What changed in this filing

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Item 1. Financial Statements

2026-08-10 compared with 2026-05-13 · 367 added, 213 removed, 738 unchanged (44% of the section changed)

Financial Statements

Our unaudited interim condensed consolidated financial statements for the three months ended March 31, 2026 and 2025 are part of this quarterly report.

Our unaudited condensed consolidated financial statements for the three and six months ended June 30, 2026 and 2025 are part of this quarterly report.

They are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.

1 unchanged sentence

Condensed Consolidated Financial Statements of Spectral Capital Corporation, Inc.

Condensed Consolidated Balance Sheets as of March 31, 2026 (unaudited) and December 31, 2025

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2026 and 2025 (unaudited)

Condensed Consolidated Statements of Stockholders' Equity (Deficit) for the Three Months Ended March 31, 2026 and 2025 (unaudited)

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 2025 (unaudited)

Notes to the Condensed Consolidated Financial Statements (unaudited)

Condensed Consolidated Balance Sheets as of June 30, 2026 (unaudited) and December 31, 2025 F-1

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2026 and 2025 (unaudited) F-2

Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the Three and Six Months Ended June 30, 2026 and 2025 (unaudited) F-3

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2026 and 2025 (unaudited) F-4

Notes to the Condensed Consolidated Financial Statements (unaudited) F-5

SPECTRAL CAPITAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2026, AND DECEMBER 31, 2025

(In thousands, except per share data and share count)

AS OF JUNE 30, 2026, AND DECEMBER 31, 2025

(In thousands, except per share data and share

Current assets:

11 unchanged sentences

Capital work-in-progress 182 439

Goodwill 48,697 48,697

Other receivable, related party 414 427

Right of use asset 131 168

Total assets $ 223,811 $ 150,746

LIABILITIES AND STOCKHOLDERS’ EQUITY

15 unchanged sentences

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 shares issued and outstanding as of March 31, 2026 and December 31, 2025

Common stock, par value $ 0.0001 , 300,000,000 shares authorized 89,354,216 and 88,254,216 shares issued and outstanding as of March 31, 2026 and December 31, 2025

Common stock to be issued (500,000 and 1,500,000 shares as of March 31, 2026 and December 31, 2025)

Series Quantum Preferred stock, par value $ 0.0001 , 2,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2026 and December 31, 2025 - -

Common stock, par value $ 0.0001 , 300,000,000 shares authorized 96,291,416 and 88,254,216 shares issued and outstanding as of June 30, 2026 and December 31, 2025 10 9

Common stock to be issued ( 500,000 and 1,500,000 shares as of June 30, 2026 and December 31, 2025) 1,135 3,407

Additional paid-in capital 91,710 74,243

Accumulated deficit ( 35,433 ) ( 33,415 )

Accumulated other comprehensive income

Accumulated other comprehensive income/(loss) 38 133

Total stockholders’ equity 57,460 44,377

Non-controlling interest ( 222 ) ( 222 )

Total stockholders’ equity 57,238

Total liabilities and stockholders’ equity $ 223,811 $ 150,746

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SPECTRAL CAPITAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025

(In thousands, except per share data and share count)

CONDENSED CONSOLIDATED STATEMENTS

OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2026 AND 2025

(In thousands, except per share data and share

Three Months Ended

Six Months Ended

Revenue $ 318,174 $ - $ 646,686 $ -

Revenue, related party 104 104

Total revenues 318,278 - 646,790 -

Cost of revenue 314,877 - 641,199 -

Cost of revenue, related party 121 - 121 -

Total cost of revenues 314,998 - 641,320 -

Gross profit 3,280 - 5,470 -

Operating expenses:

6 unchanged sentences

Interest expense, net ( 470 ) - ( 885 ) -

Loss from change in fair value of contingent consideration

Total other expense

Loss before income taxes

Net loss attributable to non-controlling interests

Net loss attributable to the Company

Change in fair value of contingent consideration 9,886 - 3,972 -

Other income 1 - 4 -

Total other income 9,417 - 3,091 -

Income/(loss) before income taxes 7,560 ( 487 ) ( 1,745 ) ( 1,147 )

Income taxes 173 - 273 -

Net income (loss) $ 7,387 $ ( 487 ) $ ( 2,018 ) $ ( 1,147 )

Net income/(loss) attributable to non-controlling interests $ - $ - $ - $ -

Net income/(loss) attributable to the Company $ 7,387 $ ( 487 ) $ ( 2,018 ) $ ( 1,147 )

Other comprehensive income (loss):

Foreign currency translation loss ( 8 ) - ( 95 ) -

Total comprehensive loss

Net loss per share attributable to the Company

Total comprehensive income (loss) $ 7,379 $ ( 487 ) $ ( 2,113 ) $ ( 1,147 )

Net income/(loss) per share attributable to the Company

Basic 0.08 ( 0.01 ) ( 0.02 ) ( 0.02 )

Diluted 0.08 ( 0.01 ) ( 0.02 ) ( 0.02 )

Weighted average shares outstanding

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Basic 92,050,072 67,717,203 90,523,116 67,708,302

Diluted 94,890,591 67,717,203 90,523,116 67,708,302

accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SPECTRAL CAPITAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025

CONDENSED CONSOLIDATED STATEMENTS

OF STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025

(In thousands, except share count)

Series Quantum

Accumulated Other

Preferred Stock

Common Stock to be issued

Non-Controlling

4 unchanged sentences

Stock-based compensation - - - - - - 416 - - - 416

Net loss - - - - - - - - - ( 660 ) ( 660 )

Balances at March 31, 2025 1,000,000 $ - 67,699,302 $ 7 - $ - $ 34,045 $ ( 222 ) $ - $ ( 34,993 ) $ ( 1,163 )

Sale of common stock - - 74,700 - - - 85 - - - 85

Stock-based compensation - - - - - - 220 - - - 220

Settlement of related party liabilities ( 1,000,000 ) - - - - - 676 - - - 676

Net loss - - - - - - - - - ( 487 ) ( 487 )

Balances at June 30, 2025 - $ - 67,774,002 $ 7 - $ - $ 35,026 $ ( 222 ) $ - $ ( 35,480 ) $ ( 669 )

Balances at December 31, 2025 - $ - 88,254,216 $ 9 1,500,000 $ 3,407 $ 74,243 $ ( 222 ) $ 133 $ ( 33,415 ) $ 44,155

1 unchanged sentence

Common stock issued pursuant to business combination - - 1,000,000 - ( 1,000,000 ) ( 2,272 ) 2,272 - - - -

( 1,000,000 )

Common stock issued pursuant to private placement - - 100,000 - - - 200 - - - 200

Net loss - - - - - - - - ( 87 ) ( 9,405 ) ( 9,492 )

Balances at March 31, 2026 - $ - 89,354,216 $ 9 500,000 $ 1,135 $ 76,990 $ ( 222 ) $ 46 $ ( 42,820 ) $ 35,138

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Stock-based compensation 227 - - - 227

Common stock issued pursuant to business combination 6,924,700 1 14,473 - - - 14,474

Common stock issued pursuant to private placement - - 12,500 - - - 20 - - - 20

Net income ( 8 ) 7,387 7,379

Balances at June 30, 2026 - $ - 96,291,416 $ 10 500,000 $ 1,135 $ 91,710 $ ( 222 ) $ 38 $ ( 35,433 ) $ 57,238

accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SPECTRAL CAPITAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025

FOR THE SIX MONTHS ENDED JUNE 30, 2026 AND 2025

(In thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

Net loss $ ( 2,018 ) $ ( 1,147 )

Adjustments to reconcile net loss to net cash used in operating activities:

Allowances for credit losses

Stock-based compensation 502 636

1 unchanged sentence

Change in fair value of contingent consideration ( 3,972 ) -

Depreciation 28 -

Amortization of intangibles 3,964 -

Amortization of prepaid expenses 2,194

Provision for expected credit losses 597

Changes in operating assets and liabilities:

Accounts receivable, net

Accounts receivable ( 82,085 ) -

Contract assets 2,908 -

Contract assets, related party 2,634

Prepaid expenses and other current assets 8 7

14 unchanged sentences

Short-term advances - 295

Accounts receivable financing facility, net

Repayment of loan - -

Accounts receivable financing facility 4,784 -

Proceeds from sale of common stock 220 85

14 unchanged sentences

Cash paid for interest $ 885 $ -

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Non-cash investing and financing activities:

Settlement of related party liabilities $ - $ 676

Common stock issued in settlement of earn-out contingent consideration $ 14,474 $ -

accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SPECTRAL CAPITAL CORPORATION

32 unchanged sentences

The condensed consolidated balance sheet as of December 31, 2025 was derived from the audited consolidated financial statements as of that date.

The results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results expected for the full year ending December 31, 2026.

The results of operations for the three and six months ended June 30, 2026 are not necessarily indicative of the results expected for the full year ending December 31, 2026.

All amounts in these unaudited condensed consolidated financial statements are presented in thousands of U.S.

7 unchanged sentences

(In thousands, except per share data and share count)

As of March 31, 2026, the Company had cash and cash equivalents of $ 2,705 and an accumulated deficit of $ 42,820 .

As of June 30, 2026, the Company had cash and cash equivalents of $ 5,267 and an accumulated deficit of $ 35,433 .

Total current liabilities of $ 162,037 exceeded total current assets of $ 136,384 , resulting in a working capital deficit of $ 25,653 .

2 unchanged sentences

Accordingly, the contingent consideration does not represent a cash funding requirement of the Company.

Excluding contingent consideration, the working capital deficit was $ 8,878 as of March 31, 2026.

Excluding contingent consideration, the working capital deficit was $ 9,259 as of June 30, 2026.

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 three months ended March 31, 2026, the Company generated total revenues of $ 328,512 , compared to $ 0 for the three months ended March 31, 2025.

For the three and six months ended June 30, 2026, the Company generated total revenues of $ 318,278 and $ 646,790 , respectively, compared to $ 0 for the three months and six months ended June 30, 2025.

The increase in revenue is attributable to the post-acquisition consolidation of 42 Telecom and Telvantis, both of which contributed telecommunications service revenue during the quarter.

The Company reported a net loss of $ 9,405 for the three months ended March 31, 2026, which includes a non-cash charge of $ 5,914 from the change in fair value of contingent consideration.

Net cash used in operating activities was $ 523 for the three months ended March 31, 2026, compared to $ 220 for the three months ended March 31, 2025.

The Company reported a net income of $ 7,387 for the three months ended June 30, 2026, driven primarily by a non-cash gain of $ 9,886 from the change in fair value of contingent consideration.

For the six months ended June 30, 2026, the Company reported a net loss of $ 2,018 , reflecting a net non-cash gain of $ 3,972 from the change in fair value of contingent consideration, comprising a $ 9,886 gain recognized during the second quarter that was more than offset by a $ 5,914 charge recognized earlier in the year.

Net cash used in operating activities was $ 1,555 for the six months ended June 30, 2026, compared to $ 481 for the six months ended June 30, 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.

2 unchanged sentences

Management continues to explore financing options, including private placements and strategic investment arrangements, while moderating discretionary expenditures to preserve liquidity.

On July 17, 2026, the Company publicly filed a Registration Statement on Form S-1 with the Securities and Exchange Commission for a proposed underwritten public offering of its common stock in connection with its planned listing on The Nasdaq Capital Market.

There can be no assurance that the offering will be completed, that the Company’s Nasdaq listing application will be approved, or that sufficient proceeds will be raised on terms favorable to the Company, or at all.

In addition, 42 Telecom and Telvantis maintain a Master Participation Agreement with Fasanara Securitisation S.A.

11 unchanged sentences

The Company completed two significant acquisitions during 2025 — 42 Telecom, which closed on August 1, 2025, and Telvantis, which closed on 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.

The successful integration of both acquired businesses continues to 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 of either acquisition, could adversely affect the Company’s financial condition, results of operations, and cash flows.

SPECTRAL CAPITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data and share count)

Market and economic conditions:

3 unchanged sentences

Furthermore, changes to policy implemented by the U.S.

Congress or the current or any

SPECTRAL CAPITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data and share count)

future administration may impact, among other things, 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, taxation, the U.S.

32 unchanged sentences

All intercompany accounts and transactions have been eliminated in consolidation.

SPECTRAL CAPITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data and share count)

Fair Value of Financial Instruments

6 unchanged sentences

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, contract assets, accounts receivable — related party, prepaid expenses and other current assets, 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 connection with business combinations.

The carrying amount of these financial instruments

SPECTRAL CAPITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data and share count)

approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these unaudited condensed consolidated financial statements.

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 unaudited condensed 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 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 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 Company also measures certain liabilities at fair value on a recurring basis.

The contingent consideration liabilities recorded in connection with the acquisitions of 42 Telecom and Telvantis are remeasured to fair value each reporting period, with changes recognized in earnings, and are classified as Level 3.

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.

16 unchanged sentences

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 measure of segment profit or loss regularly reviewed by the CODM is consolidated net income (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.

2 unchanged sentences

See Note 9 — Segment and Geographic Information for further details, including significant segment expenses regularly provided to the CODM and geographic revenue information.

SPECTRAL CAPITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data and share count)

Cash and Cash Equivalents

1 unchanged sentence

The Company also maintains restricted cash representing collateral required in connection with its corporate credit card program.

As of March 31, 2026 and December 31, 2025, the Company had restricted cash balances of $ 21 and $ 21 , respectively.

As of June 30, 2026 and December 31, 2025, the Company had restricted cash balances of $ 21 and $ 21 , respectively.

Restricted cash is excluded from cash and cash equivalents and is presented separately on the condensed consolidated balance sheets.

SPECTRAL CAPITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data and share count)

Concentration of Credit Risks and Significant Customers and Suppliers

3 unchanged sentences

The Company has not experienced any losses on its cash balances to date.

For the three months ended March 31, 2026, the Company's revenues were derived primarily from the international voice termination operations of Telvantis Voice Services, Inc.

Three customers individually accounted for approximately 49%, 23%, and 22% of consolidated revenues, respectively, for the three months ended March 31, 2026, collectively representing approximately 94% of consolidated revenues.

For the three and six months ended June 30, 2026, the Company’s revenues were derived primarily from the international voice termination operations of Telvantis Voice Services, Inc.

Three customers individually accounted for approximately 49 %, 22 %, and 21 % of consolidated revenues, respectively, for the three months ended June 30, 2026, and approximately 49 %, 23 %, and 21 % of consolidated revenues, respectively, for the six months ended June 30, 2026, collectively representing approximately 92 % and 93 % of consolidated revenues for the three and six months ended June 30, 2026, respectively.

The loss of any one of these customers could have a material adverse effect on the Company’s results of operations and financial condition.

The Company had no revenues for the three months ended March 31, 2025.

The Company had no revenues for the three and six months ended June 30, 2025.

The Company’s cost of revenues is similarly concentrated among a limited number of voice termination suppliers.

Three vendors individually accounted for approximately 49%, 23%, and 22% of consolidated cost of revenues, respectively, for the three months ended March 31, 2026, collectively representing approximately 94% of consolidated cost of revenues.

The same counterparties that represent the Company's largest customers also represent its largest vendors, reflecting the nature of the international VoIP carrier business in which carriers act as both buyers and sellers of voice termination capacity depending on destination-specific routing economics.

The Company had no cost of revenues for the three months ended March 31, 2025.

Three vendors individually accounted for approximately 49 %, 22 %, and 16 % of consolidated cost of revenues, respectively, for the three months ended June 30, 2026, and approximately 49 %, 23 %, and 19 % of consolidated cost of revenues, respectively, for the six months ended June 30, 2026, collectively representing approximately 87 % and 91 % of consolidated cost of revenues for the three and six months ended June 30, 2026, respectively.

The Company had no cost of revenues for the three and six months ended June 30, 2025.

Where possible and commercially sensible, we attempt to mitigate our credit risk related to specific Telvantis Voice Services, Inc.

6 unchanged sentences

The Company presents accounts receivable and accounts payable with these counterparties on a gross basis in the condensed consolidated balance sheets in accordance with ASC 210-20-45, as the conditions necessary to offset — including a legally enforceable right of setoff and intent to settle net — have not been met with respect to these trade balances.

The gross accounts receivable and accounts payable attributable to these reciprocal counterparties were approximately $233.4 million and $232.5 million, respectively, as of March 31, 2026.

The gross accounts receivable and accounts payable attributable to these reciprocal counterparties were approximately $ 119,508 and $ 98,637 , respectively, as of June 30, 2026.

Included within these amounts are $ 9,332 of accounts receivable and $ 3,679 of accounts payable attributable to Mexedia SpA and Mexedia DAC, related parties of the Company as described in Note 11 — Related Party Transactions.

Accounts Receivable, net and Accounts Receivable, Related Party

4 unchanged sentences

In accordance with ASC 326, Financial Instruments — Credit Losses, the allowance for credit losses represents management’s estimate of expected losses based on historical experience, current conditions, and reasonable and supportable forecasts over the contractual life of accounts receivable.

As of March 31, 2026 and December 31, 2025, the allowance for credit losses was $ 2,610 and $ 2,469 , respectively.

Accounts receivable, related party, represents amounts due from Mexedia SpA and Mexedia DAC arising from telecommunications and messaging services provided by 42 Telecom and Telvantis under bilateral service agreements.

As of June 30, 2026 and December 31, 2025, the allowance for credit losses was $ 2,925 and $ 2,469 , respectively.

SPECTRAL CAPITAL CORPORATION

1 unchanged sentence

(In thousands, except per share data and share count)

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.

10 unchanged sentences

Prepaid consulting and marketing 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 March 31, 2026 and December 31, 2025, prepaid expenses and other current assets totaled $ 4,075 and $ 5,273 , respectively.

As of June 30, 2026 and December 31, 2025, prepaid expenses and other current assets totaled $ 3,071 and $ 5,273 , respectively.

Property, Plant and Equipment, Net

9 unchanged sentences

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 during the three months ended March 31, 2026 and 2025.

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.

No impairment losses were identified during the three and six months ended June 30, 2026 and 2025.

SPECTRAL CAPITAL CORPORATION

1 unchanged sentence

(In thousands, except per share data and share count)

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

20 unchanged sentences

Capitalized software costs are amortized on a straight-line basis over five years upon being placed into service.

As of March 31, 2026 and December 31, 2025, capital work-in-progress related to software development totaled $ 331 and $ 439 , respectively.

As of March 31, 2026 and December 31, 2025, $ 417 and $ 294 , respectively, internally developed software placed into services classified as Intangible assets, net in the consolidated balance sheet.

As of June 30, 2026 and December 31, 2025, capital work-in-progress related to software development totaled $ 182 and $ 439 , respectively.

As of June 30, 2026 and December 31, 2025, $ 325 and $ 294 , respectively, internally developed software placed into services classified as Intangible assets, net in the consolidated balance sheet.

Impairment of Long-Lived Assets

2 unchanged sentences

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 during the three months ended March 31, 2026.

The Company had no long-lived assets during the three months ended March 31, 2025.

No impairment indicators were identified during the three and six months ended June 30, 2026.

The Company had no long-lived assets during the three and six months ended June 30, 2025.

SPECTRAL CAPITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data and share count)

Business Combinations

3 unchanged sentences

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

SPECTRAL CAPITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data and share count)

appropriate to reflect transfer restrictions and other factors affecting marketability.

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.

13 unchanged sentences

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 during the three months ended March 31, 2026 and 2025.

No goodwill impairment indicators were identified during the three and six months ended June 30, 2026 and 2025.

Contingent Consideration

1 unchanged sentence

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.

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 income/(loss), until the arrangement is settled or expires.

Upon settlement through the issuance of common stock, the liability is remeasured to fair value immediately prior to the settlement date, with the corresponding gain or loss recognized in earnings, and is then relieved with a corresponding increase to common stock and additional paid-in capital based on the fair value of the shares issued.

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.

3 unchanged sentences

(i) identify the contract with a customer, (ii) identify the performance obligations, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when or as performance obligations are satisfied.

SPECTRAL CAPITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data and share count)

The Company generates revenue through the following streams:

2 unchanged sentences

Revenue is generated through the duration of telephone traffic between carrier customers calculated on a minute-by-minute basis for voice services, and on a per-message basis for messaging services.

These services represented substantially all of the Company's revenues for the three months ended March 31, 2026.

SPECTRAL CAPITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data and share count)

These services represented substantially all of the Company’s revenues for the three and six months ended June 30, 2026.

Platform Services — includes SS7 platform access, managed services, and tourism platform-as-a-service.

2 unchanged sentences

Customer contracts are typically short-term in nature, invoiced based on actual usage or subscription terms, with no significant financing components.

The following table presents disaggregated revenue for the three months ended March 31, 2026 and 2025:

Three Months Ended

In the international wholesale voice termination and messaging market, the same counterparty may act as both a customer and a supplier to the Company depending on destination-specific routing economics.

In such arrangements, the Company evaluates each commercial relationship independently.

Revenue from services provided to a counterparty in its capacity as a customer, and cost of revenue for services purchased from that counterparty in its capacity as a supplier, are each recognized on a gross basis.

The receivable from the counterparty in its customer capacity and the payable to the counterparty in its supplier capacity represent separate contractual obligations and services arising under distinct bilateral agreements with independent pricing, invoicing, and settlement terms.

The Company does not have a legally enforceable right to net-settle these trade balances.

Accordingly, the conditions for offsetting under ASC 210-20-45 are not met, and gross accounts receivable and gross accounts payable with these reciprocal counterparties are presented separately on the consolidated balance sheets.

The Company generates revenue from the provision of international voice and messaging services to telecommunications carriers, aggregators and enterprise customers.

The Company contracts directly with its customers, establishes the pricing charged to customers, and is responsible for providing the promised services.

To fulfill its performance obligations, the Company may utilize third-party carriers and network providers.

The Company separately negotiates pricing with such suppliers and bears the economic risk associated with the difference between the amounts billed to customers and the amounts paid to suppliers.

Because the Company controls the promised services before transfer to the customer and is the principal in these arrangements, revenue is recognized on a gross basis and the related amounts paid to suppliers are recorded as cost of revenue.

The following table presents disaggregated revenue for the three and six months ended June 30, 2026 and 2025:

Three Months Ended Six Months Ended

June 30, June 30,

2026 2025 2026 2025

Voice Services, at a point in time $ 313,904 $ - $ 638,403 $ -

1 unchanged sentence

Platform Leasing, over time 26 - 66 -

For the three months ended March 31, 2026, Telvantis and its subsidiaries contributed approximately 99% of consolidated revenues, with 42 Telecom and its subsidiaries contributing the remaining 1%.

$ 318,278 $ - $ 646,790 $ -

For the three and six ended June 30, 2026, Telvantis and its subsidiaries contributed approximately 99 % of consolidated revenues, with 42 Telecom and its subsidiaries contributing the remaining 1 %.

No revenue was recognized during the three and six months ended June 30, 2025, as the acquisitions of 42 Telecom and Telvantis had not yet closed as of that date.

SPECTRAL CAPITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data and share count)

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 messaging and voice traffic where services were delivered at a point in time during the period but invoices are issued following month-end volume reconciliation with counterparties, at which point the balance reclassifies to accounts receivable.

As of March 31, 2026 and December 31, 2025, contract assets were $ 793 and $ 6,474 , respectively, of which $ 0 and $ 2,634 were with related parties.

As of June 30, 2026 and December 31, 2025, contract assets were $ 932 and $ 6,474 , respectively, of which $ 0 and $ 2,634 were with related parties.

Contract Liabilities

1 unchanged sentence

These balances are presented within current liabilities in the condensed consolidated balance sheets based on the expected timing of revenue recognition and are recognized as revenue when the related performance obligations are fulfilled.

As of March 31, 2026 and December 31, 2025, contract liabilities were $ 257 and $ 335 , respectively.

As of June 30, 2026 and December 31, 2025, contract liabilities were $ 352 and $ 335 , respectively.

Cost of Revenue

9 unchanged sentences

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.

SPECTRAL CAPITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data and share count)

Depreciation and Amortization

4 unchanged sentences

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.

SPECTRAL CAPITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data and share count)

Employee Benefits

2 unchanged sentences

Pension contributions are expensed as incurred.

For the three months ended March 31, 2026 and 2025, pension plan contributions totaled $ 2 and $ 0 , respectively.

For the three and six months ended June 30, 2026, pension plan contributions totaled $ 2 and $ 4 , respectively.

For the three and six months ended June 30, 2025, pension plan contribution was $ 0 .

Stock-Based Compensation

6 unchanged sentences

Changes in these assumptions can materially affect the estimated fair value of awards.

Comprehensive loss

Comprehensive loss includes net loss as well as other changes in stockholders' equity resulting from transactions and economic events other than those with shareholders.

For the Company, the only component of other comprehensive loss for the three months ended March 31, 2026 and 2025 relates to foreign currency translation adjustments arising from the consolidation of 42 Telecom, whose functional currencies include the Euro, Swedish Krona, British Pound, which differ from or are translated into the Company's reporting currency of U.S.

These translation adjustments are recorded in other comprehensive loss and accumulated in stockholders' equity under accumulated other comprehensive loss.

No other components of other comprehensive loss were recognized during the three months ended March 31, 2026 and 2025.

Comprehensive Income (loss)

Comprehensive income (loss) includes net income (loss) as well as other changes in stockholders’ equity resulting from transactions and economic events other than those with shareholders.

For the Company, the only component of other comprehensive income (loss) for the three and six months ended June 30, 2026 and 2025 relates to foreign currency translation adjustments arising from the consolidation of 42 Telecom, whose functional currencies include the Euro, Swedish Krona, British Pound, which differ from or are translated into the Company’s reporting currency of U.S.

These translation adjustments are recorded in other comprehensive income (loss) and accumulated in stockholders’ equity under accumulated other comprehensive loss.

No other components of other comprehensive income (loss) were recognized during the three and six months ended June 30, 2026 and 2025.

Foreign Currency Transactions

25 unchanged sentences

The relevant translation rate are as follows:

- For the three months ended March 31, 2026, closing rate 1.1482 US$:

- For the six months ended June 30, 2026, closing rate 1.14068 US$:

EURO, 0.10283 US$:

SEK, 1.32297 US$:

- For the three months ended March 31, 2026, average rate 1.1610 US$:

- For the six months ended June 30, 2026, average rate 1.15731 US$:

EURO, 0.10568 US$:

SEK, 1.33423 US$:

For the three months ended March 31, 2026 and 2025, the Company recorded foreign currency translation adjustments of $( 87 ) and $ 0 , respectively, which are included in other comprehensive income (loss).

For the three and six months ended June 30, 2026, the Company recorded foreign currency translation adjustments of $( 8 ) and $( 95 ), respectively, which are included in other comprehensive income (loss).

No foreign currency translation adjustments were recorded during the three and six months ended June 30, 2025, as the acquisition of 42 Telecom had not yet closed as of that date.

The Company accounts for leases under ASC 842, Leases.

10 unchanged sentences

Potentially dilutive securities include stock options, warrants, convertible instruments, and contingently issuable shares.

For the three months ended March 31, 2026, the Company reported a net loss;

accordingly, all potentially dilutive securities, including 3,846,875 stock options outstanding with a weighted-average exercise price of $0.62 per share, were excluded from the computation of diluted net loss per share as their inclusion would have been anti-dilutive During the three months ended March 31, 2025, the Company had options to purchase 6,810,000 shares of common stock, the effects of which were also 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

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 three months ended June 30, 2026, the Company had 3,846,875 stock options outstanding with a weighted-average exercise price of $ 0.62 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 average market price of the Company’s common stock of $ 2.37 per share during the three months ended June 30, 2026, resulting in 2,840,519 incremental dilutive shares.

For the six months ended June 30, 2026, and for the three and six months ended June 30, 2025, all potentially dilutive securities, including 3,846,875 and 6,810,000 stock options outstanding, respectively, were excluded from the computation of diluted net loss per share as their inclusion would have been anti-dilutive.

SPECTRAL CAPITAL CORPORATION

1 unchanged sentence

(In thousands, except per share data and share count)

holds a 60% controlling interest, with the remaining 40% held by noncontrolling interest holders.

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.

2 unchanged sentences

and Monitr Holdings, Inc.

had no operations during the three months ended March 31, 2026 and 2025, and accordingly no net income or loss was attributable to non-controlling interests during either period.

The non-controlling interest balance remained $( 222 ) as of both March 31, 2026 and December 31, 2025.

had no operations during the three and six months ended June 30, 2026 and 2025, and accordingly no net income or loss was attributable to non-controlling interests during either period.

The non-controlling interest balance remained $( 222 ) as of both June 30, 2026 and December 31, 2025.

The Company accounts for income taxes in accordance with ASC 740, Income Taxes, using the asset and liability method.

32 unchanged sentences

Customer relationships 3,100

Tradename 600

Goodwill 12,520

Other receivable, related party 417

4 unchanged sentences

Operating lease liability ( 180 )

Loan payable ( 1 )

Deferred tax liability- Intangible asset ( 3,268 )

4 unchanged sentences

in respect of pre-acquisition retained earnings.

As of March 31, 2026, the dividend remains unpaid and is reflected in accrued expenses and other current liabilities in the unaudited condensed consolidated balance sheet.

As of June 30, 2026, the dividend remains unpaid and is reflected in accrued expenses and other current liabilities in the unaudited condensed consolidated balance sheet.

The purchase price allocation for 42 Telecom remains within the 12-month measurement period ending August 1, 2026.

No measurement period adjustments were recorded during the three months ended March 31, 2026.

No measurement period adjustments were recorded during the three and six months ended June 30, 2026.

Goodwill recognized in connection with the 42 Telecom acquisition is not deductible for income tax purposes.

5 unchanged sentences

The total purchase price consideration was $ 34,513 , consisting of $ 3,407 of common stock issued and $ 31,106 of contingent consideration measured at acquisition-date fair value.

During the three months ended March 31, 2026, 1,000,000 of the shares previously classified as common stock to be issued were formally issued, with the remaining 500,000 shares continuing to be classified as common stock to be issued within stockholders' equity as of March 31, 2026.

Contingent consideration is classified as a liability and remeasured at fair value at each reporting date, with changes recognized in the unaudited condensed consolidated statements of operations.

During the three and six months ended June 30, 2026, 1,000,000 of the shares previously classified as common stock to be issued were formally issued, with the remaining 500,000 shares continuing to be classified as common stock to be issued within stockholders’ equity as of June 30, 2026.

Contingent consideration is classified as a liability and remeasured to fair value at each reporting date, with changes recognized in the unaudited condensed consolidated statements of operations, until settled or expired.

On May 22, 2026, the Company issued 6,924,700 shares of common stock in partial settlement of the earn-out component of the contingent consideration.

Immediately prior to issuance, the earn-out component was remeasured to fair value, with the resulting gain of $ 1,214 recognized in the unaudited condensed consolidated statements of operations.

The contingent consideration liability was then partially relieved for $ 14,474 — the fair value of the shares issued, based on the quoted closing price on the issuance date — with a corresponding increase to common stock and additional paid-in capital.

The Company’s Min $ 65,000 Share-Value Guarantee obligation was not settled and remains outstanding as of June 30, 2026, continuing to be remeasured at fair value each reporting period.

See Note 4 — Fair Value Measurements for further details.

10 unchanged sentences

Customer relationships 10,700

Tradename 3,100

Goodwill 35,487

Accounts payable ( 32,402 )

7 unchanged sentences

The purchase price allocation is provisional and subject to adjustment within the 12-month measurement period ending December 31, 2026.

No measurement period adjustments were recorded during the three months ended March 31, 2026.

No measurement period adjustments were recorded during the three and six months ended June 30, 2026.

Goodwill recognized in connection with the Telvantis acquisition is not deductible for income tax purposes.

NOTE 4 – FAIR VALUE MEASUREMENTS

The following table presents the Company's liabilities measured at fair value on a recurring basis as of March 31, 2026 and December 31, 2025, classified within the fair value hierarchy:

March 31, 2026

The following table presents the Company’s liabilities measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025, classified within the fair value hierarchy:

Level 1 Level 2 Level 3 Total

June 30, 2026

Contingent consideration - 42 Telecom Ltd.

$ - $ - $ 932 $ 932

Contingent consideration - Telvantis Voice Services, Inc.

$ - $ - $ 15,462 $ 15,462

Total liabilities $ - $ - $ 16,394 $ 16,394

1 unchanged sentence

Contingent consideration - 42 Telecom Ltd.

$ - $ - $ 3,733 $ 3,733

Contingent consideration - Telvantis Voice Services, Inc.

$ - $ - $ 31,106 $ 31,106

Total liabilities $ - $ - $ 34,839 $ 34,839

The Company had no assets measured at fair value on a recurring basis as of March 31, 2026 or December 31, 2025.

The Company had no assets measured at fair value on a recurring basis as of June 30, 2026 or December 31, 2025.

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 three months ended March 31, 2026.

The fair value of the 42 Telecom contingent consideration was remeasured at March 31, 2026 using a risk-neutral Monte Carlo simulation of projected FCCN share prices, consistent with the methodology applied at the acquisition date and at December 31, 2025.

The net change in fair value of the 42 Telecom contingent consideration for the three months ended March 31, 2026 resulted in a loss of $ 2,882 , recognized within change in fair value of contingent consideration in the unaudited condensed consolidated statements of operations and comprehensive loss.

There were no transfers between levels during the six months ended June 30, 2026.

The fair value of the 42 Telecom contingent consideration was remeasured at June 30, 2026 using a risk-neutral Monte Carlo simulation of projected FCCN share prices, consistent with the methodology applied at the acquisition date and at prior reporting dates.

The net change in fair value of the 42 Telecom contingent consideration resulted in a loss of $ 2,882 for the three months ended March 31, 2026 and a gain of $ 5,683 for the three months ended June 30, 2026, for a net gain of $ 2,801 for the six months ended June 30, 2026, recognized within change in fair value of contingent consideration in the unaudited condensed consolidated statements of operations and comprehensive income (loss).

The gain recognized during the six months ended June 30, 2026 reflects two factors:

(i) based on Section 4.2 of the Share Exchange Agreement, that Forty Two’s fiscal year 2025 net profit did not exceed the threshold required for Bonus Shares to be issuable, resulting in no liability for that component as of June 30, 2026;

and (ii) FCCN’s stock price declining from $ 4.13 to $ 2.56 per share during the first quarter, which increased the probability of the $ 30,000 minimum valuation guarantee triggering, followed by an increase in the stock price to $ 4.60 per share by June 30, 2026, which reduced that probability and drove the majority of the gain recognized during the second quarter.

SPECTRAL CAPITAL CORPORATION

1 unchanged sentence

(In thousands, except per share data and share count)

in fair value reflects the net effect of a decline in FCCN stock price from $4.13 to $2.56 per share, which increased the probability of the $30,000 minimum valuation guarantee triggering, partially offset by the reduction in the discount for lack of marketability arising from the shortened remaining lock-up period.

The fair value of the Telvantis contingent consideration was remeasured at March 31, 2026 using a risk-neutral Monte Carlo simulation incorporating correlated gross revenue and operating profit projections, consistent with the methodology applied at the acquisition date.

The net change in fair value of the Telvantis contingent consideration for the three months ended March 31, 2026 resulted in a loss of $ 3,032 , recognized within change in fair value of contingent consideration in the unaudited condensed consolidated statements of operations and comprehensive loss.

The increase in fair value reflects the decline in FCCN stock price from $4.13 to $2.56 per share, which reduced the aggregate market value of shares already issued to the sellers and correspondingly increased the number of additional shares expected to be required to satisfy the $65,000 minimum share value guarantee, resulting in a higher estimated liability at March 31, 2026.

The following table presents the changes in fair value of contingent consideration measured at fair value for the three months ended March 31, 2026:

The fair value of the Telvantis contingent consideration was remeasured using a risk-neutral Monte Carlo simulation incorporating correlated gross revenue and operating profit projections, consistent with the methodology applied at the acquisition date and prior reporting dates, together with a Monte Carlo simulation of projected FCCN share prices for the Min $ 65,000 Share-Value Guarantee component.

The net change in fair value of the Telvantis contingent consideration resulted in a loss of $ 3,031 for the three months ended March 31, 2026 and a gain of $ 4,203 for the three months ended June 30, 2026, for a net gain of $ 1,170 for the six months ended June 30, 2026, recognized within change in fair value of contingent consideration in the unaudited condensed consolidated statements of operations and comprehensive income (loss).

The gain recognized during the three months ended June 30, 2026 reflects three components:

(i) a gain of $ 1,214 from remeasuring the earn-out component of the liability to fair value on May 21, 2026, immediately prior to the issuance discussed below;

(ii) a loss of $ 9,112 from remeasuring the residual earn-out component to fair value at June 30, 2026, reflecting the increase in FCCN’s stock price from $ 2.09 per share on May 22, 2026 to $ 4.60 per share on June 30, 2026;

and (iii) a gain of $ 12,099 from remeasuring the Min $ 65,000 Share-Value Guarantee component to fair value at June 30, 2026, as the increase in FCCN’s stock price over the same period reduced both the probability of the guarantee triggering and the number of additional shares that would be required to satisfy it.

On May 22, 2026, the Company issued 6,924,700 shares of common stock in partial settlement of the earn-out component of the Telvantis contingent consideration, pursuant to the Board-approved determination of achievement dated May 22, 2026.

The contingent consideration liability was relieved for $ 14,474 , the fair value of the shares issued based on FCCN’s quoted closing price of $ 2.09 per share on the issuance date, with a corresponding increase to common stock and additional paid-in capital.

The Min $ 65,000 Share-Value Guarantee obligation was not settled and remains outstanding as of June 30, 2026, continuing to be remeasured to fair value each reporting period.

In estimating the fair value of the Telvantis contingent consideration, the Company applies a discount for lack of marketability (“DLOM”) to shares issuable under the arrangement that have not yet been issued, reflecting the transfer restrictions applicable to such shares prior to issuance.

The DLOM is estimated using a Black-Scholes put option model, with inputs including the estimated remaining restriction period and FCCN’s equity volatility.

No DLOM is applied to shares once issued.

Pursuant to ASC 820-10-35-44A and 35-44B, a contractual restriction on the sale of an equity security is not a separate unit of account and is not considered in measuring the fair value of the security, regardless of whether the security remains subject to transfer restrictions.

Accordingly, the 6,924,700 shares issued on May 22, 2026 were valued at their unadjusted quoted closing price notwithstanding any contractual restrictions on resale, while the fair value of unissued shares underlying the residual earn-out and the Min $ 65,000 Share-Value Guarantee continues to reflect a DLOM as of June 30, 2026, as those shares have not yet been issued and remain part of the contingent consideration liability.

The following table presents the changes in fair value of contingent consideration measured at fair value for the six months ended June 30, 2026:

Consideration

2 unchanged sentences

Change in fair value - Telvantis Voice Servies, Inc.

Balance, March 31, 2026

There were no liabilities measured at fair value on a recurring basis during the three months ended March 31, 2025.

Contingent consideration settled through issuance of common stock ( 14,474 )

Balance, June 30, 2026 $ 16,394

There were no liabilities measured at fair value on a recurring basis during the three and six months ended June 30, 2025.

NOTE 5 – PREPAID AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:

June 30, December 31,

Prepaid consulting and marketing services $ 2,143 $ 4,336

Deposits 37 37

VAT and taxes 179 40

4 unchanged sentences

Prepaid consulting and marketing services represents the unamortized portion of equity and cash consideration paid to third party vendors under consulting and marketing service agreements, recognized on a straight-line basis over the respective service periods.

During the three months ended March 31, 2026 and 2025, the Company recognized amortization of $ 1,097 and $0, respectively, related to these arrangements.

Amortization expense for the three months ended March 31, 2026, consisting of $ 1,020 in marketing expense and $ 77 in professional fees expense.

During the three and six months ended June 30, 2026, the Company recognized amortization of $ 1,097 and $ 2,194 , respectively, related to these arrangements, consisting of $ 1,020 and $ 2,040 in marketing expense and $ 77 and $ 154 in professional fees expense for the three and six months ended June 30, 2026, respectively.

There was no comparable amortization expense during the three and six months ended June 30, 2025.

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.

5 unchanged sentences

Property, plant and equipment consist of the following:

June 30, December 31,

Office equipment $ 5 $ 5

Computers 125 115

Furniture and fixtures 25 26

2 unchanged sentences

Property, plant and equipment, net $ 111 $ 126

For the three months ended March 31, 2026 and 2025, depreciation expense was $ 14 and $ 0 , respectively.

For the three and six months ended June 30, 2026, depreciation expense was $ 13 and $ 28 , respectively.

For the three and six months ended June 30, 2025, depreciation expense was $ 0 .

NOTE 7 – INTANGIBLE ASSETS

Intangible assets consist of the following:

June 30, December 31,

Developed technology $ 5,479 $ 5,479

Internally developed software

Interally developed software 750 321

Customer relationships 13,800 13,800

Tradenames 3,700 3,700

Acquired intellectual property 19,710 19,710

43,439 43,010

Accumulated amortization ( 5,547 ) ( 1,572 )

4 unchanged sentences

Acquired intellectual property of $ 19,710 represents artificial intelligence operating systems, FPGA-based technologies, and cybersecurity technologies acquired pursuant to an asset acquisition on October 15, 2025, in exchange for 9,000,000 shares of the Company’s common stock at $ 2.19 per share, and is amortized on a straight-line basis over 5 years.

Amortization expense for the three months ended March 31, 2026 and 2025 was $ 1,973 and $ 0 , respectively.

No impairment charges were recognized during the three months ended March 31, 2026 and 2025.

SPECTRAL CAPITAL CORPORATION

1 unchanged sentence

(In thousands, except per share data and share count)

The following table presents the estimated future amortization expense for intangible assets as of March 31, 2026:

Amortization expense for the three and six months ended June 30, 2026, was $ 1,991 and $ 3,964 , respectively.

There was no amortization expense during the three and six months ended June 30, 2025, as none of the underlying intangible assets had been acquired as of that date.

No impairment charges were recognized during the three and six months ended June 30, 2026 and 2025.

The following table presents the estimated future amortization expense for intangible assets as of June 30, 2026:

2026 (remaining 6 months) $ 4,000

Thereafter 4,531

NOTE 8 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

June 30, December 31,

Accrued cost of revenue $ 630 $ 823

VAT and taxes payable 1,389 1,257

Other 1,327 327

Accrued expenses and other current liabilities $ 3,346 $ 2,407

2 unchanged sentences

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 measure of segment profit or loss regularly reviewed by the CODM is consolidated net income (loss).

Neither 42 Telecom nor Telvantis was consolidated during the three months ended March 31, 2025, as both acquisitions were completed subsequent to that period.

Accordingly, the Company reported no revenues or operating expenses from its Telco Services segment for the three months ended March 31, 2025.

For the three months ended March 31, 2026, Telvantis and its subsidiaries contributed approximately 99% of consolidated revenues, with 42 Telecom and its subsidiaries contributing the remaining 1%.

Neither 42 Telecom nor Telvantis was consolidated during the three and six months ended June 30, 2025, as both acquisitions were completed subsequent to that period.

Accordingly, the Company reported no revenues or operating expenses from its Telco Services segment for the three and six months ended June 30, 2025.

For the three and six months ended June 30, 2026, Telvantis and its subsidiaries contributed approximately 99 % of consolidated revenues, with 42 Telecom and its subsidiaries contributing the remaining 1 %.

SPECTRAL CAPITAL CORPORATION

1 unchanged sentence

(In thousands, except per share data and share count)

The following table presents significant segment expenses regularly provided to the CODM and used to assess segment performance for the three months ended March 31, 2026 and 2025:

Three Months Ended

The following table presents significant segment expenses regularly provided to the CODM and used to assess segment performance for the three and six months ended June 30, 2026 and 2025:

Three Months Ended Six Months Ended

June 30, June 30,

2026 2025 2026 2025

Revenue $ 318,174 $ - $ 646,686 $ -

Revenue, related party 104 - 104 -

Total revenues 318,278 - 646,790 -

Cost of revenue 314,877 - 641,199 -

Cost of revenue, related party 121 - 121 -

Gross profit 3,280 - 5,470 -

Operating expenses:

7 unchanged sentences

Change in FV of contingent consideration

Total other expense

Loss before income taxes

9,886 - 3,972 -

Other income 1 - 4 -

Total other income 9,417 - 3,091 -

Income (loss) before income taxes

7,560 ( 487 ) ( 1,745 ) ( 1,147 )

Income taxes 173 - 273 -

Net income (loss) $ 7,387 $ ( 487 ) $ ( 2,018 ) $ ( 1,147 )

Geographic Information

For the three months ended March 31, 2026 and 2025, revenues attributable to operations by geography were as follows:

Three Months Ended

For the three and six months ended June 30, 2026 and 2025, revenues attributable to operations by geography were as follows:

Three Months Ended Six Months Ended

June 30, June 30,

2026 2025 2026 2025

Unites States $ 313,904 $ - $ 638,403 $ -

For the three months ended March 31, 2026, the United States represented approximately 99% of consolidated revenues, reflecting the first full quarter of consolidation of Telvantis Voice Services, Inc.

Malta 4,156 7,932

Sweden 218 455

$ 318,278 $ - $ 646,790 $ -

For the three and six months ended June 30, 2026, the United States represented approximately 99 % of consolidated revenues, reflecting the first two quarters of consolidation of Telvantis Voice Services, Inc.

and its subsidiaries following their acquisition on December 31, 2025.

Malta and Sweden revenues are generated by 42 Telecom Ltd., Arcus Technologies Ltd., and 42 Telecom AB Ltd., respectively.

No revenues were generated in the United States, Malta, or Sweden during the three and six months ended June 30, 2025, as the acquisitions of Telvantis and 42 Telecom had not yet closed as of that date.

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 March 31, 2026 and December 31, 2025:

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

The following table presents property, plant and equipment, net by geographic location as of June 30, 2026 and December 31, 2025:

June 30, December 31,

Malta $ 106 $ 119

SPECTRAL CAPITAL CORPORATION

1 unchanged sentence

(In thousands, except per share data and share count)

connection with the acquisition of Telvantis are held in the United States, and the acquired intellectual property intangible assets are held by Spectral in the United States.

The following table presents intangible assets, net by geographic location as of March 31, 2026 and December 31, 2025:

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 intellectual property intangible assets are held by Spectral in the United States.

The following table presents intangible assets, net by geographic location as of June 30, 2026 and December 31, 2025:

June 30, December 31,

Europe $ 8,230 $ 8,749

United States 29,662 32,689

$ 37,892 $ 41,438

NOTE 10 – LEASE OBLIGATION

3 unchanged sentences

Lease costs are included in the unaudited condensed consolidated statements of operations and comprehensive loss as selling, general and administrative expenses.

The following table summarizes operating lease assets and liabilities as of March 31, 2026 and December 31, 2025:

The following table summarizes operating lease assets and liabilities as of June 30, 2026 and December 31, 2025:

June 30, December 31,

Operating Leases

5 unchanged sentences

Weighted Average Discount Rate 4 %

The operating lease costs totaled $ 17 and $ 0 , for the three months ended March 31, 2026 and 2025, respectively.

The following table presents the maturity of operating lease liabilities as of March 31, 2026:

The operating lease costs for the three and six months ended June 30, 2026 totaled $ 18 and $ 36 , respectively and for the three and months ended June 30, 2025, $ 0 .

The following table presents the maturity of operating lease liabilities as of June 30, 2026:

2026 (remaining 6 months) $ 34

1 unchanged sentence

imputed interest ( 5 )

SPECTRAL CAPITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data and share count)

NOTE 11 – RELATED PARTY TRANSACTIONS

4 unchanged sentences

Mexedia SpA and Mexedia DAC are considered related parties of the Company as Daniel Gilcher, who was appointed Chief Financial Officer of the Company effective January 3, 2026, simultaneously serves as Chief Financial Officer and Director of Mexedia SpA.

For the three months ended March 31, 2026, 42 Telecom recognized no revenue from Mexedia SpA and incurred cost of revenues of approximately $16 from Mexedia SpA representing residual termination charges.

Telvantis recognized

SPECTRAL CAPITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data and share count)

revenue of $117 from Mexedia DAC in January 2026, with no further activity in February or March 2026, and incurred no cost of revenues from Mexedia DAC during the three months ended March 31, 2026.

As of March 31, 2026 and December 31, 2025, accounts receivable from Mexedia SpA and Mexedia DAC were $9,332 and $11,710, respectively, reflected in accounts receivable, related party in the unaudited condensed consolidated balance sheets.

Accounts payable to Mexedia SpA and Mexedia DAC were $3,683 and $9,261, respectively, reflected in accounts payable, related party in the unaudited condensed consolidated balance sheets.

In addition, Telvantis has pre-acquisition loan obligations to Mexedia DAC totaling $7,259 and $7,277 as of March 31, 2026 and December 31, 2025, respectively, reflected in due to related party in the unaudited condensed consolidated balance sheets.

Mexedia DAC was historically a wholly owned subsidiary of Telvantis Voice Services, Inc.

(“TVS”) but was carved out of TVS prior to the Company’s acquisition of TVS and was excluded from the scope of TVS’s historical carve-out financial statements;

accordingly, Mexedia DAC was not acquired by the Company in the December 31, 2025 acquisition of TVS.

The Company continues to treat Mexedia DAC as a related party following the acquisition due to its historical affiliation with TVS.

For the three and six months ended June 30, 2026, 42 Telecom recognized revenue of $ 104 from Mexedia SpA and incurred cost of revenues of $ 121 from Mexedia SpA.

As of June 30, 2026 and December 31, 2025, accounts receivable from Mexedia DAC and Mexedia SpA were $ 9,332 and $ 11,710 , respectively, reflected in accounts receivable, related party in the unaudited condensed consolidated balance sheets.

Accounts payable to Mexedia DAC and Mexedia SpA were $ 3,683 and $ 9,261 , respectively, reflected in accounts payable, related party in the unaudited condensed consolidated balance sheets.

In addition, Telvantis has pre-acquisition loan obligations to Mexedia DAC totaling $ 7,247 and $ 7,277 as of June 30, 2026 and December 31, 2025, respectively, reflected in due to related party in the unaudited condensed consolidated balance sheets.

These obligations were assumed as part of the Telvantis acquisition on December 31, 2025 and were incurred in the ordinary course of Telvantis’s pre-acquisition operations.

Pursuant to the terms of the loan agreement, Telvantis was required to make monthly payments of $ 75 commencing after the acquisition date.

As no payments have been made to date, the full outstanding balance of $7,259 is due and payable in full as of March 31, 2026 in accordance with the terms of the agreement.

As of March 31, 2026 and December 31, 2025, amounts due from Mexedia SpA were $58 and $58, respectively, and amounts due from Telvantis Inc.

No scheduled payments have been made to date, the outstanding balance of $ 7,247 is due and payable as of June 30, 2026 in accordance with the terms of the agreement.

As of June 30, 2026 and December 31, 2025, amounts due from Mexedia SpA were $ 58 and $ 58 , respectively, and amounts due from Telvantis Inc.

were $ 1,308 and $ 1,299 , respectively, included in due from related party in the unaudited condensed consolidated balance sheets.

Issuance of Telvantis Earn-Out Shares to CFO-Controlled Entity

As described in Note 3 — Business Combinations, on May 22, 2026, the Company issued an aggregate of 6,924,700 shares of common stock in settlement of the earn-out component of the contingent consideration recognized in connection with the Telvantis acquisition.

Included within this issuance were 1,041,000 shares issued to OTUS LLC, an entity controlled by Daniel Gilcher, the Company’s Chief Financial Officer.

These shares did not constitute compensation for services rendered to the Company and were issued on the same terms, and subject to the same lock-up, trickle-out, and beneficial ownership limitation provisions, applicable to the other recipients of the Telvantis earn-out shares.

Transaction with Former Shareholder of 42 Telecom

3 unchanged sentences

Taddeo resigned as sole director of 42 Telecom effective December 31, 2025 and Heritage is no longer considered a related party of the Company from January 1, 2026.

A dividend of EUR 601 in respect of 42 Telecom's retained earnings for the year ended December 31, 2024 was declared payable to Heritage on October 31, 2025 and remained unpaid as of March 31, 2026.

This obligation of $690 and $706 as of March 31, 2026 and December 31, 2025, respectively, is reflected in accrued expenses and other current liabilities and due to related party, respectively, in the unaudited condensed consolidated balance sheets.

A dividend of EUR 601 in respect of 42 Telecom’s retained earnings for the year ended December 31, 2024 was declared payable to Heritage on October 31, 2025 and remained unpaid as of June 30, 2026.

This obligation of $ 685 and $ 706 as of June 30, 2026 and December 31, 2025, respectively, is reflected in accrued expenses and other current liabilities and due to related party, respectively, in the unaudited condensed consolidated balance sheets.

42 Telecom – Other receivable

2 unchanged sentences

Nexora is considered a related party of the Company as Nexora and 42 Telecom share common management.

SPECTRAL CAPITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data and share count)

The payment is subject to a five-year moratorium, during which no cash settlement is required unless Nexora generates profits directly from the transferred intellectual property, in which case partial or full payment becomes due earlier.

As of March 31, 2026 and December 31, 2025, the carrying amount of the receivable was $ 416 and $ 427 , respectively, reflected in other receivable, related party in the condensed consolidated balance sheets.

The change in carrying amount from December 31, 2025 to March 31, 2026 is attributable to foreign currency translation adjustments.

As of June 30, 2026 and December 31, 2025, the carrying amount of the receivable was $ 414 and $ 427 , respectively, reflected in other receivable, related party in the condensed consolidated balance sheets.

The change in carrying amount from December 31, 2025 to June 30, 2026 is attributable to foreign currency translation adjustments.

Management continues to monitor the balance for collectability.

No additional transactions occurred with Nexora during the three months ended March 31, 2026.

No additional transactions occurred with Nexora during the three and six months ended June 30, 2026.

Chief Executive Officer Compensation

Jenifer Osterwalder, the Company’s Chief Executive Officer, charges the Company $ 12 per month for services rendered.

Total compensation expensed during the three months ended March 31, 2026 and 2025 was $ 36 and $ 36 , respectively.

As of March 31, 2026 and December 31, 2025, amounts due to the CEO related to accrued compensation were $ 612 and $ 576 , respectively.

Total compensation expensed during the three and six months ended June 30, 2026 and 2025 was $ 36 and $ 72 , and $ 36 and $ 72 , respectively.

As of June 30, 2026 and December 31, 2025, amounts due to the CEO related to accrued compensation were $ 648 and $ 576 , respectively.

Loans from Related Parties

1 unchanged sentence

The loan bears no interest.

As of March 31, 2026 and December 31, 2025, the total amount outstanding under this agreement was $ 10 , reflected in due to related party in the unaudited condensed consolidated balance sheets.

Subsequent to March 31, 2026, the Company repaid the outstanding balance in full.

See Note 15 — Subsequent Events for further details.

SPECTRAL CAPITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data and share count)

During the three and six months ended June 30, 2026, the Company repaid the outstanding balance of $ 10 in full.

As of June 30, 2026 and December 31, 2025, the total amount outstanding under this agreement was $ 0 and $ 10 , respectively.

On June 2, 2025, the Company entered into a promissory note with Mr.

1 unchanged sentence

The note bears interest at 5 % per annum unless repaid within 60 days of issuance.

As of March 31, 2026 and December 31, 2025, the total amount outstanding under this note was $ 10 , reflected in due to related party in the unaudited condensed consolidated balance sheets.

Subsequent to March 31, 2026, the Company repaid the outstanding balance in full.

See Note 15 — Subsequent Events for further details.

During the three and six months ended June 30, 2026, the Company repaid the outstanding balance of $ 10 in full.

As of June 30, 2026 and December 31, 2025, the total amount outstanding under this note was $ 0 and $ 10 , respectively.

NOTE 12 – ACCOUNTS RECEIVABLE FINANCING FACILITY

5 unchanged sentences

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 as of March 31, 2026 and December 31, 2025, $ 88 and $ 332 , recognized as current liabilities in the unaudited consolidated balance sheets.

The outstanding funded amount as of June 30, 2026 and December 31, 2025, $ 0 and $ 332 , recognized as current liabilities in the unaudited consolidated balance sheets.

Customer payments are remitted to a bank account maintained at Goldman Sachs used exclusively for customer collections under the arrangement.

6 unchanged sentences

The arrangement operates on substantially the same basis as the 42 Telecom facility described above.

During the three months ended March 31, 2026, Telvantis utilized this facility in the ordinary course of its operations.

As of March 31, 2026 and December 31, 2025, the outstanding balance was $ 13,659 and $ 12,342 , respectively, recognized as a current liability in the unaudited condensed consolidated balance sheets.

During the three and six months ended June 30, 2026, Telvantis utilized this facility in the ordinary course of its operations.

As of June 30, 2026 and December 31, 2025, the outstanding balance was $ 17,457 and $ 12,342 , respectively, recognized as a current liability in the unaudited condensed consolidated balance sheets.

SPECTRAL CAPITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data and share count)

NOTE 13 – STOCKHOLDERS’ EQUITY (DEFICIT)

4 unchanged sentences

The conversion right shall not become exercisable by the holder until 12 months have elapsed from the date of issuance.

As of March 31, 2026 and December 31, 2025, no shares of Series Quantum Preferred Stock were outstanding.

As of June 30, 2026 and December 31, 2025, no shares of Series Quantum Preferred Stock were outstanding.

Settlement of Related Party Advance

On May 25, 2025, the Company entered into a settlement agreement with Sean Brehm and affiliated entities to rescind all prior agreements, including the arrangements under which the Series Quantum Preferred Stock discussed above had been issued.

Pursuant to the agreement, the Company no longer owes Mr.

Brehm compensation for outstanding demand advances totaling $ 676 , and the 1,000,000 shares of Series Quantum Preferred Stock previously issued to Mr.

Brehm were cancelled.

The settlement was recorded as a capital contribution of $ 676 to additional paid-in capital.

Business Combination — Telvantis Voice Services, Inc.

1 unchanged sentence

on December 31, 2025, the Company was obligated to issue 1,500,000 shares of common stock to the former shareholders, reflected as common stock to be issued within stockholders’ equity as of December 31, 2025.

During the three months ended March 31, 2026, the Company formally issued 1,000,000 of these shares.

The remaining 500,000 shares continue to be reflected as common stock to be issued within stockholders' equity as of March 31, 2026.

In January 2026, the Company formally issued 1,000,000 of these shares.

The remaining 500,000 shares continue to be reflected as common stock to be issued within stockholders’ equity as of June 30, 2026.

See Note 3 — Business Combinations for further details.

Private Placement

In June 2025, the Company commenced a private placement offering for up to 3,333,333 shares of the Company’s common stock at a price of $ 1.00 per share, or an aggregate of up to $ 3,333 .

During the six months ended June 30, 2025, the Company issued 74,700 shares of common stock for total proceeds of $ 85 under this offering.

On March 16, 2026, the Board of Directors approved a private placement offering of up to $ 1,000 in restricted shares of the Company’s common stock at a price below market value, to remain open until the Company achieves a listing on the Nasdaq Stock Market.

In March, 2026, the Company issued 100,000 shares of common stock at $ 2.00 per share for aggregate proceeds of $ 200 under this offering.

In June 2026, the Company issued an additional 12,500 shares of common stock at $ 1.60 per share for aggregate proceeds of $ 20 under this offering.

During the six months ended June 30, 2026, the Company issued a total of 112,500 shares of common stock for aggregate proceeds of $ 220 under this offering.

SPECTRAL CAPITAL CORPORATION

1 unchanged sentence

(In thousands, except per share data and share count)

Private Placement

On March 16, 2026, the Board of Directors approved a private placement offering of up to $1,000 in restricted shares of the Company's common stock at a price below market value, to remain open until the Company achieves a listing on the Nasdaq Stock Market.

During the three months ended March 31, 2026, the Company issued 100,000 shares of common stock at $2.00 per share for aggregate proceeds of $200 under this offering.

No shares were issued under a private placement during the three months ended March 31, 2025 .

Earnout share – TVS

In connection with the acquisition of Telvantis Voice Services, Inc., the Company agreed to issue up to 8,500,000 additional shares of common stock (the “Earn-Out Shares”) upon achievement of specified post-closing performance milestones tied to the Acquired Company’s revenue and operating profit during fiscal year 2026 (the “Earn-Out Milestones”), as described in Note 3 — Business Combinations and Note 4 — Fair Value Measurements.

On May 22, 2026, the Board of Directors determined that the Earn-Out Milestones had been achieved or duly accrued for issuance, and the Company issued 6,924,700 Earn-Out Shares to the former shareholders of the Acquired Company in settlement thereof.

No cash proceeds were received by the Company in connection with this issuance.

The contingent consideration liability was reduced by $ 14,474 , the fair value of the Earn-Out Shares issued, based on the quoted closing price of FCCN’s common stock on the issuance date.

The Earn-Out Shares were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder, are restricted securities bearing a customary restrictive legend, and are subject to a lock-up and trickle-out schedule and a 4.9 % beneficial ownership cap pursuant to a Lock-Up and Trickle-Out Agreement entered into by each recipient.

As of June 30, 2026, 1,575,300 Earn-Out Shares remained unissued and available for future issuance under the Purchase Agreement, subject to achievement of the remaining Earn-Out Milestones.

The Min $ 65,000 Share-Value Guarantee was not settled in connection with this issuance and remains outstanding as of June 30, 2026.

See Note 4 — Fair Value Measurements for further information.

Employee Options

4 unchanged sentences

The Plan provides for the issuance of up to 15,000,000 common shares for employees, consultants, directors, and advisors.

During the three months ended March 31, 2026, the Company granted options to purchase an aggregate of 200,000 shares of common stock to two independent members of the Board of Directors pursuant to a Board resolution dated January 3, 2026.

During the three and six months ended June 30, 2026, the Company granted options to purchase an aggregate of 200,000 shares of common stock to two independent members of the Board of Directors pursuant to a Board resolution dated January 3, 2026.

The options have an exercise price of $ 3.99 per share, representing the closing market price on the grant date, vest over 24 months at a rate of 4,166 shares per month commencing the first full month following the grant date, and are exercisable for five years from the grant date.

6 unchanged sentences

The per-option grant-date fair value was $ 3.24 , resulting in aggregate grant-date fair value of $ 649 for both awards combined.

No options were granted during the three months ended March 31, 2025.

During the three months ended March 31, 2026 and 2025, the Company recognized stock-based compensation expense related to stock options of $ 275 and $ 416 , respectively, included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive loss.

As of March 31, 2026, total unrecognized compensation expense related to unvested stock options was $ 742 , which is expected to be recognized over a weighted-average period of approximately 1.45 years.

The following table summarizes stock option activity for the three months ended March 31, 2026:

Exercise Price

No options were granted during the three and six months ended June 30, 2025.

During the three and six months ended June 30, 2026 and 2025, the Company recognized stock-based compensation expense related to stock options of $ 227 and $ 502 , and $ 221 and $ 636 , respectively, included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive loss.

As of June 30, 2026, total unrecognized compensation expense related to unvested stock options was $ 514 , which is expected to be recognized over a weighted-average period of approximately 1.51 years.

The following table summarizes stock option activity for the six months ended June 30, 2026:

Weighted Weighted

Stock Average Average Life

Options Exercise Price Remaining

Outstanding, December 31, 2025 3,646,875 $ 0.43 8.45

Issued 200,000 3.99 5

Exercised - - -

Forfeited/Expired - - -

Outstanding, March 31, 2026

Outstanding, June 30, 2026 3,846,875 $ 0.62 7.78

Vested, December 31, 2025 2,746,875 $ 0.43 8.45

Vested, March 31, 2026

NOTE 14 – COMMITMENTS AND CONTINGENCIES

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.

Vested, June 30, 2026 3,688,535 $ 0.47 7.92

SPECTRAL CAPITAL CORPORATION

1 unchanged sentence

(In thousands, except per share data and share count)

NOTE 14 – COMMITMENTS AND CONTINGENCIES

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.

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.

14 unchanged sentences

however, a loss contingency in the range of zero to $ 250 is reasonably possible.

No accrual has been recorded as of March 31, 2026 as the loss is not considered probable.

No accrual has been recorded as of June 30, 2026 as the loss is not considered probable.

42 Telecom Ltd.

10 unchanged sentences

NOTE 15 – SUBSEQUENT EVENTS

Repayment of Related Party Obligations

On April 28, 2026, the Company repaid in full the $10 promissory note outstanding to Mr.

Michael Turner, a member of the Board of Directors, originally dated June 2, 2025.

The note has been fully discharged and cancelled with no further obligations outstanding.

On April 29, 2026, the Company repaid in full the $10 loan outstanding to SKY DATA PLL, an Estonian corporation and shareholder of the Company.

The loan has been fully discharged and cancelled with no further obligations outstanding.

The Company has evaluated events through August 10, 2026, the filing date of this Quarterly Report on Form 10-Q and determined that there have been no additional subsequent events that occurred that would require adjustments to our disclosures in the unaudited condensed consolidated financial statements, other than as follows:

Filing of Registration Statement on Form S-1 and Proposed Public Offering

On July 17, 2026, the Company publicly filed a Registration Statement on Form S-1 with the Securities and Exchange Commission relating to a proposed underwritten public offering of shares of its common stock.

Sentinel Brokers Company, Inc.

is acting as representative of the underwriters pursuant to an Assignment and Assumption Agreement dated July 1, 2026 among the Company, Sentinel Brokers Company, Inc.

and Revere Securities LLC.

The Company has applied to list its common stock on The Nasdaq Capital Market under the symbol “FCCN.” The Registration Statement has not been declared effective, and there can be no assurance that the offering will be completed or that the listing application will be approved.

Related Party Working Capital Advance

On July 20, 2026, Jenifer Osterwalder, the Company’s President and Chief Executive Officer and a member of the Board of Directors, agreed to provide the Company with working capital advances of up to $ 100,000 , evidenced by a promissory note bearing interest at 4 % per annum with a fixed 90-day term maturing October 18, 2026, subject to an automatic 90-day extension upon the written request of the Company’s Chief Financial Officer.

As of the date of this report, Ms.

Osterwalder had advanced an aggregate of $ 50,000 to the Company under this arrangement, consisting of $ 20,000 advanced on July 24, 2026 and $ 30,000 advanced on July 27, 2026.

The Board of Directors approved the advance as a related party transaction under NRS 78.140 on July 22, 2026.

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

What changed 10-Q

Item 1. Financial Statements