabilities
|
|
|
|
|
Accounts payable and accrued liabilities
|
| $362,807
|
| $290,119
|
Related party advances and accruals
|
| -
|
| 6,150
|
Short-term advances
|
| -
|
| 36,450
|
Current liabilities
|
| 362,807
|
| 332,719
|
|
|
|
|
|
Total liabilities
|
| 362,807
|
| 332,719
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficit:
|
|
|
|
|
Preferred stock, par value $0.0001, 5,000,000 shares authorized, no shares issued and outstanding
|
| -
|
| -
|
Common stock, par value $0.0001, 1,000,000,000 and 500,000,000 shares authorized, 62,899,302 and 42,017,948 shares issued and outstanding as of June 30, 2024 and December 31, 2023
|
| 6,291
|
| 4,202
|
Additional paid-in capital
|
| 30,066,959
|
| 29,181,804
|
Accumulated deficit
|
| (30,111,484)
|
| (29,296,599)
|
Total stockholders' deficit
|
| (38,234)
|
| (110,593)
|
Non-controlling interest
|
| (221,886)
|
| (221,886)
|
Total stockholders' deficit - Spectral Capital Corp.
|
| (260,120)
|
| (332,479)
|
Total liabilities and stockholders' deficit
|
| $102,687
|
| $240
|
The accompanying notes are an integral part of these consolidated financial statements.
F-2
SPECTRAL CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023
(UNAUDITED)
|
| Three Months Ended June 30, 2024
|
| Three Months Ended June 30, 2023
|
| Six
Months Ended June 30, 2024
|
| Six
Months Ended June 30, 2023
|
|
|
|
|
|
|
|
|
|
Revenues
|
| $-
|
| $-
|
| $-
|
| $-
|
|
|
|
|
|
|
|
|
|
Costs of sales
|
| -
|
| -
|
| -
|
| -
|
|
|
|
|
|
|
|
|
|
Gross profit
|
| -
|
| -
|
| -
|
| -
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
| 448,425
|
| 27,896
|
| 477,289
|
| 55,411
|
Wages and benefits
|
| 36,000
|
| 36,000
|
| 72,000
|
| 72,000
|
Total operating expenses
|
| 484,425
|
| 63,896
|
| 549,289
|
| 127,411
|
Operating loss
|
| (484,425)
|
| (63,896)
|
| (549,289)
|
| (127,411)
|
|
|
|
|
|
|
|
|
|
Other income and (expense):
|
|
|
|
|
|
|
|
|
Extinguishment of debt
|
| (265,596)
|
| -
|
| (265,596)
|
| -
|
Total other income (expense)
|
| (265,596)
|
| -
|
| (265,596)
|
| -
|
|
|
|
|
|
|
|
|
|
Net loss before non-controlling interest
|
| (750,021)
|
| (63,896)
|
| (814,885)
|
| (127,411)
|
|
|
|
|
|
|
|
|
|
Loss attributable to non-controlling interest
|
| -
|
| 18
|
| -
|
| 36
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Spectral Capital Corporation
|
| $(750,021)
|
| $(63,878)
|
| $(814,885)
|
| $(127,375)
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common share
|
| $(0.01)
|
| $(0.00)
|
| $(0.02)
|
| $(0.00)
|
Weighted average shares - basic and diluted
|
| 54,684,149
|
| 42,017,948
|
| 48,351,049
|
| 42,017,948
|
The accompanying notes are an integral part of these consolidated financial statements.
F-3
F-9
SPECTRAL CAPITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(UNAUDITED)
Foreign Currency
The Company's functional currency is the United States Dollar. Transaction gains or losses related to balances denominated in a currency other than the functional currency are recognized in the consolidated statements of operations. As a result of these foreign currency transactions in which require payment in a currency other than the United States Dollar, the Company has recorded foreign currency (income) losses within the accompanying condensed consolidated statement of operations.
Recent Accounting Pronouncements
The FASB issues ASUs to amend the authoritative literature in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). There have been a number of ASUs to date, including those above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company or (iv) are not expected to have a significant impact on the Company’s financial statement.
NOTE 3– RELATED PARTY TRANSACTIONS
Jenifer Osterwalder, the Company's Chief Executive Officer
Jenifer Osterwalder charges the Company $12,000 per month beginning January 1, 2021 for services rendered. Total amounts expended in the Company's condensed consolidated financial statements in connection with the CEO's services was $72,000 and $72,000 for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024 and December 31, 2023, amounts due to the CEO related to accrued salaries were $360,000 and $288,000 respectively.
From time to time due to the limited cash flow available, the Company's CEO pays certain operating expenditures on behalf of the Company. These advances bear no interest and are due on demand. As of June 30, 2024 and December 31, 2023, the Company's CEO was due $0 and $6,150 in connection with these advances, respectively. During the six months ended June 30, 2024, the Company issued 68,311 shares of common stock in satisfaction of $6,150 in advances. On the date of the agreement, the fair market value of the common stock per the Company’s closing stock price was $6,651 resulting an extinguishment of debt of $501.
Sean Michael Brehm, the Company’s Chairman and a member of the board of directors, is also the sole shareholder of NNN, which the Company has contracted to acquire in exchange for 40,000,000 shares of Spectral common stock. In addition, Sean Michael Brehm has agreed to purchase 5,000,000 of the Company’s common shares for a total purchase price of $1,000,000.
NOTE 4 – STOCKHOLDERS’ DEFICIT
Private Placements
On April 22, 2024, the Board of Directors approved a Private Placement Offering pursuant to Rule 506(b) of the Securities Act of 1933, as amended (the “Securities Act”) for up to 15,000,000 restricted shares of the Company’s common stock at a price of $0.01 per share, or an aggregate of $150,000. The offering commenced on April 22, 2024 and ended on June 3, 2024. The Board of Directors believes that $150,000 will be used for operating capital. As of the date of this filing, the Company has received $150,040 in proceeds from this offering.
In June 2024, the Company commenced an additional offering looking to raise up to $1,000,000 at a price of $0.20 per shares. As of June 30, 2024, total proceeds of $50,000 had been received from this offering. Subsequent to June 30, 2024, the Company has received an additional $960,000 in proceeds.
Settlement of Advances
During the six months ended June 30, 2024, the Company issued 3,563,043 shares of common stock in satisfaction of $81,950 in advances. On the date of the agreement, the fair market value of the common stock per the Company’s closing stock price was $347,040 resulting in an extinguishment of debt of $265,090.
F-10
SPECTRAL CAPITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(UNAUDITED)
Stock for Services
On April 26, 2024, we entered into a consulting contract with Scandere OU (Estonia) (“Scandere”). Scandere has the same management and been contracted on behalf of Sky Data PPL and has experience in the telecommunications industry. Scandere will provide us with management services, CDR processing, fraud management, reporting and analytics and credit and finance management to facilitate our reentry into telecommunication reselling operations. The contract shall remain in force until the completion of the services or the earlier termination of the agreement. As payment for its services, Scandere receives 2,000,000 restricted shares of the Company’s common stock, valued at $194,800 based upon the closing price of the Company’s common stock on the date of the agreement.
Employee Options
The Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation – Stock Compensation which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values.
The Company has adopted a stock option and award plan to attract, retain and motivate its directors, officers, employees, consultants and advisors. Options provide the opportunity to acquire a proprietary interest in the Company and to benefit from its growth. Vesting terms and conditions are determined by the Board of Directors at the time of the grant. The Plan provides for the issuance of up to 15,000,000 common shares for employees, consultants, directors, and advisors. During the six months ended June 30, 2024, the Company issued options to purchase 6,810,000 shares of common stock at prices ranging from $0.43 to $0.61 per share. The Company used the following variables to determine the fair value of the options: Closing stock prices ranging from $0.50 - $0.72; expected lives ranging from 6.0 to 7.0 years; volatility of 203.49%; risk free rate of 3.5% and no dividend yield. The total grant date fair value was $3,345,600 with $138,713 being expensed to selling, general and administrative during the three and six months ended June 30, 2024. As of June 30, 2024, the remaining value of approximately $3.2 million is expected to be expensed over 3.9 years.
The following is a summary of stock option activity for the six months ended June 30, 2024:
|
| Stock
Options
|
| Weighted
Average
Exercise Price
|
| Weighted
Average Life
Remaining
|
|
|
|
|
|
|
|
Outstanding, December 31, 2023
|
| -
|
| -
|
| -
|
Issued
|
| 6,810,000
|
| 0.43
|
| 10.00
|
Exercised
|
| -
|
| -
|
| -
|
Expired
|
| -
|
| -
|
| -
|
Outstanding, June 30, 2024
|
| 6,810,000
|
| $0.43
|
| 10.00
|
Vested, June 30, 2024
|
| -
|
| $-
|
| -
|
NOTE 5 – COMMITMENTS AND CONTINGENCIES
The Company leases virtual office space on a three-month basis in Seattle, Washington.
F-11
SPECTRAL CAPITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(UNAUDITED)
NOTE 6– SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to June 30, 2024 to the date these condensed consolidated financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these consolidated financial statements, other than disclosed below.
As reported in the Form 8-K filed with the Securities and Exchange Commission on June 7, 2024, Spectral Capital Corporation, a Nevada corporation (the “Company”, “we”, “our” or “us”) entered into a Share Exchange Agreement (the “Exchange Agreement”) with Node Nexus Network Co LLC, a limited liability company formed under the laws of the Emirate of Dubai (“Target”), and Sean Michael Brehm, also known as Sean Michael Obrien (the “Target Shareholder”), the sole shareholder of Target, whereby (i) the Company agreed to acquire, and Target agreed to sell to the Company, 150 shares of capital stock, representing 100% of the Target’s outstanding shares, in exchange for 40,000,000 newly issued shares of common stock (the “Exchange Shares”) of the Company and (ii) the Target Shareholder agreed to purchase 5,000,000 shares of the Company’s restricted common shares at a per share price of $0.20 or an aggregate of $1,000,000 (the “Purchase Price”) concurrently with or prior to the Closing, as defined below, (“Financing Shares”). The Company, the Target and the Target Shareholder are collectively the “Parties” or individually a “Party”.
As reported in the Form 8-K filed with the Securities and Exchange Commission on May 13, 2024, the Target Shareholder was appointed as our director on May 13, 2024, and as reported on an additional Form 8-K with the Securities and Exchange Commission on June 6, 2024, the Target Shareholder was appointed as Chairman of the Board of Directors on June 6, 2024.
On July 23, 2024, the Parties entered into an amendment to the Exchange Agreement (the “Amendment”) with the following terms:
●The Closing shall occur on or before August 31, 2024, unless extended (the “Closing”).
●The Company and its transfer agent shall enter into an escrow agreement (the “Escrow Agreement”) whereby the Financing Shares shall be held in escrow pending the Company’s receipt of the Purchase Price, and the Exchange Shares shall be held in escrow pending the losing of the transactions contemplated by the Exchange Agreement on or before August 31, 2024.
●In the event that the Closing does not occur on or prior to August 31, 2024, the Financing Shares and Exchange Shares shall be cancelled and returned to Treasury.
●Parties shall enter into a licensing agreement (“Licensing Agreement”) for the Intellectual Property as defined in the Exchange Agreement.
The Closing of the Exchange Agreement, as amended, is subject to the satisfaction or, if permitted by applicable law, waiver by the Company, Target and Target Shareholder of various conditions. These conditions include but are not limited to the following: (i) Assignment of intellectual property; (ii) delivery of Board of Director and shareholder approval of each Target and Target Shareholder approving the Exchange Agreement; (iii) personal guarantee of Target Shareholder; (iv) financial statements of the Target audited by an auditor who is a member of the Public Company Accounting Oversight Board (“PCAOB”) for the prior two fiscal years or such shorter period since Target’s inception; (v) unaudited financial statements of the Target for the period from the date of the audited financial statements to the date of the Closing; and (vi) such other documents as reasonably requested by the Company.
F-12
Item 2.
| MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements. The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and related notes included in this report and those in our Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission on March 28, 2024 and all subsequent filings.
OVERVIEW
Spectral Capital Corporation (“us”, “we”, “our” or the “Company”) is a technology company focused on the identification, acquisition, development, financing of technology that has the potential to transform existing industries. We look for technology that can be protected through patents or laws regarding trade secrets. Spectral has acquired significant stakes in two technology companies. Spectral intends to own, in full or in part, technology companies whose founders and key management can take advantage of the deep networks and experience in technology development embodied in Spectral management.
In December 2021, we began providing wholesale telecommunications, data and switching services consisting of international long distance reselling services on a business-to-business (“B2B”) basis. Since December 2021, we have provided this service in conjunction with approximately 3 network providers who, in turn, provided services directly to customers around the world. We paused these services in Q3 2022 because we believed that we could increase our profits if we could find partners that provide real time data exchange and technical advantages over what we had previously. We intend to resume this business in the fourth quarter of 2024 facilitated by our emerging QAAS capabilities.
On January 3, 2022, we entered into a telecommunications services agreement with Sky Data PLL OU (Estonia) (“Sky”) to provide long distance switching services. We provided services under this agreement to 3 customers and generated $98,323 of revenue from the contract during 2022. We have paused this line of business and plan to resume our telecommunications reselling services through our partnership with SKY/Scandere within the 2024 fiscal year and without third-party intervention. Testing of these services will begin initially via SKY/Scandere, and after sufficient revenue streams and data providers have been resolved, we intend to join this arrangement. Having control of this traffic will allow full transparency and full control of this line of business and will allow us to scale the initial small traffic into higher amounts without added costs.
In April of 2024, Spectral commenced a new business in the area of Quantum Computing and related technologies. Spectral engaged additional management and board resources to enhance its expertise in this area. The Company believes it can derive revenue through the development, acquisition and sale of Quantum Computing as a Service (QAAS) as well as providing services, support and platforms to Company’s operating in that sector. Toward this end, the Company has signed an agreement on June 7, 2024 for a share exchange with a Quantum Computing technology company, Node Nexus Network Co. LLC (“NNN”) in order to enhance its Quantum Computing offerings through acquiring NNN.
The Company believes that QAAS is exactly the type of technology that management has been searching for, as it has the potential to disrupt the way that classical computing cloud service providers meet the needs of enterprise customers. QAAS offerings have the potential to create faster, safer and more efficient methods of data storage and retrieval. The additional management resources that the Company has added in this area include the appointment of Chairman and member of the board of directors, Sean Michael Brehm. Mr. Brehm has a background developing and deploying large scale enterprise software solutions for the public and the private sector. He has led teams that have developed Quantum Computing solutions that make these technologies accessible for enterprise software clients without developed Quantum Computing infrastructure.
Management intends to develop a suite of QAAS solutions as well as to identify and partner with startups in the QAAS field.
13
Quantum Computing harnesses the principles of quantum mechanics to perform computations that far surpass the capabilities of classical computers. Its transformative potential spans numerous sectors, including cryptography, drug discovery, supply chain management and materials science, with the potential to transform what is possible in these sectors. However, practical implementation remains challenging due to technological complexities, high development costs, and a shortage of skilled professionals. This is a field where a number of startups have emerged that lack the full infrastructure, funding, expertise, access to shared platforms and markets that exist as mature ecosystems within the software as a service field (SAAS) that traditionally meets the classical computing needs of enterprise customers.
Spectral’s approach to QAAS is a fundamentally decentralized one that puts users in full charge and control of Quantum Computing technologies. We believe that this approach, which follows in the open source software ethos, will be attractive to enterprise customers. Our market research to date suggests that the advantages of incumbency in the SAAS space seem to be less pronounced in the QAAS space, where no company has yet established itself as a market leader. This gives Spectral the opportunity to compete for business with enterprise customers in the QAAS field on a more level playing field than in the field of classical cloud computing solutions.
The Company has also undertaken to revitalize both its Noot and Monitor technologies and resume operations of those two companies using a QAAS approach. Management believes that the architecture of both of these products is well suited to the type of enhancements a QAAS approach can provide.
The Company also believes that QAAS will increase demand for the SKY/Scandere data and switching services and that the data centers required by QAAS companies will allow the Company to substantially grow its data center business in a way that enhances customer security, is climate friendly and facilitates needed decentralization in the sector.
RESULTS OF OPERATIONS
Comparison of the three months ended June 30, 2024 and 2023
Operating Expenses
Operating expenses increased $420,529, from $63,896 for the three months ended June 30, 2023 to $484,425 for the three months ended June 30, 2024. During the current period, the increase was primarily due to stock-based compensation of $333,513 related to the issuance of options and common stock from services.
Comparison of the six months ended June 30, 2024 and 2023
Operating Expenses
Operating expenses increased $421,878, from $127,411 for the six months ended June 30, 2023 to $64,864 for the six months ended June 30, 2024. During the current period, the increase was primarily due to stock-based compensation of $333,513 related to the issuance of options and common stock from services.
Liquidity and Capital Resources
As of June 30, 2024, we had $102,687 cash on hand. We intend to fund operations through the use of cash on hand, cash flows from operations and through debt and equity financings until sufficient cash flows from operations can be achieved.
14
Net cash used in operating, activities increased $116,979 from $26,114 in cash used during the six months ended June 30, 2023 to $143,093 cash used in the six months ended June 30, 2024. This increase was due to the Company collecting a significant amounts of accounts receivable in the prior year as we as an increase in the loss during the current year due to the Company expending a significant amount of capital to improve the corporate structure of the Company.
Net cash provided by financing activities increased by $228,540 from $17,000 for the six months ended June 30, 2023 to $245,540 for the six months ended June 30, 2024. Net cash provided by financing activities during the six months ended June 30, 2024 related to proceeds from short term advances and capital raised through our offerings.
We believe that our current financial resources are not sufficient to meet our working capital requirements over the next year. Additional funding will be necessary in order to expand portfolio operations and to reach our goals. Currently, the Company does not have any commitments or assurances for additional capital nor can the Company provide assurance that such financing will be available to it on favourable terms, or at all. If, after utilizing the existing sources of capital available to the Company, further capital needs are identified and the Company is not successful in obtaining the financing, it may be forced to curtail its existing or planned future operations. In addition, if necessary, we will decrease expenses and redirect our efforts towards a sale of one of more of our assets should funding become inadequate.
We believe that our short-term prospects are promising. The Company has spent more than a decade actively researching, identifying and testing the types of disruptive technologies that could be enhanced by common management and technological resources and it feels that it has found such technologies in the Quantum Computing field as well as in the applications of Quantum Computing to both the Noot and Monitor portfolio company solutions. We also believe that we will experience significant operational and financial growth as a result of entering the QAAS field, as a result of the enhancements this technology will provide to our two portfolio companies as well as to our data center business. We also believe that the acquisition of Node Nexus Co. LLC (“NNN”), should it occur, will further enhance our QAAS offerings. However, we need significant capital to implement our plan.
Off Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for a smaller reporting company.
15
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
As required by Rule 13a-15 or Rule 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, including our principal executive officer and principal accounting officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing evaluation, we have concluded that our disclosure controls and procedures were not effective as of June 30, 2024 and that they do not allow for information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission (“SEC”) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the us in the reports that we file or submit under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive and Principal Accounting & Financial Officers as appropriate to allow timely decisions regarding required disclosure.
The material weaknesses were first identified in our annual report on Form 10-K for the year ended December 31, 2012 in which related to a lack of an accounting staff resulting in a lack of segregation of duties necessary for an effective system of internal control. The weakness in segregation of duties will continue to exist until such time as management can retain internal staff to properly segregate duties.
(b) Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
16
PART II OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Unregistered Sales of Securities and Use of Proceeds
On April 22, 2024, the Board of Directors approved a Private Placement Offering pursuant to Rule 506(b) of the Securities Act of 1933, as amended (the “Securities Act”) for up to 15,000,000 restricted shares of the Company’s common stock at a price of $0.01 per share, or an aggregate of $150,000. The offering commenced on April 22, 2024 and ended on June 3, 2024. The Board of Directors believes that $150,000 will be used for operating capital. As of the date of this filing, the Company has received $150,040 in proceeds from this offering.
In June 2024, the Company commenced an additional offering looking to raise up to $1,000,000 at a price of $0.20 per shares. As of June 30, 2024, total proceeds of $50,000 had been received from this offering. Subsequent to June 30, 2024, the Company has received an additional $960,000 in proceeds.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information
None.
Item 6. Exhibits
17
EXHIBITS
List of Exhibits
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3(i)(1)
| Articles of Incorporation of Spectral Capital Corporation, dated September 13, 2000, incorporated by reference to Exhibit 3(a) on Form 10-SB filed May 1, 2003.
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3(i)(2)
| Certificate of Amendment to Articles of Incorporation of Spectral Capital Corporation, dated June 17, 2007, incorporated by reference to Exhibit 2.1 on Form 8-K filed July 7, 2004.
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3(ii)
| By-laws of Spectral Capital Corporation, dated September 14, 2000, incorporated by reference to Exhibit 3(b) on Form 10-SB filed May 1, 2003.
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31.1
| Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
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31.2
| Certification of Chief Financial and Principal Accounting Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
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32.1
| Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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32.2
| Certification of the Company’s Chief Financial and Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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18
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: August 13, 2024
| Spectral Capital Corporation
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|
|
| /s/ Jenifer Osterwalder
|
| Jenifer Osterwalder
|
| President and Chief Executive Officer
|
19
Exhibit 31.1
CERTIFICATE OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jenifer Osterwalder certify that:
1.I have reviewed this 10-Q for the quarter ended June 30, 2024, of Spectral Capital Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| /s/ Jenifer Osterwalder
|
Date: August 13, 2024
| Jenifer Osterwalder
President and Chief Executive Officer
|
Exhibit 31.2
CERTIFICATE OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Stephen Spalding, certify that:
1.I have reviewed this 10-Q for the quarter ended June 30, 2024, of Spectral Capital Corporation
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| /s/ Jenifer Osterwalder
|
Date: August 13, 2024
| Jenifer Osterwalder
President and Chief Executive Officer
|