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Item 9A. Controls and Procedures

2025-06-24 compared with 2024-03-28 · 143 added, 62 removed, 136 unchanged (60% of the section changed)

CONTROLS AND PROCEDURES.

Jenifer Osterwalder, our Chief Executive Officer, and Stephen Spalding, our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2023.

Jenifer Osterwalder, our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2024 and 2023.

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, mean controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

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Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgement in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures as of December 31, 2023, our Chief Executive Officer and Chief Financial Officer concluded that, as a result of a material weakness identified in our internal control over financial reporting, our disclosure controls and procedures were not effective as of December 31, 2023 .

Based on the evaluation of our disclosure controls and procedures as of December 31, 2024 and 2023, our Chief Executive Officer and Chief Financial Officer concluded that, as a result of a material weakness identified in our internal control over financial reporting, our disclosure controls and procedures were not effective as of December 31, 2024 and 2023.

In the course of preparing the financial statements that are included in this Form 10-K, management has determined that a material weakness exists within the internal controls over financial reporting.

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Also, projections of any evaluation of effectiveness of the internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.

Our management, under the supervision and with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our internal control over financial reporting as of the end of the period covered by this Annual Report on Form 10-K based on the framework in Internal Control---Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway

Commission, or COSO.

Our management, under the supervision and with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our internal control over financial reporting as of the end of the period covered by this Annual Report on Form 10-K based on the framework in Internal Control—Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO.

Based on such evaluation, our management concluded that our internal control over financial reporting was effective as of the end of the period covered by this Annual Report on Form 10-K.

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Jenifer Osterwalder

Chief Executive Officer, President and Director

Stephen Spalding

Chief Financial and Accounting Officer and Director

Jenifer Osterwalder - Chief Executive Officer, President, and Director

Chief Executive Officer, President, Chief Financial and Accounting Officer and Director

Sean Michael Brehm

Chairman of the Board, Director

Chief Technology Officer

Aaron Christensen

Chief Revenue Officer

Aby Alexander

Paul Breitenbach

Chad McLeaming

Jenifer Osterwalder - Chief Executive Officer, President, Chief Accounting and Financial Officer 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.

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From January 2000 to January 2005, she served as a consultant investment banker to Five Seas Securities, Ltd., a securities firm in British Columbia, Canada.

From August 2004 to December 2004, Ms.

Osterwalder served as a consultant Manager 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.

Osterwalder received her Bachelor of Science in Business Administration in marketing and logistics from Ohio State University.

Jennifer Osterwalder, our Chief Executive Officer, President and Director donates approximately 160 hours per month to our business.

Stephen Spalding – Interim Chief Financial and Accounting Officer , Director

Since March 2008, Mr.

Spalding has been an independent management and financial consultant based in Mill Valley, California.

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.

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 a Master of Business Administration, Quantitative Analysis, University of Arizona, 1974.

He also has a Bachelor of Science, Finance and Management, Eastern Illinois University, 1973, a Bachelor of Science, Physics (solid state), Eastern Illinois University, 1969 and a Bachelor of Science, Mathematics, Eastern Illinois University, 1969.

Stephen Spalding, our Interim Chief Financial, Accounting Officer and Director donates approximately 1 hour per month to our business.

Sean Michael Brehm – Chairman of the Board, Director

Sean Michael Brehm’s career encompasses Chairman and CEO of Crowd Point Technologies and the Chairman of Node Nexus Network and previous roles as the Founder and CEO of Cyber Security, and Big Data Analytic and AI.

In these roles he has worked with the U.S.

Department of Defense and other commercial customers developing and enhancing cyber security measures and AI and big data platforms.

Moshik Cohen, PhD – Chief Technology Officer

Cohen is a technology and business leader, specializing in applied research, deep technology and business strategy.

Experienced in Automotive RADAR, Antennas and Phased Arrays, Semiconductor, RFCMOS, Algorithms, Hardware, Nano Photonics and Artificial Intelligence.

He has vast experience in building best-in-class multidisciplinary teams and developing HW & SW products, from inception to deployment.

Strong scientific background with numerous high-impact publications, including 10 papers in Nature & Science Journals.

Aaron Christensen – Chief Revenue Officer

Skilled in Intelligence Analysis, Operations Management, Government, Operational Planning, and Team Building.

Strong business development professional.

FAMILY RELATIONSHIPS

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BOARD OF DIRECTORS COMMITTEES

As of the date of this annual report on Form 10-K for the year ended December 31, 2023, 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, 2024, we have no standing committees, however, we intend to appoint an audit, a compensation and a nominating committee of our board of directors in the coming months.

As of the date of this annual report on Form 10-K for the year ended December 31, 2024, there have been no material changes to the procedures by which our security holders may recommend nominees to our board of directors.

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Stephen Spalding,

Interim Chief Financial and Accounting Officer and Director

Interim Chief Financial and Accounting Officer and Director (former)

EMPLOYMENT AGREEMENTS

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Osterwalder $12,000 a month beginning January 1, 2020 for services rendered.

As of December 31, 2023 and 2022, amounts due to Ms.

Osterwalder for accrued compensation were $288,000 and $144,000, respectively.

On March 16, 2022, we issued to Ms.

Osterwalder a promissory note in the amount of $1,054,653 for accrued salary of $1,054,653 due to Ms.

Osterwalder as of December 31, 2021.

On March 16, 2022, the Board of Directors approved a resolution to convert the accrued salary of $1,054,653 owed to Ms.

Osterwalder through December 31, 2021 into 210,930,660 shares of our common stock.

As of the date of this annual report on Form 10-K for the year ended December 31, 2023, we have no employment agreements in place with any of our other executive officers, directors or employees.

As of December 31, 2024 and 2023, amounts due to the CEO related to accrued salaries were $432,000 and $288,000 respectively.

As of the date of this annual report on Form 10-K for the year ended December 31, 2024, we have no other employment agreements in place with any of our other executive officers, directors or employees.

OUTSTANDING EQUITY AWARDS AT YEAR END

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Pursuant to authority granted under 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, 2023:

The following table sets forth the compensation of our directors for the year ended December 31, 2024 and for December 31, 2023

DIRECTOR COMPENSATION

As of December 31, 2024

Fees Earned or Paid in Cash

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Stephen Spalding

Aby Alexander*

Paul Breitenbach

Chad McLeaming

* These options were promised by the Company but have not yet been approved by the board of directors and no option agreements have been entered into between the directors and the Company.

As the directors resigned before the board issued these options, these options will not be issued by the Company.

These directors didn’t serve in 2023.

There was no compensation paid to the Directors during the year 2023.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

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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 March 28, 2024.

The following table sets forth certain information regarding the beneficial ownership of our common stock as of June 23, 2025.

The information in these tables provides ownership information for:

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each of our directors and executive officers;

· all of our directors and executive officers as a group.

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.

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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 9 th Avenue NE, Seattle, Washington, 98105.

The address of each person listed is care of Spectral Capital Corporation., 701 Fifth Avenue, Suite 4200, Seattle, Washington, 98104.

Nature of Ownership

Percent of Class

Jenifer Osterwalder

Stephen Spalding

All officers, directors, and 5% or greater shareholders as a group (3 persons)

Sean Michael Brehm

Chad McLeaming

All officers, directors, and 5% or greater shareholders as a group

*Includes options to purchase 3,000,000 shares.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

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Osterwalder’s services was $144,000 for each of the years ended December 31, 2023 and 2022.

As of December 31, 2023 and 2022, amounts due to Ms.

Osterwalder related to accrued salaries were $288,000 and $144,000, respectively.

On March 16, 2022, we issued to Ms.

Osterwalder a promissory note in the amount of $1,054,653 for accrued salary of $1,054,653 due to Ms.

Osterwalder as of December 31, 2021.

On March 16, 2022, the Board of Directors approved a resolution to convert the accrued salary of $1,054,653 owed to Ms.

Osterwalder through December 31, 2021 into 210,930,660 shares of our common stock.

During March 2022, Ms.

Osterwalder subsequently sold the 210,930,660 shares of common stock to Decus Pro OU in a private transaction for a total purchase price of $18,910.

As of December 31, 2024 and 2023, amounts due to the CEO related to accrued salaries were $432,000 and $288,000 respectively.

Related Party Transactions (Cont’d)

Spectral Capital Corporation engages in transactions with certain related parties, including directors, officers, significant shareholders, and affiliates.

The Company’s policy is that any related party transaction must be reviewed and approved by disinterested members of the Board of Directors to ensure fairness and compliance with corporate governance best practices.

Below are the related party transactions that occurred during the fiscal year ended December 31, 2024.

Acquisition of Node Nexus Network Co.

· Transaction Date:

August 29, 2024

· Related Party:

Sean Michael Brehm , Chairman of the Board

· Transaction Description:

o On August 29, 2024, Spectral completed the acquisition of 100% of Node Nexus Network Co.

LLC (“Node Nexus”) from Sean Michael Brehm , the sole owner of Node Nexus and now Spectral’s Chairman.

o Spectral issued 1,000,000 shares of Series Quantum Preferred Stock in exchange for all of the outstanding membership interests of Node Nexus.

Each preferred share is convertible into 40 common shares after a 12-month holding period, subject to the availability of authorized shares.

o Concurrently, Mr.

Brehm invested $1,010,000 in Spectral through a private placement, purchasing 5,050,000 common shares at $0.20 per share .

o As a result of this transaction, Mr.

Brehm became Spectral’s controlling shareholder and now holds a substantial voting interest in the Company.

· Conflict Mitigation:

o Given that Mr.

Brehm was both the seller and a newly appointed director, the transaction was reviewed and approved by Spectral’s independent directors to ensure that the terms were fair and in the best interest of the Company and its shareholders .

o The Share Exchange Agreement and related documents were filed with the SEC and disclosed in the Company’s Form 8-K filed on August 30, 2024.

Licensing Agreement with Crwdunit, Inc.

· Transaction Date:

June 23, 2024

· Related Party:

Crwdunit, Inc.

, controlled by Sean Michael Brehm

· Transaction Description:

o In connection with the acquisition of Node Nexus, Spectral entered into a Licensing Agreement with Crwdunit, Inc.

to license the Distributed Quantum Ledger Database (DQLDB) technology that powers the Vogon Cloud.

o Crwdunit, Inc.

is a Delaware corporation controlled by Mr.

Brehm , who was appointed as Spectral’s Chairman in June 2024.

o This technology is critical to Spectral’s business, as it underpins its quantum-secured cloud infrastructure and decentralized computing model.

· Potential Conflict and Oversight:

o The licensing arrangement was structured on arms-length terms and reviewed by independent directors to ensure fairness.

o As part of the transaction, Spectral also secured an option to acquire 100% of Crwdunit, Inc.

for $10 million in cash or stock at a future date.

o If Spectral does not exercise this option, the Company will remain reliant on Crwdunit’s technology under the terms of the licensing agreement.

Stock Issuance to CEO for Expense Reimbursement

· Transaction Date:

April 22, 2024

· Related Party:

Jenifer Osterwalder, Chief Executive Officer

· Transaction Description:

o On April 22, 2024, Spectral issued 68,311 restricted common shares to CEO Jenifer Osterwalder in exchange for $6,148 in reimbursable business expenses she had personally funded.

o The shares were valued at approximately $0.09 per share , based on the closing price of the Company’s stock at the time of issuance.

· Purpose and Justification:

o This issuance was approved by the Board of Directors as a reimbursement mechanism due to Spectral’s limited cash resources at the time.

o No interest or additional compensation was granted in connection with this transaction.

Director and Officer Stock Option Grants

· Transaction Date:

June 12, 2024

· Related Parties:

o Sean Michael Brehm (Chairman) – 3,000,000 options

o Jenifer Osterwalder (CEO) – 3,000,000 options

o Independent Directors – Smaller option grants

· Transaction Description:

o On June 12, 2024, Spectral granted stock options to directors and executive officers as part of its equity incentive program.

o The options have an exercise price based on the then-current 409(a) valuation , with vesting schedules aligned to long-term service and performance .

· Board Approval & Fairness Considerations:

o The grants were reviewed and approved by the Board to ensure that they aligned with market standards for executive and director compensation.

o The options provide an equity-based incentive for leadership to focus on increasing shareholder value.

Debt Settlement with Sky Data PLL OU

· Transaction Date:

· Related Party:

Sky Data PLL OU , a significant shareholder

· Transaction Description:

o In April 2024, Spectral settled a $81,950 liability owed to Sky Data PLL OU by issuing 3,563,043 shares of common stock .

o The shares were valued at approximately $0.09 per share , based on the fair market value at the time.

· Purpose and Justification:

o This transaction allowed Spectral to eliminate debt without using cash resources , supporting its financial stability.

o Sky Data was a major creditor and investor in Spectral’s previous telecommunications operations.

· Potential Conflict and Oversight:

o While Sky Data is a significant shareholder, it does not have board representation or executive control over Spectral.

o The transaction was approved by independent directors and was structured to be mutually beneficial .

Director Independence

As a smaller reporting company , Spectral is not required to comply with the stricter corporate governance requirements applicable to large publicly traded firms.

However, the Board of Directors recognizes the importance of independent oversight in reviewing transactions and strategic decisions.

Currently, the Company’s Board consists of five directors, three of whom are considered independent under SEC guidelines .

These independent directors have no material relationships with the Company outside of their board service and stock ownership.

The Board intends to continue strengthening its governance practices and may expand its independent oversight in the future.

Policy on Related Party Transactions

Spectral has adopted a formal policy requiring that any transaction involving an officer, director, or significant shareholder be reviewed and approved by the disinterested members of the Board .

This policy is intended to ensure:

· Fairness in business dealings

· Alignment with shareholder interests

· Compliance with regulatory and corporate governance standards

From time to time, due to the limited cash flow available, Ms.

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Osterwalder was due $0 and $6,150 in connection with these advances, respectively.

On March 16, 2022, we issued to Ms.

Osterwalder a promissory note in the amount of $206,956 in connection with these cash advances due to Ms.

Osterwalder as of December 31, 2021.

On March 20, 2022, Ms.

Osterwalder assigned the promissory note to Decus Pro OU in a private transaction for a total purchase price of $10,348.

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.

The Board of Directors has determined that a director is an independent director under standards established by the Securities and Exchange Commission.

The following Directors are considered independent directors:

Aby Alexander, Paul Breitenbach, Samson Lee and Chad McLeaming.

Review, Approval or Ratification of Transactions with Related Persons

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dated February 15, 2022.

List of Subsidiaries of the Registrant

Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes -Oxley Act of 2002 .

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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.

March 28, 2024

June 23, 2025

SPECTRAL CAPITAL CORPORATION

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President and Chief Executive Officer

/s/ Stephen Spalding

Stephen Spalding

/s/ Jenifer Osterwalder

Jenifer Osterwalder

Chief Financial and Accounting Officer

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures