Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis of our financial condition, results of operations and liquidity should be read in conjunction with our consolidated financial statements for the years ended December 31, 2023 and 2022 and the related notes appearing elsewhere in this annual report. Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles.
CRITICAL ACCOUNTING POLICIES
Our critical accounting policies, including the assumptions and judgments underlying those policies, are more fully described in the notes to our consolidated financial statements. We have consistently applied these policies in all material respects. Investors are cautioned, however, that these policies are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially. Set forth below are the accounting policies that we believe are most critical to an understanding of our financial condition, results of operations and liquidity.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company, Spectral Holdings, Inc., its 60% owned subsidiary, Noot Holdings, Inc., from its date of incorporation of February 28, 2013, and its 60% owned subsidiary, Monitr Holdings, Inc. from its date of incorporation of December 1, 2013. All material intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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 the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
OVERVIEW
Spectral Capital Corporation (“Spectral” or the “Company”, also “We” or “Us”) is a technology company focused on the identification, acquisition, development, and financing of technology that has the potential to transform existing industries. We have interests in telecommunications, data and switching services, specifically providing international long distance reselling services on a business-to-business (“B2B”) basis. We intend to resume this line of our business and seek partnerships to expand our network as well as seek technological advancement opportunities that may provide us with a substantial advantage over our competition. Additionally, we have majority ownership of two non-operating technology companies: Noot Holdings, Inc. (“Noot”) and Monitr Holdings, Inc. (“Monitr”). We believe the underlying technologies for both Noot and Monitr have the potential to create profitable businesses on their own but require substantial capital to upgrade their software to become competitive. We currently do not have the financial means for these required upgrades and are actively seeking optimal partners for these assets in order to develop these services to their full potential.
PLAN OF OPERATIONS
We are a technology startup accelerator that invests in early-stage companies. We target industry verticals and solutions where disruption and network effects allow for rapid adoption and displacement of incumbents. We work with startups, focusing them on rapid development, getting to market, and refining their products and services with innovative features that reflect direct customer and market feedback. In addition to meeting some of the financing needs of our portfolio companies, we provide our teams with executive support at the technology, marketing and operations level in an effort to bring optimal results. Additionally, We have interests in wholesale telecommunications, data and switching services consisting of international long distance reselling services on a business-to-business (“B2B”) basis.
Our technology portfolio consists of two companies, of which we are the majority owner: Noot and Monitr.
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Noot is a mobile technology company that created the mobile application “Noot” which utilized proprietary search engine technology for mobile devices that delivered personalized information to the user. While Noot is no longer a working mobile application, its foundation of mobile search and machine learning is still relevant today. Given adequate funding to upgrade its software, we believe there are alternative markets in which Noot could enter. The mobile search sector has much room to grow. Currently, we are unable to provide the necessary funds for this upgrade; however, we are actively seeking optimal partners for this endeavor.
Monitr, launched in late 2014, is a technology and financial data services company that identifies for investors stocks that its software detects to be trending up in price at the moment.
· Monitr leverages cloud computing, big data and software to analyze the financial markets to discover those stocks that are trending now. Thousands of companies, news stories, blogs and opinion pieces are analyzed daily to uncover the trends and displayed in an accessible and easy-to-use web-based interface for investors and traders.
· Many investors use only a few sources to become informed of market conditions. Monitr provides investors with access to thousands of sources.
Monitr specializes in the analysis of news and opinion to determine the aggregate sentiment and trends of equities across markets in part to detect trends and provide relevant data for its users.
Although Monitr is no longer a working application, with the growth of Fintech, Monitr has a growing list of competitors. However, we believe that Monitr´s trend-detecting software could perform well relative to the competition but will require substantial additional investment to become competitive in the growing marketplace. Currently, we are unable to provide the necessary funds for this upgrade; however, we are actively seeking optimal partners for this endeavor.
Additionally, we intend to resume our telecommunications reselling services through our partnership with Sky Data PLL OU (Estonia) (“SKY”), specifically providing international long distance reselling services on a B2B basis. We are working to form partnerships in order to expand our business as well as seek technological advancement opportunities that may provide us with an advantage over our competition.
Over the course of the next 12 months, we intend to: 1. Resume the telecommunication re-selling services operations along with our partner, SKY; 2. Form partnerships with data providers to expand traffic; 3. Identify optimal partnerships to develop Noot and/or Monitr; 3. Increase capital through private placement or other equity sale opportunities.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Revenues and Cost of Revenues
We are currently engaged in a technology development business and intend to resume operations within the telecom industry. Net revenues decreased from $98,323 for the year ended December 31, 2022 to $0 for the year ended December 31, 2023. The decrease is due to us temporarily pausing our telecom related operations during 2023.
Operating Expenses
Operating expenses decreased $123,906, from $339,383 for the year ended December 31, 2022 to $215,477 for the year ended December 31, 2023. The decrease was due to our pause in the telecom reselling services business.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2023, we had $240 of cash on hand. We intend to fund operations through the use of cash on hand, additional advances from our chief executive officer, and debt and equity financings until sufficient cash flows from operations can be achieved.
Net cash used in operating activities increased $2,510, from $45,022 for the year ended December 31, 2022 to $47,532 for the year ended December 31, 2023. This continued low amount of costs was primarily related to our limited operations due to the cash flow limitations.
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Net cash provided by financing activities decreased by $18,330 from $55,530 for the year ended December 31, 2022 to $37,100 for the year ended December 31, 2023. Net cash provided by financing activities during the year ended December 31, 2022 primarily related to sales of common stock.
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, we do not have any commitments or assurances for additional capital, nor can we provide assurance that such financing will be available to it on favorable terms, or at all. If, after utilizing the existing sources of capital available to us, further capital needs are identified and we are not successful in obtaining the financing, we may be forced to curtail our existing or planned future operations. In addition, if necessary, we will decrease expenses and redirect our efforts toward the sale of one or more of our assets should funding become inadequate.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
As a “Smaller Reporting Company”, this Item and the related disclosure are not required.
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