SPECTRAL CAPITAL Corp 10-K

Item 8. Financial Statements and Supplementary Data SPECTRAL CAPITAL CORPORATION TABLE OF CONTENTS DECEMBER 31, 2024 AND 2023 Report of Independent Registered Public Accounting Firm F - 2 Consolidated Balance Sheets as of December 31, 2024 and 2023 F – 4 Consolidated Statements of Operations for the years ended December 31, 2024 and 2023 F – 5 Consolidated Statement of Stockholders’ Deficit for the years ended December 31, 2024 and 2023 F – 6 Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023 F – 7 Notes to Consolidated Financial Statements F - 8 F-1 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Spectral Capital Corporation and subsidiaries, Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Spectral Capital Corporation and subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Explanatory Paragraph - Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations, had an accumulated deficit and has a deficit working capital raise substantial doubt about its ability to continue as going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. F-2 Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters /s/ RBSM LLP We have served as the Company’s auditor since 2025. PCAOB ID 587 New York, NY June 23, 2025 F-3 SPECTRAL CAPITAL CORPORATION CONSOLIDATED BALANCE SHEETS December 31, 2024 December 31, 2023 Assets: Cash and cash equivalents $ 107,475 $ 240 Prepaid expenses 6,500 - Current assets 113,975 240 Total assets $ 113,975 $ 240 Liabilities and Stockholders' Deficit: Current liabilities Accounts payable and accrued liabilities $ 482,461 $ 290,119 Related party advances 550,700 6,150 Short-term advances - 36,450 Current liabilities 1,033,161 332,719 Total liabilities 1,033,161 332,719 Commitments and contingencies Stockholders' Deficit: Preferred stock, par value $ 0.0001 , 5,000,000 shares authorized, no shares issued and outstanding - - Series Quantum Preferred Stock, par value $ 0.0001 , 2,000,000 and 0 shares authorized, 1,000,000 and 0 shares issued and outstanding as of December 31, 2024 and 2023 100 - Common stock, par value $ 0.0001 , 1,000,000,000 and 500,000,000 shares authorized, 67,699,302 and 42,017,948 shares issued and outstanding as of December 31, 2024 and 2023 6,770 4,202 Additional paid-in capital 33,629,226 30,948,057 Accumulated deficit ( 34,333,396 ) ( 31,062,852 ) Total stockholders' deficit ( 697,300 ) ( 110,593 ) Non-controlling interest ( 221,886 ) ( 221,886 ) Total stockholders' deficit - Spectral Capital Corp. ( 919,186 ) ( 332,479 ) Total liabilities and stockholders' deficit $ 113,975 $ 240 The accompanying notes are an integral part of these consolidated financial statements. F-4 SPECTRAL CAPITAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, 2024 Year Ended December 31, 2023 Revenues $ - $ - Costs of sales - - Gross profit - - Operating expenses: Selling, general and administrative 2,115,924 71,477 Wages and benefits 144,000 144,000 Research and development 745,024 - Total operating expenses 3,004,948 215,477 Operating loss ( 3,004,948 ) ( 215,477 ) Other income and (expense): Extinguishment of debt ( 265,596 ) - Total other income (expense) ( 265,596 ) - Net loss before non-controlling interest ( 3,270,544 ) ( 215,477 ) Loss attributable to non-controlling interest - 90 Net loss attributable to Spectral Capital Corporation $ ( 3,270,544 ) $ ( 215,387 ) Basic and diluted loss per common share $ ( 0.06 ) $ ( 0.01 ) Weighted average shares - basic and diluted 57,925,034 42,017,948 The accompanying notes are an integral part of these consolidated financial statements. F-5 SPECTRAL CAPITAL CORPORATION CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023 Series Quantum Preferred Stock Common Stock Shares Amount Shares Amount Additional Paid-in Capital Non-Controlling Interest Accumulated Deficit Total Stockholders' Deficit December 31, 2022 - $ - 42,017,948 $ 4,202 $ 30,873,057 $ ( 221,796 ) $ ( 30,847,465 ) $ ( 192,002 ) Settlement of liability by shareholder - - - - 75,000 - - 75,000 Non-controlling interest - - - - - ( 90 ) - ( 90 ) Net loss - - - - - - ( 215,387 ) ( 215,387 ) December 31, 2023 - $ - 42,017,948 $ 4,202 $ 30,948,057 $ ( 221,886 ) $ ( 31,062,852 ) $ ( 332,479 ) Sale of common stock - - 15,000,000 1,500 148,540 - - 150,040 Issuance of common stock for liabilities - - 3,631,354 363 353,328 353,691 Common and preferred stock issued for cash 1,000,000 100 5,050,000 505 1,014,350 - - 1,014,955 Stock-based compensation - - 2,000,000 200 1,164,951 - - 1,165,151 Net loss - - - - - - ( 3,270,544 ) ( 3,270,544 ) - - December 31, 2024 1,000,000 $ 100 67,699,302 $ 6,770 $ 33,629,226 $ ( 221,886 ) $ ( 34,333,396 ) $ ( 919,186 ) The accompanying notes are an integral part of these consolidated financial statements. F-6 SPECTRAL CAPITAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2024 Year Ended December 31, 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss attributable to Spectral Capital Corporation $ ( 3,270,544 ) $ ( 215,387 ) Adjustments to reconcile net loss to net cash used in operating activities: Non-controlling interest - ( 90 ) Stock-based compensation 1,165,151 - Excess value of common stock issued to settle liabilities 265,591 - Changes in operating assets and liabilities: Accounts receivable - 25,000 Prepaids and other assets ( 6,500 ) - Due to related parties - accrued salary 144,000 144,000 Accounts payable and accrued expenses 48,343 ( 1,055 ) Net cash used in operating activities ( 1,653,959 ) ( 47,532 ) CASH FLOWS FROM INVESTING ACTIVITIES: Net cash used in investing activities - - CASH FLOWS FROM FINANCING ACTIVITIES: Intercompany Short-term advances - 36,450 Proceeds from related party advances 596,199 650 Proceeds from sale of common and preferred stock 1,164,995 - Net cash provided by financing activities 1,761,194 37,100 Effect of exchange rate changes on cash - - Change in cash and cash equivalents 107,235 ( 10,432 ) Cash and cash equivalents, beginning of period 240 10,672 Cash and cash equivalents, end of period $ 107,475 $ 240 Supplemental disclosures of cash flow information: Cash paid for interest $ - $ - Cash paid for income taxes $ - $ - Non-cash investing and financing activities: Common stock issued to settle liabilities $ 88,100 $ - Settlement of a liability by a shareholder $ - $ 75,000 The accompanying notes are an integral part of these consolidated financial statements. F-7 SPECTRAL CAPITAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – BUSINESS AND NATURE OF OPERATIONS Spectral Capital Corporation (“Spectral” or the “Company”) is a Nevada corporation, originally incorporated on September 13, 2000. Since its inception, the Company has undergone several strategic transitions, ultimately refocusing its operations in 2024 to become a deep technology company centered on hybrid classical-quantum computing. Headquartered in Seattle, Washington, Spectral now operates as a vertically integrated quantum and AI innovation platform, offering Quantum as a Service (QaaS), intellectual property licensing, proprietary software products, and value-driven acquisitions. Spectral’s business model is built on four synergistic pillars: (1) the development of a robust intellectual property portfolio—including patents and trade secrets—at the intersection of artificial intelligence and hybrid classical computing; (2) monetization of that IP through licensing agreements that include both cash payments and equity in licensee companies; (3) creation of high-impact software tools derived from Spectral’s core IP that are modular, cost-efficient, and capable of producing significant risk-adjusted returns; and (4) acquisition and transformation of smaller technology companies through the strategic application of Spectral’s proprietary technology. In 2024, Spectral filed 104 patent applications across artificial intelligence, quantum computing, and autonomous systems, while concurrently developing an internal pipeline of over 400 additional patentable innovations. The Company also engaged a network of senior scientific and commercial advisors to enhance IP defensibility and commercialization readiness. These efforts support an expanding pipeline of licensing negotiations and product development initiatives. The Company’s legacy as a technology incubator included several historical acquisitions, such as Noot Holdings and Monitr Holdings. In 2024, Spectral entered a new strategic phase through a series of acquisitions and platform developments in quantum and decentralized computing. However, in 2025, the Company formally rescinded certain transactions involving former Chairman Sean Michael Brehm and related entities. These rescissions preserved Spectral’s independently developed intellectual property, clarified ownership of over 100 provisional patents, and returned in excess of \$100 million in share-based consideration to shareholders—thereby restoring strategic focus and corporate governance alignment. Spectral’s current operations are focused on licensing its IP, developing quantum- and AI-enhanced software products, and executing acquisitions where its technologies can drive transformative growth. The Company has not yet generated revenues and reported net losses for fiscal years 2023 and 2024. Management is actively pursuing strategic partnerships and financing opportunities to support operational expansion and long-term commercialization efforts. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company is in the development stage and has sustained substantial losses since inception. As of December 31, 2024, the Company has cash on hand of $ 107,475 and negative working capital of $ 919,186 . The Company expects current cash on hand will not be able to fund operations for a period 12 months or more. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. To date management has funded its operations through selling equity securities and advances from related parties. The ability of the Company to continue as a going concern is dependent on the Company generating cash from the sale of its common stock and/or obtaining debt financing and attaining future profitable operations, however, there can be no assurance the Company will be successful in these efforts. As of the date of these consolidated financial statements the Company does not have any firm commitments for capital. Without the required capital, the Company will be required to reduce their development expenditures which will potentially delay the completion of products which are expected to generate future revenues. Risks and Uncertainties The Company has a limited operating history and has not generated revenues from our planned principal operations. The Company’s business and operations are sensitive to general business and economic conditions in the U.S. and worldwide. These conditions include short-term and long-term interest rates, inflation, fluctuations in debt and equity capital markets and the general condition of the U.S. and world economy. A host of factors beyond the Company’s control could cause fluctuations in these conditions, including the political environment and acts or threats of war or terrorism. Adverse developments in these general business and economic conditions, including through recession, downturn or otherwise, could have a material adverse effect on the Company’s consolidated financial condition and the results of its operations. The Company currently has no sales and limited marketing and/or distribution capabilities. The Company has limited experience in developing, training or managing a sales force and will incur substantial additional expenses if we decide to F-8 market any of our current and future products. Developing a marketing and sales force is also time consuming and could delay launch of our future products. In addition, the Company will compete with many companies that currently have extensive and well-funded marketing and sales operations. Our marketing and sales efforts may be unable to compete successfully against these companies. In addition, the Company has limited capital to devote sales and marketing. The Company’s industry is characterized by rapid changes in technology and customer demands. As a result, the Company’s products may quickly become obsolete and unmarketable. The Company’s future success will depend on its ability to adapt to technological advances, anticipate customer demands, develop new products and enhance our current products on a timely and cost-effective basis. Further, the Company’s products must remain competitive with those of other companies with substantially greater resources. The Company may experience technical or other difficulties that could delay or prevent the development, introduction or marketing of new products. Also, the Company may not be able to adapt new or enhanced products to emerging industry standards, and the Company’s new products may not be favorably received. Nor may we have the capital resources to further the development of existing and/or new ones. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company, Spectral Holdings, Inc, and its 60% owned subsidiaries, Noot Holdings, Inc. from its date of incorporation of February 28, 2013, and Monitr Holdings, Inc. from its date of incorporation of December 1, 2013. All material intercompany accounts and transactions have been eliminated in consolidation. See Note 1 and 3 for discussion of the acquisition and then rescindment of the NNN acquisition. Basis of Presentation The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. Revised Financial Statements The Company has revised its previously issued consolidated statement of stockholders' deficit as of December 31, 2022 to correct an immaterial misstatement identified during the current period. Specifically, in connection with the conversion of certain liabilities into common stock during 2022, the Company determined it had not previously recorded the full excess fair value of the consideration issued. As a result, the Company revised the previously reported additional paid-in capital, increasing it from $29,106,804 to $30,873,057, and the accumulated deficit, increasing it from $32,613,718 to $34,379,971. These adjustments reflect a net increase of $1,766,253 to both accounts. The Company has evaluated and concluded that the misstatement, was not material to its previously issued consolidated financial statements. However, it has revised the consolidated statement of stockholders’ deficit to reflect the corrections described above. There was no impact on the remaining consolidated financial statements or disclosures. Stock-Based Compensation The Company accounts for employee stock-based compensation in accordance with the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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 follows ASC Topic 505-50, Equity: Equity-Based Payments to Non-Employees for stock options and warrants issued to consultants and other non-employees. In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined. The fair value of the equity instrument is charged directly to compensation expense and additional paid-in capital over the period during which services are rendered. The Company accounts for forfeitures as they occur. Accordingly, compensation expense is recognized only for awards that ultimately vest. Forfeitures are recognized in the period in which they occur, and no estimations or adjustments are made for anticipated forfeitures. Because the Company’s stock-based compensation options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the estimate, amounts estimated using the Black-Scholes option pricing model may differ materially from the actual fair value of the Company’s stock-based compensation options. Use of Estimates The preparation of the consolidated 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 of the consolidated financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-9 Revenue Recognition The Company revenues in accordance with Accounting Standards Codification (“ASC”) 606, “Revenue from contracts with customers”. Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. There was no revenue during the year ended December 31, 2024 and 2023. Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value: Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 - Include other inputs that are directly or indirectly observable in the marketplace. Level 3 - Unobservable inputs which are supported by little or no market activity. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. As of December 31, 2024 and 2023, the Company does not have any assets or liabilities which would be considered Level 2 or 3. The Company’s financial instruments primarily consist of cash and cash equivalents, accounts payable, and amounts payable to related parties. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these consolidated financial statements. F-10 Income Taxes The Company follows ASC 740, Income Taxes for recording the provision for income taxes. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Tax law and rate changes are reflected in income in the period such changes are enacted. The Company records a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. The Company includes interest and penalties related to income taxes, including unrecognized tax benefits, within the income tax provision. The Company’s income tax returns are based on calculations and assumptions that are subject to examination by the Internal Revenue Service and other tax authorities. In addition, the calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcomes of examinations by tax authorities in determining the adequacy of its provision for income taxes. The Company continually assesses the likelihood and amount of potential adjustments and adjusts the income tax provision, income taxes payable and deferred taxes in the period in which the facts that give rise to a revision become known. The Company recognizes windfall tax benefits associated with share-based awards directly to stockholders’ equity only when realized. A windfall tax benefit occurs when the actual tax benefit realized by the Company upon an employee’s disposition of a share-based award exceeds the deferred tax asset, if any, associated with the award that the Company had recorded. When assessing whether a tax benefit relating to share-based compensation has been realized, the Company follows the tax law ordering method, under which current year share-based compensation deductions are assumed to be utilized before net operating loss carryforwards and other tax attributes. We are currently delinquent with respect to our U.S. federal income tax filings for the past several years. Segments The Company has evaluated the criteria for segment reporting under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting , and has determined that it operates as a single operating and reportable segment. This conclusion is based on the following factors: · The chief operating decision maker (“CODM”) reviews financial information on a consolidated basis for purposes of evaluating performance and allocating resources. · The Company’s operations exhibit similar economic characteristics and are managed and reported as a single business unit. · The Company’s products and services are offered in a consistent manner across its markets, with no discrete business lines requiring separate reporting. As a result, no additional segment disclosures are required. Cash and Cash Equivalents The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. Basic Loss Per Share Basic loss per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. During the year ended December 31, 2024, the Company had options to purchase 6,810,000 shares of common stock for which the effects were anti-dilutive. During the year ended December 31, 2023, the Company did not have any dilutive shares. F-11 Non-Controlling Interests Non-controlling interests disclosed within the consolidated statement of operations represent the minority ownership’s 40% share of net losses of Noot Holdings, Inc. and Monitr Holdings, Inc incurred during the years ended December 31, 2024 and 2023. The following table sets forth the changes in non-controlling interest for the years ended December 31, 2024 and 2023: Non-Controlling Interests Balance at December 31, 2022 $ ( 221,796 ) Net loss attributable to non-controlling interest ( 90 ) Balance at December 31, 2023 ( 221,886 ) Net loss attributable to non-controlling interest - Balance at December 31, 2024 $ ( 221,886 ) 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. Recent Accounting Pronouncements In March 2024, the FASB issued ASU No. 2024-01, “Compensation—Stock Compensation (Topic 718): Scope Applications of Profits Interests and Similar Awards” (“ASU 2024-01”). ASU 2024-01 adds an example to Topic 718 which illustrates how to apply the scope guidance to determine whether profits interests and similar awards should be accounted for as share-based payment arrangements under Topic 718 or under other U.S. GAAP. ASU 2024-01 is effective for annual periods beginning after December 15, 2025, although early adoption is permitted. Upon adoption, ASU 2024-01 is not expected to have an impact on the Company’s consolidated financial statements. In March 2024, the FASB issued ASU No 2024-02, “Codification Improvements - Amendments to Remove References to the Concepts Statements” (“ASU 2024-02”). ASU 2024-02 removes references to various Concepts Statements. In most instances, the references are extraneous and not required to understand or apply the guidance. ASU 2024-02 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. ASU 2024-02 can be applied prospectively or retrospectively. Upon adoption, ASU 2024-01 is not expected to have an impact on the Company’s consolidated financial statements. In November 2024, the FASB issued ASU No. 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40).” This standard requires disclosure of specific information about costs and expenses and becomes effective January 1, 2027. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU 2024-04, “Debt - Debt with Conversions and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments” (“ASU 2024-04”). ASU 2024-04 clarifies the requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted for as an induced conversion. The requirements of ASU 2024-04 are effective for the Company for fiscal years beginning after December 15, 2025, and interim periods within those periods. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures. In November 2023, the FASB issued Accounting Standards Update 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280, on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, F-12 with early adoption permitted. The Company adopted this standard in the year ended December 31, 2024. The adoption did not have a material effect on the Company’s consolidated financial statements. In December 2023, the FASB issued Accounting Standards Update 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted this standard in the year ended December 31, 2024. The adoption did not have a material effect on the Company’s consolidated financial statements. The FASB issues ASUs to amend the authoritative literature in the 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 statements. NOTE 3 – RELATED PARTY TRANSACTIONS Jenifer Osterwalder, the Company’s Chief Executive Officer Jenifer Osterwalder, the Company’s Chief Executive Officer, charges the Company $12,000 per month beginning January 1, 2021 for services rendered. Total amounts expended in the Company's consolidated financial statements in connection with the CEO's services were $ 144,000 and $ 144,000 for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024 and 2023, amounts due to the CEO related to accrued salaries were $ 432,000 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 December 31, 2024 and 2023, the Company's CEO was due $ 0 and $ 6,150 in connection with these advances, respectively. During the year ended December 31, 2024, the Company issued 68,311 shares of common stock in satisfaction of $ 6,150 in advances. During the year ended December 31, 2024, the Company received $ 550,700 in total demand advances from the Chairman of the Board of Directors, Sean Michael Brehm. These advances are documented under a promissory note dated November 14, 2024 (“Note”). The Note provides for up to $2,500,000 in advances under the Note by Mr. Brehm to Spectral. The Note must be repaid by the Company, including accrued interest at 4% APR at the end of five years. As of December 31, 2024, accrued interest on the note was insignificant to the financial statements. The Note balance may be applied to the exercise of Mr. Brehm’s options to acquire common stock in the Company at any time while the Note is outstanding. Subsequently, the Company entered into a settlement agreement with Sean Brehm and affiliated entities to rescind all prior agreements and no longer owes Mr. Brehm compensation for the demand advances (see Note 7). 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 acquired in exchange for 1,000,000 shares of newly designated Series Quantum Preferred Stock effective August 29, 2024; see Note 4. In connection with the acquisition, Sean Michael Brehm also purchased 5,050,000 of the Company’s common shares at $0.20 per share for a total purchase price of $ 1,010,000 . Due to the related party and common control nature of this transaction, the acquisition was accounted for at the carrying value of the acquired net assets of NNN. Assets acquired consisted of approximately $ 4,955 in cash. The pre-acquisition financial results of NNN were not significant. Due to the cancellation, the initial transaction recorded at par value. Prior to the close of the acquisition, the Company paid approximately $145,000 to NNN for development services. Subsequently, on November 13, 2024, the transaction was rescinded. The 1,000,000 Series Quantum Preferred Shares that were issued have been assigned to a new Delaware corporation, controlled by Sean Michael Brehm, which was assigned the intellectual property previously owned by NNN. The new entity was recently established and had no operations. See Note 7 for subsequent event regarding the return of the 1,000,000 Series Quantum Preferred Shares. NOTE 4 – STOCKHOLDERS’ DEFICIT Common Stock On August 8, 2022, we increased our common stock, $ 0.0001 par value per share, from 500,000,000 to 1,000,000,000 (the “Increase in Authorized Capital”). On November 22, 2022, we effected a reverse stock split of our common stock whereby every ten (10) shares of issued and outstanding common stock was combined into one (1) share of common stock (the “Reverse Stock Split”). F-13 Preferred Stock On August 30, 2024, the Company filed a Certificate of Designation for the newly designated Series Quantum Preferred Stock. The number of Series Quantum Preferred Stock designated is 2,000,000 . The Series Quantum Preferred Stock contain a liquidation preference over common shareholders equal to 40 times the amount per share to be distributed to the common shareholders. The Series Quantum Preferred Stock is convertible at the option of the Company or the holder into 40 shares of the Company’s common stock, contingent upon the Company having enough authorized shares to effectuate the conversion. In addition, the conversion right shall not become exercisable by the holder until 12 months have elapsed from the date of issuance of the Series Quantum Preferred Stock. The holders of the Series Quantum Preferred Stock have the right to vote on an as-converted-to-common basis, such that one share of Series Quantum Preferred Stock has 40 votes. On August 29, 2024, the Company issued 1,000,000 shares of Series Quantum Preferred Stock to Sean Michael Brehm in connection with the acquisition of NNN. See Note 3. See Note 7 for subsequent event regarding the return of the 1,000,000 Series Quantum Preferred Shares. Due to the cancellation, the initial transaction recorded at par value. 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 $150,000 was used for operating capital. As of the date of this filing, the Company has received $ 150,041 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 December 31, 2024, total proceeds of $ 1,010,000 had been received from this offering. In addition, cash contributed through NNN was $4,955. As further discussed in Note 3, this offering was consummated with a related party in connection with the acquisition of NNN. Settlement of Advances During the year ended December 31, 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 . During the year ended December 31, 2023, a shareholder of the Company satisfied various liabilities totaling $75,000 which were recorded as contributed capital. See Note 3 for additional share issuances. Stock for Services On April 26, 2024, we entered into a consulting contract with Scandere OU (Estonia) (“Scandere”). Scandere has the same management and has 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 entry into the data center market. 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. Asset Acquisitions On September 10, 2024, the Company entered into an Acquisition Agreement to exchange shares with Quantomo OU., an Estonian corporation (“Quantomo”), whereby the Company agreed to acquire from Quantomo 100% of the Quantomo’s outstanding shares in exchange for 2,000,000 shares of the Company’s common stock and a one-time cash payment of $ 135,000 or (120,000 Euros) which was paid and expensed in 2024. The closing of the transaction was expected to occur by December 10, 2024, subject to the satisfaction of the certain closing conditions as defined within the agreement. Subsequent to December 31, 2024, the agreement was rescinded without an impact on the year ended December 31, 2024. On September 10, 2024, the Company entered into an Acquisition Agreement to exchange shares with Crowdpoint Technologies, Inc., a Texas corporation (“Crowdpoint”), a company controlled by Sean Michael Brehm, and its wholly owned subsidiary, Crwdunit Inc., a Delaware corporation (“Target”), whereby the Company agreed to acquire from Crowdpoint 100% of the Target’s outstanding shares in exchange for 3,750,000 shares of the Company’s common stock. The closing of the transaction was expected to occur by December 10, 2024, subject to the satisfaction of certain closing conditions as F-14 defined within the agreement. Subsequent to December 31, 2024, the agreement was rescinded without an impact on the year ended December 31, 2024. Spectral entered into an Agreement between the Company and Verdant Quantum OU and Moshik Cohen dated December 15, 2024 whereby Spectral acquired certain plasmonic technology for the development of room temperature semiconductors. Subsequent to December 31, 2024, the agreement was rescinded without an impact on the year ended December 31, 2024. 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 year ended December 31, 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 $ 1,165,151 being expensed to selling, general and administrative during the year ended December 31, 2024, respectively. As of December 31, 2024, the remaining value of approximately $2.4 million is expected to be expensed over 3.45 years. The following is a summary of stock option activity for the nine months ended December 31, 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, December 31, 2024 6,810,000 $ 0.43 9.45 Vested, December 31, 2024 1,695,000 $ 0.43 9.45 Subsequent to December 31, 2024, various board members resigned resulting the forfeiture of approximately 3.6 million options. NOTE 5 – INCOME TAXES As of December 31, 2024, the Company had net operating loss carry forwards of approximately $ 16,600,000 that may be available to reduce future years’ taxable income through 2037. Future tax benefits which may arise as a result of these losses have not been recognized in these consolidated financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards. The difference between the Company’s tax rate and the statutory rate is due to a full valuation allowance. The provision for Federal income tax consists of the following: December 31, December 31, 2024 2023 Federal income tax benefit attributable to: Current operations $ 386,358 $ 45,250 Less: valuation allowance ( 386,358 ) ( 45,250 ) Net provision of income taxes $ - $ - F-15 The cumulative tax effect at the expected rate of 21 % of significant items comprising our net deferred tax amount is as follows: December 31, December 31, 2024 2023 Deferred tax asset attributable to: Net operating loss carryforward $ 5,353,538 $ 4,967,180 Less: valuation allowance ( 5,353,538 ) ( 4,967,180 ) Net deferred tax asset $ - $ - Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years. The Company is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The Company believes they are no longer subject to income tax examinations for years prior to 2012. NOTE 6 – COMMITMENTS AND CONTINGENCIES The Company leases virtual office space on a month-to-month basis in Seattle, Washington and office space in Lugano, Switzerland on a six-month basis. Litigation From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company’s business. The Company is not aware of any such legal proceedings that will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results. There was a claim made by a third party entity regarding Mr. Brehm and Node Nexus Network. The Company believes there is no basis for this claim and that the Company has no legal exposure on this claim and has been provided with an indemnity by Mr. Brehm for the same. The Company previously owed Rubenstein Public Relations $30,000. There was a dispute regarding the proper amount of the invoice and the parties agreed to settle the amount due for $24,000 and signed a settlement agreement to that effect. The amount was paid in full in June 2025. RESEARCH AND DEVELOPMENT For the year ended December 31, 2024, we incurred research and development expenses of $ 745,024 related to the development of our current software products. This expense consists of expenses related to our technology acquisitions, primarily the acquisition of the Node Nexus Network technology which were subsequently rescinded. SIGNIFICANT CUSTOMERS AND SUPPLIERS In the year ended December 31, 2024, we had 0 customers. And presently have 1 customer whom we are entirely dependent on for our current revenue. We expect this to change over the next 180 days. NOTE 7 – SUBSEQUENT EVENTS In accordance with ASC 855-10, the Company has analyzed its operations subsequent to December 31, 2024 to the date these consolidated financial statements were issued and has determined that it has the following material subsequent events to disclose in these consolidated financial statements, other than those disclosed above and below. From the end of fiscal 2024 through June 3, 2025, Spectral Capital Corporation (“Spectral” or the “Company”) completed several significant corporate actions. These events are summarized below: Investment in White Label Loyalty (May 2025): In May 2025, the Company entered into a definitive agreement to invest $15,000,000 in White Label Loyalty, a UK-based SaaS provider of enterprise-grade loyalty and customer engagement platforms. The investment was structured as a primary equity infusion to support White Label Loyalty’s product development and international expansion. The transaction exemplifies Spectral’s strategy of acquiring or investing in scalable software F-16 businesses that can be enhanced through integration with the Company’s proprietary intellectual property and platform technologies. This investment was financed in part through the Company’s existing equity resources. Restated Share Transfer Agreement (May 30, 2025): On May 30, 2025, the Company executed a Restated Share Transfer Agreement with Intrepid View Partners, LP, under which Spectral acquired 169,889 common shares of a global autonomous vehicle company for an aggregate purchase price of $16,988,900, paid via the issuance of 1,698,890 restricted shares of Spectral’s common stock. Rescission of Transactions with Sean Brehm and Affiliates: The Company entered into a settlement agreement with Sean Brehm and affiliated entities to rescind all prior acquisitions and planned collaborations involving Node Nexus Network, Vogon Cloud, Quantomo, and Crwdunit. Under the agreement, Spectral retains ownership of 104 patent filings developed during the course of the collaboration. Brehm and his affiliates will pursue independent commercial development of the foregoing technologies in a separate private vehicle. All shares previously issued to Brehm and his affiliates have been returned and cancelled except for the private placement shares of 5,050,000 purchased by Brehm which were fully paid for. As of December 31, 2024, these entities did not have any assets or liability as to be reflected as discontinued operations. Additionally, the Company intends to continue the development of its intellectual property and software development on its own and does not require any resources, assets or inputs from any of the above entities or individuals to continue the development of its technologies. Board of Directors Changes: Effective May 30, 2025, five members of the Board of Directors—Sean Brehm, Sam Lee, Aby Alexander, Chad Lemming, and Paul Breitenbach—resigned. On the same date, the Board appointed Michael Turner and Jeffrey Chong as new directors. These changes are part of the Company’s broader governance overhaul in preparation for a potential Nasdaq uplisting. F-17 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AN ACCOUNTING FINANCIAL DISCLOSURE Not applicable.