What changed in this filing

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Item 1. Business

2026-03-31 compared with 2025-06-24 · 467 added, 286 removed, 50 unchanged (94% of the section changed)

Spectral Capital Corporation is a publicly traded technology company that operates as a hybrid research, intellectual property, and operating business.

Spectral has operated continuously as an operating company;

however, for much of its history, the Company’s operations were relatively small in scale and primarily focused on research and development, software experimentation, and intellectual property creation.

While these efforts resulted in the development of proprietary technologies and technical know-how, Spectral’s earlier software products achieved limited commercial adoption and did not generate meaningful recurring revenues.

Beginning in 2024 and accelerating through 2025, Spectral initiated a strategic transformation designed to reduce reliance on speculative or long-cycle technology commercialization and to build a more diversified, revenue-oriented operating model.

This transformation reflects management’s view that long-term shareholder value is best created by pairing intellectual property development with direct ownership of operating businesses that maintain established customer relationships, generate recurring revenues, and can benefit from the selective deployment of Spectral’s technologies.

As a result, Spectral now operates as an integrated platform that combines ongoing research and development, intellectual property strategy, software development, and the ownership and operation of technology-enabled businesses.

Strategic Transformation and Focus

Spectral Capital Corporation is a publicly traded deep quantum technology platform company that has transformed from a technology incubator into an operator of integrated quantum computing solutions.

Based in Seattle, Washington, Spectral now specializes in “Quantum as a Service” (QaaS) – delivering quantum computing power and next-generation cloud services through a decentralized, quantum-ready infrastructure.

This strategic evolution, initiated in 2024, positions Spectral at the forefront of the emerging quantum era by bridging the gap between classical computing and quantum innovation.

Spectral’s mission is to develop and operate a fully integrated platform combining distributed cloud architecture, quantum algorithms, and advanced hardware to make quantum computing practical, scalable, and energy-efficient for real-world applications.

Our business relies on four pillars for growth (1) the continued development of a patent and trade secret portfolio at the leading edge of integration between artificial intelligence (AI) and hybrid classical computing, together called our intellectual property (IP) (2) the monetization of our IP through licensing deals that provide us cash revenue as well as shares of stock in licensee companies:

(3) the development of high value software products based on our IP that are easy and cost-effective for us to develop and that can provide dramatic increases in risk-adjusted return;

(4) acquisition of small technology companies and radical increases in their top line and bottom line revenue through the integration of our IP in their legacy operations.

Key Developments in 2024

Over the past year, Spectral has executed a series of strategic initiatives and acquisitions to build out its quantum technology platform and expand its market presence:

Patent Portfolio Expansion:

In 2024, Spectral Capital filed 104 patent applications across a broad range of advanced technologies including artificial intelligence, quantum computing, and autonomous systems.

This aggressive expansion of our IP portfolio reflects our commitment to building long-term value through innovation.

These patents form the foundation of our technology commercialization strategy and support potential licensing, joint ventures, and future revenue streams.

The filings span both U.S.

and international jurisdictions and are aligned with high-growth sectors where Spectral is actively engaged in product development and strategic discussions with leading OEMs and institutional partners.

Scientific Research and Pipeline Development:

In parallel with our 2024 patent filings, Spectral engaged in foundational scientific work that has resulted in a robust pipeline of more than 400 additional patentable innovations.

These inventions are currently undergoing internal validation and drafting, with phased filings scheduled to continue through 2025 and 2026.

This pipeline reflects breakthroughs in system architectures, signal processing, applied machine learning, and patents related to photonic-qubit integration.

The rigor of this foundational work positions Spectral as a technology leader and creates optionality across potential licensing, potential spinouts, and potential joint R\&D ventures with academic, corporate, and government stakeholders in North America, Europe, and Asia.

Strategic Consultant Engagements:

During 2024, Spectral onboarded a number of senior scientific and commercial consultants with proven track records in intellectual property development, deep tech commercialization, and regulatory strategy.

These engagements significantly accelerated our internal R\&D velocity and improved the defensibility of our patent claims.

The consultants include former senior engineers, IP counsel, and regulatory experts from leading firms in AI, quantum computing, semiconductors, and cybersecurity.

Their contributions have strengthened our patent applications, streamlined our innovation capture process, and provided critical insights into global IP protection frameworks and commercialization pathways in both regulated and rapidly evolving markets.

Rescission of Brehm Transactions and Preservation of Core IP

In Q2 2025, Spectral Capital successfully rescinded a series of transactions involving former Chairman Sean Michael Brehm and related entities.

These transactions were found to be a suboptimal use of shareholder value.

The rescission preserved our core independently developed intellectual property, clarified ownership of more than 100 provisional patents, and returned over \$100 million in share-based consideration to Spectral’s shareholders.

This decisive action restored investor confidence, strengthened corporate governance, and allowed Spectral to refocus resources on advancing its proprietary technology portfolio and strategic partnerships.

Platform and Operations

Spectral’s current operations center on developing and integrating its quantum-enabled cloud platform , which is comprised of several interrelated components and offerings:

Spectral’s strategic evolution has not been a shift away from technology development, but rather a rebalancing of its business model.

Historically, the Company functioned primarily as a technology incubator, with emphasis on invention, patent strategy, and early-stage software concepts.

While this approach produced a growing body of intellectual property, it did not, on its own, result in sustained commercial traction.

The Company’s current strategy emphasizes building operating businesses that can function independently as commercial enterprises while also serving as practical environments for the application of Spectral’s intellectual property.

These businesses are not exclusively dependent on the success of any single patent, algorithm, or software product.

Instead, they generate revenues through established services and customer relationships, with Spectral’s technologies positioned as complementary tools that may enhance efficiency, margins, scalability, or competitive positioning over time.

Key Developments

Intellectual Property Development

At the foundation of Spectral’s business model is the creation of a differentiated portfolio of intellectual property, including patents and trade secrets that combine artificial intelligence with hybrid classical computing architectures.

This work positions Spectral at the convergence of software, hardware, and algorithmic innovation.

In 2024, we filed 104 provisional patent applications and laid the groundwork for hundreds more.

Our IP strategy emphasizes defensible claims, cross-sector applications, and forward-looking innovation to support licensing, product development, and joint ventures.

This deep IP base enables us to build and control key technologies underlying the next generation of high-performance computation.

IP Monetization and Licensing Strategy:

Spectral is committed to monetizing its intellectual property through carefully structured licensing agreements.

These deals provide immediate and long-term financial returns by securing both cash payments and equity stakes in licensee companies.

Our licensing model targets firms across artificial intelligence, autonomous systems, and quantum-enabled technologies, allowing us to generate diversified revenue while maintaining strategic influence.

Equity participation ensures alignment with long-term upside potential.

We continue to negotiate multiple new agreements, and our pipeline includes prospective licensees ranging from venture-backed startups to publicly traded enterprises, all seeking to integrate advanced AI and hybrid compute capabilities into their offerings.

Software Product Development:

Spectral develops proprietary software products that are based on its patented technologies and trade secrets.

These tools are designed to be lightweight, scalable, and cost-efficient to build, with a focus on producing high-value applications that improve decision-making, risk management, and operational intelligence.

Many of these software tools can be deployed quickly and generate measurable improvements in risk-adjusted return for users.

Because of our deep internal IP base, Spectral can create these products with minimal reliance on external engineering resources.

These products also serve as proof points for the broader commercial applicability of our core inventions.

Value-Driven Acquisition Strategy:

Spectral targets the acquisition of small technology companies with promising assets but underutilized IP or limited access to scalable AI tools.

Upon acquisition, we deploy our intellectual property into the operations of these companies to unlock top-line growth and dramatically enhance profitability.

This model allows Spectral to create rapid enterprise value by combining our proprietary capabilities with the domain expertise and distribution networks of the acquired entity.

Post-acquisition integration is led by our internal technical and product development teams, who work to transform these businesses into high-margin, defensible operations with the potential for follow-on capital events or exit opportunities.

Integrated Growth Platform:

The synergy of Spectral’s IP creation, licensing, product development, and acquisition strategies forms an integrated platform designed for scalable and capital-efficient growth.

Each pillar reinforces the others:

IP development feeds licensing and product initiatives;

software products demonstrate market validation;

and acquired businesses amplify value creation through applied innovation.

This cross-functional approach allows Spectral to remain agile and opportunistic while building long-term enterprise value.

Our operating structure is designed to leverage internal innovation, minimize overhead, and rapidly adapt to shifts in technology and market dynamics.

As a result, we are positioned for sustainable, innovation-driven growth in complex global markets.

Market Position and Strategy

Spectral Capital is building a differentiated position at the convergence of artificial intelligence, hybrid classical computing, and next-generation infrastructure.

Unlike firms that narrowly focus on single-point technologies such as quantum processors or large-scale cloud deployments, Spectral is developing a vertically integrated platform rooted in proprietary intellectual property.

Our strategy blends deep scientific research, high-value software development, and strategic acquisitions to unlock scalable value across industries.

By leading the integration of AI-driven algorithms with hybrid computing frameworks, Spectral aims to redefine how enterprises and governments access advanced computational power without requiring internal expertise in quantum or specialized AI architecture.

Spectral’s business model is anchored in four mutually reinforcing pillars:

the continued development of our patent and trade secret portfolio, the monetization of that IP through licensing, the creation of software products that are simple to deploy but deliver substantial ROI, and the acquisition of small technology companies that can be transformed by embedding Spectral’s IP into their operations.

This ecosystem-driven approach allows us to rapidly expand our influence while remaining capital-efficient.

In 2024, we filed 104 patents and laid the scientific groundwork for an additional 400 inventions in process—positioning Spectral among the most prolific early-stage IP developers in emerging computation technologies.

The Company operates in a dynamic market shaped by growing demand for secure, intelligent, and energy-efficient computing solutions.

Our focus on domains such as cybersecurity, data analytics, logistics optimization, and simulation—especially those requiring high-dimensional computation—enables us to serve pressing real-world needs.

Spectral’s strategy to embed quantum-inspired and AI-accelerated capabilities into familiar cloud and software delivery models lowers the

adoption barrier for customers while preserving long-term defensibility.

Our commitment to decentralized infrastructure and green compute practices further aligns our offerings with the market’s increasing prioritization of sustainability, privacy, and technological sovereignty.

To support this strategy, Spectral actively engages in partnerships with research institutions, infrastructure developers, and commercial collaborators.

These alliances accelerate our go-to-market efforts, enrich our technical roadmap, and support co-development of industry-specific applications.

Additionally, we have brought on a team of senior consultants to guide IP development and commercialization.

These efforts are complemented by targeted acquisitions, which not only expand our operating footprint but also provide high-leverage opportunities to deploy our core technologies.

Our integrated platform strategy—grounded in innovation, monetization, and transformation—positions Spectral to become a leading force in the evolution of enterprise-grade computational intelligence.

Spectral Capital enters 2025 with a focused strategy to commercialize its growing intellectual property portfolio, scale operational capabilities, and maximize the value of its four-pillar platform.

In the near term, the Company is prioritizing integration of technologies acquired in 2024, and accelerating the deployment of software products and licensing arrangements derived from our 104 filed patents and over 400 additional inventions in development.

These efforts will support near-term monetization and proof of concept for our broader technology base.

Initial pilots of Spectral’s AI- and quantum-enhanced software solutions are expected to generate early customer validation, enabling conversion of IP into recurring revenue.

Spectral’s outlook is rooted in the accelerating demand for advanced computing capabilities across cybersecurity, data intelligence, and predictive modeling.

By delivering a unified platform built on high-value intellectual property, Spectral aims to offer practical, scalable, and secure tools that meet enterprise and government needs.

Our hybrid architecture and IP licensing model are designed to minimize deployment friction and offer rapid ROI, allowing customers to access cutting-edge capabilities without internal quantum expertise or capital expenditures.

Management believes this approach positions Spectral as a potential market-maker in the emerging category of AI- and quantum-enabled enterprise infrastructure.

Looking forward, Spectral remains committed to its vision of leading the next generation of intelligent computing.

However, the Company also recognizes the substantial capital and technical execution required to fulfill this vision.

As such, Spectral is actively evaluating a range of strategic alternatives—including potential joint ventures, IP licensing arrangements, acquisitions and platform partnerships—to optimize shareholder value while ensuring technical continuity and go-to-market execution.

Management remains focused on balancing bold innovation with disciplined financial stewardship as the Company transitions from an R\&D-centric organization to an integrated platform business with commercial momentum.

Spectral continues to invest in the development of proprietary intellectual property across artificial intelligence, data processing, software architecture, and emerging computing approaches, including quantum-adjacent and hybrid computing concepts.

To date, the company has developed more than 500 patentable innovations covering a broad range of system architectures, algorithms, and applied technologies.

These innovations were designed to establish priority positions across multiple technical domains rather than to commercialize any single product.

In parallel, Spectral has developed an internal pipeline of additional inventions that management believes may be patentable.

These potential inventions are subject to internal technical review, commercial relevance assessment, and prioritization, and may be pursued through future patent

filings, trade secret protection, or other defensive measures.

There can be no assurance that any such inventions will result in issued patents or commercially viable products.

Scientific and Technical Development

Spectral’s research and development activities focus on applied technologies intended for deployment in real-world commercial environments.

These activities include software development, algorithm design, data analytics, automation tools, and system integration techniques.

While the Company monitors and evaluates developments in advanced and emerging computing fields, including quantum-inspired approaches, many such initiatives remain exploratory in nature and may require substantial additional investment, validation, and time to achieve commercial readiness, if at all.

Corporate Governance and Transactional Cleanup

During 2025, Spectral undertook actions to simplify its corporate structure and clarify ownership of its intellectual property.

This included the rescission of certain historical transactions that management determined were not aligned with long-term shareholder value.

These actions preserved the Company’s independently developed intellectual property, reduced structural complexity, and allowed management to refocus resources on current operating priorities and strategic initiatives.

Platform and Operations

Telecommunications Businesses

A core component of Spectral’s current business model is the ownership and operation of technology-enabled businesses that provide services directly to customers, which have grown into the domain of telecommunications and data infrastructure in 2025.

These businesses maintain their own customer relationships, generate recurring revenues, and operate within established commercial markets.

Spectral’s operating subsidiaries provide services such as telecommunications infrastructure, enterprise messaging, routing, analytics, and related technology-enabled solutions across multiple jurisdictions.

Management’s operating strategy emphasizes service reliability, regulatory compliance, customer retention, and disciplined cost management.

These operating businesses provide a commercial foundation that supports Spectral’s broader platform strategy and reduces dependence on speculative technology commercialization.

Role of Intellectual Property

Spectral’s intellectual property portfolio is intended to complement and enhance its operating businesses rather than serve as the sole driver of revenues.

Proprietary technologies may be deployed internally to improve operational efficiency, automate workflows, enhance analytics, reduce fraud, or support margin expansion.

In addition, Spectral may pursue licensing, strategic collaborations, or joint development arrangements where appropriate, although there can be no assurance that such arrangements will be completed.

Spectral’s intellectual property strategy includes a combination of patent filings and trade secret protection.

In certain cases, management may determine that maintaining technologies as trade secrets provides greater long-term value than public disclosure through the patent process.

This strategy involves inherent risks, including the potential for independent development or unauthorized disclosure.

Software Development

The Company develops proprietary software tools derived from its internal research and intellectual property.

These products are designed to be scalable and cost-efficient to develop and deploy, with a focus on practical applications that support data analysis, automation, decision support, and operational intelligence.

Software products may be deployed internally within operating businesses or offered to third parties, depending on market demand and strategic priorities.

Growth Strategy and Acquisitions

Spectral’s growth strategy contemplates a combination of organic growth within its operating businesses and selective acquisitions of additional technology-enabled companies.

Management evaluates acquisition opportunities based on commercial viability, customer base, operational performance, and the potential for Spectral’s technologies to enhance value.

The Company does not pursue acquisitions solely for intellectual property and does not assume that technology integration alone will result in improved performance.

Future acquisitions may be financed through a combination of cash, equity, or other consideration, subject to market conditions and the availability of capital.

Integration efforts are expected to require management attention and resources, and there can be no assurance that anticipated benefits will be realized.

Market Position

Spectral operates in markets characterized by rapid technological change, increasing demand for data-driven services, and heightened regulatory and competitive pressures.

The Company seeks to differentiate itself through a diversified operating model that combines commercial execution with selective technology deployment.

Unlike companies that rely exclusively on the commercialization of emerging technologies, Spectral’s strategy emphasizes operational stability, incremental innovation, and disciplined capital allocation.

Spectral’s business strategy is focused on executing its operating model, integrating acquired businesses, selectively deploying proprietary technologies, and pursuing growth opportunities in a disciplined manner.

While the Company continues to invest in research and intellectual property development, management does not assume that any particular technology initiative will result in material revenue.

The Company’s future results will depend on a variety of factors, including operating performance, market conditions, regulatory developments, and access to capital.

There can be no assurance that Spectral will achieve its strategic objectives or generate sustained profitability.

Spectral Capital Corporation, a Nevada corporation (“us”, “we”, “our” or the “Company”) was formed in the state of Nevada on September 13, 2000.

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Our website is www.spectralcapital.com.

We incurred a net loss of $(215,387) and $(3,270,544) for the years ended December 31, 2023 and 2024.

Our revenues were $0 and $0 for the years ended December 31, 2023 and 2024.

Our assets were $240 and $107,475 at December 31, 2023 and December 31, 2024.

As of the date of this Form 10-K, we had cash on hand of approximately $107,475 for our operational needs.

Currently, our operating expenses are approximately $83,000 per month.

If we fail to generate sufficient revenues or raise additional funds to meet our monthly operating costs, we will have available cash for our operating needs for approximately one month.

We reported a net income of $918,355 for the year ended December 31, 2025, compared to a net loss of $(3,270,544) for the year ended December 31, 2024.

Net income for the year ended December 31, 2025 includes a non-cash gain of $3,387,266 from the change in fair value of contingent consideration liabilities recognized in connection with our business combinations.

Excluding this non-cash item, loss from operations was approximately $(2,468,911) for the year ended December 31, 2025.

As of December 31, 2025, our total assets were $150,746,286, compared to $113,975 at December 31, 2024, reflecting the consolidation of 42 Telecom Ltd.

and Telvantis Voice Services, Inc.

As of December 31, 2025, we had cash and cash equivalents of $2,087,400 and current assets totaled $59,451,611 compared with current liabilities of $102,018,696, resulting in a working capital deficit of $(42,567,085).

Included within current liabilities is $34,838,484 of contingent consideration related to the Company's business combinations, which is expected to be settled through the issuance of equity.

Excluding contingent consideration, our working capital deficit was $(7,728,601).

Our accumulated deficit was $(33,415,041) as of December 31, 2025.

CORPORATE HISTORY AND DEVELOPMENT

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Since July 27, 2010, we have operated under the name Spectral Capital Corporation.

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”).

On February 26, 2013, we signed a definitive Technology Acquisition Agreement to acquire mobile search engine and mobile sharing technology from Fiveseas Securities Ltd.

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TL Global was granted a right of first refusal for any subsequent sale of the technology.

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 were combined into one (1) share of common stock (the “Reverse Stock Split”).

In May 13, 2024, Sean Michael Brehm joined Spectral as a member of the Board of Directors.

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Node Nexus Network Co.

LLC (August 2024) – Spectral acquired Node Nexus, a developer of decentralized cloud and quantum computing technologies, in August 2024 which was subsequently restructured as an asset purchase in November 2024.

LLC (“Node Nexus”) (August 2024) – Spectral acquired Node Nexus, a developer of decentralized cloud and quantum computing technologies, in August 2024 which was subsequently restructured as an asset purchase in November 2024.

This transaction formed the core of Spectral’s flagship Vogon Cloud platform, bringing in proprietary DQ-LDB ledger technology and “QuantumVM” middleware for hybrid classical/quantum computing.

The Node Nexus acquisition provided Spectral with a secure, immutable distributed ledger for data storage and a highly efficient virtual machine to integrate classical and quantum workloads, establishing the foundation for the Company’s QaaS offerings.

Quantomo OU (September 2024) – In September 2024, Spectral acquired Quantomo, a pioneer in quantum tomography algorithms for advanced search and data analysis.

Nexus acquisition provided Spectral with a secure, immutable distributed ledger for data storage and a highly efficient virtual machine to integrate classical and quantum workloads, establishing the foundation for the Company’s QaaS offerings.

This transaction was rescinded in May 2025.

Quantomo OU (“Quantomo”) (September 2024) – In September 2024, Spectral acquired Quantomo, a pioneer in quantum tomography algorithms for advanced search and data analysis.

Quantomo’s technology leverages quantum parallelism to dramatically accelerate search functions and AI inference across distributed datasets.

This acquisition is being integrated into Spectral’s platform to power next-generation search engine capabilities and other data-intensive applications, enhancing the analytical functionality of the Vogon Cloud.

This transaction was subsequently rescinded and is being restructured as an asset purchase so that the technology can be more efficiently integrated into Spectral.

This transaction was rescinded in May 2025.

crwdunit, Inc.

(agreement September 2024, closed December 2024) – Spectral entered into an agreement to acquire crwdunit, Inc.

in September 2024 and formally closed the acquisition in December 2024.

(“crwdunit”) (agreement September 2024, closed December 2024) – Spectral entered into an agreement to acquire crwdunit, in September 2024 and formally closed the acquisition in December 2024.

crwdunit developed a proprietary resource quantization mechanism that optimizes computing workloads (CPU, memory, storage, and bandwidth) in decentralized cloud environments.

The asset purchase added crwdunit’s performance-measurement technology and its community of stakeholders to Spectral’s portfolio.

The acquisition added crwdunit’s performance-measurement technology and its community of stakeholders to Spectral’s portfolio.

Together with Node Nexus and Quantomo, this addition broadened Spectral’s intellectual property and technical expertise, improving the performance and efficiency of the Vogon Cloud platform and strengthening the Company’s position in decentralized “edge” computing.

Subsequently, this transaction was rescinded and is being restructured to more efficiently be able to integrate the crwdunit technology into Spectral and more efficiently distribute the specified Spectral shares to crwdunit shareholders pursuant to the original intent of the acquisition.

This transaction was rescinded in May 2025.

Verdant Quantum OU (December 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.

Subsequently all transactions with Sean Brehm, crwdunit, Quantomo, Node Nexus and Verdant Quantum and related entities were rescinded.

This transaction was rescinded in May 2025

In the interest of fully clarification, all transactions with Sean Brehm, crwdunit, Quantomo, Node Nexus and Verdant Quantum OU and related entities were rescinded in May 2025.

Key Developments in 2025

During 2025, Spectral underwent a significant strategic transformation, transitioning from a research-driven company with no revenue into an operating company with established telecommunications subsidiaries generating recurring revenue.

The principal corporate transactions during 2025 were as follows:

Acquisition of 42 Telecom Ltd.

(August 2025).

On July 15, 2025, Spectral entered into a definitive share-exchange agreement to acquire 100% of the issued and outstanding shares of 42 Telecom Ltd.

(“42 Telecom”), a Maltese-organized telecommunications infrastructure provider.

The transaction closed on August 1, 2025;

42 Telecom is now a wholly owned subsidiary of Spectral.

As consideration, the Company issued 8,000,000 shares of its common stock and placed an additional 8,000,000 shares into escrow subject to earn-out and performance milestones.

The acquisition included the following wholly owned subsidiaries of 42 Telecom:

42 Telecom AB Ltd.

(Sweden), 42 Telecom UK Ltd.

(United Kingdom), and Arcus Technologies Ltd.

42 Telecom provides international telecommunications and messaging solutions, including SMS aggregation, enterprise messaging, OTT messaging (including Viber traffic), access to proprietary SS7 and messaging platforms, and subscription-based communication solutions.

42 Telecom contributed approximately $21.8 million in revenue to the Company’s consolidated results of operations for the period from August 1, 2025 through December 31, 2025.

Eliznikcomp OÜ - Asset Purchase (October 2025).

On October 15, 2025, Spectral entered into an Asset Purchase Agreement with Eliznikcomp OÜ, an Estonian corporation, pursuant to which Spectral acquired all right, title, and interest in twenty-one (21) patentable innovations related to native artificial intelligence operating systems developed in a Linux environment, FPGA optimization processes, and security and multi-application remote synchronization technology.

consideration, Spectral issued 9,000,000 shares of its common stock to the shareholders of Eliznikcomp.

The transaction was structured as a taxable asset purchase.

The acquired intellectual property has been recorded as §197 intangible assets and are being amortized over their respective estimated useful life for book purposes and over fifteen years for tax purposes.

Snack Prompt Corp.

- Binding Term Sheet (October 2025).

On October 3, 2025, Spectral entered into a Binding Term Sheet with Snack Prompt Corp.

(“Snack Prompt”), a Delaware corporation, for the acquisition of 100% of the issued and outstanding capital stock of Snack Prompt.

The transaction was binding only to the extent that Spectral make a good faith effort to conduct due diligence, but Spectral can still make the decision to proceed or not based on its judgment regarding the due diligence process.

As consideration, Spectral agreed to issue up to 10,000,000 shares of its common stock, consisting of 1,500,000 initial shares and up to 8,500,000 earn-out shares.

The transaction is subject to customary closing conditions, including delivery of audited financial statements audited under PCAOB standards, completion of due diligence, board approval, and execution of a definitive Stock Purchase Agreement.

Spectral also committed to invest up to $5,000,000 into the Snack Prompt business unit upon satisfaction of certain conditions.

The transaction had not closed as of December 31, 2025.

To date, Spectral has not received required diligence materials from Snack Prompt and management believes it is substantially likely to terminate this transaction.

MultiCortex, LLC / Toroa, LLC - Binding Term Sheet (October 2025).

On October 4, 2025, Spectral entered into a Binding Term Sheet with MultiCortex, LLC and Toroa, LLC (together, “MultiCortex”) for the acquisition of 100% of the issued and outstanding equity of MultiCortex.

As consideration, Spectral agreed to issue up to 10,000,000 shares of its common stock, consisting of 1,500,000 initial shares and up to 8,500,000 earn-out shares.

Spectral also committed to invest up to $15,000,000 into the MultiCortex business unit upon satisfaction of certain conditions, including completion of an audit of MultiCortex financial statements under PCAOB standards and Spectral’s uplisting to the NASDAQ.

Subsequent to year end, the Binding Term Sheet was terminated due to the failure to satisfy closing conditions, including the non-completion of due diligence.

The termination was effective as of the date of the termination notice in 2026, and neither party has any continuing obligations under the term sheet.

Acquisition of Telvantis Voice Services, Inc.

(December 2025).

On December 29, 2025, Spectral entered into a Definitive Stock Purchase Agreement with Telvantis, Inc.

(formerly Raadr, Inc.), a Nevada corporation, to acquire 100% of the issued and outstanding shares of Telvantis Voice Services, Inc.

(“Telvantis”), a Florida corporation.

The transaction closed on December 31, 2025;

Telvantis is now a wholly owned subsidiary of Spectral.

As consideration, Spectral issued 1,500,000 shares of its common stock at closing and may issue up to an additional 8,500,000 shares subject to fiscal year 2026 performance milestones.

The acquisition included the following wholly owned subsidiaries of Telvantis:

Phonetime, Inc.

(U.S.), a subsidiary providing international voice termination services, and Matchcom Telecommunications, Inc.

(U.S.), a subsidiary focused on customer care and telecom solutions.

Telvantis is a telecommunications services provider specializing in VoIP and voice traffic solutions delivered primarily on a business-to-business basis.

Telvantis was acquired on December 31, 2025 and accordingly contributed no revenues to the consolidated results of operations for the year ended December 31, 2025.

Patent Portfolio Expansion.

During 2025, Spectral continued its aggressive expansion of its intellectual property portfolio, filing additional provisional patent applications covering innovations in artificial intelligence, quantum computing, telecommunications, and hybrid classical computing architectures.

Combined with filings from 2024, the Company’s patent

portfolio encompasses several hundred provisional and non-provisional applications.

The Company also began the process of converting select provisional applications to utility patent applications for prosecution before the United States Patent and Trademark Office.

Management and Governance Changes.

During 2025 and early 2026, the Company appointed Daniel Gilcher as Chief Financial Officer and Principal Accounting Officer (effective January 3, 2026) and reconstituted its Board of Directors, which as of the date of filing of this Annual Report on Form 10-K consists of Jenifer Osterwalder (CEO, President and Director), Daniel Gilcher (CFO), Jeff Chong (Director), Michael Turner (Director), Gottfried Werner (Director), and Olga Nezerenko (Director).

The Company also established an Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee in preparation for its planned NASDAQ uplisting.

We have not been involved in a material bankruptcy, receivership, or similar proceeding.

Other than as set forth above, in the prior five years, we have not been involved in any material reclassification, merger or consolidation.

PRINCIPAL PRODUCTS AND SERVICES

Products and Services

Spectral Capital Corporation offers a suite of products and services built upon its proprietary intellectual property portfolio at the intersection of artificial intelligence, hybrid classical computing, and emerging quantum technologies.

The Company’s platform is structured around four key growth pillars:

(1) the development of patentable and protectable IP, (2) the monetization of that IP through licensing and equity-based deals, (3) the creation of cost-effective software solutions that embody our core innovations, and (4) the acquisition and transformation of technology businesses through IP integration.

Each product or service offered by Spectral derives from or reinforces one or more of these strategic pillars.

At the core of Spectral’s offering is its intellectual property licensing business, which enables third-party enterprises to incorporate Spectral’s inventions into their technology stacks.

Licensing agreements typically include both cash payments and equity participation, giving Spectral immediate revenue upside as well as longer-term exposure to the growth of its partners.

These licenses are especially valuable for companies in AI, autonomous systems, cybersecurity, logistics, and advanced analytics that seek to differentiate their offerings using cutting-edge algorithms or architectures developed by Spectral.

Spectral also offers a growing portfolio of AI-enhanced software products designed to demonstrate and commercialize the company’s proprietary technology.

These products are modular, lightweight, and designed for rapid deployment.

Many are built to serve functions such as secure data search, model optimization, pattern recognition, and probabilistic reasoning—

applications where hybrid AI-quantum approaches provide material performance advantages over traditional software.

These tools are designed to improve risk-adjusted decision-making, reduce computing costs, and expand the analytical capabilities of enterprises without requiring major infrastructure investment.

In parallel, the Company is also developing an intelligent cloud compute environment tailored for high-dimensional AI and quantum-inspired workloads.

This environment will integrate decentralized edge computing with scalable hybrid architecture to offer clients both performance and data sovereignty.

Though still in the R&D phase, is expected to support quantum-enhanced simulation, ultra-secure computation, and real-time distributed intelligence for enterprise and government customers.

The service is being developed with a focus on low latency, high privacy, and flexible deployment options, especially in regulated or mission-critical industries.

Spectral’s acquisition and transformation services comprise a distinctive element of its value proposition.

The Company seeks out underperforming or undercapitalized technology firms with valuable legacy assets and potential for growth through integration of Spectral’s IP.

After acquisition, Spectral deploys its AI and hybrid computing capabilities into the operations of the acquired entity, resulting in increased top-line revenue, expanded margins, and renewed market relevance.

This playbook not only generates immediate operational improvements but also opens opportunities for follow-on monetization through resale, joint ventures, or IPO pathways.

Collectively, Spectral’s products and services reflect a vertically integrated strategy that blends IP creation, monetization, productization, and transformation into a cohesive platform.

This approach enables Spectral to generate diversified revenue streams while amplifying the reach and impact of its core innovations across sectors and geographies.

Is currently in beta testing, and leverages quantum computing and security to enhance Collective Intelligence by drawing insights from diverse disciplines and expertise.

These insights are securely stored on Spectral’s proprietary Distributed Quantum Ledger Database (DQLDB), powered by sustainable green micro data centers.

An innovative web-based collaboration and document management platform, currently in beta testing, designed to integrate seamlessly with both quantum and traditional technologies.

It empowers businesses, individuals, and investment clubs to securely store, organize, share, and access information using Spectral’s proprietary Distributed Quantum Ledger Database (DQLDB).

Our business differs from those companies whose capital reserves, successful previous ability to monetize technology and scale, efficiencies and existing customer base allow them to select and develop technology because we have very limited resources and have not located sources of capital to fund our operations.

We compete with a wide variety of parties in connection with our efforts.

The AI and hybrid quantum as a service (QaaS) industry is rapidly evolving, with major tech giants like IBM, Google, and Microsoft competing alongside specialized startups such as Rigetti Computing, IonQ, and D-Wave plus many other emerging AI companies such as Anthropic, Scale AI, Shield AI and others.

These companies are racing to offer cloud-based access to robust data models and neural nets, as well as hybrid environments in which problems can be tackled on quantum processors, enabling researchers and businesses to experiment with quantum algorithms without owning expensive hardware.

Much of the competition centers on hardware approaches — superconducting qubits, trapped ions, and photonic systems — each offering unique advantages in terms of scalability and error correction.

Additionally, players are differentiating themselves through software ecosystems, developer tools, and partnerships with industries like finance, pharmaceuticals, and logistics to explore real-world applications.

As the technology matures, competition is intensifying around performance benchmarks, ease of integration, and the development of practical use cases, shaping a dynamic and fast-growing market.

Moreover, many of our current and potential competitors have longer operating histories, greater brand recognition, larger customer bases and/or significantly greater financial, technical and marketing resources than we do.

As a result, they have the ability to devote comparatively greater resources to the development and promotion of their products and services, which could result in greater market acceptance of their products and services relative to those offered by us.

We are dependent upon the receipt of capital to fund our operations, which may not become available to us, and even if available it, may not be available upon commercially reasonable terms.

Spectral Capital Corporation’s products and services are organized around a diversified operating model that combines direct customer-facing businesses with ongoing technology development and intellectual property creation.

While the Company continues to invest in proprietary software, algorithms, and data-driven technologies, its current operations are not exclusively dependent on the commercialization of intellectual property.

Instead, Spectral seeks to deploy its technologies in ways that complement and enhance its operating businesses and selected third-party platforms.

Spectral’s strategy is organized around four interrelated areas:

(1) the development and protection of proprietary intellectual property, including patents and trade secrets;

(2) selective monetization of intellectual property through licensing and strategic arrangements;

(3) development of proprietary software tools derived from internal research;

and (4) the ownership and operation of technology-enabled businesses with established customer relationships and recurring revenues.

Intellectual Property Licensing and Strategic Arrangements

Spectral may enter into licensing or strategic collaboration arrangements that allow third parties to utilize certain proprietary technologies developed by the Company.

These arrangements may include cash-based licensing fees, equity consideration, or a combination of both, depending on the structure of the transaction and the strategic objectives of the parties.

Licensing arrangements are pursued selectively and are intended to complement the Company’s operating businesses rather than replace them as a primary source of revenue.

There can be no assurance that any licensing arrangements will be completed or that they will generate material revenue.

Software Products and Internal Tools

Spectral develops proprietary software tools and platforms based on its internal research and intellectual property.

These tools are designed to support data analysis, automation, operational intelligence, and decision-support functions and may be deployed internally within Spectral’s operating businesses or, in certain cases, offered to third parties.

Software development efforts are focused on practical, scalable applications rather than speculative or purely experimental technologies.

The Company does not assume that any individual software product will achieve broad market adoption or generate material standalone revenues.

NOOT and Monitr Platforms

The Company has previously developed software platforms known as NOOT and Monitr, each of which remains in a limited development or testing phase.

These platforms were designed to explore collaborative intelligence, secure information management, and data aggregation concepts.

Neither platform is currently commercialized at scale, and neither generates material revenue.

Spectral continues to evaluate whether further development, integration, licensing, or discontinuation of these platforms is appropriate based on resource availability, strategic priorities, and market conditions.

Acquisition and Operating Business Model

A central component of Spectral’s current business is the ownership and operation of technology-enabled businesses that provide services directly to customers.

Through acquisitions completed in 2025, the Company now operates data infrastructure, telecommunications and messaging infrastructure businesses that generate recurring revenues through established commercial services.

These operating businesses are not dependent on the commercialization of Spectral’s intellectual property, although the Company may selectively deploy proprietary technologies to improve efficiency, analytics, automation, or scalability over time.

Spectral may pursue additional acquisitions of operating businesses that meet defined criteria, including established customer bases, recurring revenues, and opportunities for operational improvement.

The Company does not pursue acquisitions solely for intellectual property and does not assume that integration of proprietary technology will necessarily result in improved performance.

Spectral operates in highly competitive markets that include telecommunications services, data-driven software, artificial intelligence-enabled tools, and emerging computing technologies.

Competition varies by business line and includes established multinational technology companies, specialized service providers, and smaller technology firms.

In the telecommunications sector, the Company competes with other infrastructure providers, aggregators, and platform operators.

In software and technology development, competition includes firms offering analytics, automation, and AI-enabled solutions.

Many of the Company’s competitors have longer operating histories, greater brand recognition, larger customer bases, and substantially greater financial, technical, and marketing resources than Spectral.

These competitors may be able to respond more quickly to technological change, devote greater resources to product development, or offer more favorable pricing.

As a result, Spectral may face challenges in gaining or maintaining market share.

The Company’s ability to compete effectively depends on operational execution, customer service, regulatory compliance, and disciplined capital allocation.

There can be no assurance that Spectral will be able to compete successfully in all of its markets.

Principal Agreements Affecting Our Ordinary Business

We do not have any current long-term agreements that impact our business.

Information Technology Governmental Regulation

Our operations are subject to various rules, regulations and limitations impacting the information technology industry as a whole.

We are subject to numerous United States (U.S.) federal, state, and foreign laws and regulations covering a wide variety of subject matters.

Like other companies in the technology industry, we face heightened scrutiny from both U.S.

and foreign governments with respect to our compliance with laws and regulations.

Many of these laws and regulations are evolving and their applicability and scope, as interpreted by the courts, remain uncertain.

Our compliance with these laws and regulations may be onerous and could, individually or in the aggregate, increase our cost of doing business, make our products and services less useful, limit our ability to pursue certain business models, cause us to change our business practices, affect our competitive position relative to our peers, and/or otherwise have an adverse effect on our business, reputation, financial condition, and operating results.

Except for agreements entered into in the ordinary course of business, including customer contracts, vendor agreements, and agreements relating to its acquired operating businesses, the Company does not currently have any material long-term agreements that are outside the ordinary course of its business.

Information Technology and Governmental Regulation

Spectral’s operations are subject to a variety of U.S.

federal, state, and foreign laws and regulations applicable to technology, telecommunications, data processing, privacy, cybersecurity, and cross-border commerce.

These laws and regulations are complex, continue to evolve, and may be subject to differing interpretations.

Compliance with applicable laws and regulations requires ongoing investment in systems, processes, and personnel and may increase operating costs or limit certain business activities.

Regulatory requirements may affect the manner in which the Company collects, processes, stores, and transmits data;

provides telecommunications services;

and deploys software and technology solutions.

Failure to comply with applicable laws and regulations could result in fines, penalties, litigation, reputational harm, or restrictions on the Company’s operations, any of which could adversely affect the Company’s business, financial condition, results of operations and cash flows.

Environmental Matters

We do not anticipate any significant impact of environmental regulations on our business.

Spectral Capital Corporation operates as a next-generation technology platform company focused on the systematic development, monetization, and application of intellectual property at the frontier of artificial intelligence (AI) and hybrid classical computing.

Our business model is designed around four interlocking growth pillars:

(1) the continued expansion of a robust patent and trade secret portfolio, (2) the monetization of that intellectual property through licensing agreements and equity-linked partnerships, (3) the creation of scalable, software-based products leveraging our proprietary technologies, and (4) the acquisition and transformation of small technology businesses through integration of Spectral's IP.

This integrated approach supports both near-term cash generation and long-term enterprise value creation.

Intellectual Property Development

At the core of Spectral’s operations is its commitment to building a defensible and forward-looking intellectual property portfolio.

In 2024, we filed 104 new patent applications covering innovations across AI architecture, probabilistic modeling, optimization techniques, quantum-classical hybrid computing, and secure computation.

These patents reflect internal research conducted by our scientific and engineering consultants, as well as technology developed through our integration of acquired entities.

In parallel, Spectral has established a structured internal process for IP generation, which includes invention harvesting sessions, collaboration with outside technical consultants, and an internal review and vetting framework that ensures high-value, novel, and commercially relevant filings.

This process has resulted in the development of over 400 additional patentable inventions, which we expect to file on a phased basis throughout 2025 and 2026.

We believe this makes Spectral one of the most prolific early-stage IP generators in our target domains.

Licensing and IP Monetization

Licensing of Spectral’s intellectual property represents a major channel for revenue and equity upside.

Our licensing model typically includes upfront cash payments, ongoing royalties, and/or equity stakes in licensee companies.

This dual-structure model allows us to capture both current income and long-term appreciation as our partners grow.

We target firms across multiple sectors including AI-enabled software, edge computing, autonomous systems, cybersecurity, and industrial automation.

These sectors benefit from Spectral’s unique capabilities in scalable algorithms, hybrid compute methods, and secure data processing.

Spectral has ongoing licensing discussions with several early-stage and mid-market companies and anticipates finalizing new agreements throughout the coming fiscal year.

We are also exploring broader joint development and white-labeling opportunities that allow third-party firms to embed our technology into their existing platforms.

Software Product Development

In addition to licensing its technologies, Spectral develops high-value software products that showcase and operationalize its inventions.

These products are designed to be cost-effective to build and deploy, relying heavily on reusable code modules and algorithmic libraries developed in-house.

Our software tools address critical needs in analytics, risk forecasting, high-efficiency search, anomaly detection, and automated decision-making.

These solutions are typically designed as standalone or API-accessible tools and are suitable for rapid pilot testing and scalable deployment.

Because the products are IP-rich, they serve the dual purpose of generating revenue and validating the commercial viability of our underlying inventions.

Software revenue is expected to grow as we continue to commercialize our internally developed tools and expand our licensing base.

Strategic Acquisitions and Business Transformation

Spectral pursues targeted acquisitions of small, undercapitalized, or undervalued technology firms with latent potential that can be unlocked through application of our IP.

These businesses often have customer relationships, domain expertise, or specialized distribution channels but lack scalable technological differentiation.

Upon acquisition, Spectral deploys its proprietary tools and patented processes to transform these operations.

We integrate AI-enhanced analytics, automated workflows, and new product offerings that significantly increase revenue and operational efficiency.

By focusing on IP-led transformation, we aim to drive both top-line growth and substantial margin expansion in the acquired entities.

In 2024, we began implementing this strategy with early acquisition targets and expect to report initial performance improvements in 2025.

Organizational Capabilities

To support our operations, Spectral has assembled a cross-disciplinary team of inventors, engineers, consultants, and business strategists.

In 2024, we added a number of highly experienced advisors in IP law, AI model design, computational physics, and corporate development.

This bench of experts enhances our capacity to identify patentable innovations, ensure rigorous filings, and guide technical and commercial validation of our IP.

The team operates in a distributed structure across North America and Europe, giving us access to global expertise and operational flexibility.

Our operational infrastructure is lean by design, with a strong emphasis on leveraging automation, cloud-based development environments, and modular deployment strategies to maximize return on R\&D investment.

This capital-efficient operating model enables Spectral to generate high-value outputs with minimal fixed overhead, while retaining the agility to scale with opportunity.

Technology and Market Positioning

Spectral’s operations are uniquely positioned at the convergence of three critical technology trends:

AI acceleration, hybrid computing, and IP-driven enterprise infrastructure.

By focusing on technologies that sit at the intersection of these trends, we position ourselves not only as an innovator but as a multiplier for others’ success—whether through licensing, acquisition, or product deployment.

Our emphasis on hybrid classical architectures allows us to provide practical, near-term enhancements to existing systems while preserving forward compatibility with quantum and neuromorphic compute systems as they mature.

Our products and services are designed to align with the growing demand for scalable, high-performance computation in privacy-sensitive, regulated, or high-complexity domains such as healthcare, finance, logistics, and defense.

We view this positioning as a durable source of long-term differentiation and value creation.

Spectral Capital Corporation operates as a technology platform company focused on the systematic development, protection, and commercialization of advanced intellectual property and software systems in artificial intelligence, algorithmic computing, and hybrid classical computing architectures.

Historically, Spectral operated as a research-driven company with limited commercial operations and modest revenue generation.

In recent periods, the Company has begun transitioning toward an operating model that combines intellectual property creation with direct commercial engagement, including licensing, software deployment, and the operation of acquired businesses that maintain customer relationships independent of Spectral’s intellectual property, while remaining complementary to it.

Our operations are organized around four interrelated pillars:

(1) the development and protection of proprietary intellectual property, including patents and trade secrets;

(2) selective monetization of intellectual property through licensing and strategic arrangements;

(3) development of proprietary software tools derived from internal research;

and (4) the ownership and operation of technology-enabled businesses with established customer relationships and recurring revenues.

This structure is designed to balance long-term value creation through invention with nearer-term revenue generation and operational scale.

Intellectual Property and Trade Secret Development

The foundation of Spectral’s operations is its internal invention and technology development process, which is designed to continuously generate novel algorithms, system architectures, and computational methods.

Our innovation efforts focus primarily on artificial intelligence architectures, optimization and probabilistic modeling, secure computation, algorithmic decision systems, and hybrid classical computing approaches.

During 2024 and 2025, Spectral filed a substantial number of patent applications, including provisional and non-provisional applications, reflecting inventions developed internally and through collaboration with consultants and technical advisors.

As disclosed elsewhere in this Annual Report on Form 10-K, a portion of these filings remain pending, and there can be no assurance that any particular application will mature into an issued patent or that issued patents will provide commercially meaningful protection.

In addition to patents, Spectral strategically relies on trade secrets to protect certain innovations, particularly in areas where public disclosure could enable reverse engineering or where rapid iteration may outpace the patent process.

As part of this strategy, we may elect not to pursue patent protection for certain inventions, may withdraw patent applications, or may allow provisional applications to expire when management determines that continued confidentiality provides stronger protection.

This approach reflects the realities of software- and AI-driven innovation, where competitive advantage may depend more on implementation detail, data, and operational know-how than on formal patent claims.

Our intellectual property development process includes internal invention review, technical vetting, legal evaluation, and strategic assessment of whether patenting, trade secret protection, or a hybrid approach is most appropriate.

While we maintain a growing pipeline of patentable concepts, not all inventions are expected to be filed, issued, or commercialized, and there can be no assurance that our intellectual property strategy will prevent competitors from developing similar technologies.

Licensing and Structured IP Monetization

Spectral seeks to monetize certain elements of its intellectual property through selective licensing arrangements, structured to balance near-term economics with longer-term strategic value.

Licensing arrangements may include upfront fees, royalties, milestone payments, equity interests, or combinations thereof.

In many cases, licensing discussions are exploratory in nature and may not result in executed agreements.

We target licensing opportunities where our technologies can be integrated into third-party platforms in sectors such as data analytics, telecommunications-adjacent services, enterprise software, and automation.

However, we do not expect licensing alone to be the primary driver of our operating revenues, and we do not assume that our intellectual property will be broadly adopted across markets without substantial customer validation and integration effort.

Because many of our technologies are emerging and application-specific, licensing discussions often involve extended evaluation periods, technical diligence, and customization.

There can be no assurance that these discussions will result in material revenue or that licensees will successfully commercialize products incorporating our technologies.

Software Product Development and Deployment

In parallel with IP development, Spectral develops proprietary software tools and platforms that operationalize elements of its research and algorithmic capabilities.

These products are designed to demonstrate practical application of our technologies and to support revenue generation independent of patent enforcement.

Our software development efforts emphasize modular architectures, reusable algorithmic components, and API-driven deployment models.

Products may be delivered as standalone applications, integrated services, or internal platforms used within acquired operating businesses.

Software development is conducted with a focus on capital efficiency, and products may be iterated, delayed, or discontinued based on customer feedback, technical feasibility, or resource constraints.

Historically, Spectral’s software products achieved limited commercial traction.

Management believes that recent operational changes, including closer alignment with end-user needs and integration with operating businesses, may improve adoption;

however, there can be no assurance that future software offerings will achieve market acceptance or generate material revenue.

Acquisition, Integration, and Operation of Technology-Enabled Businesses

Spectral’s operating strategy includes the acquisition and operation of technology-enabled businesses that possess existing customers, revenue streams, and operational infrastructure.

These businesses are not solely dependent on Spectral’s intellectual property for their viability but are expected to benefit from selective application of Spectral’s technologies over time.

The Company’s recent acquisitions represent a significant expansion from a historically small, research-oriented organization into a more complex operational structure involving multiple jurisdictions, employees, regulatory frameworks, and customer relationships.

Integration efforts focus on maintaining service continuity, regulatory compliance, and customer satisfaction while evaluating opportunities to improve efficiency and margins through automation, analytics, and software enhancements.

Not all anticipated benefits of these acquisitions may be realized, and integration efforts may require greater time, capital, and management attention than expected.

In some cases, Spectral may determine that operational improvements are limited by market conditions, customer pricing sensitivity, or regulatory constraints.

Organizational Capabilities and Infrastructure

Spectral operates with a lean organizational structure, supplemented by consultants and advisors with expertise in engineering, intellectual property, and corporate development.

This model is intended to control fixed costs while allowing access to specialized talent.

However, reliance on external contributors introduces execution risk and may limit scalability.

Spectral does not currently have a full-time Chief Technology Officer at the corporate level, but instead relies on a combination of consultants, contractors and technologists at the subsidiary level who are close to the specific technological implementations of our intellectual property into current products.

Spectral expects to significantly expand its technical staff as it looks to increase commercialization of its intellectual property and continues to build out that intellectual property.

As the Company expands its operating footprint, it is enhancing internal controls, financial reporting processes, and operational oversight to meet the requirements of a public company and a potential Nasdaq listing.

These efforts may divert resources from product development and commercialization.

Outlook for Operations

In 2025, Spectral plans to significantly expand its operational footprint in all four pillars.

Spectral’s near-term operational focus is on stabilizing and scaling its operating businesses, continuing disciplined intellectual property development, and selectively commercializing technologies through software and partnerships.

While management believes this integrated approach provides multiple paths to value creation, the Company remains subject to significant execution, market, and financial risks.

There can be no assurance that Spectral will successfully transition from a primarily research-driven organization to a sustainably profitable operating company, or that its intellectual property and software initiatives will result in meaningful long-term returns for stockholders.

Outlook for Operations

In 2026, Spectral plans to expand its operational footprint in all four pillars.

We anticipate a sharp increase in patent filings, a broadening of our licensing relationships, a commercial launch of multiple proprietary software tools, and follow-on acquisitions to reinforce our transformation strategy.

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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.

This expense consists of expenses related to our technology acquisitions, primarily the acquisition of the Node Nexus technology which was subsequently rescinded.

For the year ended December 31, 2025, research and development expenses were $0, as the Company's activities during this period shifted toward the integration of acquired operating businesses and the continued development of its intellectual property portfolio through patent filings and trade secret protections rather than through capitalized or expensed R&D activities.

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.

For the year ended December 31, 2024, the Company did not have any customers, as its activities during that period were primarily focused on research and development, intellectual property creation, and strategic planning, and it had not yet commenced revenue-generating commercial operations.

For the year ended December 31, 2025, total revenues were $21,839,868, derived from the operations of 42 Telecom and its subsidiaries following the acquisition closing on August 1, 2025, Two customers individually accounted for 10% or more of consolidated revenues during the year ended December 31, 2025.

One customer accounted for approximately 35.7% of consolidated revenues and another customer a related party of the Company accounted for approximately 33.0% of consolidated revenues.

The loss of either of these customers could have a material adverse effect on the Company's results of operations, cash flows and financial condition.

For the year ended December 31, 2025, two suppliers individually accounted for 10% or more of the Company's consolidated cost of revenue.

One supplier accounted for approximately 36.0% of consolidated cost of revenue and another supplier, a related party of the Company, accounted for approximately 39.1% of consolidated cost of revenue.

The loss of either of these suppliers could have a material adverse effect on the Company's results of operations and financial condition.

INTELLECTUAL PROPERTY

Summary and Categorization of Spectral Capital Corporation's Provisional Patents

Spectral Capital Corporation has filed 104 provisional patent applications covering various aspects of quantum computing, hybrid quantum/classical computing, AI-driven material discovery, security, and photonic technologies .

Below is a summary and categorization of select patents based on the provided documents.

Quantum Computing and Hybrid Quantum/Classical Systems

These patents focus on advancing quantum computing architectures, improving qubit fidelity, and developing hybrid quantum-classical computational frameworks .

Agent-Based Migration and Optimization for Hybrid Quantum/Classical Data Systems

o Patent No.:

Spectral Patent 48

Describes a system for migrating and optimizing data from classical computing environments to a hybrid quantum/classical framework using a distributed quantum ledger database .

This patent introduces an intelligent agent that continuously monitors and optimizes system configurations for efficiency and security.

o Applications:

Enterprise data migration, financial records, government databases.

Quantum Information Processing Using Nuclear Spin Superposition in Bismuth-Doped Silicon

o Patent No.:

Spectral Patent 52

Utilizes bismuth-doped silicon as a platform for quantum computing, leveraging nuclear spin superposition for enhanced error correction.

o Applications:

Fault-tolerant quantum computing, quantum memory systems.

Quantum Information Processing Using Crystalline Fluorine

o Patent No.:

Spectral Patent 53

Investigates the use of crystalline fluorine as a novel quantum computing material, offering a potential alternative to existing superconducting and trapped-ion systems.

o Applications:

Next-generation quantum processors, quantum communication networks.

AI-Driven Design and Optimization of Fluxonium-Based Counter-Rotating Gates

o Patent No.:

Spectral Patent 51

Uses Fluxonium qubits to design counter-rotating quantum gates , improving gate fidelity and reducing decoherence using AI-assisted simulations.

o Applications:

Error-resistant quantum computing, advanced quantum gates.

AI-Driven Quantum Security & Cryptography

These patents focus on quantum-safe security solutions , including dynamic encryption techniques .

Continuous Dynamic Password Generation Using a Quantum/ Classical Hybrid Computing System

o Patent No.:

Spectral Patent 49

Proposes a quantum-enhanced password system that continuously evolves to prevent brute-force attacks, using quantum random number generators (QRNGs) and classical security integration .

o Applications:

Enterprise cybersecurity, government secure networks, financial systems.

AI-Driven Material Discovery for Quantum Computing

These patents focus on the discovery and simulation of novel quantum materials using AI and hybrid computing .

AI-Driven Design and Simulation of Single Atom Catalysts Using a Hybrid Quantum/Classical Computing System

o Patent No.:

Spectral Patent 50

Uses AI and quantum computing to accelerate the discovery of single-atom catalysts (SACs) for industrial applications.

The system integrates quantum simulations with AI algorithms to optimize catalytic performance.

o Applications:

Green chemistry, fuel cell research, carbon capture.

Fabricating Nanometer-Thin Tellurium Crystals Using Atomic Molding Plates for Quantum Computing

o Patent No.:

Spectral Patent 54

Details a method for growing and controlling thin tellurium crystals for use as semiconductors in quantum computing.

· Applications:

Quantum transistor development, superconducting quantum computers.

Quantum Information Processing Using Hexagonal Boron Nitride with Nitrogen Vacancies

o Patent No.:

Spectral Patent 56

Describes using nitrogen vacancies (NV) in hexagonal boron nitride (hBN) as a solid-state qubit platform with long coherence times and high scalability.

o Applications:

Quantum networking, secure quantum encryption.

Photonic & Optical Quantum Computing

These patents explore photonic-based quantum computing and light-based qubit control .

Quantum Information Processing Using Rubidium Tantalate in Integrated Photonic Circuits

o Patent No.:

Spectral Patent 55

Develops rubidium tantalate (RbTaO3) photonic circuits with low birefringence for integrated quantum photonics applications, enhancing coherence and qubit manipulation .

o Applications:

Quantum communication, optical quantum computing.

Spectral Capital Corporation's provisional patents cover a broad range of innovations at the intersection of quantum computing, AI-driven material discovery, and security .

The patents suggest a strategic focus on hybrid quantum/classical systems , error-resistant quantum architectures , and AI-driven optimization .

Intellectual Property and Technology Portfolio

Spectral Capital Corporation has developed a broad and evolving portfolio of proprietary technologies focused on advanced computation, algorithmic optimization, artificial intelligence, security, and hybrid classical computing architectures.

The Company’s intellectual property strategy emphasizes systematic invention, selective patenting, and the strategic use of trade secrets, rather than reliance on any single technology or patent family.

To date, Spectral has reduced more than 500 distinct innovations to written patent applications, including provisional and non-provisional utility applications filed in the United States, covering

a wide range of methods and systems relating to hybrid classical and quantum computing, algorithmic task orchestration, probabilistic modeling, error mitigation, security, cryptography, simulation, and data optimization.

These applications reflect internally developed concepts as well as inventions developed with the assistance of technical consultants and collaborators.

Many of these applications remain provisional or pending or are being evaluated for superior protection as trade secrets, and there can be no assurance that any application will result in an issued patent or that any issued patent will provide meaningful commercial protection.

In addition to applications already prepared, Spectral maintains an active pipeline of more than 400 additional patentable innovations that are currently under evaluation, documentation, or internal review.

Not all innovations in this pipeline are expected to be filed as patent applications.

Management regularly assesses whether particular inventions are more effectively protected through patent filings, trade secret protection, or a combination of both.

In certain cases, the Company may elect not to pursue patent protection, may withdraw applications, or may allow provisional applications to expire where continued confidentiality, implementation complexity, or rapid iteration is believed to provide stronger protection than public disclosure.

The Company anticipates that, through continued invention, selective filing, and ongoing refinement of existing applications, it may have in excess of 1,000 patent applications in various stages of preparation, filing, or prosecution by the end of 2026.

This estimate reflects the pace of internal innovation and documentation activities and does not represent a commitment to file or prosecute any specific number of applications.

Spectral’s intellectual property portfolio spans several functional domains, including:

• hybrid classical and quantum task allocation, optimization, and error mitigation methods;

• algorithmic security, cryptography, authentication, and data integrity systems;

• synthetic data generation, simulation, and probabilistic modeling frameworks;

• software-based orchestration of distributed, decentralized, and cloud-based computing environments;

• materials, hardware-adjacent, and physics-informed computational models evaluated at a research or exploratory stage.

Intellectual Property Portfolio – Functional Areas

Spectral’s intellectual property portfolio encompasses a broad range of computational methods, algorithmic frameworks, and system architectures.

The Company’s inventions are generally intended to address challenges associated with complexity, uncertainty, efficiency, and security in advanced computing environments.

While the Company does not commercialize all inventions and does not operate quantum computing hardware, its patent applications and trade secrets generally relate to the following functional areas:

Hybrid Classical and Advanced Computing Methods

A substantial portion of Spectral’s intellectual property relates to algorithmic frameworks designed to coordinate, optimize, and manage workloads across heterogeneous computing environments.

These inventions include methods for agent-based task migration, workload scoring, and dynamic allocation of computational resources based on latency, efficiency, energy consumption, and reliability considerations.

Certain inventions address preprocessing and post-processing techniques intended to improve performance or reduce noise and error when integrating advanced

or emerging computational approaches with conventional systems.

These methods are designed to be adaptable to evolving hardware and software environments and are generally research-oriented in nature.

Materials and Hardware-Adjacent Computational Models

The Company has developed computational models and simulation techniques applicable to advanced materials, devices, and hardware-adjacent systems.

These inventions generally focus on algorithmic design, modeling, and optimization rather than physical fabrication or manufacturing.

Potential areas of application include materials discovery, catalysis, and device-level performance modeling.

These inventions are primarily exploratory and may be evaluated for potential relevance to future research, licensing, or collaboration opportunities, but may never be commercialized.

Security, Cryptography, and Network Intelligence

Spectral’s intellectual property also includes algorithmic approaches relating to cybersecurity, cryptography, authentication, and network intelligence.

These inventions address topics such as anomaly detection, risk scoring, behavioral analysis, and secure data handling within distributed or networked environments.

Certain concepts are designed to support adaptability to evolving security standards, cryptographic methods, and threat models.

These inventions are intended to complement existing security infrastructure rather than replace established cryptographic or network security systems.

Applied Modeling, Simulation, and Decision Support

The Company has developed computational methods intended to support complex modeling, simulation, and decision-support use cases.

These inventions generally involve synthetic data generation, probabilistic modeling, scenario analysis, and large-scale simulation techniques.

Potential applications may include environmental modeling, logistics optimization, fraud and risk detection, resource planning, and other data-intensive analytical contexts.

These methods are designed to support analysis and forecasting rather than to provide definitive predictions or automated decision-making outcomes.

Many of the Company’s inventions are early-stage, conceptual, or research-oriented and may never be commercialized.

The Company does not represent that it currently owns or operates quantum computing hardware, nor that any invention will result in commercially viable products or services.

Commercialization, if any, may occur through internal software development, selective licensing, integration into operating businesses, or strategic collaborations.

The Company’s ability to protect its intellectual property depends on a number of factors, including the scope and enforceability of patents that may issue, the effectiveness of trade secret protections, the cost of enforcement, and the willingness of courts in various jurisdictions to uphold intellectual property rights.

In certain jurisdictions, particularly outside the United States and Western Europe, enforcement of intellectual property rights may be limited or uncertain.

Spectral Capital Corporation’s potentially patentable innovations reflect a broad set of research-oriented and applied innovations focused on advanced computational methods, algorithmic optimization, and security-related systems.

Collectively, these inventions illustrate the Company’s emphasis on hybrid computing approaches, data-driven optimization techniques, and methods intended to improve efficiency, reliability, and analytical capability in complex computing environments.

Many of these innovations remain exploratory in nature and may be protected

through a combination of patent filings and trade secret practices, and there can be no assurance that any particular invention will result in commercially viable products or services.

Trade Secrets

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These agreements will generally provide that all confidential information developed or made known to the individual by us during the course of the individual’s relationship with us is to be kept confidential and not to be disclosed to third parties except under specific circumstances.

As of the date of this annual report on Form 10-K for the year ended December 31, 2024, we have executed non-disclosure agreements with key consultants or advisors.

As of the date of this filing, we have executed non-disclosure agreements with key consultants or advisors.

HUMAN CAPITAL

For the year ended December 31, 2024, we had five full time employees and 10 consultants.

As of the date of this filing, we had 97 full-time employees and 13 consultants.

We are not subject to any collective bargaining agreements and believe that our relationships with our employees and consultants are good.

Available Information

Our common stock is quoted on the OTC Markets, OTCQB, under the symbol “FCCN”.

We file annual, quarterly, and current reports and other information with the U.S.

Securities Exchange Commission (the “SEC”).

These filings are available to the public on the Internet at the SEC’s website at http://www.sec.gov.

We maintain a website where our annual, quarterly and current reports and amendments to those reports, if any, are available free of charge.

We rent a virtual office located at 701 Fifth Avenue, Suite 4200, Seattle, Washington, 98104, under a month-to-month basis.

We pay monthly rent of $378.00 for this location.

We believe that our current facilities are sufficient to meet our current and near-term needs and that, should it be needed, suitable additional space will be available.

Legal Proceedings

We are not party to any material legal matters.

In the future, we may become party to legal matters and claims arising in the ordinary course of business.

We cannot predict the outcome of any such legal matters or claims, and despite the potential outcomes, the existence thereof may have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

There was a claim made by a third-party entity regarding Mr.

Brehm and Node Nexus.

The Company believes there is no basis for this claim and that the Company has no legal exposure on this claim.

In addition, the Company has been provided with an indemnity by Mr.

Brehm for this claim.

Executive Officers, Directors

The following table sets forth our executive officers and directors, their ages and the positions held by them:

Our Board of Directors was 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 date of this filing.

Jenifer Osterwalder

Chief Executive Officer, President and Director

Daniel Gilcher

Chief Financial Officer and Principal Accounting Officer

Michael Turner

Gottfried Werner

Olga Nezerenko

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 of FUSA Technology Investments Corp.

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.

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

Daniel Gilcher – Chief Financial Officer and Principal Accounting Officer

Daniel Gilcher was appointed Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer of Spectral Capital Corporation, effective January 3, 2026.

Gilcher brings extensive international public-company financial leadership experience across technology, telecommunications and capital markets.

Prior to joining Spectral, he served as Chief Financial Officer and a Director of Mexedia, an Italian listed technology and communications company, and previously served as Interim Chief Financial Officer and a Director of Nuvo, an Israel-based healthcare company.

In these and other roles, he has worked closely with management teams, boards of directors and auditors in multiple jurisdictions on financial reporting, public-market governance, mergers and acquisitions, due diligence, negotiation and post-merger integration.

Earlier in his career, Mr.

Gilcher worked in investment analysis and portfolio management at Shareholder Value Management AG.

He holds a Ph.D.

in Empirical Finance from EBS Business School, an MBA from the Indian Institute of Management Ahmedabad, an M.Sc.

in Finance from EBS Business School and an M.A.

from Johannes Gutenberg University Mainz.

His academic research has been published in peer-reviewed journals.

In connection with the previously disclosed acquisition of 42 Telecom and Telvantis, Mr.

Gilcher received 400,000 shares and 175,000 shares, respectively, of Spectral common stock as acquisition consideration on August 1, 2025 and December 31, 2025, prior to his appointment as an executive officer.

That issuance was made under the terms of the acquisitions and was not compensation for services.

As Chief Financial Officer, Mr.

Gilcher oversees Spectral’s finance, accounting, reporting and capital markets functions as the Company advances its preparation for a planned listing on The Nasdaq Capital Market.

Jeffrey Chong-Director

Jeffrey Chong has been employed as an economist, capital markets expert and Chief Investment Officer for more than 20 years.

Since November 2024, Mr.

Chong has been employed as an independent capital markets consultant to Spectral.

Previously, he served as the Chief Investment officer of Turicum Asset Management AG (Zurich, Switzerland) from March of 2021 to September of 2023.

Chong has a bachelor’s degree in Economics from the University of Victoria.

Turner, Director

Turner has over 20 years of leadership and operational experience across the energy and advanced technology sectors.

He has held senior executive roles including President of Operations and Vice President, where he led the implementation of advanced ultrasonic and hydrocarbon technologies, process optimization initiatives, and environmentally focused systems.

Turner has extensive experience in facility commissioning, regulatory compliance, technology commercialization, and operational scaling.

His background includes oversight of complex projects, collaboration on patent development, and executive leadership in both public and private organizations in Canada and internationally.

Gottfried Werner, Director

Werner began his career in tax consultancy before becoming Director of an international, Swiss-based leasing company.

He later founded his own investment and consulting firm with a focus on Impact, IT, Telecommunications, Media, Entertainment, and Human Resources.

Today, he operates the largest independent telecommunications retail network in Germany and serves on the boards of several companies.

In addition, he owns a consulting firm specializing in lobbying and facilitating business relations between the German and English-speaking markets.

Olga Nezerenko-Director

Nezerenko holds a PhD in Economics and Business Administration from Tallinn University of Technology and is a senior expert recognized for her strategic oversight of complex systems, quality assurance, and long-term program management.

She has served since 2004 as Head of the Logistics Study Programme at the Estonian Entrepreneurship University of Applied Sciences, where she has led curriculum development, supervised applied research, and managed industry partnerships.

Nezerenko is actively involved in professional and sectoral organizations, including long-standing membership in the Estonian Logistics and Freight Forwarding Association and representation within the Transport and Logistics Professional Chamber.

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.

Family Relationships

There are no family relationships among any of our officers or directors.

Corporate Governance

Corporate governance refers to the policies and structure of the Board of Directors of a corporation, whose members are elected by and are accountable to the shareholders of the company.

Corporate governance encourages establishing a reasonable degree of independence of the board from executive management and the adoption of policies to ensure the board recognizes the principles of good management.

Our Board is committed to sound corporate governance practices, as such practices are both in the interests of shareholders and help to contribute to effective and efficient decision-making.

Board of Directors

Our Board is responsible for the stewardship of the Company, overseeing management and the enhancement of shareholder value.

The Board is responsible for:

(a) adopting a strategic plan for the Company and reviewing the plan in light of management’s assessment of emerging trends, the competitive environment, the opportunities for the business of the Company, risk issues, and significant business practices and products;

(b) ensuring that the risk management of the Company is prudently addressed;

(d) reviewing the Company’s approach to corporate governance, including an evaluation of the adequacy of the mandate of the Board, director independence standards and

(e) compliance with the Company’s Code of Business Conduct and Ethics;

(f) upholding a comprehensive policy for communications with shareholders and the public at large.

The frequency of meetings of the Board and the nature of agenda items may change from year to year depending upon the activities of Spectral.

Our Board of Directors intend to meet at least quarterly and at each meeting there is a review of the business of Spectral.

Our Board facilitates its exercise of independent supervision over the Company’s management through meetings of the board held for the purposes of obtaining an update on significant corporate activities and plans, both with and without members of the Company’s management being in attendance.

Board Composition;

The NASDAQ listing standards require that a majority of our Board of Directors must be composed of “independent directors,” which is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion of the company’s Board of Directors would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director.

The Board has determined that Olga Nezerenko, Michael Turner and Gottfried Werner, are considered to be independent.

Our Board currently consists of five directors, three of whom are independent.

Board Committees

Our Board directs the management of our business and affairs and conducts its business through meetings of the Board and its standing committees.

As of the date hereof, the Board has established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee.

In addition, from time to time, special committees may be established under the direction of the Board of Directors when necessary to address specific issues.

Audit Committee

Our audit committee consists of Ms.

Nezerenko, Mr.

Turner and Mr.

Werner serving as the chairman.

Our Board has determined that Gottfried Werner is an “audit committee financial expert” within the meaning of the SEC regulations.

Our Board has also determined that each member of our audit committee can read and understand fundamental financial statements in accordance with applicable requirements.

In arriving at these determinations, the Board has examined each audit committee member’s scope of experience and the nature of their employment in the corporate finance sector.

The functions of this committee include:

● selecting a qualified firm to serve as the independent registered public accounting firm to audit our financial statements;

● helping to ensure the independence and performance of the independent registered public accounting firm;

● discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, our interim and year-end operating results;

● developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters;

● reviewing our policies on risk assessment and risk management;

● reviewing related party transactions;

● obtaining and reviewing a report by the independent registered public accounting firm at least annually, that describes our internal quality-control procedures, any material issues with such procedures, and any steps taken to deal with such issues when required by applicable law;

● approving (or, as permitted, pre-approving) all audit and all permissible non-audit services, other than de minimis non-audit services, to be performed by the independent registered public accounting firm

Compensation Committee

Our compensation committee consists of Mr.

Turner, and Ms.

The functions of the compensation committee will include:

● reviewing and approving, or recommending that our Board approve, the compensation of our executive officers;

● reviewing and recommending that our Board approve the compensation of our directors;

● reviewing and approving, or recommending that our Board approve, the terms of compensatory arrangements with our executive officers;

● administering our stock and equity incentive plans;

● selecting independent compensation consultants and assessing conflict of interest compensation advisers;

● reviewing and approving, or recommending that our Board approve, incentive compensation and equity plans;

● reviewing and establishing general policies relating to compensation and benefits of our employees and reviewing our overall compensation philosophy.

Nominating and Corporate Governance Committee

Our nominating and corporate governance committee consists of Mr.

Turner and Ms.

The functions of the nominating and governance committee will include:

● identifying and recommending candidates for membership on our Board;

● including nominees recommended by stockholders;

● reviewing and recommending the composition of our committees;

● overseeing our code of business conduct and ethics, corporate governance guidelines and reporting;

● making recommendations to our Board concerning governance matters.

The nominating and corporate governance committee also annually reviews the nominating and corporate governance committee charter and the committee’s performance.

Board Leadership Structure and Role in Risk Oversight

Our Board is primarily responsible for overseeing our risk management processes.

Our Board receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our assessment of risks.

Our Board focuses on the most significant risks we face our general risk management strategy, and also ensures that risks we undertake are consistent with our Board’s appetite for risk.

While our Board oversees our risk management, management is responsible for day-to-day risk management processes.

We believe this division of responsibilities is the most effective approach for addressing the risks we face and that our Board leadership structure supports this approach.

Our bylaws provide our Board with flexibility in its discretion to combine or separate the positions of Chairman of the Board and Chief Executive Officer.

The Board currently separates the roles of Chief Executive Officer and Chairman of the Board in recognition of the differences between the two roles.

Our Chief Executive Officer, who is also a member of our Board, is responsible for setting the strategic direction of the Company and the day-to-day leadership and performance of the Company, while the Chairman of the Board provides guidance to the Chief Executive Officer, sets the agenda for the Board meetings, presides over meetings of the Board and tries to reach a consensus on Board decisions.

Although these roles are currently separate, the Board believes it should be able to freely select the Chairman of the Board based on criteria that it deems to be in the best interest of the Company and its stockholders, and therefore one person may, in the future, serve as both the Chief Executive Officer and Chairman of the Board.

The Company does not currently have a Chairman of the Board.

Code of Business Conduct and Ethics

We have adopted a code of business conduct and ethics, applicable to all of our directors, officers, employees and all persons performing similar functions.

A copy of the code is attached as Exhibit to this Annual Report on Form 10-K.

We expect that any amendments to the code, or any waivers of its requirements, will be disclosed in our public filings with the Commission.

Corporate Governance Guidelines

We have adopted corporate governance guidelines that serve as a flexible framework within which our Board and its committees operate.

These guidelines cover a number of areas including the size and composition of the Board, Board membership criteria and director qualifications, director responsibilities, Board agenda, roles of the chairman of the Board and Chief Executive Officer and Chief Financial Officer, meetings of independent directors, committee responsibilities and assignments, Board member access to management and independent advisors, director communications with third parties, director compensation, director orientation and continuing education, evaluation of senior management and management succession planning.

A copy of our corporate governance guidelines is attached hereto as an Exhibit.

Family Relationships

None of our directors or executive officers has a family relationship as defined in Item 401 of Regulation S-K.

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 1. Business