ITEM 1. DESCRIPTION OF BUSINESS
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 and intends to increase its portfolio over time.
CORPORATE HISTORY AND DEVELOPMENT
We were incorporated in the State of Nevada on September 13, 2000 as Galaxy Championship Wrestling, Inc., a media and entertainment company focused on developing, producing and marketing live entertainment in the professional wrestling sphere.
On March 31, 2004, unable to generate sufficient revenues to sustain our professional wrestling business, we ceased operations in this field and began exploring other business opportunities.
Also, on March 31, 2004 our controlling shareholders entered into a certain private stock purchase agreement, wherein they sold an aggregate of 5,750,000 of our common shares, representing a sixty-two and seventeen twentieths percent (62.85%) controlling interest, to an unrelated third party.
By certificate of amendment filed June 17, 2004, we changed our name from Galaxy Championship Wrestling, Inc. to FUSA Capital Corporation.
During the period from March 31, 2004 until March 7, 2005 we had no meaningful operations and did not carry on any active business, focusing instead on identifying and evaluating the merits of alternative potential business and acquisition opportunities which might allow us to restart operations.
On March 7, 2005 we entered into a certain plan and agreement of reorganization with FUSA Technology Investments Corp. ("FTIC"), a Nevada corporation engaged in the emerging growth field of audio and video search engine technology, whereby we acquired all of the issued and outstanding capital stock of FTIC in addition to obtaining
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certain intellectual property concepts related to search engine technology as developed by FTIC and its principals. In March of 2005 we also entered into a 3 for one stock dividend payable to our shareholders.
From April, 2005 until September 2010, we were engaged continuously in the development and operation of consumer focused media search engine technologies and portals. During the last nine months of 2009, we began to substantially curtail our operations and ongoing technology development as a consequence of (i) having completed a substantial portion of our planned principal technology development work and (ii) being unable to raise sufficient funds through revenue or sales of debt or equity securities to continue our previous levels of operation and development. We ceased operating our Internet properties in December 2010.
We had consistently lost money on our on-line consumer media properties due to the expenses involved in hosting, promotion, development and management of those sites. In an effort to maintain as much traffic as possible on our most popular media site, www.searchforvideo.com, which is also responsible for a large proportion of our expenses, we contracted with Brass Consulting Ltd. to maintain the site in exchange for net revenue produced from the site. This agreement was cancellable after 30 days notice. We cancelled this agreement in September 2009. We were not able to operate the site properly internally or through an external provider.
On June 29, 2009, our Board of Directors resolved to amend the Articles of Incorporation pursuant to Nevada Revised Statues 78.207 to decrease the number of authorized shares of our common stock, par value $0.0001, from 500,000,000 to 333,333 shares. Correspondingly, our Board of Directors affirmed a reverse split of one thousand and five hundred (1,500) to one (1) in which each shareholder was issued one (1) share in exchange for every one thousand and five hundred (1,500) common shares of their currently issued common stock. The record date for the reverse split was July 6, 2009.
On July 27, 2010, our shareholders voted to change our name to Spectral Capital Corporation and to increase number of shares of our authorized common stock from 333,333, par value $0.0001 to 500,000,000, par value $0.0001.
On August 18, 2010, we entered into a financing with a third party, Trafalgar Wealth Management. Under the terms of the financing, for aggregate consideration of $50,000 or $0.001 per common share, we sold 50,000,000 common shares and issued warrants to purchase 10,000,000 common shares at an exercise price of $1.00 per share. Under the terms of the agreements as amended in 2011, subject to certain terms and conditions, Trafalgar is obligated to exercise at least $1,000,000 worth of these warrants over the next 24 months or Spectral will receive back 5,000,000 of the shares.
Pursuant to a notice of conversion by holders of our April 2009 promissory notes, we converted the outstanding of interest and principal under the notes, which was in excess of $50,000, for a settled amount of $50,000. Under the terms of the April 2009 note, we are required to convert these shares at the current financing price of $0.001 per share. Therefore, on August 18, 2010 we issued 50,000,000 shares to various holders of the April 2009 promissory notes, which represents 49.9% of our current issued and outstanding shares.
In September 2010, the Company purchased an interest in mineral properties in the Chita region of the Russian Federation. The Kadara and Kaltagay license is located in the Mogochinsky district of the Chita Region in the Russian Federation. Initially, we purchased 47% of the License for prospecting, exploration and production of gold and all other metals. The length of the License runs to August 31, 2031. The size of the License is 186 square kilometers or 18,200 hectares. Development and exploration activities are currently being undertaken. In December, 2010, we purchased an additional interest of 5% in this property, bringing our total interest in the property to 52%.
In January, 2011, we purchased a 65% interest in mineral properties in the Bayankol River region of Kazakhstan (“Bayankol”).
In July, 2011, we conveyed our interest in our Chita property back to our counterparty in exchange for cancellation of warrants to purchase Spectral common stock issued in the transaction and our right to be reimbursed for incurred costs to date. We have not yet sought any reimbursement under this agreement.
In September, 2011, we developed a partnership in Saratov, Russia to acquire and develop oil leases in the region.
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In December, 2011, we restructured our interest in our Bayankol property. The agreement rescinded the original transaction of January 14, 2011 and the previously issued warrants were cancelled. Spectral agreed to issue 1,000,000 common shares of Spectral stock in exchange for an option to purchase 65% of the property. Spectral will also have an obligation to find third party debt financing of $200,000,000 over five years to maintain its interest in the Bayankol property.
In February, 2012, we acquired a 60% interest in a Canadian oil and gas field in the Red Earth region of Alberta for a cash payment of $750,000, which we paid. Under the agreement, we also had the right to fund additional drilling on the property up to $17,500,000 on a secured creditor basis. The property is currently in production and producing oil. There are eight permitted drilling locations on the property.
In December, 2012, the Company entered into an agreement with Akoranga AG, a Company owned by the CEO of Spectral, to transfer its ownership interests in the Alberta oil and gas properties for $950,000, the value of Spectral’s contributions to the project to date. In satisfaction of the purchase price, Akoranga agreed to offset liabilities of Spectral in the amount of $626,022. The balance owing of $323,978 is non-interest bearing and was to be repaid within a one year period. Subsequent to the year ended December 31, 2013, the fulfillment of the agreement was extended to December 31, 2014. 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.
On February 26, 2013, Spectral Capital Corporation, through its subsidiary, Spectral Holdings, Inc. signed a definitive Technology Acquisition Agreement (“Agreement”) to acquire mobile search engine and mobile sharing technology from Fiveseas Securities Ltd. Under the Agreement, Spectral issued Fiveseas 5,000,000 common shares of Spectral Capital Corporation, par value $0.0001. The Agreement calls for the technology to reside within a newly formed entity called Noot Holdings, Inc., a Delaware corporation, which Spectral is a 60% owner of and Fiveseas is a 40% owner of. Fiveseas was granted a right of first refusal for any subsequent sale of the technology.
On March 7, 2013, Spectral sold 1,650,000 common shares, par value $0.0001 at approximately $0.61 per share and received a total of $1,000,000 USD in financing proceeds. Spectral also issued warrants to purchase 1,650,000 common shares, par value $0.0001 to the purchasers at an exercise price of $0.80 per share. The warrants expired on March 6, 2015. The shares were sold in a private placement to a non-US purchaser. There were no commissions paid in the financing and no registration rights granted.
On March 14, 2013, Spectral Capital Corporation purchased 8% of the issued and outstanding shares of Kontexto, Inc., a Canadian corporation. Spectral purchased the shares from Sargas Capital, Ltd., a minority shareholder, in exchange for 5,000,000 common shares of Spectral stock, par value $0.0001 and warrants to purchase 5,000,000 common shares at $0.85 per share, expiring on March 13, 2015. There were no commissions associated with the transaction and the shares were issued to non US shareholders of a Sargas Capital, Ltd., a Canadian company. The Company's CEO is an officer of Sargas Capital, Ltd. but does not have any holdings in Sargas Capital, Ltd.
On December 1, 2013, Spectral Capital Corporation, through its subsidiary, Spectral Holdings, Inc. signed a definitive Technology Acquisition Agreement (“Agreement”) to acquire a technology application and service that enhances the way people find, consume, analyze, share and discuss financial news and topics, equities, commodities and currencies on the web from TL Global Inc. Under the Agreement, Spectral issued TL Global Inc. 5,000,000 common shares of Spectral Capital Corporation, par value $0.0001. The Agreement calls for the technology to reside within a newly formed entity called Monitr Holdings, Inc., a Delaware corporation, which Spectral is a 60% owner of and TL Global Inc. is a 40% owner of. TL Global Inc. was granted a right of first refusal for any subsequent sale of the technology.
Our principal executive offices are located at 4500 9th Avenue NE, Seattle, Washington 98105. Our phone number is (206) 385-6490. The Company’s year end is December 31.
PRINCIPAL PRODUCTS AND SERVICES
Spectral is focused on the identification, acquisition, development, and 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 two technology companies and intends to increase its portfolio over time.
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Companies within the technology development and commercialization sector have a variety of areas of principal competence. Some companies focus on aggressively developing a portfolio of intellectual property and then licensing that property and defending it through litigation. Others focus on a technology embodied in a software product or device which has the potential to be acquired by businesses and/or consumers at a profit. Others seek to develop and commercialize technology that attracts a significant number of users who can be monetized through advertising. Of course, technology development and commercialization is a vast and complex field. Spectral has had an initial focus on information technology with a direct value proposition to businesses or consumers.
Like all companies that seek to develop a portfolio of high impact technologies and the corporate and organizational structure to monetize those technologies, Spectral must do the specialized work of lowering the risk profile of the commercialization of a particular technology to the point where it is able to grow at a reasonable customer acquisition cost.
Our business differs from those companies whose capital reserves, successful previous ability to monetize technology and scale, efficiencies and existing customer base allow them to select and develop technology by flooding the technology with financial and human resources. Spectral’s approach is much more targeted. We only develop technology that we believe has a very specific fit with our expertise and limited capital. We develop technology that does not require massive investments in sales and marketing in order to reach an initial audience.
We currently have two technology companies in the Spectral portfolio, Noot, and Monitr.
Noot is a mobile technology company that created the mobile application “Noot” which utilized proprietary search engine technology for mobile devices that delivered personalized information to the user. While Noot is no longer a working mobile application, as we determined the revenue potential did not meet our expectations, we are seeking alternative business opportunities to utilize the underlining technology.
Monitr, launched in late 2014, is a technology and financial data services company that identifies for investors stocks that its software detects to be trending up in price at the moment.
· Monitr leverages cloud computing, big data and software to analyze the financial markets to discover those stocks that are trending now. Thousands of companies, news stories, blogs and opinion pieces are analyzed daily to uncover the trends and displayed in an accessible and easy-to-use web-based interface for investors and traders.
· Many investors use only a few sources to become informed of market conditions, Monitr provides investors with access to thousands of sources.
Monitr specializes in the analysis of news and opinion to determine the aggregate sentiment and trends of equities across markets in part to detect trends and provide relevant data for its users. In a change to its business model, Monitr no longer offers these services direct to individual customers for monthly or annual fees. Instead, it has focused on sourcing its services to professional trading organizations that want access to Monitr’s trend detecting software.
On September 30, 2015 one of Spectral´s portfolio companies, Kontexto, ceased operations and is no longer in business.
Competition
We compete with a wide variety of parties in connection with our efforts to: (i) attract users to our various Analytics, Search & Software portfolio companies and the ones we intend to develop; (ii) develop, market and distribute our current and anticipated B2C (“Business to Consumer”) and B2B (“Business to Business”) software applications (“Applications or Apps”) as developed by our portfolio companies; (iii) attract third parties to distribute our Applications and related technology; and (iv) attract advertisers. In the case of our anticipated search services generally, our competitors include Google and other destination search websites and search centric portals (some of which provide a broad range of content and services and/or link to various desktop applications), third party toolbar, convenience search and applications providers, other search technology and convenience service providers (including internet access providers, social media platforms, online advertising networks, traditional media companies and companies that provide online content). When we market our portfolio search and analytics services, we compete against a variety of established players and new entrants.
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Moreover, some of our current and potential competitors have longer operating histories, greater brand recognition, larger customer bases and/or significantly greater financial, technical and marketing resources than we do. As a result, they have the ability to devote comparatively greater resources to the development and promotion of their products and services, which could result in greater market acceptance of their products and services relative to those offered by us.
In the case of our portfolio companies Noot and Monitr, we believe that our ability to compete successfully will depend primarily upon the relevance and authority of our search results, the usefulness of our analytics and other content, the functionality of our software and the quality of related content and features and the attractiveness of the services provided by our technology generally to consumers and business relative to those of our competitors. All of these attributes require capital expenditures in order to compete in this marketplace effectively.
Marketing and Customers
Noot is no longer a working mobile application, however, its foundation of mobile search and machine learning is still relevant today. Given adequate funding to upgrade its software, we believe there are alternative markets in which Noot could enter. The mobile search sector has much room to grow.
With the growth of Fintech, Monitr has a growing list of competitors, however, we believe that Monitr´s trend detecting software performs well relative to the competition. Over time, though, Monitr will require additional investment into its software to remain competitive in the growing marketplace.
Principal Agreements Affecting Our Ordinary Business
We do not have any current long-term agreements that impact our business.
Information Technology Governmental Regulation
Our operations are subject to various rules, regulations and limitations impacting the information technology industry as whole.
Environmental Matters
We do not anticipate any significant impact of environmental regulations on our business.
OPERATIONS
Spectral is focused on the identification, acquisition, development, and 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 two technology companies and intends to increase its portfolio over time.
The majority of our operations consist of the development and commercialization of portfolio technology; including attendant information security needs and providing consistent and reliable access to our applications/technology.
RESEARCH AND DEVELOPMENT
We conducted development efforts regarding our previously held oil and gas properties. As we have divested of our operating oil assets, we do not anticipate any additional development expenses in existing the natural resource sector.
For the year ended December 31, 2020, we have not incurred research and development expenses related to the development of our current software products and for our previous technology business.
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COMPETITION
Overview
Some of the largest and most technologically sophisticated and financially successful companies in the world compete in the search engine and software development space. Capital requirements in this space can easily run into the hundreds of millions of dollars and Spectral is in no way able to compete directly against its larger and more well-financed competitors with respect to technology brands which require hundreds of millions of dollars to be spent either on technology development or sales and marketing. Instead, we tend to compete against much smaller companies, with limited capital resources, who are all looking at early-stage technology companies which require 1-4 years of development and $2-$5 million dollars in financing in order to reach critical mass in an important market.
Therefore, Spectral, like its smaller competitors within this space, can compete only by having a low enough overhead, a flexible enough risk profile, patience, a willingness to secure expensive management and technological resources on a flexible project basis and the utilization of equity-based incentives to attract talented personnel who find the risk reward profile of emerging growth companies appealing.
Failure of Competitors
Many of our smaller competitors fail because of improperly architected technology, excessive spending on sales and marketing, information technology security problems, the failure to secure required development capital, the inability to efficiently develop a customer acquisition program cost effectively and the inability to efficiently and cost effectively manage technology development.
Our Competitive Position
Because we currently have already acquired interests in two portfolio companies, our competitive position with respect to our existing projects is relevant to our ability to attract and retain key management personnel. The technology sector is booming and successes like Google, Facebook and Twitter, as well as a proliferation of other mobile technologies, drive intense competition for executive talent in the industry. As a smaller competitor without a track record operating in a booming area, we will have to offer significant cash and equity incentives to attract talented personnel. As we have had some limited success to date in attracting officers and board members based on the strength of our portfolio companies to date, we believe that we are reasonably well positioned to compete for these human resources if we are able to raise significant additional funding.
SIGNIFICANT CUSTOMERS AND SUPPLIERS
We are not particularly dependent on any one customer or supplier.
INTELLECTUAL PROPERTY
Overview
Our intellectual property consists almost exclusively of trade secret protectable software code and proprietary information technology architecture.
We regard our intellectual property rights, including trademarks, domain names, trade secrets, patents, copyrights and other similar intellectual property, as critical to our success.
The businesses within our Noot Search and Monitr´s trend detection software rely upon trade secrets, including algorithms for the generation, organization and presentation of search results.
Trademarks
We no longer intend to apply for registration of a trademark with the United States Patent and Trademark Office given the company’s current status.
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Trade Secrets
Whenever we deem it important for purposes of maintaining the secrecy of information, such as sensitive and valuable search algorithms, we require parties with whom we share, or who otherwise are likely to become privy to, our trade secrets or other confidential information to execute and deliver to us confidentiality and/or non-disclosure agreements. Among others, this may include employees, consultants and other advisors, each of whom may require us to execute such an agreement upon commencement of their employment, consulting or advisory relationships. These agreements generally provide that all confidential information developed or made known to the individual by us during the course of the individual’s relationship with us is to be kept confidential and not to be disclosed to third parties except under specific circumstances.
As of the date of this annual report on Form 10-K for the year ended December 31, 2020, we have executed non-disclosure agreements with all of our key employees, consultants or advisors.
EMPLOYEES
For the year ended December 31, 2020, we had one full-time employee.
We are not subject to any collective bargaining agreements and believe that our relationships with our employees and consultants are good.