SPECTRAL CAPITAL Corp 10-K

ITEM 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures As required by Rule 13a-15 under the Exchange Act, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2022. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Principal Financial and Accounting Officer, as well as outside consultants. In assessing the effectiveness of our internal control over financial reporting we utilized the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission as published in “Internal Control over Financial Reporting – Guidance for Smaller Public Companies.” Based on that evaluation, our Chief Executive Officer and Principal Financial and Accounting Officer found material weaknesses in our disclosure controls and procedures and therefore concluded that our disclosure controls and procedures as of the end of the period covered by this report were ineffective. The determination of ineffective internal control is based upon the lack of separation of duties, which was first identified during the year ended December 31, 2010. Our entire management is comprised of one individual. It is impossible to create a system of checks and balances with oversight in this circumstance. It is management’s intention to bring additional people into the management team. Once there are more members of management, responsibilities can be divided and oversight roles created. The Company estimates the annual costs of such remediation efforts in the form of additional management will be $150,000 per year. The Company intends to make such hires and create segregation of duties and proper oversight as soon as the capital is obtained. We understand that remediation of disclosure controls is a continuing work in progress due to the issuance of new standards and promulgations. However, remediation of the material weaknesses described above is among our highest priorities. Our management will periodically assess the progress and sufficiency of our ongoing initiatives and make adjustments as and when necessary. As of the date of this report, our management believes that our efforts will remediate the material weaknesses in internal control over financial reporting as described above. Notwithstanding these material weaknesses which are described below, our management performed additional analyses, reconciliations and other post-closing procedures and has concluded that the Company’s consolidated financial statements for the periods covered by and included in this Annual Report on Form 10-K are fairly stated in all material respects in accordance with generally accepted accounting principles in the U.S. for each of the periods presented herein. Inherent Limitations Over Internal Controls The Company’s internal control over financial reporting is designed 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. The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. 14 Management does not expect that the Company’s internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the (i) effectiveness and efficiency of operations, (ii) reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and (iii) compliance with applicable laws and regulations. Our internal controls framework is based on the criteria set forth in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management, consisting of our Chief Executive Officer and Principal Accounting and Financial Officer, is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting. Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022, utilizing the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission as published in “Internal Control over Financial Reporting – Guidance for Smaller Public Companies.” Based on the assessment by management, we determined that our internal control over financial reporting was ineffective as of December 31, 2022. Changes in Internal Control of Financial Reporting During the year ended there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections N/A. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Our board of directors were elected and will serve until their successor is duly elected and qualified, or until their earlier resignation. The following table sets forth our directors and executive officers and their ages as of the year ended December 31, 2022: Name Age Position Jenifer Osterwalder 58 Chief Executive Officer, President and Director Stephen Spalding 76 Chief Financial and Accounting Officer and Director Jenifer Osterwalder - Chief Executive Officer, President, and Director Jenifer Osterwalder has served as our Chief Executive Officer, Principal Accounting Officer, President, Treasurer, Secretary and as a director since March 7, 2005. Previously, from January 2005 to March 2005, Ms. Osterwalder served as President, Chief Executive Officer, Treasurer, Secretary and as a director FUSA Technology Investments Corp. From January 2000 to January 2005, she served as a consultant investment banker to Five Seas 15 Securities, Ltd., a securities firm in British Columbia, Canada. From August 2004 to December 2004, Ms. Osterwalder served as a consultant Manger to International Conference Services, Ltd., a conference and destination management firm in British Columbia, Canada. From January 2003 to December 2003, she served as a consultant Investment Liaison and Marketing Director for Terrikon Corporation, in British Columbia, Canada. Ms. Osterwalder received her Bachelor of Science in Business Administration in marketing and logistics from Ohio State University. Stephen Spalding – Interim Chief Financial and Accounting Officer , Director Mr. Spalding has been an independent management and financial consultant based in Mill Valley, California since March 2008. In the course of his management and financial consulting business, Mr. Spalding serves on numerous boards and is an advisor and interim officer for numerous companies, which include Paxton Energy Incorporated, Cytta Corporation and Verde Resources, Inc. Mr. Spalding is also former CEO of Vigilant Privacy Corporation, a private Nevada corporation that was based in Pleasanton, California, from 2003 to March 2008, where he procured the firm’s angel round of financing and led the organization while the company’s product was transformed from a desktop product to an enterprise security solution. Previously he was a Partner at Deloitte & Touche LLP, from 1997 - 2003, where he was responsible for their IDI Practice (Implementation, Development and Integration) Division. He was formerly a partner at KPMG Peat Marwick LLP from 1995 - 1997, and was involved in Strategic Services, Enabling Technology Practice. Until recent budget cuts, Mr. Spalding was an Assistant Professor at San Francisco State University of Business Systems Management and Control, Course Number 507 (Senior/Graduate Level). He has an MBA, in Quantitative Analysis, University of Arizona, 1974. He also has a B.S., Finance and Management, Eastern Illinois University, 1973, a B.S., Physics (solid state), Eastern Illinois University, 1969 and a B.S., Mathematics, Eastern Illinois University, 1969. FAMILY RELATIONSHIPS There are no family relationships, by blood or marriage, among any of our directors or executive officers. INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS During the past ten years, none of our directors, executive officers and control persons have been involved in any of the following events: · any bankruptcy petition filed by or against any business of which such person was an executive officer either at the time of the bankruptcy or within two years prior to that time; · any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); · being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and · being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. BOARD OF DIRECTORS COMMITTEES As of the date of this annual report on Form 10-K for the year ended December 31, 2022, we have no standing committees and our entire board of directors serves as our audit, compensation and nominating committees. Our board of directors has determined that Stephen Spalding, a member of our board, qualifies as an audit committee financial expert. However, we intend to appoint an audit, a compensation and a nominating committee of our board of directors. As of the date of this annual report on Form 10-K for the year ended December 31, 2022, there have been no material changes to the procedures by which our security holders may recommend nominees to our board of directors. 16 CODE OF ETHICS We currently do not have a Code of Ethics and plan to adopt one as we develop our business. ITEM 11. EXECUTIVE COMPENSATION The following table sets forth the total compensation awarded to, earned by, or paid to our Chief Executive Officer during each of the last two completed years. No other individuals are employed by us or have earned a total annual salary and bonus in excess of $100,000 during any of the last two completed years. SUMMARY COMPENSATION TABLE Name and Principal Position Year Salary Bonus Stock Awards Option Awards Non-Equity Incentive Plan Compensation Nonqualified Deferred Compensation Earnings All Other Compensation Total Jenifer Osterwalder 2022 $144,000 - - - - - - $144,000 President and Chief Executive Officer 2021 $144,000 - - - - - - $144,000 Stephen Spalding, Interim Chief Financial and Accounting Officer and Director 2022 - - - - - - - - 2021 - - - - - - - EMPLOYMENT AGREEMENTS Our President and CEO, Ms. Osterwalder, does not currently have an employment agreement, however, the Company has agreed to pay Ms. Osterwalder $12,000 a month beginning January 1, 2020 for services rendered. As of December 31, 2022 and 2021, amounts due to Ms. Osterwalder for accrued compensation were $144,000 and $1,054,653, respectively. As of the date of this annual report on Form 10-K for the year ended December 31, 2022, we have no other employment agreements in place with any of our other executive officers, directors or employees. OUTSTANDING EQUITY AWARDS AT YEAR END There were no outstanding option equity awards at our year end. COMPENSATION OF DIRECTORS Pursuant to authority granted under our Article II, Section 2.16 of our bylaws, directors are entitled to such compensation as our board of directors shall from time to time determine. The following table sets forth the compensation of our directors for the year ended December 31, 2022: DIRECTOR COMPENSATION Name Fees Earned or Paid in Cash Stock Awards Option Awards Non-Equity Incentive Plan Compensation Non- Qualified Deferred Compensation Earnings All Other Compensation Total Jenifer Osterwalder Stephen Spalding $ $ 17 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS The following table sets forth information with respect to compensation plans under which our equity securities are authorized for issuance as of the end of the year ended December 31, 2022: EQUITY COMPENSATION PLAN INFORMATION Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted-average exercise price of outstanding options, warrants and rights (b) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) Equity compensation plans approved by security holders — — — Equity compensation plans not approved by security holders Total SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding the beneficial ownership of our common stock as of January 31, 2023. The information in these tables provides ownership information for: · each person known by us to be the beneficial owner of more than a 5% of our common stock · each of our directors and executive officers; and · all of our directors and executive officers as a group. Beneficial ownership has been determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to our common stock and those rights to acquire additional shares within sixty days. Unless otherwise indicated, the persons named in the table below have sole voting and investment power with respect to the number of shares of common stock indicated as beneficially owned by them, except to the extent such power may be shared with a spouse. In computing the number of shares beneficially owned by a person and the percentage of ownership of that person, shares of common stock subject to options and/or warrants held by that person that are currently exercisable, as appropriate, or will become exercisable within sixty (60) days of the reporting date are deemed outstanding, even if they have not actually been exercised. Those shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person. The address of each person listed is care of Spectral Capital Corporation., 4500 9th Avenue NE, Seattle, Washington, 98105. Name Amount and Nature of Ownership Percent of Class Jenifer Osterwalder - 0.0% Stephen Spalding - 0.0% All officers, directors, and 5% or greater shareholders as a group (2 persons) - 0.0% 18 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE Related Party Transactions Jenifer Osterwalder, President, Director and Chief Executive Officer Jenifer Osterwalder charges the Company $12,000 per month beginning January 1, 2020 for services rendered. Total amounts expended in the Company’s consolidated financial statements in connection with the Ms. Osterwalder’s services was $144,000 for each of the years ended December 31, 2021 and 2020. As of December 31, 2022 and 2021, amounts due to the Ms. Osterwalder related to accrued salaries were $144,000 and $1,054,653, respectively. From time to time due to the limited cash flow available, Ms. Osterwalder pays certain operating expenditures on behalf of the Company. These advances bear no interest and are due on demand. As of December 31, 2022 and 2021, Ms. Osterwalder was due $5,500 and $206,956 in connection with these advances, respectively. Independent Directors The Board of Directors has determined that director Stephen Spalding is an independent director under standards established by the Securities and Exchange Commission. Review, Approval or Ratification of Transactions with Related Persons The board of directors may ratify a “Related Transaction” by a majority vote of the disinterested directors that are voting at any Special or Regularly scheduled board meeting. A Related Transaction is defined as a material agreement, contract, or other transaction between a current officer, director, or shareholder of the Company and the Company itself. Additionally, under no circumstances may the Related Transaction that is ratified be on less favorable terms to the Company than it would have it been negotiated with an unrelated third party. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The following table sets forth the aggregate amount of various professional fees billed by our principal accountants with respect to our last two years: 2022 2021 Audit fees $ 20,000 19,413 Audit-related fees - - Tax fees - - All other fees - - Total $ 20,000 19,413 19 ITEM 15. EXHIBITS No. Description of Exhibit 3.1 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. 3.2 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. 3.3 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. 3.4 Certificate of Amendment to Articles of Incorporation of Spectral Capital Corporation, dated November 22, 2022 filed with the secretary of state of Nevada and effective on December 2, 2022. 10.1 Telecommunications services agreement with Sky Data PLL OU (Estonia) dated January 3, 2022. 10.2 Reciprocal Carrier Services Agreement entered into between EZ Mobile, LLC and Spectral Capital Corp. dated February 15, 2022. 31.1 Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial and Principal Accounting Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002. 32.1 Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350). 32.2 Certification of Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350). 20 Signatures In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: March 27, 2023 SPECTRAL CAPITAL CORPORATION By: /s/ Jenifer Osterwalder Jenifer Osterwalder President and Chief Executive Officer /s/ Stephen Spalding Stephen Spalding Chief Financial and Accounting Officer 21