SPECTRAL CAPITAL Corp 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS Spectral Capital Corporation (a Nevada corporation) Our audited consolidated financial statements for the years ended December 31, 2025, and 2024 are part of this Annual Report on Form 10-K. They are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles. Report of Independent Registered Public Accounting Firm F-1 Consolidated Balance Sheets as of December 31, 2025 and 2024 F-3 Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2025 and 2024 F-4 Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2025 and 2024 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024 F-6 Notes to the Consolidated Financial Statements F-7 58 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Spectral Capital Corporation and subsidiaries, Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Spectral Capital Corporation (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2025, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. Explanatory Paragraph - Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations, has an accumulated deficit and a working capital deficit which raise substantial doubt about its ability to continue as going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated F-1 financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Goodwill and Other Intangibles – Refer to Notes 3 to the consolidated financial statements Critical Audit Matter Description As disclosed in Note 3, Goodwill arises in connection with acquisitions. The excess purchase price over the fair value of net tangible assets and identifiable intangible assets acquired is recorded as goodwill. The Company assesses goodwill for impairment annually as of December 31, and more frequently if events and circumstances indicate that goodwill might be impaired. As disclosed in Note 3, on August 1, 2025, the Company completed an acquisition referred to as the 42 Telecom Ltd. acquisition in accordance with the stock purchase agreement. The consideration included an initial payment of $12,880,000 through common stock. In addition to the initial payment amount, the Company agreed to issue an earn-out to the selling stockholders that is subject to an earn-out adjustment based on actual EBITDA achieved in 2026 with total guarantee minimum share value consideration of $30,000,000. The Company gave a fair value of approximately $7,120,000 to the earn-out on the date of acquisition which is considered a contingent liability. Also, as disclosed in Note 3, on December 31, 2025, the Company completed an acquisition referred to as the Telvantis Voice Services, Inc. acquisition in accordance with the stock purchase agreement. The consideration included an initial payment of $3,407,250 through common stock. In addition to the initial payment amount, the Company agreed to issue an earn-out agreement to the selling stockholders that is subject to an earn-out adjustment based on actual EBITDA achieved in 2027 with total guarantee minimum share value consideration of $65,000,000. The Company gave a fair value of approximately $31,105,750 to the earn-out on the date of acquisition which is considered a contingent liability. Given the significant judgments made by management to estimate the earn-outs as well as intangible assets acquired with the 42 Telecom Ltd acquisition and Telvantis Voice Services, Inc. acquisition, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions required a high degree of auditor judgment and an increased effort, including the need to involve our fair value specialists. How the Critical Audit Matter Was Addressed in the Audit · We utilized personnel with specialized knowledge and skill in valuation to assist in; a) assessing the appropriateness and relative weighting of valuation methodology for the various intangible assets, including the Multi-Period Excess Earnings Method, Cost to Replace, Relief from Royalty and Monte Carlo Simulation model, b) evaluating the reasonableness of the growth rates, percent of revenues lost without existing agreements, discount rate used in the income approach and the discount rate used for lack of marketability of the Company’s common stock and, c) evaluating the reasonableness of the assumptions and estimates used in the various valuation methodologies. · Evaluate the reasonableness of management’s significant estimates and assumptions including revenue growth rates and EBITDA margins, discount rates and futures market conditions. · Evaluate if there have been events and circumstances that might indicate Goodwill has been impaired. · Reviewed and assessed the appropriateness of adjustments to Goodwill, Other Intangibles and other Assets and Liabilities acquired based on changes to their estimated fair values. /s/ RBSM LLP We have served as the Company’s auditor since 2025. PCAOB ID 587 New York, NY March 31, 2026 F-2 SPECTRAL CAPITAL CORPORATION CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2025 AND 2024 December 31, 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 2,087,400 $ 107,475 Restricted cash 21,174 - Accounts receivable, net 32,528,372 - Accounts receivable, related party 11,709,931 Contract assets 3,840,357 - Contract assets, related party 2,633,806 Due from related party 1,357,768 - Prepaid expenses and other current assets 5,272,803 6,500 Total current assets 59,451,611 113,975 Property, plant and equipment, net 126,054 - Intangible assets, net 41,437,559 - Capital work-in-progress 439,264 - Goodwill 48,697,465 - Other receivable, related party 426,526 - Right of use asset 167,807 - Total assets $ 150,746,286 $ 113,975 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 34,441,494 $ 482,461 Accounts payable, related party 9,260,754 Accrued expenses and other current liabilities 2,407,194 - Due to related party 7,996,710 550,700 Accounts receivable financing facility 12,673,595 - Contingent consideration 34,838,484 - Contract liabilities 335,309 - Operating lease liability, current portion 65,156 - Total current liabilities 102,018,696 1,033,161 Operating lease liability, net of current portion 102,651 - Deferred tax liability 4,470,480 - Total liabilities 106,591,827 1,033,161 Commitments and contingencies (Note 15) Stockholders' equity (deficit): Preferred stock, par value $ 0.0001 , 5,000,000 shares authorized no shares issued and outstanding Series Quantum Preferred stock, par value $ 0.0001 , 2,000,000 shares authorized, 0 and 1,000,000 shares issued and outstanding as of December 31, 2025 and 2024 - 100 Common stock, par value $ 0.0001 , 300,000,000 shares authorized 88,254,216 and 67,699,302 shares issued and outstanding as of December 31, 2025 and 2024 8,825 6,770 Common stock to be issued (1,500,000 shares at December 31, 2025) 3,407,250 - Additional paid-in capital 74,242,760 33,629,226 Accumulated deficit ( 33,415,041 ) ( 34,333,396 ) Accumulated other comprehensive income/(loss) 132,551 - Total stockholders' equity (deficit) 44,376,345 ( 697,300 ) Non-controlling interest ( 221,886 ) ( 221,886 ) Total liabilities and stockholders' equity (deficit) 44,154,459 ( 919,186 ) $ 150,746,286 $ 113,975 The accompanying notes are an integral part of these audited consolidated financial statements. F-3 SPECTRAL CAPITAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024 Year Ended December 31, 2025 2024 Revenue $ 14,551,774 $ - Revenue, related party 7,288,094 - Total revenues 21,839,868 - Cost of revenue 11,652,662 Cost of revenue, related party 7,303,516 - Gross profit 2,883,690 - Operating expenses: Selling, general and administrative 3,187,054 2,115,924 Wages and benefits 1,026,034 144,000 Depreciation and amortization 1,598,742 - Research and development - 745,024 Total operating expenses 5,811,830 3,004,948 Loss from operations ( 2,928,140 ) ( 3,004,948 ) Other income (expense): Interest expense, net ( 5,573 ) - Extinguishment of debt - ( 265,596 ) Change in fair value of contingent consideration 3,387,266 Other expense ( 32,693 ) - Total other income (expense) 3,349,000 ( 265,596 ) Income (loss) before income taxes 420,860 ( 3,270,544 ) Income taxes (benefit) ( 497,495 ) - Net income (loss) $ 918,355 $ ( 3,270,544 ) Net income (loss) attributable to Non-controlling interests $ - $ - Net income (loss) attributable to the Company $ 918,355 $ ( 3,270,544 ) Other comprehensive income (loss): Foreign currency translation income (loss) 132,551 - Total comprehensive income (loss) $ 1,050,906 $ ( 3,270,544 ) Net Income (loss) per share attributable to the Company Basic $ 0.01 $ ( 0.06 ) Diluted $ 0.01 $ ( 0.06 ) Weighted average shares outstanding Basic 73,438,957 57,925,034 Diluted 76,406,977 57,925,034 The accompanying notes are an integral part of these audited consolidated financial statements. F-4 SPECTRAL CAPITAL CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024 Series Quantum Additional Accumulated Other Total Preferred Stock Common Stock Common Stock to be issued Paid-In Non-Controlling Comprehensive Accumulated Stockholders' Shares Amount Shares Amount Shares Amount Capital Interest Income Deficit Equity (Deficit) Balances at December 31, 2023 - $ - 42,017,948 $ 4,202 - $ - $ 30,948,057 $ ( 221,886 ) $ - $ ( 31,062,852 ) $ ( 332,479 ) Proceeds from sale of common stock - - 15,000,000 1,500 - - 148,540 - - - 150,040 Issuance of common stock for liabilities - - 3,631,354 363 - - 353,328 - - - 353,691 Common and preferred stock issued for cash 1,000,000 100 5,050,000 505 - - 1,014,350 - - - 1,014,955 Stock-based compensation - - 2,000,000 200 - - 1,164,951 - - - 1,165,151 Net loss - - - - - - - - - ( 3,270,544 ) ( 3,270,544 ) Balances at December 31, 2024 1,000,000 $ 100 67,699,302 $ 6,770 - $ - $ 33,629,226 $ ( 221,886 ) $ - $ ( 34,333,396 ) $ ( 919,186 ) Common stock issued pursuant to private placement - - 1,494,700 149 - - 1,834,821 - - - 1,834,970 Common stock issued pursuant to business combination - - 8,000,000 800 - - 12,879,200 - - - 12,880,000 Common stock to be issued pursuant to business combination - - - - 1,500,000 3,407,250 - - - - 3,407,250 Common stock issued pursuant to assets purchase agreement - - 9,000,000 900 - - 19,709,100 - - - 19,710,000 Common stock issued pursuant to debt settlement - - 10,000 1 - - 9,999 - - - 10,000 Common stock issued pursuant to services - - 2,050,000 205 - - 4,427,295 - - - 4,427,500 Settlement of related party liabilities ( 1,000,000 ) ( 100 ) - - - - 675,800 - - - 675,700 Stock-based compensation - - 214 - - - 1,077,319 - - - 1,077,319 Net income - - - - - - - - 132,551 918,355 1,050,906 Balances at December 31, 2025 - $ - 88,254,216 $ 8,825 1,500,000 $ 3,407,250 $ 74,242,760 $ ( 221,886 ) $ 132,551 $ ( 33,415,041 ) $ 44,154,459 The accompanying notes are an integral part of these audited consolidated financial statements. F-5 SPECTRAL CAPITAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024 Year Ended December 31, 2025 2024 Cash flows from operating activities: Net income (loss) $ 918,355 $ ( 3,270,544 ) Adjustments to reconcile net loss to net cash used in operating activities: Bad debt 12,995 Stock-based compensation 1,077,319 1,165,151 Common stock issued for professional and marketing services 350,224 - Amortization of right of use assets 23,320 - Change in fair value of contingent consideration ( 3,387,266 ) - Depreciation 26,302 - Amortization of intangibles 1,572,441 - Deferred tax adjustments ( 1,042,689 ) Excess value of common stock issued to settle liabilities - 265,591 Changes in operating assets and liabilities: Accounts receivable ( 5,646,523 ) - Contract assets ( 5,641,421 ) - Prepaid expenses and other current assets ( 282,650 ) ( 6,500 ) Other receivable, related party ( 9,431 ) - Due to / from related party 163,922 Accounts payable 3,882,906 48,343 Accounts payable, related party 5,645,743 144,000 Accrued expenses and other current liabilities 841,566 - Contract liabilities 84,806 - Deferred tax liability ( 65,662 ) - Operating lease liabilities, net ( 11,817 ) - Net cash used in operating activities ( 1,487,560 ) ( 1,653,959 ) Cash flows from investing activities: Cash and restricted cash acquired from business combinations 1,391,391 - Purchase of property, plant and equipment ( 40,399 ) - Software development capitalization ( 160,371 ) - Net cash provided by investing activities 1,190,621 - Cash flows from financing activities: Short-term advances, related party - 596,199 Repayment of loan ( 915 ) - Accounts receivable financing facility 331,432 - Proceeds from sale of common and preferred stock 1,834,970 1,164,995 Net cash provided by financing activities 2,165,487 1,761,194 Effect of exchange rate changes on cash and cash equivalents 132,551 - Net change in cash and cash equivalents 2,001,099 107,235 Cash and cash equivalents and restricted cash at beginning of year 107,475 240 Cash and cash equivalents and restricted cash at end of year $ 2,108,574 $ 107,475 Reconciliation of cash and restricted cash: Cash at beginning of year $ 107,475 $ 240 Restricted cash at beginning of year - - Cash and restricted cash at beginning of year $ 107,475 $ 240 Cash at end of year $ 2,087,400 $ 107,475 Restricted cash at end of year 21,174 - Cash and restricted cash at end of year $ 2,108,574 $ 107,475 Supplemental disclosure of cash flow information: Cash paid for income taxes $ - $ - Cash paid for interest $ 5,771 $ - Supplemental disclosure of non-cash operating activities: Issuances of common stock for consulting and marketing services - prepaid expense $ 4,427,500 $ - Supplemental disclosure of non-cash investing and financing activities: Purchase of intangible assets in exchange of issuance of common stock $ 19,710,000 $ - Dividend payable to former owner of 42 arising from measurement year adjustment to goodwill $ 690,870 $ - Contingent consideration liability recognized with business combination $ 38,225,750 $ - Issuance of common stock pursuant to business combination $ 12,880,000 $ - Common stock to be issued pursuant to business combination $ 3,407,250 $ - Settlement of related party liabilities $ 675,700 $ - Issuance of common stock in settlement of liabilities $ 10,000 $ 88,100 Deferred tax adjustment to goodwill $ 5,506,542 $ - The accompanying notes are an integral part of these audited consolidated financial statements. F-6 SPECTRAL CAPITAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – BUSINESS AND NATURE OF OPERATIONS Spectral Capital Corporation (the “Company” or “Spectral”) was incorporated on September 13, 2000 under the laws of the State of Nevada. The Company is focused on the identification, acquisition, development, and financing of technology with the potential to transform existing industries. Spectral has acquired significant stakes in two recently reactivated technology companies (Noot Holdings, Inc. (“Noot”) and Monitr Holdings, Inc.(“Monitr”)) as well as interests within telecommunications, data and switching services, specifically providing international long distance reselling services on a business-to-business (B2B) basis and a newly emergent business in the field of deploying Quantum Computing as a Service (“QAAS”) technologies as well as supporting start-ups in that field with shared technological, marketing and other resources. Spectral’s business model is built on four synergistic pillars: (1) the development of a robust intellectual property portfolio—including patents and trade secrets—at the intersection of artificial intelligence and hybrid classical computing; (2) monetization of that IP through licensing agreements that include both cash payments and equity in licensee companies; (3) creation of high-impact software tools derived from Spectral’s core IP that are modular, cost-efficient, and capable of producing significant risk-adjusted returns; and (4) acquisition and transformation of smaller technology companies through the strategic application of Spectral’s proprietary technology. In 2025, the Company formally rescinded certain transactions involving former Chairman Sean Michael Brehm and related entities. These rescissions preserved Spectral’s independently developed intellectual property, clarified ownership of over 100 provisional patents, and returned in excess of $100 million in share-based consideration to shareholders, thereby restoring strategic focus and corporate governance alignment. Acquisition of 42 Telecom Ltd. 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 “Escrow Shares”). The acquisition included the following wholly owned subsidiaries of 42 Telecom: • 42 Telecom AB Ltd. (Sweden) • 42 Telecom UK Ltd. (United Kingdom) • Arcus Technologies Ltd. (Malta) 42 Telecom provides international telecommunications and messaging solutions. Its activities include SMS aggregation, enterprise messaging, OTT messaging (including Viber traffic), access to proprietary SS7 and messaging platforms, and subscription-based communication solutions. Through Arcus Technologies Ltd., 42 Telecom also offers platform-as-a-service solutions tailored for the tourism sector. 42 Telecom serves a global customer base consisting primarily of mobile network operators and enterprises. F-7 Acquisition of Telvantis Voice Services. Inc. 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. At the time of the acquisition, Telvantis was considered a related party of the Company, as Telvantis is 75% owned by Mexedia SpA, an entity that is a related party of Spectral through the common directorship of Mr. Orlando Taddeo, who served as director of 42 Telecom (a wholly owned Spectral subsidiary) and retained a controlling ownership interest in Mexedia SpA through Heritage Ventures Ltd. through December 31, 2025. 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 financial year 2026 performance milestones (the “Earn-Out Shares”) (i) Earn-Out Shares shall be earned at a rate of 1,000,000 shares for each $1,000,000 of annualized net operating profit (GAAP basis) above $1,500,000, up to a maximum of 8,500,000 shares; or alternatively, (ii) upon achievement of total annualized gross revenues of $665,000,000 with an equivalent or superior operating margin as compared to the Company's 2025 results. In addition, the aggregate value of all Spectral shares issued in connection with the acquisition must achieve a 30-day volume weighted average price ("VWAP") of at least $65,000,000 by December 29, 2026, failing which the Seller may elect to rescind the transaction or Spectral may, at its sole option, issue such additional shares as would be necessary to satisfy the minimum value threshold. The acquisition included the following wholly owned subsidiaries of Telvantis: · Phonetime, Inc. (U.S.) — A subsidiary providing international voice termination services · 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 to telecommunications businesses on a business-to-business basis, with a focus on high-quality, cost-effective international voice services. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Going Concern The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred recurring operating losses from operations since inception and has not yet generated consistent positive cash flows from operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that these financial statements are issued. As of December 31, 2025, the Company had cash and cash equivalents of $ 2,087,400 and an accumulated deficit of $( 33,415,041 ). Total current liabilities of $ 102,018,696 exceeded total current assets of $ 59,451,611 , resulting in a working capital deficit of $( 42,567,085 ). Included within current liabilities is $ 34,838,484 of contingent consideration arising from the acquisitions of 42 Telecom and Telvantis. Pursuant to the terms of the respective acquisition agreements, the contingent consideration obligations are expected to be settled through the issuance of shares of the Company's common stock upon achievement of specified performance conditions. Accordingly, the contingent consideration does not represent a cash funding requirement of the F-8 Company. Excluding contingent consideration, the working capital deficit was $( 7,728,601 ) as of December 31, 2025. The Company does not have any significant long-term debt maturities within the evaluation period and is not in breach of any financial covenants. For the year ended December 31, 2025, the Company generated total revenues of $ 21,839,868 , compared to $ 0 for the year ended December 31, 2024. The increase in revenue is attributable to the post-acquisition consolidation of 42 Telecom, which contributed telecommunications service revenue beginning August 1, 2025. Telvantis was acquired on December 31, 2025 and accordingly contributed no revenues to the consolidated results of operations and comprehensive income (loss) for the year ended December 31, 2025. The Company reported net income of $ 918,355 for the year ended December 31, 2025, which includes a non-cash gain of $ 3,387,266 from the change in fair value of contingent consideration. Excluding this non-cash item, the Company incurred a loss from operations of $( 2,468,911 ) for the year ended December 31, 2025. Net cash used in operating activities was $( 1,487,560 ) for the year ended December 31, 2025. Although management expects continued revenue generation from 42 Telecom and Telvantis, current cash and cash equivalents on hand may not be sufficient to fund operations. To date, the Company has funded operations primarily through the sale of equity securities and advances from related parties. The Company’s ability to continue as a going concern is dependent upon generating sufficient cash flows from operations, securing additional capital through the issuance of equity or debt, and ultimately achieving profitable operations. Management continues to explore financing options, including private placements and strategic investment arrangements, while moderating discretionary expenditures to preserve liquidity. In addition, 42 Telecom and Telvantis maintain a Master Participation Agreement with Fasanara Securitisation S.A. pursuant to which Fasanara provides funding against a specified percentage of trade receivables arising from telecommunications services, providing the Company with access to working capital liquidity against its receivables base. The Company intends to continue utilizing this arrangement to support near-term operating cash needs. There can be no assurance that such financing or operational success will be achieved on terms favorable to the Company, or at all. Accordingly, the accompanying audited consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Risks and Uncertainties The Company faces certain risks and uncertainties that could have a material impact on its operations, financial position, results of operations, and cash flows. These include, but are not limited to, the following: Limited operating history and profitability: The Company has a limited operating history in its current line of business and has not yet achieved profitability. Although the acquisition of 42 Telecom on August 1, 2025 introduced the Company’s initial revenue streams, the Company continues to depend on external financing to fund operations and there can be no assurance that it will achieve or attain profitability in the future. Integration and acquisition risks. The Company completed two significant acquisitions during 2025 — 42 Telecom, which closed on August 1, 2025 and contributed revenues during the year, and Telvantis, which closed on December 31, 2025 and accordingly its operations are not reflected in the consolidated statement of operations and comprehensive income (loss) for the year ended December 31, 2025. The successful integration of both acquired businesses involves significant operational, financial, and management challenges, including the coordination of personnel, technology platforms, customer relationships, and financial reporting processes across multiple jurisdictions. Failure to integrate these businesses effectively, or to realize the anticipated benefits F-9 of either acquisition, could adversely affect the Company’s financial condition, results of operations and cash flows. Market and economic conditions: The Company's business and financial performance are affected by general economic and business conditions in the United States and globally, including changes in inflation, interest rates, capital-market liquidity, and access to financing. Adverse macroeconomic trends or recessionary conditions could reduce demand for technology and telecommunications services and have a material adverse effect on the Company's results and cash flows. The United States and global markets are experiencing volatility and disruption following the geopolitical instability resulting from the ongoing Russia-Ukraine conflict and the Israel-Hamas conflict. In response to the ongoing Russia-Ukraine conflict, the North Atlantic Treaty Organization ("NATO") deployed additional military forces to eastern Europe, and the United States, the United Kingdom, the European Union and other countries have announced various sanctions and restrictive actions against Russia, Belarus and related individuals and entities, including the removal of certain financial institutions from the Society for Worldwide Interbank Financial Telecommunication payment system. Certain countries, including the United States, have also provided and may continue to provide military aid or other assistance to Ukraine and to Israel, increasing geopolitical tensions among a number of nations. The invasion of Ukraine by Russia and the Israel-Hamas conflict and the resulting measures that have been taken, and could be taken in the future, by NATO, the United States, the United Kingdom, the European Union, Israel and its neighboring states and other countries have created global security concerns that could have a lasting impact on regional and global economies. Although the length and impact of the ongoing conflicts are highly unpredictable, they could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions and increased cyberattacks against U.S. companies. Additionally, any resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets. Furthermore, changes to policy implemented by the U.S. Congress or the current or any future administration may impact, among other things, the U.S. and global economy, international trade relations, unemployment, immigration, healthcare, taxation, the U.S. regulatory environment, inflation and other areas. Any of the above mentioned factors, or any other negative impact on the global economy, capital markets or other geopolitical conditions resulting from the Russian invasion of Ukraine, the Israel-Hamas conflict and subsequent sanctions or related actions, could adversely affect the Company's operations or its future capital-raising activities. The Company has not been materially affected by these conflicts or related tariffs to date." Foreign exchange and geopolitical risks: The Company conducts a substantial portion of its operations internationally through 42 Telecom and its subsidiaries, whose functional currencies include the Euro, Swedish Krona, and British Pound. The Company is therefore exposed to foreign currency fluctuations that affect the translation of foreign-denominated revenues, expenses, assets, and liabilities into U.S. dollars. In addition, geopolitical instability, trade restrictions, sanctions, and regional conflicts in the markets in which the Company operates could disrupt operations, increase costs, or adversely affect reported financial results and cash flows. Technological change and competitive pressures: The Company operates in industries characterized by rapid technological innovation and evolving customer demands. Failure to anticipate or adapt to such changes could render the Company’s technologies or products less competitive or obsolete. The Company competes with organizations that possess significantly greater financial, technical, and marketing resources than the Company currently has. Operational and cybersecurity risks: The Company’s operations may be affected by supply-chain disruptions, cybersecurity threats, data-privacy and data-protection requirements across multiple F-10 jurisdictions, and other operational risks inherent in the telecommunications and technology industries. A cybersecurity incident, systems failure, or data breach could result in significant liability, regulatory penalties, reputational harm, and material disruption to the Company’s operations and customer relationships. Management continuously monitors these risk factors and may implement mitigation strategies, including management of foreign-currency exposures, diversification of its customer and supplier base, cost management initiatives, and pursuit of additional capital resources. However, the effects of these risks and uncertainties cannot be predicted with certainty, and actual results may differ materially from management’s expectations. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and the following subsidiaries from their respective date of acquisition: • Spectral Holdings, Inc. (wholly owned, from August 29, 2024); • Noot Holdings, Inc. (60% owned, from February 28, 2013); • Monitr Holdings, Inc. (60% owned, from December 1, 2013); • 42 Telecom and its wholly owned subsidiaries — 42 Telecom AB Ltd. (Sweden), 42 Telecom UK Ltd. (United Kingdom), and Arcus Technologies Ltd. (Malta) — each wholly owned by Spectral from August 1, 2025; and • Telvantis Voice Services, Inc. and its wholly owned subsidiaries — Phonetime, Inc. (U.S.) and Matchcom Telecommunications, Inc. (U.S.). All intercompany accounts and transactions have been eliminated in consolidation. Refer to Note 1 for further description of the Company’s acquisitions. In June 2025, the Company entered into a settlement agreement with former Chairman Sean Michael Brehm and affiliated entities to rescind all prior acquisitions and planned collaborations, including Node Nexus Network and related entities. Refer to Note 11 for further detail. Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the rules and regulation of the Securities and Exchange Commission (the “SEC”) for reporting on Form 10-K and are presented in US dollars. The accompanying consolidated financial statements reflect all adjustments that management considers necessary for a fair presentation of the results of operations for these periods. Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the F-11 asset or liability. The Company follows the three-level fair value hierarchy established under U.S. GAAP, which maximizes the use of observable inputs and minimizes the use of unobservable inputs: Level 1 Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 Include other inputs that are directly or indirectly observable in the marketplace. Level 3 Unobservable inputs which are supported by little or no market activity. The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, contract assets, accounts receivable- related party, prepaid expense and other current assts, other receivables, related party receivables and advances, accounts payable and accrued liabilities, contract liabilities, financing liabilities arising from the Company’s receivables participation arrangements, amounts due to related parties, and deferred tax liabilities recognized in connections with business combinations. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these consolidated financial statements. The Company’s operating lease liability and right-of-use asset are recorded based on the present value of future lease payments discounted at the rate implicit in the lease or the Company's incremental borrowing rate, in accordance with ASC (Accounting Standards Codification) 842, Leases. The Company measures certain assets and liabilities at fair value on a nonrecurring basis, including assets acquired and liabilities assumed in business combinations, and property, plant and equipment and intangible assets written down to fair value when held for sale or determined to be impaired. The contingent consideration liabilities recorded in connection with the acquisitions of 42 Telecom and Telvantis are classified as Level 3 liabilities under the fair value hierarchy. The fair value of these liabilities is determined using a Monte Carlo simulation incorporating a Black-Scholes framework and a discount for lack of marketability determined using a Black-Scholes put option model. See Note 3 — Business Combinations and Note 4 — Fair Value Measurements for further details. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures in financial statements and accompanying notes. Actual results could differ materially from those estimates. Areas requiring significant estimates and assumptions by the Company include, but are not limited to: • discount rate applied in determining right-of-use assets and operating lease liabilities; • allowances for income taxes, related valuation allowances, and uncertain tax positions; • recoverability of long-lived assets and their related estimated lives, including internally developed software and acquired intangible assets; • accruals for estimated liabilities; • evaluation of goodwill for impairment; • allowance for credit losses on accounts receivable and contract assets; • fair value of share-based compensation and equity issued for services and F-12 • fair value of assets acquired and liabilities assumed in business combinations, including the identification, valuation, and estimated useful lives of acquired intangible assets, and the fair value of contingent consideration. Segment Reporting The Company manages its operations as a single reportable segment — Telco Services — in accordance with ASC 280, Segment Reporting. The Company's Chief Executive Officer serves as the Chief Operating Decision Maker (“CODM”) and regularly reviews consolidated revenues, cost of revenue, gross profit, selling general and administrative expenses, and wages and benefits to evaluate performance and allocate resources. The measure of segment profit or loss regularly reviewed by the CODM is consolidated net loss. The Company identified two operating segments based on legal entity groupings — 42 Telecom and subsidiaries, and Telvantis and subsidiaries — and determined that both meet the aggregation criteria under ASC 280-10-50-11 based on similar nature of products and services, production processes, customer class, distribution methods, and regulatory environment, and are therefore presented as a single reportable segment. Spectral holds intellectual property assets and is developing AI infrastructure and IP monetization capabilities; these activities are at an early stage, do not currently generate revenue, and do not constitute a separately managed business with discrete financial information reviewed by the CODM and are accordingly treated as unallocated corporate overhead. See Note 9 - Segment and Geographic Information for further details, including significant segment expenses regularly provided to the CODM and geographic revenue information. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and highly liquid investments with original maturities of three months or less at the date of purchase, including certificates of deposit and money market funds that are readily convertible into known amounts of cash. The Company also maintains restricted cash representing collateral required in connection with its corporate credit card program. As of December 31, 2025 and 2024, the Company had restricted cash balances of $ 21,174 and $ 0 , respectively. Restricted cash is excluded from cash and cash equivalents and is presented separately on the consolidated balance sheets. Concentration of Credit Risks and Significant Customers and Suppliers Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company maintains its cash balances at financial institutions located in Malta, Sweden, the United Kingdom, and the United States. The balances located outside the United States are not insured by the Federal Deposit Insurance Corporation (“FDIC”) or equivalent government deposit protection schemes in the respective jurisdictions. The Company has not experienced any losses on its cash balances to date. For the year ended during ended December 31, 2025, two customers individually accounted for 10% or more of the Company’s consolidated revenues. One customer accounted for approximately 35.7% of consolidated revenues and another customer, a related party, accounted for approximately 33.0% of consolidated revenues. See Note 11 - Related Party Transactions for further details regarding the Company's transactions and balances with related party. 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 F-13 approximately 39.1% of consolidated cost of revenue. See Note 11 - Related Party Transactions for further details regarding the Company's transactions and balances with related party. The loss of either of these suppliers could have a material adverse effect on the Company's results of operations and financial condition. Accounts Receivable, net and Accounts Receivable, related party The Company’s accounts receivable consist primarily of amounts due from customers for telecommunications and messaging services provided by 42 Telecom. Receivables are recorded at the invoiced amount and do not bear interest. The Company maintains an allowance for credit losses based on management’s periodic assessment of factors including customer payment history, creditworthiness, aging of receivable balances, current economic conditions, and historical collection experience. Receivables determined to be uncollectible are written off against the allowance when collection efforts have been exhausted. As of December 31, 2025 and 2024, the allowance for credit losses was $ 2,469,251 and $ 0 , respectively. Accounts receivable, related party, represents amounts due from Mexedia and Mexedia SpA, a related party of the Company, arising from telecommunications and messaging services provided by 42 Telecom under bilateral messaging service agreements. These receivables are recorded at the invoiced amount on the same basis as third-party accounts receivable and are subject to the same credit loss assessment methodology described above. Receivables Financing Arrangements The Company, through 42 Telecom and Telvantis, maintains participation arrangements with a third-party financing provider under which funding is advanced against a specified percentage of eligible trade receivables. The Company retains responsibility for customer billing, collection, and servicing under these arrangements and maintains direct customer relationships. Management evaluated the substance of these arrangements under ASC 860, Transfers and Servicing, and concluded that they do not qualify for sale accounting, as the Company retains continuing involvement with the receivables and the receivables are not fully isolated from the Company and its creditors. Accordingly, the arrangements are accounted for as receivables financing. The underlying receivables remain recognized on the consolidated balance sheets until collected, and the associated financing obligations are classified within short-term borrowings. Interest and fees incurred under these arrangements are recognized as interest expense in the consolidated statements of operations and comprehensive income (loss). Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets primarily consist of advance payments for services and operational costs to be consumed within one-year, prepaid taxes and deposits related to the Company’s telecommunications and technology operations. Prepaid services representing common stock issued for future services are recorded at the fair value of the shares on the date of issuance and recognized ratably as expense over the contractual service period. As of December 31, 2025 and 2024, prepaid expenses and other current assets totaled $ 5,272,803 and $ 6,500 , respectively. The increase is primarily attributable to the consolidation of 42 Telecom and Telvantis following their respective acquisitions. Property, Plant and Equipment, Net Property, plant and equipment, net (“PP&E”) is stated at cost less accumulated depreciation and amortization and any accumulated impairment losses. Depreciation is computed using the straight-line method over the assets’ estimated useful lives. The estimated useful lives of PP&E are as follows: F-14 Office Equipment and tools – 3 - 5 years Computers – 3 - 5 years Furniture and Fittings – 8 - 10 years Leasehold improvements – Shorter of the estimate useful life or remaining lease term Major renewals and improvements are capitalized. Replacements, maintenance, and repairs, which do not significantly improve or extend the useful life of the assets, are expensed as incurred. Upon the disposal or retirement of an asset, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the consolidated statement of operations in the period of disposal. The Company reviews PP&E for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. No impairment losses were identified for the years ended December 31, 2025 and 2024. Intangible Assets, net The Company’s intangible assets primarily consist of (i) identifiable intangible assets acquired in connection with the acquisitions of 42 Telecom and Telvantis, including developed technology, customer relationships, and trade names and (ii) intellectual property assets acquired pursuant to an Asset Purchase Agreement dated October 15, 2025, consisting of a portfolio of patentable innovations and proprietary technologies including artificial intelligence operating systems, FPGA-based technologies, and cybersecurity technologies; All intangible assets are carried net of accumulated amortization and any accumulated impairment losses. Intangible Assets Acquired in Business Combinations Identifiable intangible assets acquired in the 42 Telecom and Telvantis business combinations were valued as of the respective acquisition dates in accordance with ASC 805, Business Combinations (“ASC 805”). These assets are amortized on a straight-line basis over their estimated useful lives as follows: Developed technology – 42 Telecom – 5 years Customer relationship – 42 Telecom – 7 years Trade name – 42 Telecom – 3 years Customer relationship – Telvantis – 8 years Trade name – Telvantis – 4 years The useful lives assigned to each asset class reflect entity-specific factors assessed as of the respective acquisition dates, including customer attrition rates, contract durations, and brand recognition, which differ between the two acquired businesses. Intellectual Property Asset Acquisition On October 15, 2025, the Company acquired a portfolio of intellectual property assets pursuant to an Asset Purchase Agreement. The acquired assets consist of patentable innovations and proprietary technologies, including artificial intelligence operating systems, FPGA-based technologies, and cybersecurity technologies. The transaction was evaluated under ASC 805 and determined not to constitute a business combination, as no workforce, customers, operational F-15 processes, or revenue-generating activities were transferred. Accordingly, the transaction was accounted for as an asset acquisition under ASC 805-50. The total purchase consideration consisted of 9,000,000 shares of Spectral common stock, measured at fair value based on the quoted market price of $2.19 per share on the acquisition date, resulting in total consideration of $ 19,710,000 . In accordance with ASC 805-50, no goodwill was recognized; the entire consideration was allocated to the acquired intangible assets. The acquired intellectual property is amortized on a straight-line basis over an estimated useful life of five years from the acquisition date. Capitalized Software Development 42 Telecom capitalizes certain costs incurred during the application development stage of internal-use software projects in accordance with ASC 350-40, Internal-Use Software. Capitalized costs include direct labor and related benefits for employees engaged in software development activities and qualifying third-party contractor fees. Costs incurred during the preliminary project and post-implementation stages, including training, maintenance, and data conversion, are expensed as incurred. Capitalized software costs are amortized on a straight-line basis over five years upon being placed into service. Amortization of software used directly in service delivery is classified within cost of revenue. As of December 31, 2025, the Company had $ 439,264 software projects classified as capital work-in-progress and $ 294,157 internally developed software placed into services classified as Intangible assets, net in the consolidated balance sheet. Impairment of Long-Lived Assets The Company reviews long-lived assets, including intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability is assessed by comparing the carrying amount to the sum of undiscounted future net cash flows expected to be generated by the asset or asset group. If the carrying amount exceeds the undiscounted cash flows, an impairment loss is recognized equal to the excess of the carrying amount over the asset’s fair value, generally determined using estimated discounted future cash flows. No impairment indicators were identified for the years ended December 31, 2025 or 2024. Business Combinations The Company accounts for business combinations using the acquisition method of accounting in accordance with ASC 805. Under the acquisition method, the Company recognizes the identifiable assets acquired and liabilities assumed at their fair values as of the acquisition date. The excess of the consideration transferred over the net acquisition-date fair values of the assets acquired and liabilities assumed is recognized as goodwill. Consideration transferred in a business combination may include cash, equity instruments, and contingent consideration. Equity instruments issued as consideration are measured at acquisition-date fair value, adjusted where appropriate to reflect transfer restrictions and other factors affecting marketability. Contingent consideration is recognized at acquisition-date fair value and classified as either a liability or equity based on the terms of the arrangement. Contingent consideration classified as a liability is remeasured to fair value at each reporting date, with changes recognized in the consolidated statements of operations and comprehensive loss. During the measurement period, which may not exceed 12 months from the acquisition date, fair values of assets acquired and liabilities assumed may be adjusted with corresponding offsets to goodwill as additional information becomes available. After the measurement period closes, F-16 adjustments are recognized in the consolidated statements of operations and comprehensive loss. Acquisition-related costs are expensed as incurred. Goodwill Goodwill represents the excess of the consideration transferred over the estimated fair value of the net identifiable assets acquired in a business combination. In accordance with ASC 350, Intangibles — Goodwill and Other, goodwill is not amortized but is tested for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable. Goodwill is tested at the reporting unit level. The Company may first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Qualitative factors considered include macroeconomic conditions, industry and market trends, cost factors, discount rates, competitive dynamics, and the financial performance of the reporting unit. If the qualitative assessment indicates that impairment is more likely than not, a quantitative test is required. The Company may also elect to bypass the qualitative assessment and proceed directly to the quantitative test in any given period. Under the quantitative test, the estimated fair value of the reporting unit is compared to its carrying value including goodwill. If the carrying value exceeds the fair value, a goodwill impairment charge equal to the excess is recognized, not to exceed the total goodwill allocated to that reporting unit. Goodwill recognized in connection with the acquisitions of 42 Telecom and Telvantis represents the residual consideration after allocation to identifiable net assets and is preliminary and subject to change upon completion of the respective purchase price allocations. No goodwill impairment indicators were identified for the year ended December 31, 2025. Contingent Consideration The Company records contingent consideration at its estimated acquisition-date fair value as part of the total consideration transferred in a business combination in accordance with ASC 805. Contingent consideration is classified as either a liability or equity based on the terms of the arrangement. Contingent consideration classified as a liability is remeasured to fair value at each reporting date, with changes recognized in the consolidated statements of operations and comprehensive loss. Upon settlement, the liability is relieved with a corresponding increase to common stock and additional paid-in capital. The fair value of contingent consideration is estimated using a Monte Carlo simulation incorporating projected financial performance metrics, simulated share prices, equity volatility, and a discount for lack of marketability determined using a Black-Scholes put option model. Because the valuation relies on significant unobservable inputs, contingent consideration is classified as Level 3 within the fair value hierarchy. Revenue Recognition The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, using the five-step model: (i) identify the contract with a customer, (ii) identify performance obligations, (iii) determine the transaction price, (iv) allocate the transaction price to performance obligations, and (v) recognize revenue when or as performance obligations are satisfied. The Company generates revenue through the following streams, all of which were generated by 42 Telecom and its subsidiaries for the year ended December 31, 2025: · Messaging Services – includes SMS aggregation, enterprise messaging, and instant messaging (Viber). Revenue from these services is recognized at a point in time when each F-17 message or lookup is successfully processed and transmitted. Messaging services represented the substantial majority of the Company’s revenues. · Platform Services – includes SS7 platform access, managed services, staff leasing arrangement, and the tourism platform-as-a-service. Revenue from these services is recognized over time, as customers receive and consume the benefits of continuous access or managed service delivery. The Company generally acts as principal in its arrangements, as it controls the services before transfer, bears responsibility for performance, and has discretion in pricing. Customer contracts are typically short-term in nature, invoiced monthly based on actual usage or subscription terms, with no significant financing components. The following table presents the disaggregated revenue for the years ended December 31, 2025 and 2024: Year Ended December 31, 2025 2024 Messaging Services, at a point in time $ 21,609,822 $ - Platform Leasing, over time 230,046 - $ 21,839,868 $ - Contract Assets Contract assets represent amounts recognized as revenue for performance obligations satisfied under customer contracts where the Company’s right to payment is not yet unconditional, primarily consisting of accrued income on December 2025 messaging traffic where services were delivered point-in-time during the month but invoices are issued following month-end volume reconciliation with counterparties, at which point the balance reclassifies to accounts receivable. As of December 31, 2025 and 2024, contract assets were $ 6,474,163 , of which $2,633,806 is with a related party and $ 0 , respectively. Contract Liabilities Contract liabilities, historically referred to as deferred revenue, represent amounts billed or collected from customers in advance of satisfying performance obligations under customer contracts. These balances are presented within current liabilities in the consolidated balance sheets, based on the expected timing of revenue recognition. Contract liabilities are recognized as revenue when the related performance obligations are fulfilled. As of December 31, 2025 and 2024, contract liabilities were $ 335,309 and $ 0 , respectively. Cost of Revenue Cost of revenue consists of direct expenses incurred in providing telecommunication and platform services and is recognized in the period in which the related revenues are earned. Cost of revenue includes accruals for third-party service providers, purchases of services from both local and non-EU vendors, and charges for telecommunication services inside and outside the EU, including data, voice, and connectivity costs. It also includes wholesale carrier and traffic fees, consultancy and technical service costs directly tied to service delivery, commissions and referral fees related to customer acquisition or usage. Additionally, platform or PaaS licensing fees and other directly attributable costs necessary to fulfill service obligations, such as internally generated software amortization used in service infrastructure, are included. These costs are recorded when incurred and matched to the related revenue in accordance with U.S. GAAP expense recognition principles. F-18 Selling, General and Administrative Expense Selling, general and administrative expenses represent the routine costs of operating the Company. They primarily consist of rent and facilities, marketing and travel, professional and administrative services, insurance and compliance costs, finance and bank charges, and other general operating expenses. Depreciation and Amortization Depreciation and amortization expenses are related to the Company’s property and equipment and intangible assets. Depreciation and amortization is recognized on a straight-line basis over the estimated useful life of the respective assets. Wages and Benefits Expense Wages and benefit expenses include gross wages and salaries, bonuses, performance-related pay, casual wages, training expenses, staff welfare and wellness costs, employer social insurance contributions, pensions, insurance costs, education, maternity contributions and other staff-related costs. These are recorded in accordance with the Company’s payroll policies and applicable labor, pension and social security regulations in each jurisdiction in which the Company operates. Employee Benefits Pursuant to Malta regulations, contributions to pension schemes are voluntary. The Company provides pension contributions to team management members. Pension contributions are expensed as incurred. For the years ended December 31, 2025 and 2024, pension plan contributions totaled $ 3,711 and $ 0 , respectively. Research and Development The Company’s research and development activities are primarily focused on the design, testing, and enhancement of proprietary artificial intelligence, quantum computing, and communications technologies, as well as on software platform development initiatives. Research and development expenses include personnel costs, contractor and consulting fees, materials and supplies, and other direct expenditures incurred in the development of new technologies, products, and enhancements to existing systems. Expenditures for research activities and costs associated with the preliminary project stage of software development are expensed as incurred in accordance with ASC 730, Research and Development. Stock-Based Compensation The Company accounts for stock-based compensation in accordance with ASC 718, Compensation — Stock Compensation, which requires all share-based payments to employees, directors, and non-employees to be recognized in the consolidated financial statements based on their grant-date fair values. Compensation cost for awards with service conditions is recognized on a straight-line basis over the requisite service period. For equity instruments issued to non-employees in exchange for services, compensation cost is measured at the grant-date fair value of the equity instruments issued. The Company accounts for forfeitures as they occur; accordingly, compensation expense is recognized only for awards that ultimately vest. The fair value of stock options is estimated using the Black-Scholes option pricing model, which requires management to make assumptions regarding expected term, stock price volatility, risk-free interest rate, and dividend yield. Changes in these assumptions can materially affect the estimated fair value of awards. F-19 Comprehensive Income (Loss) Comprehensive income (loss) includes net income (loss) as well as other changes in shareholders’ equity resulting from transactions and economic events other than those with shareholders. In addition to net income (loss), comprehensive income (loss) encompasses other comprehensive income (loss) items that are excluded from net income under U.S. GAAP. For the Company, the only component of other comprehensive income (loss) for the year ended December 31, 2025 relates to foreign currency translation adjustments arising from the consolidation of 42 Telecom, whose functional currencies (EUR, SEK, and GBP) differ from the Company’s reporting currency (USD). These translation adjustments are recorded in Other Comprehensive Income (Loss) and accumulated in stockholders’ equity (deficit) under Accumulated Other Comprehensive Income (Loss). No other components of other comprehensive income (loss) were recognized for the year ended December 31, 2025. Foreign Currency Transactions The Company’s reporting currency is the U.S. dollar. Each consolidated entity determines its functional currency based on the primary economic environment in which it operates. The functional currencies of the Company’s foreign subsidiaries are as follows: • 42 Telecom (Parent): Euro (EUR) • 42 Telecom AB Ltd (Sweden): Swedish Krona (SEK) • 42 Telecom UK Ltd: British Pound (GBP) • Arcus Technologies Ltd: Euro (EUR) For consolidation purposes, assets and liabilities of subsidiaries with functional currencies other than U.S. dollar are translated at exchange rates prevailing at the balance sheet date. Revenues and expenses are translated at average exchange rates for the reporting period. Equity accounts, other than retained earnings, are translated at historical exchange rates. The resulting translation adjustments are recorded in Other Comprehensive Income (Loss) and accumulated in stockholders’ equity under Accumulated Other Comprehensive Income (loss). Transactions denominated in currencies other than the functional currency are remeasured into the functional currency at the exchange rate on the transaction date. Monetary assets and liabilities denominated in foreign currencies are remeasured at period-end exchange rates, and non-monetary assets and liabilities are carried at historical exchange rates. Resulting foreign exchange gains and losses are recognized within other income (expense), net in the consolidated statements of operations and comprehensive income (loss). The exchange rates used in the preparation of the consolidated financial statements are as follows: • For the year ended December 31, 2025, closing rate 1.1763 US: 1 EURO, 0.1088US:1퐸푈푅푂,0.1088푈푆: 1 SEK, and 1.3491 US: 1 GBP. • For the year ended December 31, 2025, average rate 1.1596 US: 1 EURO, 0.1055US::1퐸푈푅푂,0.1055푈푆 1 SEK, 1.3361 US: 1 GBP. For the years ended December 31, 2025 and 2024, the Company recorded foreign currency translation adjustments of $ 132,551 and $ 0 , respectively, which are included in other comprehensive income (loss). F-20 Leases The Company accounts for leases under ASC 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right of use asset result in straight-line rent expense over the lease term. For finance leases, interest on the lease liability and the amortization of the right of use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred. In calculating the right of use asset and lease liability, the Company has elected not to combine lease and non-lease components. The Company excludes short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election, and recognizes rent expense on a straight-line basis over the lease term. Earnings Per Share (EPS) Basic net income (loss) per share attributable to common stockholders is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, adjusted for the dilutive effect of potentially dilutive securities using the treasury stock method. Potentially dilutive securities include stock options, warrants, convertible instruments, and contingently issuable shares. In periods of net loss, all potentially dilutive securities are excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive. For the year ended December 31, 2025, the Company had 3,646,875 stock options outstanding with a weighted-average exercise price of $0.43 per share, which were dilutive as the Company reported net income for the period. The dilutive effect was computed using the treasury stock method based on the weighted-average market price of the Company's common stock of $2.31 per share during the year ended December 31, 2025. For the year ended December 31, 2024, all 3,646,875 stock options outstanding were excluded from the computation of diluted net loss per share as their inclusion would have been anti-dilutive. Non-Controlling Interests Noncontrolling interests represent the equity interests in consolidated subsidiaries that are not attributable to the Company. The Company consolidates Noot Holdings, Inc. and Monitr Holdings, Inc., in each of which the Company holds a 60% controlling interest, with the remaining 40% held by noncontrolling interest holders. Noncontrolling interests are presented as a separate component of stockholders’ equity in the consolidated balance sheets. Net income or loss attributable to noncontrolling interests is presented separately in the consolidated statements of operations and comprehensive loss. The following table sets forth the changes in non-controlling interest for the year ended December 31, 2025 and 2024: F-21 Non-Controlling Interests Balance at December 31, 2024 $ ( 221,886 ) Net loss attributable to non-controlling interest - Balance at December 31, 2025 $ ( 221,886 ) Balance at December 31, 2023 $ ( 221,886 ) Net loss attributable to non-controlling interest - Balance at December 31, 2024 $ ( 221,886 ) Noot Holdings, Inc. and Monitr Holdings, Inc. had no operations during the years ended December 31, 2025 and 2024, and accordingly no net income or loss was attributable to noncontrolling interests during either year. Income Tax The Company accounts for income taxes in accordance with ASC 740, Income Taxes, using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities, as well as for net operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the consolidated statements of operations and comprehensive loss in the period in which the change is enacted. The Company records a valuation allowance against deferred tax assets to the extent it is more likely than not that some or all of the deferred tax assets will not be realized, based on all available positive and negative evidence, including historical operating results, projected future taxable income, and the expected timing of reversals of existing temporary differences. The Company recognizes and measures uncertain tax positions using a two-step process in accordance with ASC 740-10. In the first step, the Company evaluates whether a tax position is more likely than not to be sustained upon examination by the relevant taxing authority. In the second step, for positions that meet the recognition threshold, the Company measures the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. The Company recognizes interest and penalties related to uncertain tax positions within the income tax provision in the consolidated statements of operations and comprehensive loss. The Company operates across multiple tax jurisdictions, including the United States, Malta, Sweden, and the United Kingdom. The calculation of the Company’s tax provision involves significant judgment in the application of complex tax regulations across these jurisdictions. The Company’s income tax returns are subject to examination by the Internal Revenue Service and other domestic and foreign tax authorities. Recent Accounting Pronouncements Recently Adopted Standards ASU 2023-09 — Income Taxes (Topic 740): Improvements to Income Tax Disclosures: In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires public business entities to disclose, on an annual basis, a rate reconciliation presented in both dollar amounts and percentages, with specific categories and F-22 further disaggregation of those categories based on a quantitative threshold equal to 5% or more of the amount determined by multiplying pre-tax income (loss) by the applicable statutory rate. The ASU also requires disclosure of income taxes paid disaggregated by federal, state, and foreign jurisdictions. The Company adopted ASU 2023-09 effective January 1, 2025 on a prospective basis. The adoption had a financial statement disclosure impact only and did not have a material impact on the Company’s consolidated financial statements. Recently Issued Standards Not Yet Adopted ASU 2024-03 — Disaggregation of Income Statement Expenses: In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The ASU requires public business entities to disclose specified information about certain costs and expenses included in expense line items presented on the face of the income statement. The guidance is effective for annual reporting periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of ASU 2024-03 on its consolidated financial statements and related disclosures. ASU 2025-05 — Measurement of Credit Losses for Accounts Receivable and Contract Assets: In July 2025, the FASB issued ASU 2025-05, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The ASU provides a practical expedient permitting entities to assume that conditions at the balance sheet date remain unchanged over the life of current accounts receivable and current contract assets when estimating expected credit losses. The guidance is effective for annual and interim reporting periods beginning after December 15, 2025, with early adoption permitted. The Company does not expect ASU 2025-05 to have a material impact on its consolidated financial statements. ASU 2025-06 — Targeted Improvements to the Accounting for Internal-Use Software: In September 2025, the FASB issued ASU 2025-06, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The ASU requires entities to begin capitalizing software development costs when management has authorized and committed to funding the project and it is probable the project will be completed and the software will be used to perform its intended function. The amendments are effective for annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of ASU 2025-06 and will assess the impact upon adoption. NOTE 3 – BUSINESS COMBINATIONS The Company evaluated the acquisitions of 42 Telecom and Telvantis under ASC 805 and ASU 2017-01, Business Combinations (Topic 805) which clarifies the definition of a business for purposes of applying the acquisition method. Both acquisitions were determined to constitute business combinations. Under the acquisition method, the identifiable assets acquired and liabilities assumed are recognized at their fair values as of the respective acquisition dates. Goodwill recognized in connection with each acquisition represents the excess of consideration transferred over the fair value of net identifiable assets acquired and reflects the expected synergies, assembled workforce, and other economic benefits anticipated from each transaction that do not qualify for separate recognition as identifiable intangible assets. F-23 Acquisition of 42 Telecom Ltd. On July 15, 2025, the Company entered into a Share Exchange Agreement with Heritage Ventures Ltd. (“Heritage”) and 42 Telecom, pursuant to which Heritage transferred 100% of the issued and outstanding shares to Spectral in exchange for shares of the Company’s common stock. The acquisition closed on August 1, 2025, and the results of operations of 42 Telecom and its subsidiaries — 42 Telecom AB Ltd. (Sweden), 42 Telecom UK Ltd. (United Kingdom), and Arcus Technologies Ltd. (Malta) — have been consolidated from that date. The total purchase price consideration was $ 20,000,000 , consisting of the following: Common stock issued $ 12,880,000 (1) Contingent consideration 7,120,000 (2) Purchase price consideration $ 20,000,000 (1) Represents the fair value of 8,000,000 shares of the Company's common stock issued to Heritage Ventures Ltd. at closing on August 1, 2025. The shares had a marketable value of $18,400,000 based on the closing market price of $2.30 per share on the acquisition date. The fair value was adjusted to $12,880,000 to reflect a 30% discount for lack of marketability, using a Black-Scholes put option model, reflecting the 12-month lock-up period and subsequent 10-month trickle-out release restrictions applicable to the shares under the Exchange Agreement. (2) Represents the acquisition-date fair value of contingent consideration consisting of two components. First, up to 1,000,000 bonus shares of the Company's common stock are issuable to Heritage Ventures Ltd. contingent upon 42 Telecom achieving a consolidated net profit threshold of $1,000,000 for the year ended December 31, 2025, with pro-rata releases of 1,000,000 shares for each $1,000,000 of net profit above the threshold. Second, up to 4,307,080 additional shares are issuable to satisfy a $30,000,000 minimum valuation guarantee measured 12 months from the closing date, with additional shares issued to the extent the aggregate 30-day VWAP of all shares issued in the transaction falls below the guaranteed amount. The acquisition-date fair value of each component was determined using a risk-neutral Monte Carlo simulation incorporating the Company's projected financial results, applicable volatility assumptions, and a 30% discount for lack of marketability determined using a Black-Scholes put option model, reflecting the lock-up and trickle-out release restrictions applicable to the shares. The aggregate acquisition-date fair value of both components was determined $7,120,000 using a risk-neutral Monte Carlo simulation of projected FCCN share prices, incorporating an equity volatility factor of 90% and applicable risk-free and corporate bond discount rates to reflect counterparty risk. The contingent consideration is classified as a liability and remeasured at fair value at each reporting date with changes in fair value recognized in the consolidated statements of operations. See Note 4 — Fair Value Measurements for the remeasured fair value as of December 31, 2025. The following table summarizes the provisional purchase price allocation to the identifiable assets acquired and liabilities assumed from the acquisition of 42 Telecom as of August 1, 2025: F-24 Total Cash and cash equivalents $ 276,229 Restricted cash 20,705 Accounts receivables, net 1,271,006 Contract assets 832,742 Prepaid expenses and other current assets 423,957 Property, plant and equipment, net 111,957 Capital work-in-progress 278,893 Intangible assets: Developed technology 5,800,000 Customer relationships 3,100,000 Tradename 600,000 Goodwill 12,519,695 Other receivable, related party 417,095 Right of use asset 191,127 Accounts payable ( 1,289,041 ) Accrued expenses and other current liabilities ( 741,002 ) Contract liabilities ( 250,503 ) Operating lease liability ( 179,624 ) Loan payable ( 915 ) Deferred tax liability on identified intangible assets ( 3,268,425 ) Deferred tax liability on pre existing temporary differences ( 113,896 ) Purchase price consideration $ 20,000,000 Goodwill of $ 12,519,695 presented in the purchase price allocation table above represents $ 9,251,270 pertaining to the excess of consideration transferred over the fair value of net identifiable assets acquired as of August 1, 2025, and a $ 3,268,425 increase pursuant to ASC 805-740-25-8 for the recognition of a deferred tax liability on identifiable intangible assets, as further described below. Total goodwill recognized in the consolidated balance sheet is $ 13,210,565 , reflecting the measurement period adjustment of $ 690,870 described below. The goodwill reflects the expected synergies from 42 Telecom's telecommunications operations, the going-concern value of the assembled workforce, and future economic benefits arising from assets that do not qualify for separate recognition at the acquisition date. Deferred Tax Adjustment Pursuant to ASC 805-740-25-8, the deferred tax liability of $ 3,268,425 presented in the purchase price allocation table above represents the temporary difference between the fair values assigned to identifiable intangible assets — developed technology $ 5,800,000 , customer relationships $ 3,100,000 , and trade name $ 600,000 , totaling $ 9,500,000 — and their respective tax bases of $0, as the acquisition was structured as an equity acquisition for income tax purposes and no step-up in tax basis was obtained. A corresponding increase to goodwill of $ 3,268,425 was recorded. Measurement Period Adjustment During the measurement period, the Board of Directors of 42 Telecom resolved on October 31, 2025 to distribute a dividend of EUR 600,600, ($ 690,870 ) to Heritage representing 42 Telecom’s retained earnings for the year ended December 31, 2024. The Company determined that the purchase price allocation included assets attributable to pre-acquisition profits that were not intended to transfer to the Company. Accordingly, the purchase price allocation was adjusted pursuant to ASC 805-10-25-13 to exclude such assets from net identifiable assets acquired, resulting in an increase to goodwill from $12,519,695 to $ 13,210,565 . The goodwill adjustment of $690,870 was recorded at the acquisition-date EUR/USD exchange rate. The adjustment had no effect on the consolidated statements of operations and comprehensive income (loss) or accumulated deficit. As of December 31, 2025, the dividend of EUR 600,600 remains unpaid and F-25 is reflected in due to related party in the consolidated balance sheet Note 11 — Related Party Transactions. The results of 42 Telecom have been included in the consolidated financial statements since the date of its acquisitions i.e. August 1, 2025. 42 Telecom’s revenue and net income included in the consolidated financial statements since the acquisition date were $ 21,839,868 and $ 1,211,954 , respectively. Acquisition of Telvantis Voice Services, Inc. On December 29, 2025, the Company entered into a Stock Purchase Agreement to acquire 100% of the issued and outstanding shares of Telvantis. The acquisition closed on December 31, 2025. Telvantis and its subsidiaries — Phonetime, Inc. (U.S.) and Matchcom Telecommunications, Inc. (U.S.) — were consolidated as of December 31, 2025 and contributed no revenues or expenses to the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2025. The total purchase price consideration was $ 34,513,000 , consisting of the following: Common stock issued $ 3,407,250 (1) Contingent consideration 31,105,750 (2) Purchase price consideration $ 34,513,000 (1) Represents the fair value of 1,500,000 shares of the Company's common stock issuable to the sellers at closing. As the shares had not been formally issued as of December 31, 2025, the obligation is reflected as common stock to be issued within stockholders' equity in the consolidated balance sheet. The shares had a marketable value of $6,195,000 based on the closing market price of $4.13 per share on the acquisition date. The fair value was adjusted to $3,407,250 to reflect a 45% discount for lack of marketability, determined by an independent valuation specialist using a Black-Scholes put option model, reflecting the 12-month lock-up period and subsequent 30-month trickle-out release restrictions applicable to the shares. (2) Represents the acquisition-date fair value of contingent consideration consisting of two components. First, up to 8,500,000 earn-out shares of the Company's common stock are issuable to the sellers contingent upon Telvantis achieving specified performance thresholds for the year ending December 31, 2026: (i) 1,000,000 earn-out shares for each $1,000,000 of annualized net operating profit above $1,500,000, up to a maximum of 8,500,000 shares upon achievement of $10,000,000 of net operating profit; or alternatively, (ii) the equivalent number of shares upon achievement of total annualized gross revenues of $665,000,000 with an equivalent or superior operating margin as compared to 2025 results. Second, additional shares are issuable to the extent the aggregate 30-day VWAP of all shares issued in the transaction falls below a $65,000,000 minimum share value measured as of December 31, 2026, with Spectral having the option to satisfy the shortfall through issuance of additional shares or other consideration. The acquisition-date fair value of each component was determined using a risk-neutral Monte Carlo simulation incorporating correlated gross revenue and operating profit projections, a gross revenue volatility factor of 25%, an operating profit volatility factor of 65%, an 80% correlation between gross revenue and operating profit., and a 45% discount for lack of marketability determined using a Black-Scholes put option model, reflecting the 12-month lock-up period and subsequent 30-month trickle-out release restrictions applicable to the shares. The aggregate acquisition-date fair value of both components was $31,105,750. The contingent consideration is classified as a liability and remeasured at fair value at each F-26 reporting date with changes in fair value recognized in the consolidated statements of operations. See Note 4 — Fair Value Measurements for the remeasured fair value as of December 31, 2025. The following table summarizes the provisional purchase price allocation to the identifiable assets acquired and liabilities assumed from the acquisition of Telvantis Voice Services, Inc. as of December 31, 2025: Total Cash and cash equivalents $ 1,094,457 Accounts receivables, net 37,333,769 Due from related party 1,357,768 Prepaid expenses and other current assets 482,420 Deferred tax assets 41,607 Intangible assets: Customer relationships 10,700,000 Tradename 3,100,000 Goodwill 35,486,899 Accounts payable ( 32,402,097 ) Accrued expenses and other current liabilities ( 824,625 ) Accounts receivable financing facility ( 12,342,163 ) Deferred tax liability on identified intangible assets ( 2,238,117 ) Due to related party ( 7,276,918 ) Purchase price consideration $ 34,513,000 Goodwill of $ 35,486,899 represents $ 33,248,782 the excess of consideration transferred over the fair value of net identifiable assets acquired as of December 31, 2025, and a $ 2,238,117 increase pursuant to ASC 805-740-25-8 for the recognition of a deferred tax liability on identifiable intangible assets as further described below. The goodwill reflects the expected synergies from combining Telvantis’ voice termination and telecommunications services with Spectral's platform, the going-concern value of the assembled workforce, and future economic benefits arising from assets that do not qualify for separate recognition at the acquisition date. The purchase price allocation as of December 31, 2025 is subject to adjustment within the 12-month measurement period ending December 31, 2026. Deferred Tax Adjustment Pursuant to ASC 805-740-25-8, the deferred tax liability of $ 2,238,117 presented in the purchase price allocation table above represents the temporary difference between the fair values assigned to identifiable intangible assets — customer relationships $ 10,700,000 and trade name $ 3,100,000 , totaling $ 13,800,000 — and their respective tax bases of $0, as the acquisition was structured as an equity acquisition for income tax purposes and no step-up in tax basis was obtained. A corresponding increase to goodwill of $ 2,238,117 was recorded in the consolidated balance sheet. Neither the 42 Telecom nor the Telvantis acquisition was structured as an asset acquisition for income tax purposes; accordingly, goodwill recognized in connection with each acquisition is not deductible for income tax purposes. F-27 Pro Forma Financial Information (unaudited) The following unaudited pro forma financial information presents the combined results of operations of the Company as if the acquisitions of 42 Telecom and Telvantis had occurred on January 1, 2024. The pro forma financial information includes adjustments for amortization of acquired intangible assets based on their fair values and useful lives as determined in the purchase price allocations. The pro forma financial information is presented for informational purposes only and is not necessarily indicative of what the actual results of operations would have been had the acquisitions occurred at the beginning of the periods presented, nor is it intended to project the future results of operations of the combined company. Year Ended December 31, 2025 2024 Net revenues $ 259,800,594 $ 48,273,959 Net loss $ ( 8,186,604 ) $ ( 3,297,967 ) Net loss per common share $ ( 0.10 ) $ ( 0.05 ) NOTE 4 – FAIR VALUE MEASUREMENTS The following table presents the Company’s liabilities measured at fair value on a recurring basis as of December 31, 2025 and 2024, classified within the fair value hierarchy: Fair Value Measurements Level 1 Level 2 Level 3 Total December 31, 2025 Liabilities: Contingent consideration - 42 Telecom Ltd. $ - $ - $ 3,732,734 $ 3,732,734 Contingent consideration - Telvantis Voice Services, Inc. $ - $ - $ 31,105,750 $ 31,105,750 Total liabilities $ - $ - $ 34,838,484 $ 34,838,484 December 31, 2024 Total liabilities $ - $ - $ - $ - The Company had no assets measured at fair value on a recurring basis as of December 31, 2025 or 2024. The contingent consideration liabilities are classified as Level 3 within the fair value hierarchy as their valuation requires significant unobservable inputs. There were no transfers between levels during the year ended December 31, 2025. The fair value of the 42 Telecom contingent consideration was remeasured at December 31, 2025 using a risk-neutral Monte Carlo simulation of projected FCCN share prices, consistent with the methodology applied at the acquisition date. Key inputs to the remeasurement included an updated FCCN stock price of $4.13, updated risk-free rates, and a remaining term of approximately 7 months to the guarantee measurement date of July 31, 2026 and a probability of achieving the bonus share trigger of 100%, based on 42 Telecom’s full year 2025 net income of exceeded the $1,000,000 threshold. The net change in fair value of the contingent consideration for the year ended December 31, 2025 resulted in a gain of $ 3,387,266 , recognized within other income (expense) in the consolidated statements of operations and comprehensive Income (loss). The decrease in fair value reflects the net effect of the increased stock price offset by the reduction in the remaining lock-up period and updated discount for lack of marketability. The Telvantis contingent consideration was initially recognized at its acquisition-date fair value of $31,105,750 on December 31, 2025. As the acquisition closed on December 31, 2025, no remeasurement was required during the year ended December 31, 2025. F-28 The following table presents changes in fair value of contingent consideration measured at fair value for the years ended December 31, 2025 and 2024: Contingent Consideration Balance, December 31, 2023 $ - Purchase price consideration - Change in fair value - Balance, December 31, 2024 - Purchase price consideration - 42 Telecom Ltd. 7,120,000 Purchase price consideration - Telvantis Voice Services, Inc. 31,105,750 Change in fair value ( 3,387,266 ) Balance, December 31, 2025 $ 34,838,484 NOTE 5 – PREPAID AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consisted of the following: December 31, 2025 2024 Prepaid consulting and marketing services $ 4,336,250 $ - Deposits 37,642 - VAT and taxes 39,667 - Prepaid expenses 216,959 - Settlement receivable 172,564 - Other receivable 469,721 Prepaid and other current assets $ 5,272,803 $ - Prepaid consulting and marketing services represents the unamortized portion of equity consideration paid to Data Center Constructors LLC and Finplays LLC under consulting and marketing service agreements, amortized straight-line over the respective service periods. Settlement receivables represent amounts held in dedicated collection accounts under the Fasanara receivables financing arrangements that have been remitted by customers but not yet contractually settled against the outstanding facility balances. See Note 13 — Accounts Receivable Financing Facility and Note 14 — Equity Transactions for further details. NOTE 6- PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment consist of the following: December 31, 2025 2024 Office equipment $ 4,313 $ - Computers 114,946 - Furniture and fixtures 26,176 - Leasehold improvements 7,373 - 152,807 - Less: Accumulated depreciation ( 26,753 ) - Property, plant and equipment, net $ 126,054 $ - For the years ended December 31, 2025 and 2024, depreciation expense was $ 26,753 and $ 0 , respectively. F-29 NOTE 7 – INTANGIBLE ASSETS Intangible assets consist of the following: December 31, 2025 2024 Developed technology $ 5,479,102 Internally developed software 320,898 $ - Customer relationships 13,800,000 Tradenames 3,700,000 - Acquired intellectual property 19,710,000 - 43,010,000 - Less: Accumulated amortization ( 1,572,441 ) - Intangible assets, net $ 41,437,559 $ - Intangible assets of $ 5,479,102 , $ 3,100,000 , and $ 600,000 represent developed technology, customer relationships, and trade name, respectively, identified and measured at fair value pursuant to the acquisition of 42 Telecom completed on August 1, 2025 (see note 3). Internally developed software of $ 320,898 represents capitalized software development costs recognized at 42 Telecom and measured at fair value as of the acquisition date. Intangible assets of $ 10,700,000 and $ 3,100,000 represent customer relationships and trade name, respectively, identified and measured at fair value pursuant to the acquisition of Telvantis completed on December 31, 2025 (see note 3). As the acquisition closed on the last day of the fiscal year, no amortization was recorded during the year ended December 31, 2025. Amortization will be recognized on a straight-line basis over estimated useful lives of 8 years for customer relationships and 4 years for trade name, commencing January 1, 2026. On October 15, 2025, the Company completed an asset acquisition pursuant to which it acquired certain artificial intelligence operating systems, FPGA-based technologies, and cybersecurity technologies in exchange for 9,000,000 shares of the Company’s common stock. The transaction was determined to be an asset acquisition rather than a business combination. Accordingly, no goodwill was recognized and the total consideration of $ 19,710,000 , representing the fair value of 9,000,000 shares at $2.19 per share, was allocated entirely to the acquired intangible assets. Amortization is recognized on a straight-line basis over an estimated useful life of 5 years. No impairment charges were recognized during the years ended December 31, 2025 or 2024. The following table presents the estimated future amortization expense for intangible assets as of December 31, 2025: Year Ended December 31, 2025 2026 $ 7,857,357 2027 7,857,357 2028 7,774,024 2029 7,657,357 2030 5,577,774 Thereafter 4,713,689 $ 41,437,559 F-30 NOTE 8 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consist of the following: December 31, 2025 2024 Accrued cost of revenue $ 823,405 $ - VAT and taxes payable 1,256,608 - Other 327,181 - Accrued expenses and other current liabilities $ 2,407,194 $ - NOTE 9 – SEGMENT AND GEOGRAPHIC INFORMATION The Company manages its operations as a single reportable segment — Telco Services — in accordance with ASC 280, Segment Reporting. The Company's Chief Executive Officer serves as the CODM and regularly reviews consolidated revenues, cost of revenue, gross profit, selling general and administrative expenses, and wages and benefits to evaluate performance and allocate resources to the Telco Services segment. The measure of segment profit or loss regularly reviewed by the CODM is consolidated net loss. The Company identified two operating segments based on legal entity groupings — 42 Telecom and subsidiaries, and Telvantis and subsidiaries — and determined that both meet the aggregation criteria under ASC 280-10-50-11 based on similar nature of products and services, production processes, customer class, distribution methods, and regulatory environment, and are therefore presented as a single reportable segment. Telvantis and its subsidiaries were consolidated as of December 31, 2025 and contributed no revenues or expenses to the consolidated statements of operations and comprehensive loss for the year ended December 31, 2025. F-31 The following table presents significant segment expenses regularly provided to the CODM and used to assess segment performance for the years ended December 31, 2025 and 2024: Year Ended December 31, 2025 2024 Revenue $ 14,551,774 $ - Revenue, related party 7,288,094 - Total revenues 21,839,868 - Cost of revenue 11,652,662 - Cost of revenue, related party 7,303,516 Gross profit 2,883,690 - Operating expenses: Selling, general and administrative 3,187,054 2,115,924 Wages and benefits 1,026,034 144,000 Depreciation and amortization 1,598,742 Research and development - 745,024 Total operating expenses 5,811,830 3,004,948 Loss from operations ( 2,928,140 ) ( 3,004,948 ) Other income (expense): Interest expense, net ( 5,573 ) - Extinguishment of debt - ( 265,596 ) Change in FV of contingent consideration 3,387,266 Other expense ( 32,693 ) - Total other income (expense) 3,349,000 ( 265,596 ) Income (loss) before income taxes 420,860 ( 3,270,544 ) Income taxes ( 497,495 ) - Net income (loss) $ 918,355 $ ( 3,270,544 ) Geographic Information For the year ended December 31, 2025 and 2024, revenues attributable to operations by geography were as follows: Year Ended December 31, 2025 2024 Malta 21,256,026 Sweden 583,842 $ 21,839,868 $ - For the year ended December 31, 2025, approximately 97% of total consolidated revenues were attributable to operations in Malta, with the remaining 3% attributable to Sweden. Telvantis and its subsidiaries were consolidated as of December 31, 2025 and contributed no revenues to the consolidated statements of operations and comprehensive income (loss) for the year ended December 31, 2025. There were no revenues during the year ended December 31, 2024. Substantially all of the Company’s property, plant and equipment is held by 42 Telecom and its subsidiaries in Europe. The following table presents property, plant and equipment, net by geographic location as of December 31, 2025 and 2024. F-32 Year Ended December 31, 2025 2024 Malta 118,886 - Sweden 7,168 - $ 126,054 $ - The Company’s intangible assets are held across multiple jurisdictions — business combination intangibles recognized in connection with the acquisition of 42 Telecom are held in Europe, business combination intangibles recognized in connection with the acquisition of Telvantis are held in the United States, and the acquired IP intangible assets are held by the Spectral in the United States. The following table presents Intangibles, net by geographic location as of December 31, 2025 and 2024. Year Ended December 31, 2025 2024 Europe 8,748,810 - United States 32,688,749 - $ 41,437,559 $ - NOTE 10 – LEASE OBLIGATIONS In connection with the acquisition of 42 Telecom on August 1, 2025, the Company assumed an operating lease for office l premises located on the third and fourth floors of Hyundai Block, Valley Road, Msida, Malta. The lease commenced upon handover on July 24, 2023 and has a contractual term of five years, of which the first two years are non-cancellable and the remaining three years may be terminated by the Company with two months’ notice. Annual base rent is €60,000 plus VAT, payable quarterly in advance. Lease costs are included in the consolidated statements of operations as selling, general and administrative expenses. The following is the summary of operating lease assets and liabilities: December 31, 2025 2024 Operating Leases Right-of-use assets $ 167,807 $ - Operating lease liability, current portion 65,156 - Operating lease liability, net of current portion 102,651 - Total lease liabilities $ 167,807 $ - Weighted Average Remaining Lease Term (in years) 2.5 Weighted Average Discount Rate 4 % The operating lease costs totaled $ 28,927 and $ 0 , for the years ended December 31, 2025 and 2024, respectively. F-33 The following is the summary of future minimum payments as of: December 31, 2026 $ 70,579 2027 70,579 2028 35,289 Total lease payments 176,447 Less : imputed interest ( 8,640 ) Total $ 167,807 NOTE 11 – RELATED PARTY TRANSACTIONS 42 Telecom Acquisition On July 15, 2025, the Company entered into a Definitive Share Exchange Agreement (the “Agreement”) with Heritage, an Irish corporation, and 42 Telecom, a Maltese corporation. Pursuant to the Agreement, the Company acquired 100% of the outstanding capital stock of 42 Telecom in exchange for 8,000,000 shares of the Company’s common stock, plus 8,000,000 escrow shares subject to performance-based and valuation-adjustment provisions (see Note 3 – Business Combinations). Under the terms of the Agreement, each Heritage holder’s beneficial ownership of the Company’s outstanding common stock is expressly limited to 4.9% or less at all times. This ownership limitation is intended to prevent any holder from being deemed an “affiliate” under SEC Rule 144 and to ensure that no post-closing shareholder obtains control or significant influence over the Company’s management or policies. At the time the Agreement was executed and the transaction consummated, neither Heritage nor 42 Telecom was a related party to the Company as defined in ASC 850-10-20 and PCAOB AS 2410.02-.03, since no common ownership, control, or significant influence existed. The transaction was negotiated and completed on an arm’s-length basis and approved by the independent members of the Company’s Board of Directors. Accordingly, management has concluded that the share exchange does not constitute a related-party transaction for purposes of ASC 850-10-50 or Regulation S-X § 4-08(k). The acquisition accounted for as a business combination under ASC 805, with the identifiable assets acquired and liabilities assumed recognized at their estimated fair values as of the closing date. The Company’s post-acquisition financial statements includes the results of 42 Telecom beginning on the date of acquisition. See Note 3 for further detail. Transaction with Mexedia SpA 42 Telecom is party to bilateral messaging service agreements with Mexedia SpA, an Italian telecommunications company, under which either party may act as a customer or vendor depending on destination-specific routing economics. The Company has determined that Mexedia SpA was a related party of the Company for the period August 1 through December 31, 2025. Mr. Orlando Taddeo served as the sole director of 42 Telecom throughout the post-acquisition period while simultaneously serving as Chief Executive Officer and Director of Mexedia SpA through October 2025 and retaining a controlling ownership interest in Mexedia SpA through Heritage through December 31, 2025. F-34 For the period August 1 through December 31, 2025, revenues recognized from Mexedia SpA were $7,288,094 and cost of revenues incurred from Mexedia SpA as a termination services vendor were $7,303,516, each presented on a gross basis as 42 Telecom acts as principal under ASC 606. Transactions between 42 Telecom and Mexedia SpA are conducted pursuant to bilateral messaging service agreements on a destination-specific routing basis and are priced based on market rates for telecommunications termination services. At December 31, 2025, accounts receivable from Mexedia SpA of $11,709,931 and contract assets of $2,633,806 representing December 2025 messaging services billed to Mexedia SpA in January 2026 are reflected in accounts receivable, related party and contract assets, respectively, in the consolidated balance sheets. Accounts payable to Mexedia SpA of $9,260,754 are reflected in accounts payable, related party in the consolidated balance sheets. Daniel Gilcher served as Chief Financial Officer and Director of Mexedia SpA throughout the year ended December 31, 2025 and held no executive role at the Company during that period. Mr. Gilcher received 400,000 shares of Spectral common stock in connection with the 42 Telecom acquisition and 175,000 shares in connection with the Telvantis acquisition from the respective sellers and did not constitute compensation for services rendered to the Company. He was appointed Chief Financial Officer of the Company effective January 3, 2026. Transaction With Former Shareholder of 42 Telecom Heritage is the 100% owner of 42 Telecom prior to its acquisition by the Company on August 1, 2025. The beneficial owner of Heritage is Mr. Orlando Taddeo. Heritage is considered a related party of the Company through Mr. Taddeo’s continued service as sole director of 42 Telecom through December 31, 2025. The beneficial owner of Heritage, Mr. Orlando Taddeo, bought 42 Telecom (through Heritage) in September 2023. At the time, Mexedia SpA verbally promised a share option incentive scheme to staff if 42 Telecom reached an EBITDA of €1.2 million in 2024. Further, payments were made due to the 2024 performance of 42 Telecom, but it was not something that was included in employee agreements. Employees had regular payments that were made and accrued for within the 2024 results, but this payment was separate from those. It was only in July, 2025 that agreements were distributed and signed by employees, and those agreements were provided by Heritage. It was determined that 42 Telecom acted solely as a paying agent in the transaction whereby Heritage will pay cash bonuses to 42 Telecom’s employees. The transaction is deemed payable in the third quarter of 2025, when the final determination was made. Heritage, as the primary obligor will record the P&L impact on its books and 42 Telecom will record the pass-through transaction. Accordingly, during the year ended December 31, 2025, the Company distributed €1.3 million to the employee and related tax payable by employees depending on their tax band. Heritage, the former sole shareholder of 42 Telecom and an entity controlled by Mr. Orlando Taddeo, provided management services to 42 Telecom. Management fee invoices of EUR 102,000 were issued by Heritage to 42 Telecom for services in the first half of 2025 and subsequently reversed in full by credit note on June 30, 2025, resulting in no net management fee expense recognized during the year ended December 31, 2025. During the year ended December 31, 2025, cash payments totaling approximately $180,000 (EUR 153,000) were made to Heritage in settlement of management fees accrued in prior periods. At December 31, 2025, approximately $100,000 (EUR 85,000) remained payable to Heritage in respect of prior period management fees and is included in accounts payable, related party in the consolidated balance sheets. F-35 A dividend of EUR 600,600 in respect of 42 Telecom’s retained earnings for the year ended December 31, 2024 was declared on October 31, 2025, payable to Heritage as the former 100% shareholder of 42 Telecom. The dividend remained unpaid at December 31, 2025 and is reflected as a liability of $706,492, due to related party in the consolidated balance sheets. See Note 3 — Business Combinations for further details. 42 Telecom - Other receivable As part of the acquisition of 42 Telecom on August 1, 2025, the Company acquired a receivable from Nexora Holdings Ltd. (“Nexora”) amounting to €362,597 (approximately $ 417,095 ). Nexora is an entity controlled by Mr. Orlando Taddeo and is therefore considered a related party under ASC 850. The receivable originated from an Intellectual Property Transfer Agreement dated July 1, 2025, between 42 Telecom and Nexora. Under this agreement, 42 Telecom transferred certain proprietary software and related IP to Nexora in exchange for consideration of €362,597. The payment is subject to a five-year moratorium, during which no cash settlement is required unless Nexora generates profits directly from the transferred IP, in which case partial or full payment becomes due earlier. The receivable was recognized as part of the purchase-price allocation in connection with the 42 Telecom acquisition and remains outstanding as of December 31, 2025, with a carrying amount of US $426,526. The change in U.S. dollar equivalent from the acquisition date is solely due to foreign currency translation adjustments. Management continues to monitor the balance for collectability. No additional transactions occurred with Nexora Holdings Ltd. during the period. The Company concluded that the IP sale did not constitute a discontinued operation as per ASC 205. Chief Executive Officer Compensation Jenifer Osterwalder, the Company’s Chief Executive Officer, charges the Company $12,000 per month beginning January 1, 2021 for services rendered. Total amounts expended in the Company’s condensed consolidated financial statements in connection with the CEO’s services was $ 144,000 for the both years ended December 31, 2025 and 2024, respectively. As of December 31, 2025 and 2024, amounts due to the CEO related to accrued salaries were $ 576,000 and $ 432,000 respectively. During the year ended December 31, 2024, the Company issued 68,311 shares of common stock in satisfaction of $6,150 in advances previously made by the Chief Executive Officer on behalf of the Company, resulting in a loss on extinguishment of $501. Loans from Related Parties On February 5, 2025, the Company entered into a loan agreement with B Holdings OU, which is associated with the beneficial owner of DecusPro, Mr. Boriss Aleksandrov, a shareholder of the Company. During the year ended December 31, 2025, the Company received total of proceeds of $ 204,590 under this agreement and repaid the full amount during the same year. The loan bore interest at 10% per annum repayable on demand and matured in 12 months. As of December 31, 2025, no balance was outstanding under this agreement. In June 2025, the Company entered into a loan agreement with SKY PLL OU, a shareholder of the Company, whereby the Company may borrow up to a total principal amount of $500,000. During the year ended December 31, 2025, the Company received a total of $ 10,000 under this agreement. The loan bears no interest and matures on December 31, 2025. As of December 31, 2025, the total amount due under this agreement was $ 10,000 . The Company is currently in extension discussions regarding payment term. F-36 On June 2, 2025, the Company entered into a promissory note with Mr. Michael Turner, a member of the Board of Directors, for a principal amount of $ 10,000 . The note bears interest at 5% per annum, unless repaid in full within 60 days of issuance, in which case no interest is due. The principal and any accrued interest are payable on demand. As of December 31, 2025, the total amount due under this note was $ 10,000 . Telvantis Voice Services, Inc. — Assumed Related Party Balances In connection with the acquisition of Telvantis, on December 31, 2025 the Company assumed certain pre-existing related party balances. As of December 31, 2025, amounts due to related parties of $7,276,918 are included in current liabilities in the consolidated balance sheets, representing loans payable to Mexedia, $7,276,918. Mexedia SpA is a related party of the Company as described above. The loans were incurred in the ordinary course of Telvantis's pre-acquisition operations. Additionally, as of December 31, 2025, amounts due from related parties of $1,357,768 are included in current assets, representing $1,299,468 owed by Telvantis Inc. (the seller), and $58,300 owed by Mexedia SpA. These balances are expected to be settled in the ordinary course of business. Transactions with Former Chairman and Affiliates During the years ended December 31, 2025 and 2024, the Company received $ 125,000 and $ 550,700 , respectively, in total demand advances from the former Chairman of the Board of Directors, Sean Michael Brehm. These advances are documented under a promissory note dated November 14, 2024 (“Note”). The Note provides for up to $2,500,000 in advances under the Note by Mr. Brehm to Spectral. The Note must be repaid by the Company, including accrued interest at 4% APR at the end of five years. The Note balance may be applied to the exercise of Mr. Brehm’s options to acquire common stock in the Company at any time while the Note is outstanding. In June 2025, the Company entered into a settlement agreement with Sean Brehm and affiliated entities to rescind all prior agreements and no longer owes Mr. Brehm compensation for the demand advances. As a result of the settlement, the total outstanding balance of $ 675,700 was relieved and recorded to additional paid-in capital. As of December 31, 2025 and 2024, amounts due under the note totaled $ 0 and $ 550,700 , respectively. Sean Michael Brehm, the Company’s former Chairman and a member of the Board of Directors, is also the sole shareholder of Node Nexus Network Co. LLC (“NNN”), which the Company had acquired in exchange for 1,000,000 shares of newly designated Series Quantum Preferred Stock effective August 29, 2024; see Note 14. In connection with the acquisition, Sean Michael Brehm also purchased 5,050,000 of the Company’s common shares at $0.20 per share for a total purchase price of $ 1,010,000 . Due to the related party and common control nature of this transaction, the acquisition was accounted for at the carrying value of the acquired net assets of NNN. Assets acquired consisted of approximately $ 4,955 in cash. The pre-acquisition financial results of NNN were not significant. Due to the rescission below, the initial transaction was recorded at par value. Prior to the close of the acquisition, the Company paid approximately $ 145,000 to NNN for development services. Subsequently, on November 13, 2024, the transaction was rescinded. The 1,000,000 Series Quantum Preferred Shares that were issued have been assigned to a new Delaware corporation, controlled by Sean Michael Brehm, which was assigned the intellectual property previously owned by NNN. The new entity was recently established and had no operations. F-37 The Company entered into a settlement agreement with Sean Brehm and affiliated entities to rescind all prior acquisitions and planned collaborations involving Node Nexus Network, Vogon Cloud, Quantomo, and Crwdunit. Under the agreement, Spectral retains ownership of 104 patent filings developed during the course of the collaboration. Brehm and his affiliates will pursue independent commercial development of the technology associated with Node Nexus Network, Vogon Cloud, Quantomo, and Crwdunit in a separate private vehicle. All shares previously issued to Brehm and his affiliates have been returned and cancelled except for the private placement shares of 5,050,000 purchased by Brehm which were fully paid for. As of December 31, 2025, these entities did not have any assets or liabilities as to be reflected as discontinued operations. Additionally, the Company intends to continue the development of its intellectual property and software development on its own and does not require any resources, assets or inputs from any of the above entities or individuals to continue the development of its technologies. Governance Changes Effective May 30, 2025, five members of the Board of Directors—Sean Brehm, Sam Lee, Aby Alexander, Chad Lemming, and Paul Breitenbach—resigned. On the same date, the Board appointed Michael Turner and Jeffrey Chong as new directors. Subsequently, Gottfried Werner and Olga Nezerenko were appointed to the board on November 19, 2025 and December 27, 2025 respectively. These changes are part of the Company’s broader governance overhaul in preparation for a potential Nasdaq uplisting. NOTE 12 – DEBT On April 21, 2025, the Company entered into a short-term loan agreement with a third-party lender for a total principal amount of $ 10,000 . The loan bears no interest and matures on October 21, 2025. On October 29, 2025, the Company issued 10,000 shares of its common stock at $1.00 per share in full settlement of the outstanding loan balance pursuant to a Subscription Agreement. As of December 31, 2025, no balance was outstanding under this agreement. NOTE 13 – ACCOUNTS RECEIVABLE FINANCING FACILITY Fasanara Participation Arrangement — 42 Telecom Ltd 42 Telecom, a wholly owned subsidiary of the Company, is party to a Master Participation Agreement dated February 20, 2025 with Fasanara Securitisation S.A. (“Fasanara”), pursuant to which Fasanara provides funding against a specified percentage of trade receivables arising from telecommunications services. 42 Telecom retains servicing responsibilities, maintains direct customer relationships, and retains a portion of the credit risk associated with the receivables. The arrangements are undisclosed, meaning customers are not notified of Fasanara’s participation. Accordingly, the participation arrangements do not meet the criteria for sale accounting under ASC 860, Transfers and Servicing of Financial Assets, and are accounted for as receivables financing. The outstanding funded amount $ 331,432 recognized as current liabilities in the consolidated balance sheets. Customer payments are remitted to a bank account maintained at Goldman Sachs used exclusively for customer collections under the arrangement. Because the Company does not control or have withdrawal rights over this account, amounts held therein do not meet the definition of cash or cash equivalents or restricted cash under ASC 305, Cash and Cash Equivalents and are classified within other current assets as a settlement receivable. Accounts receivable are reduced upon customer remittance as the customer’s obligation is extinguished at that time. The Fasanara financing liability is not reduced until customer collections are contractually settled or applied against the outstanding balance. F-38 Fasanara Participation Arrangement — Telvantis Voice Services, Inc. In connection with the acquisition of Telvantis on December 31, 2025, the Company assumed a pre-existing receivables financing facility with Fasanara with an outstanding balance of $ 12,342,163 , recognized at carrying value. There was no post-acquisition activity under this facility during the year ended December 31, 2025. NOTE 14 – STOCKHOLDERS’ EQUITY (DEFICIT) Preferred Stock On August 30, 2024, the Company filed a Certificate of Designation for the newly designated Series Quantum Preferred Stock. The number of Series Quantum Preferred Stock designated is 2,000,000 . The Series Quantum Preferred Stock contains a liquidation preference over common shareholders equal to 40 times the amount per share to be distributed to the common shareholders. The Series Quantum Preferred Stock is convertible at the option of the Company or the holder into 40 shares of the Company’s common stock, contingent upon the Company having enough authorized shares to effectuate the conversion. In addition, the conversion right shall not become exercisable by the holder until 12 months have elapsed from the date of issuance of the Series Quantum Preferred Stock. The holders of the Series Quantum Preferred Stock have the right to vote on an as-converted-to-common basis, such that one share of Series Quantum Preferred Stock has 40 votes. On August 29, 2024, the Company issued 1,000,000 shares of Series Quantum Preferred Stock to Sean Michael Brehm in connection with the acquisition of NNN. The acquisition was subsequently rescinded and the transaction was recorded at par value. In connection with the settlement agreement entered into in June 2025, all 1,000,000 shares of Series Quantum Preferred Stock were returned and cancelled. See Note 11 for further details. As of December 31, 2025 and 2024, the Company had 0 and 1,000,000 shares of Series Quantum Preferred Stock outstanding, respectively. Restated Share Transfer Agreement On May 30, 2025, the Company executed a Restated Share Transfer Agreement with Intrepid View Partners, LP, under which Spectral acquired 1,698,890 common shares of a global autonomous vehicle company (the “WAV Company”) for an aggregate purchase price of $16,988,900, which will be paid via the issuance of 1,698,890 restricted shares of Spectral’s common stock. The WAV Company shares are subject to a 12-month delivery restriction, and both the WAV Company shares and the Spectral shares issued as consideration are subject to a three-year lock-up period. Delivery is contingent upon satisfaction of certain regulatory and procedural requirements, which may involve delays. The Seller makes no representations regarding the financial condition or value of the WAV Company, and the transaction is structured as an “as-is” investment. Both parties have agreed to customary representations, warranties, and mutual indemnification provisions. As of December 31, 2025, the transaction was not yet finalized and as a result, there has been no accounting recognition associated with the Restated Share Transfer Agreement. F-39 Private Placements In June 2025, the Company commenced an additional private placement offering for up to 3,333,333 shares of the Company’s common stock at a price of $1.00 - $1.49 per share, or an aggregate of $3,333,333. During the year ended December 31, 2025, the Company issued 1,494,700 shares of common stock for total proceeds of $ 1,834,970 under this offering . On April 22, 2024, the Board of Directors approved a Private Placement Offering pursuant to Rule 506(b) of the Securities Act of 1933, as amended (the “Securities Act”) for up to 15,000,000 restricted shares of the Company’s common stock at a price of $0.01 per share, or an aggregate of $150,000. The offering commenced on April 22, 2024 and ended on June 3, 2024. During the year ended December 31, 2024, the Company has received $ 150,040 in proceeds from this offering. In June 2024, the Company commenced an additional offering looking to raise up to $1,000,000 at a price of $0.20 per shares. As of December 31, 2024, total proceeds of $ 1,010,000 had been received from this offering. As further discussed in Note 11, this offering was consummated with a related party in connection with the acquisition of NNN. Business Combinations On August 1, 2025, the Company issued 8,000,000 shares of common stock in connection with the acquisition of 42 Telecom Ltd., recorded at a fair value of $ 12,880,000 . See Note 3 — Business Combinations for further details. On December 31, 2025, in connection with the acquisition of Telvantis Voice Services, Inc., the Company became obligated to issue 1,500,000 shares of common stock to the former shareholders, recorded at a fair value of $3,407,250. As the shares had not been formally issued as of December 31, 2025, the obligation is reflected as common stock to be issued within stockholders' equity in the consolidated balance sheets. See Note 3 — Business Combinations for further details. In January 2026, the Company issued 1,000,000 shares of common stock to the former shareholders of Telvantis Voice Services, Inc. Settlement of Advances On May 25, 2025, the Company entered into a settlement agreement with Sean Brehm and affiliated entities to rescind all prior agreements. Pursuant to the agreement, the Company no longer owes Mr. Brehm compensation for outstanding demand advances totaling $ 675,500 . See Note 11 for additional discussion. On October 29, 2025, the Company issued 10,000 shares of its common stock at $1.00 per share in full settlement of a $10,000 outstanding loan balance due to Quantum Investment Fund 1 LLC. See Note 12— Debt for further details. During the year ended December 31, 2024, the Company issued 3,563,043 shares of common stock in satisfaction of $81,950 in advances. On the date of the agreement, the fair market value of the common stock per the Company’s closing stock price was $347,040 resulting in an extinguishment of debt of $265,090 . Asset Acquisitions On October 15, 2025, the Company issued 9,000,000 shares of its common stock at a fair value of $2.19 per share, based on the closing market price on the acquisition date, as consideration for the acquisition of certain intellectual property assets from Eliznikcomp OÜ, an Estonian corporation, for total consideration of $19,710,000. See Note 7 — Intangible Assets for further discussion. F-40 Stock for Services On October 28, 2025, the Company entered into a twelve-month consulting agreement with Data Center Constructors LLC (“DCC”) for strategic advisory, partnership development, and government relations services. As consideration, the Company issued 50,000 shares of common stock at a fair value of $2.15 per share, valued $107,500 and $200,000 had been paid in cash as of December 31, 2025. Total consideration paid through December 31, 2025 was $ 307,500 . On December 3, 2025, the Company entered into a marketing services agreement with Finplays LLC (“Finplays”) for investor awareness and public relations services through December 31, 2026. As consideration, the Company issued 2,000,000 restricted shares of common stock at a fair value of $2.16 per share, valued $4,320,000 and agreed to fund a $100,000 cash marketing budget, for total consideration of $ 4,420,000 . The restricted shares are subject to a six-month resale restriction from the date of issuance. On April 26, 2024, we entered into a consulting contract with Scandere OU (Estonia) (“Scandere”). Scandere has the same management and been contracted on behalf of Sky Data PPL and has experience in the telecommunications industry. Scandere will provide us with management services, CDR processing, fraud management, reporting and analytics and credit and finance management to facilitate our reentry into telecommunication reselling operations. The contract shall remain in force until the completion of the services or the earlier termination of the agreement. As payment for its services, Scandere receives 2,000,000 restricted shares of the Company’s common stock, valued at $ 194,800 based upon the closing price of the Company’s common stock on the date of the agreement. Employee Options The Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation – Stock Compensation which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The Company has adopted a stock option and award plan to attract, retain and motivate its directors, officers, employees, consultants and advisors. Options provide the opportunity to acquire a proprietary interest in the Company and to benefit from its growth. Vesting terms and conditions are determined by the Board of Directors at the time of the grant. The Plan provides for the issuance of up to 15,000,000 common shares for employees, consultants, directors, and advisors. During the year ended December 31, 2024, the Company issued options to purchase 6,810,000 shares of common stock at prices ranging from $ 0.43 to $ 0.61 per share. The Company used the following variables to determine the fair value of the options: Closing stock prices ranging from $ 0.50 - $ 0.72 ; expected lives ranging from 6.0 to 7.0 years; volatility of 203.49 %; risk free rate of 3.5 % and no dividend yield. The total grant date fair value was $ 3,345,600 . During the years ended December 31, 2025 and 2024, $ 1,077,319 and $ 1,165,151 was expensed to selling, general and administrative, respectively. As of December 31, 2025, total unrecognized compensation expense from stock options was $ 367,500 and is expected to be expensed over 0.5 year. In May 2025, five members of the Board of Directors resigned which resulted in the forfeiture of 3,163,125 options and approximately $ 930,000 in total unrecognized compensation expense. F-41 The following is a summary of stock option activity for the years ended December 31, 2025 and 2024: Weighted Weighted Stock Average Average Life Options Exercise Price Remaining Outstanding, December 31, 2023 - - - Issued 6,810,000 0.43 10 Exercised - - - Forfeited/Expired - - - Outstanding, December 31, 2024 6,810,000 0.43 9.45 Issued - - - Exercised - - - Forfeited/Expired ( 3,163,125 ) 0.43 8.95 Outstanding, December 31, 2025 3,646,875 $ 0.43 8.45 Vested, December 31, 2025 2,746,875 $ 0.43 8.45 NOTE 15 – COMMITMENTS AND CONTINGENCIES Lease Refer to Note 10 for the Company’s lease obligation. In addition, Company leases virtual office space on a month-to-month basis in Seattle, Washington. Litigation From time to time, the Company and its subsidiaries may become involved in various lawsuits and legal proceedings arising in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company's business. Tellza, Inc. v. Telvantis Voice Services Inc. f/k/a Mexedia Inc. (Broward County, Florida; Case No. Cace-25-017748). On January 1, 2023, Telvantis Voice Services Inc. ("Telvantis"), now a wholly owned subsidiary of the Company, entered into a stock purchase agreement with Tellza, Inc. to acquire Tellza's ownership interest in Phonetime, Inc. and Matchcom Telecommunications, Inc. as part of a $3,000,000 purchase price. Telvantis was required to pay $250,000 on January 1, 2024 and did not make this payment. Tellza filed suit to recover the $250,000. Telvantis filed a motion to dismiss, and the parties subsequently entered into an Agreed Order. Based on the facts as presently known, the Company is unable to determine the likelihood of an unfavorable outcome; however, a loss contingency in the range of zero to $250,000 is reasonably possible. No accrual has been recorded as of December 31, 2025 as the loss is not considered probable. The Company acquired Telvantis effective December 31, 2025. 42 Telecom Ltd. v. Symplify Technologies AB (Malta; Case No. 937/2025). 42 Telecom Limited ("FortyTwo"), a wholly owned subsidiary of the Company, instituted legal proceedings in the Civil Court, First Hall, of the Republic of Malta against Symplify Technologies AB, a Swedish corporation, for recovery of €443,118.70 (approximately $478,000) in unpaid invoices for telecommunications services. The case was filed September 15, 2025. Subsequent to year-end, on March 26, 2026, the Court entered judgment in favor of FortyTwo for the full amount of €443,118.70 plus legal interest and costs. The defendant did not appear or contest the proceedings. The judgment is now subject to collection. The Company has not recorded a receivable for the judgment amount as collectability has not yet been assessed. F-42 Arcus Technologies Ltd. Arcus Technologies Limited, an indirect subsidiary of the Company, entered into a settlement agreement with a customer relating to outstanding debt, with monthly payments. The matter has been resolved by agreement. There was also a claim made by a third-party entity regarding former Chairman Sean Michael Brehm and Node Nexus Network. The Company believes there is no basis for this claim and that the Company has no legal exposure on this claim because an indemnity has been provided by Mr. Brehm. Acquisitions On September 10, 2024, the Company entered into an Acquisition Agreement to exchange shares with Quantomo OU., an Estonian corporation (“Quantomo”), whereby the Company agreed to acquire from Quantomo 100% of the Quantomo’s outstanding shares in exchange for 2,000,000 shares of the Company’s common stock and a one-time cash payment of $135,000 or (120,000 Euros) which was paid and expensed in 2024. The closing of the transaction was expected to occur by December 10, 2024, subject to the satisfaction of the certain closing conditions as defined within the agreement. As of December 31, 2025, the agreement was rescinded without an accounting impact on any period. On September 10, 2024, the Company entered into an Acquisition Agreement to exchange shares with Crowdpoint Technologies, Inc., a Texas corporation (“Crowdpoint”), a company controlled by Sean Michael Brehm, and its wholly owned subsidiary, Crwdunit Inc., a Delaware corporation (“Target”), whereby the Company agreed to acquire from Crowdpoint 100% of the Target’s outstanding shares in exchange for 3,750,000 shares of the Company’s common stock. The closing of the transaction was expected to occur by December 10, 2024, subject to the satisfaction of certain closing conditions as defined within the agreement. As of December 31, 2025, the agreement was rescinded without an accounting impact on the any period. 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. As of December 31, 2025 the agreement was rescinded without an accounting impact on the any period. On May 25, 2025, the Company entered into a settlement agreement with Sean Brehm and affiliated entities to rescind all prior agreements and no longer owes Mr. Brehm compensation for the demand advances. Investment in White Label Loyalty In May 2025, the Company entered into a non-binding term sheet to invest $15,000,000 in White Label Loyalty, a UK-based SaaS provider of enterprise-grade loyalty and customer engagement platforms. The investment was structured as a primary equity infusion to support White Label Loyalty’s product development and international expansion. The Company has elected to let the term sheet expire according to its terms and not to pursue this financing. F-43 NOTE 16 – INCOME TAX Provision for Income Taxes The provision (benefit) for income taxes consisted of the following: 2025 2024 Federal: - - Current - - Deferred $ ( 836,347 ) - State: - - Current - - Deferred - - Foreign — Malta LTD: - - Current $ 557,659 - Deferred ( 206,342 ) - Other subsidiaries — Telecom AB: - - Income tax expense $ ( 12,465 ) - - Total provision (benefit) for income taxes $ ( 497,495 ) - Income (Loss) Before Income Taxes Income (loss) before income taxes by jurisdiction: 2025 2024 Domestic (U.S.) $ ( 1,129,939 ) $ ( 3,270,544 ) Foreign 1,550,799 - Total $ 420,860 $ ( 3,270,544 ) Effective Tax Rate Reconciliation The following table reconciles the U.S. federal statutory income tax rate to the Company’s effective income tax rate. Amount Effective Rate Expected tax benefit at U.S. statutory rate (21%) $ 88,381 21.0 % State and local income taxes, net of federal benefit ( 142,378 ) ( 33.8 )% Foreign statutory rate differential $ 249,971 59.4 % Change in fair value of contingent consideration (a) ( 711,326 ) ( 169 )% Tax credits - - % Acquisitions and dispositions - - % Non-deductible expenses and permanent differences $ 107 Changes in valuation allowance: 17,751 4.2 % Total provision (benefit) for income taxes $ ( 497,495 ) ( 118.2 )% (a) Represents the tax effect of a $3,387,266 non-cash gain from the change in fair value of contingent consideration recognized in connection with the Company's business combinations. This item is not deductible for U.S. federal income tax purposes and represents a permanent difference. Deferred Tax Assets and Liabilities Significant components of deferred tax assets and liabilities as of December 31: F-44 2025 2024 Deferred Tax Assets: Net operating loss carryforwards — U.S. federal $ 1,173,630 $ - Stock-based compensation — U.S. 226,237 - Other - - Total deferred tax assets 1,399,867 Valuation allowance — U.S. ( 1,399,867 ) Net deferred tax assets - - 2025 2024 Deferred Tax Liabilities (net): Purchased intangibles — U.S. (42 Telecom / Telvantis), net $ ( 1,401,770 ) - Purchased intangibles — Foreign (Malta LTD) ( 3,110,317 ) - Deferred tax asset — Telvantis (b) 41,607 - Right-of-use assets and other — Foreign - Total deferred tax liabilities, net ( 4,470,480 ) Net deferred tax liability $ ( 4,470,480 ) $ (b) Represents a deferred tax asset recognized at Telvantis in connection with temporary differences arising at acquisition. The net deferred tax liability of $(4,470,480) is presented within non-current liabilities on the consolidated balance sheet as of December 31, 2025. Net Operating Loss Carryforwards As of December 31, 2025, the Company had U.S. federal net operating loss carryforwards of approximately $ 5,589,000 available to offset future taxable income. Under the Tax Cuts and Jobs Act of 2017, U.S. federal NOLs generated after December 31, 2017 carry forward indefinitely but are limited to 80% of taxable income in any given year. Utilization of these NOLs may be subject to annual limitations under Section 382 of the Internal Revenue Code as a result of ownership changes Valuation Allowance The Company maintains a full valuation allowance against its U.S. net deferred tax assets of $ 1,399,867 . Management has evaluated the available positive and negative evidence, including the Company's history of cumulative operating losses in the U.S. and the absence of sufficient objectively verifiable positive evidence to support realization, and has concluded that it is more likely than not that the U.S. net deferred tax assets will not be realized. Accordingly, a full valuation allowance has been recorded as of December 31, 2025. Deferred tax liabilities related to acquired intangible assets from the business combinations of 42 Telecom and Telvantis are recorded with no corresponding deferred tax asset offset, as these arise from purchase price allocation temporary differences that are expected to reverse through future amortization charges. Income Taxes Paid The following table presents income taxes paid (net of refunds received), disaggregated by jurisdiction Jurisdiction 2025 2024 U.S. federal - - U.S. state and local - - Foreign — Malta $ 601,768 (c) - Total income taxes paid $ 601,768 - F-45 (c) Represents the Malta corporation tax payable balance accrued as of December 31, 2025. Uncertain Tax Positions The Company had no unrecognized tax benefits as of December 31, 2025 and 2024, and does not anticipate any significant changes in unrecognized tax benefits within the next twelve months. The Company’s policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. No material interest or penalties were accrued as of December 31, 2025. NOTE 17 - SUBSEQUENT EVENTS 1. On January 3, 2026, the Board of Directors appointed Mr. Daniel Gilcher as Chief Financial Officer, Principal Financial Officer, and Principal Accounting Officer of the Company, effective January 3, 2026. 2. On January 4, 2026, the Company entered into a binding term sheet with Intermatica S.p.A., a società per azioni organized under the laws of Italy, setting forth the principal terms of a proposed acquisition of 100% of the issued and outstanding equity interests of Intermatica. The proposed transaction is subject to the negotiation and execution of definitive acquisition documentation and the satisfaction of customary closing conditions. Pursuant to the term sheet, the consideration contemplated to be paid at closing consists of the issuance of 5,000,000 shares of the Company’s common stock, subject to certain escrow, buy-back, standstill, and minimum value protection provisions. The term sheet also contemplates the potential issuance of up to an additional 5,000,000 shares of the Company’s common stock as earn-out consideration upon the achievement of specified post-closing performance milestones, for a maximum potential aggregate consideration of 10,000,000 shares. The term sheet provides that no Intermatica shareholder may beneficially own more than 4.9% of the Company’s issued and outstanding common stock at any time. The proposed transaction is subject to, among other conditions, the completion of financial, legal, and operational due diligence (including, unless waived, an audit of Intermatica’s financial statements under PCAOB standards), approval by the boards of directors of both parties, and the execution of definitive agreements. As of the date of issuance of these financial statements, no definitive agreement has been executed and there can be no assurance that the proposed transaction will be consummated. 3. On March 13, 2026, the Company entered into a private placement subscription agreement pursuant to Rule 506(b) of Regulation D under the Securities Act of 1933, as amended, for the issuance of 100,000 shares of the Company’s common stock at a price of $2.00 per share, for aggregate proceeds of $200,000. The Company received full payment on March 13, 2026. The shares have not been registered under the Securities Act and bear a restrictive legend. Management has considered all events through the date of issuance and determined that none of these subsequent events require adjustment to amounts recognized in the consolidated financial statements as of the reporting date. All described items are considered non-adjusting subsequent events under U.S. GAAP. F-46 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.