Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2018
OR
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[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ________ to ________
Commission File No. 000-50274
Spectral Capital Corporation
(Exact name of Registrant as specified in its charter)
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Nevada
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51-0520296
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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701 Fifth Avenue, Suite 4200, Seattle, WA
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98104
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(Address of principal executive offices)
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(Zip/Postal Code)
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(206) 262-7820
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(Telephone Number)
___________
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(Former name or former address if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X] YES [ ] NO
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☒
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. [ ] Yes [ X] No
As of May __, 2018, there are issued and outstanding only common equity shares in the amount of 117,857,623 shares, par value $0.0001, of which there is only a single class. There are 5,000,000 preferred shares authorized and none issued and outstanding.
SPECTRAL CAPITAL CORPORATION
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION
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Page | |
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Item 1. Financial Statements
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3 | |
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
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11 | |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
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12 | |
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Item 4. Controls and Procedures
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12 | |
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PART II - OTHER INFORMATION
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Item 1. Legal Proceedings
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13 | |
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Item 1A. Risk Factors
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13 | |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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13 | |
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Item 3. Defaults Upon Senior Securities
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13 | |
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Item 4. Mine Safety Disclosures
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13 | |
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Item 5. Other Information
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13 | |
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Item 6. Exhibits
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13 | |
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SIGNATURES
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14 | |
1
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Report contains forward-looking statements. Such forward-looking statements are generally accompanied by words such as "intends," "projects," "strategies," "believes," "anticipates," "plans," and similar terms that convey the uncertainty of future events or outcomes. The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in ITEM 2 of this Report, the section entitled "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION." Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof and are in all cases subject to the Company's ability to cure its current liquidity problems. There is no assurance that the Company will be able to generate sufficient revenues from its current business activities to meet day-to-day operation liabilities or to pursue the business objectives discussed herein.
The forward-looking statements contained in this Report also may be impacted by future economic conditions. Any adverse effect on general economic conditions and consumer confidence may adversely affect the business of the Company.
Spectral Capital Corporation undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should carefully review the risk factors described in other documents the Company files from time to time with the Securities and Exchange Commission.
2
SPECTRAL CAPITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2018 AND DECEMBER 31, 2017
(UNAUDITED)
Item 1: Financial Statements
Our unaudited interim financial statements for the three months ended March 31, 2018 and 2017 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.
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INDEX TO UNAUDITED FINANCIAL STATEMENTS
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Condensed Consolidated Financial Statements of Spectral Capital Corporation, Inc.
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Condensed Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017 (unaudited)
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F-1
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Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2018 and 2017 (unaudited)
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F-2
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Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017 (unaudited)
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F-3
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Notes to the Condensed Consolidated Financial Statements (unaudited)
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F-4
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3
SPECTRAL CAPITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2018 AND DECEMBER 31, 2017
(UNAUDITED)
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March 31,
2018
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December 31,
2017
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Assets:
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Cash and cash equivalents
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$
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647
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$
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692
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Current assets
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647
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692
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Total assets
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$
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647
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$
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692
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Liabilities and Stockholders' Deficit:
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Current liabilities
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Accounts payable and accrued liabilities
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779
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779
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Related party advances and accruals
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618,140
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564,509
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Current liabilities
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618,919
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565,288
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Total liabilities
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618,919
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565,288
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Stockholders' Deficit:
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Preferred stock, par value $0.0001, 5,000,000 shares authorized, no shares issued and outstanding
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-
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-
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Common stock, par value $0.0001, 500,000,000 shares authorized, 117,857,623 shares issued and outstanding as of March 31, 2018 and December 31, 2017
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11,786
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11,786
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Additional paid-in capital
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27,787,681
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27,787,681
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Accumulated deficit
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(28,198,349
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)
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(28,144,934
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)
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Total stockholders' deficit
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(398,882
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)
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(345,467
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)
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Non-controlling interest
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(219,390
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)
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(219,129
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)
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Total stockholders' deficit
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(618,272
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)
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(564,596
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)
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Total liabilities and stockholders' deficit
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$
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647
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$
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692
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017
(UNAUDITED)
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Three Months
Ended
March 31,
2018
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Three Months
Ended
March 31,
2017
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Revenues
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$
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-
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$
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-
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Operating expenses:
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Selling, general and administrative
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14,366
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18,355
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Wages and benefits
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39,311
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37,063
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Total operating expenses
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53,677
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55,418
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Operating loss
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(53,677
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)
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(55,418
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)
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Loss from operations and before non-controlling interest and provision for income taxes
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(53,677
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)
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(55,418
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)
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Provision for income taxes
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-
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-
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Net loss before non-controlling interest
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(53,677
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)
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(55,418
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)
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(Income) loss attributable to non-controlling interest
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262
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196
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Net loss attributable to Spectral Capital Corporation
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$
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(53,415
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)
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$
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(55,222
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)
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Basic and diluted loss per common share
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$
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(0.00
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)
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$
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(0.00
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)
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Weighted average shares - basic and diluted
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117,857,623
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117,857,623
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SPECTRAL CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017
(UNAUDITED)
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Three Months
Ended
March 31,
2018
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Three Months
Ended
March 31,
2017
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net loss attributable to Spectral Capital Corporation
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$
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(53,415
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)
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$
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(55,222
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)
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Adjustments to reconcile net loss to net cash used in by operating activities:
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Non-controlling interest
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(261
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)
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(196
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)
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Changes in operating assets and liabilities:
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Prepaids and other assets
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-
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2,500
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Due to related parties - accrued salary
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39,311
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37,063
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Net cash used in operating activities
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(14,365
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)
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(15,855
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)
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Proceeds from related party advances
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14,320
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15,485
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Net cash provided by financing activities
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14,320
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15,485
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Change in cash and cash equivalents
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(45
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)
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(370
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)
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Cash and cash equivalents, beginning of year
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692
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1,222
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Cash and cash equivalents, end of year
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$
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647
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$
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852
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Supplemental disclosures of cash flow information:
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Cash paid for interest
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$
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-
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$
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-
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Cash paid for income taxes
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$
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-
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$
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-
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Non cash investing and financing activities:
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Relief of related party advances and accruals treated as a capital contribution to additional paid-in capital
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$
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-
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$
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-
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2018
(UNAUDITED)
NOTE 1 – BUSINESS AND NATURE OF OPERATIONS
Spectral Capital Corporation (the "Company" or "Spectral") was incorporated on September 13, 2000 under the laws of the State of Nevada. Spectral is focused on the identification, acquisition, development, financing of technology that has the potential to transform existing industries. The Company looks for technology that can be protected through patents or laws regarding trade secrets. Spectral has acquired significant stakes in three technology companies currently and actively works with management to drive these companies toward increasing market penetration in their particular verticals. Spectral intends to own, in full or in part, technology companies whose founders and key management can take advantage of the deep networks and experience in technology development embodied in Spectral management.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company is in the development stage and has sustained substantial losses since inception. As of March 31, 2018, the Company has cash on hand of $647 and negative working capital of $618,272. The Company expects current cash on hand will not be able to fund operations for a period in excess of 12 months. These factors raise substantial doubt regarding the Company's ability to continue as a going concern.
To date management has funded its operations through selling equity securities and advances from related parties. The ability of the Company to continue as a going concern is dependent on the Company generating cash from the sale of its common stock and/or obtaining debt financing and attaining future profitable operations, however, there can be no assurance the Company will be successful in these efforts. As of the date of these consolidated financial statements the Company does not have any firm commitments for capital. Without the required capital, the Company has had to reduce their development expenditures which will delay the completion of products which are expected to generate future revenues.
Risks and Uncertainties
The Company has a limited operating history and has not generated revenues from our planned principal operations.
The Company's business and operations are sensitive to general business and economic conditions in the U.S. and worldwide. These conditions include short-term and long-term interest rates, inflation, fluctuations in debt and equity capital markets and the general condition of the U.S. and world economy. A host of factors beyond the Company's control could cause fluctuations in these conditions, including the political environment and acts or threats of war or terrorism. Adverse developments in these general business and economic conditions, including through recession, downturn or otherwise, could have a material adverse effect on the Company's consolidated financial condition and the results of its operations.
The Company currently has no sales and limited marketing and/or distribution capabilities. The Company has limited experience in developing, training or managing a sales force and will incur substantial additional expenses if we decide to market any of our current and future products. Developing a marketing and sales force is also time consuming and could delay launch of our future products. In addition, the Company will compete with many companies that currently have extensive and well-funded marketing and sales operations. Our marketing and sales efforts may be unable to compete successfully against these companies. In addition, the Company has limited capital to devote sales and marketing.
The Company's industry is characterized by rapid changes in technology and customer demands. As a result, the Company's products may quickly become obsolete and unmarketable. The Company's future success will depend on its ability to adapt to technological advances, anticipate customer demands, develop new products and enhance our current products on a timely and cost-effective basis. Further, the Company's products must remain competitive with those of other companies with substantially greater resources. The Company may experience technical or other difficulties that could delay or prevent the development, introduction or marketing of new products or enhanced versions of existing products. Also, the Company may not be able to adapt new or enhanced products to emerging industry standards, and the Company's new products may not be favorably received. Nor may we have the capital resources to further the development of existing and/or new ones.
7
Interim Consolidated Financial Statements
The accompanying unaudited interim consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these consolidated financial statements have been included. Such adjustments consist of normal recurring adjustments. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2017. The results of operations for the three months ended March 31, 2018 are not indicative of the results that may be expected for the full year.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company, Spectral Holdings, Inc, and its 60% owned subsidiaries, Noot Holdings, Inc. from its date of incorporation of February 28, 2013, and Monitr Holdings, Inc. from its date of incorporation of December 1, 2013. All material intercompany accounts and transactions have been eliminated in consolidation.
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.
Fair Value of Financial Instruments
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:
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Level 1
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Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
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Level 2
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Include other inputs that are directly or indirectly observable in the marketplace.
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Level 3
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Unobservable inputs which are supported by little or no market activity.
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The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. As of March 31, 2018 and December 31, 2017, the Company does not have any assets or liabilities which would be considered Level 2 or 3.
The Company's financial instruments consist of cash and cash equivalents, investments in technologies and related party advances. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these consolidated financial statements.
The Company measures certain assets at fair value on a nonrecurring basis. These assets include cost method investments when they are deemed to be other-than-temporarily impaired, assets acquired and liabilities assumed in an acquisition or in a nonmonetary exchange, and property and equipment and intangible assets that are written down to fair value when they are held for sale or determined to be impaired. Excluding these items, the Company did not have any significant assets or liabilities that were measured at fair value on a nonrecurring basis in periods subsequent to initial recognition.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
8
Basic Loss Per Share
Basic loss per share is calculated by dividing the Company's net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company's net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. Common share equivalents totalling 13,000,000 and 13,000,000 were outstanding at March 31, 2018 and 2017, respectively, representing outstanding warrants and options, and were not included in the computation of diluted earnings per share for the three months ended March 31, 2018 and 2017, as their effect would have been anti-dilutive.
Non-Controlling Interests
Non-controlling interest disclosed within the consolidated statement of operations represents the minority ownership 40% share of net income (losses) of Noot Holdings, Inc. and Monitr Holdings, Inc. incurred during the three months ended March 31, 2018. The following table sets forth the changes in non-controlling interest for the three months ended March 31, 2018:
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Non-Controlling
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Interest
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Balance at December 31, 2017
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(219,129
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)
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Net loss attributable to non-controlling interest
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(262
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)
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Balance at March 31, 2018
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$
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(219,391
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)
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Foreign Currency
The Company's functional currency is the United States Dollar. Transaction gains or losses related to balances denominated in a currency other than the functional currency are recognized in the consolidated statements of operations. As a result of these foreign currency transactions in which require payment in a currency other than the United States Dollar, the Company has recorded foreign currency (income) losses within the accompanying consolidated statement of operations.
Recent Accounting Pronouncements
In May 2014, and later amended in August 2015, the Financial Accounting Standards Board ("FASB") issued new Accounting Standards Update ("ASU") regarding revenue recognition under GAAP. This new guidance will supersede nearly all existing revenue recognition guidance, and is effective for public entities for annual and interim periods beginning after December 31, 2017. Early adoption is permitted for reporting periods beginning after December 15, 2016. The Company is currently evaluating the impact of this new guidance on the Company's financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 840), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in this standard are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, for a public entity. Early adoption of the amendments in this standard is permitted for all entities and the Company must recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently in the process of evaluating the effect this guidance will have on its consolidated financial statements and related disclosures.
9
NOTE 3– RELATED PARTY TRANSACTIONS
Akoranga, AG
At March 31, 2018 and December 31, 2017, $0 and $0, respectively, was owed to Akoranga AG, a Swiss Company owned by the CEO of Spectral. Akoranga was formed to facilitate the Company's business in Europe. In connection with the facilitation of the Company's operations which includes making payments on the Company's obligations, Akoranga charges the Company a 10% fee on all transactions processed by Akoranga on behalf of the Company. The Company ceased using Akoranga services in August 2014. The advances do not incur interest and are payable upon demand. The decrease in amounts payable were due to changes in foreign currency exchange rates. As of December 31, 2017, all loans with Akoranga have been forgiven. The forgiveness was treated as a capital contribution to additional paid-in capital as the Company's CEO also controls the operations of Akoranga.
Jenifer Osterwalder, the Company's Chief Executive Officer
Through August 2014, Akoranga charged the Company 12,350 CHF per month for the Company's CEO, Jenifer Osterwalder, for services related to the Company. Starting in September 2014, these amounts were the responsibility of the Company. Total amounts expended in the Company's consolidated financial statements in connection with the CEO's services was $39,311 and $37,063 for the three months ended March 31, 2018 and 2017, respectively. Amounts charged by Akoranga to the Company prior to August 2014 are included within the Akoranga liability disclosed above. As of March 31, 2018 and December 31, 2017, amounts due to the CEO related to accrued salaries were $507,143 and $467,832, respectively.
Commencing in September 2014, from time to time due to the limited cash flow available, the Company's CEO pays certain operating expenditures on behalf of the Company. These advances bear no interest and are due on demand. As of March 31, 2018 and December 31, 2017, the Company's CEO was due $110,997 and $96,677 in connection with these advances, respectively.
NOTE 4 – STOCKHOLDERS DEFICIT
Employee Options
The Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation – Stock Compensation which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values.
The Company has adopted a stock option and award plan to attract, retain and motivate its directors, officers, employees, consultants and advisors. Options provide the opportunity to acquire a proprietary interest in the Company and to benefit from its growth. Vesting terms and conditions are determined by the Board of Directors at the time of the grant. The Plan provides for the issuance of up to 15,000,000 common shares for employees, consultants, directors, and advisors.
On February 6, 2012, the Company granted 7,500,000 options to two employees. Stock-based compensation is being recognized over the two year vesting period. The options were valued at $3,408,750 using the Black-Scholes Option Pricing Model. Employee stock-based compensation expense relating to options granted in 2010 and 2012, recognized during the three months ended March 31, 2018 and year ended December 31, 2017 totalled $0 and $0, respectively.
NOTE 5 – COMMITMENTS AND CONTINGENCIES
The Company leases office space on a three month basis in Seattle, Washington.
NOTE 6– SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to March 31, 2018 to the date these consolidated financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these consolidated financial statements.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements. The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included in this report and those in our Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission March 19, 2018 and all subsequent filings.
OVERVIEW
Spectral Capital Corporation ("Spectral" or the Company, also "We or Us") is a technology company focused on the identification, acquisition, development, financing of technology that has the potential to transform existing industries. We look for technology that can be protected through patents or laws regarding trade secrets. Spectral has acquired significant stakes in two technology companies currently and actively works with management to drive these companies toward increasing market penetration in their particular verticals. Spectral intends to own, in full or in part, technology companies whose founders and key management can take advantage of the deep networks and experience in technology development embodied in Spectral management.
RESULTS OF OPERATIONS
Comparison of the Three Months Ended March 31, 2018 and March 31, 2017
Operating expenses for the three months ended March 31, 2018 totalled $53,677, compared to $55,418 for the three months ended March 31, 2017, a decrease of $1,741 or 3.1%. The slight decrease from the prior year is directly related to our limitations of capital. Major expenses during the three months ended March 31, 2018 and 2017, related to salaries accrued to our Chief Executive Officer and professional fees in connection with the Company's public filings.
The Company's consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. For the three months ended March 31, 2018, net cash used in operating activities, consisted primarily of loss from operations offset by the accrual of our Chief Executive Officers salary, was $14,365 compared to net cash used of $15,855 for the three months ended March 31, 2017. The decrease in net cash used by operating activities was a result of decreased expenditures during the three months ended March 31, 2018 due to the limited operations.
Net cash provided by financing activities was $14,320 and $15,485 for the three months ended March 31, 2018 and 2017, respectively. During the current and prior period, the Company was dependent upon advances provided by the Chief Executive Officer. It is expected that the Chief Executive Officer will continue to fund operations until sufficient capital is obtained.
We believe that our current financial resources are not sufficient to meet our working capital requirements over the next year. Additional funding will be necessary in order to expand portfolio operations and to reach our goals. Currently, the Company does not have any commitments or assurances for additional capital nor can the Company provide assurance that such financing will be available to it on favorable terms, or at all. As of March 31, 2018, the Company has limited the amount of capital spent on the development of their technologies. If, after utilizing the remaining sources of capital available to the Company, further capital needs are identified and the Company is not successful in obtaining the financing, it may be forced to curtail its existing or planned future operations even further. In addition, if necessary, we will decrease expenses further and redirect our efforts towards a sale of one of more of our assets should funding become inadequate.
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Our short-term prospects are promising given our success to date in securing the two portfolio companies, Noot and Monitr. We believe we will experience significant operational and financial growth from these and other portfolio companies during the next 12 months. However, we need significant capital to implement our plan.
Off Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for a smaller reporting company.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
As required by Rule 13a-15 or Rule 15d-15(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), our management, including our principal executive officer and principal accounting officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing evaluation, we have concluded that our disclosure controls and procedures were not effective as of March 31, 2018 and that they do not allow for information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission ("SEC") rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the us in the reports that we file or submit under the Exchange Act is accumulated and communicated to the Company's management, including its Chief Executive and Principal Accounting & Financial Officers as appropriate to allow timely decisions regarding required disclosure.
The material weaknesses were first identified in our annual report on Form 10-K for the year ended December 31, 2012 in which related to a lack of an accounting staff resulting in a lack of segregation of duties necessary for an effective system of internal control. The weakness in segregation of duties will continue to exist until such time as management can retain internal staff to properly segregate duties.
(b) Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Unregistered Sales of Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information
None.
Item 6. Exhibits
EXHIBITS
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List of Exhibits
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3(i)(1)
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3(i)(2)
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3(ii)
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31.1
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Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
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31.2
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Certification of Chief Financial and Principal Accounting Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
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32.1
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Certification of the Company's Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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32.2
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Certification of the Company's Chief Financial and Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Spectral Capital Corporation
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/s/ Jenifer Osterwalder
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Jenifer Osterwalder
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President and Chief Executive Officer
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Dated: May ___, 2018
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