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 condensed consolidated financial statements and related notes included in this report and those in our Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission on March 4, 2022 and all subsequent filings.





OVERVIEW

Spectral Capital Corporation ("Spectral," the "Company," "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. 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.

In January 2022, the Company commenced a new line of business which is providing data and telecommunications reselling services on a global basis. On February 15, 2022, the Company entered into a telecommunications services agreement with Sky Data PLL OU (Estonia) to provide long distance switching services. The contract does not contain a fixed term or value and is on an as needed basis via invoice for Sky Data PLL OU. The Company is focusing on this line of business and is currently expanding its network on an as needed basis by adding as many ports as its customers require in any given month. We provide business to business (B2) telecommunications interconnection services to mainly Asia, South America and Africa. This is done by negotiating directly with international private and public carriers for telecommunications rates based on certain volume and transaction levels.





RESULTS OF OPERATIONS

Comparison of the Nine Months Ended September 30, 2022 and 2021





Revenues

We are currently engaged in a technology development business and recently commenced operations within the telecom industry. Revenues increased from $0 for the nine months ended September 30, 2021 to $3,070,487 for the nine months ended September 30, 2022. The increase is due commencing our new business venture. The Company temporarily paused its current operations during increase is due to launching of our new business venture.





Cost of Revenues

We are currently engaged in a technology development business and recently commenced operations within the telecom industry. Cost of revenues increased from $0 for the nine months ended September 30, 2021 to $2,894,267 for the nine months ended September 30, 2022. The increase is due commencing our new business venture.





Operating Expenses

Operating expenses increased $225,827, from $133,324 for the nine months ended September 30, 2021 to $359,151 for the nine months ended September 30, 2022.

The significant increase was due to the expansion of our operations due to our new line of business.


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Liquidity and Capital Resources

As of September 30, 2022, we had $1,074 of cash on hand. We intend to fund operations through the use of cash on hand, cash flows from operations and through debt and equity financings until sufficient cash flows from operations can be achieved.

Net cash used in operating activities increased $23,170 from $25,950 cash used during the nine months ended September 30, 2021 to $49,120 cash used in the nine months ended September 30, 2022. This increase was primarily related to the Company having increased operations.

Net cash provided by financing activities increased by $24,078 from $25,852 for the nine months ended September 30, 2021 to $49,930 for the nine months ended September 30, 2022. Net cash provided by financing activities during the nine months ended September 30, 2022 and 2021 related to net proceeds from advances from a related party in connection with payment of the Company's obligations and proceeds from the sale of common stock.

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 favourable terms, or at all. If, after utilizing the existing 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. In addition, if necessary, we will decrease expenses and redirect our efforts towards a sale of one of more of our assets should funding become inadequate.

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.

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