UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2020
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File No. 333-221726
FDCTECH, INC.
(Exact name of the small business issuer as specified in its charter)
| DELAWARE | 81-1265459 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
200 Spectrum Center Drive, Suite 300
Irvine, CA 92618
(Address of principal executive offices)
(877) 445-6047
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock, par value $0.0001 | FDCT | OTC Markets |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | [ ] | Accelerated filer | [ ] |
| Non-accelerated filer | [ ] | Smaller reporting company | [X] |
| Emerging growth company | [X] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
The number of shares of Common Stock, $0.0001 par value, of the registrant outstanding on August 10, 2020, was 71,371,385.
TABLE OF CONTENTS
| 2 |
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Form 10-Q”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies, and objectives of management for future operations; any statements concerning proposed new products or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.
Forward-looking statements may include the words “may,” “could,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “desire,” “goal,” “should,” “objective,” “seek,” “plan,” “strive” or “anticipate,” as well as variations of such words or similar expressions, or the negatives of these words. These forward-looking statements present our estimates and assumptions only as of the date of this Form 10-Q. Except for our ongoing obligation to disclose material information as required by the federal securities laws, we do not intend and undertake no obligation to update any forward-looking statement. We caution readers not to place undue reliance on any such forward-looking statements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes will likely vary materially from those indicated.
| 3 |
FDCTECH, INC.
(Formerly known as Forex Development Corporation)
Index to Consolidated Financial Statements
| F-1 |
(Formerly known as Forex Development Corporation)
CONSOLIDATED BALANCE SHEETS
| June 30, 2020 | December 31, 2019 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 124,524 | $ | 27,884 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $95,961 and $78,087, respectively | 12,965 | 16,479 | ||||||
| Other current assets | 650,877 | 5,378 | ||||||
| Total Current assets | 788,366 | 49,741 | ||||||
| Capitalized software, net | 678,155 | 689,625 | ||||||
| Total assets | $ | 1,466,521 | $ | 739,366 | ||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 41,000 | $ | 21,000 | ||||
| Line of credit | 38,624 | 31,514 | ||||||
| Payroll tax payable | 109,975 | 99,498 | ||||||
| Related-party convertible notes payable – current | 1,000,000 | 1,000,000 | ||||||
| Related-party accrued interest – current | 226,908 | 196,908 | ||||||
| Cares act- paycheck protection program advance | 16,765 | - | ||||||
| Total Current liabilities | 1,433,272 | 1,348,920 | ||||||
| SBA loan – non-current | 144,900 | - | ||||||
| Cares act- paycheck protection program advance – non-current | 33,867 | |||||||
| Accrued interest – non-current | 938 | - | ||||||
| Total liabilities | 1,612,977 | 1,348,920 | ||||||
| Commitments and Contingencies (Note 9) | - | - | ||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, par value $0.0001, 10,000,000 shares authorized, 4,000,000 issued and outstanding, as of June 30, 2020 and December 31, 2019 | 400 | 400 | ||||||
| Common stock, par value $0.0001, 100,000,000 shares authorized; 71,371,385 and 68,626,332 shares issued and outstanding, as of June 30, 2020 and December 31, 2019 | 7,137 | 6,862 | ||||||
| Additional paid-in capital | 1,104,667 | 418,678 | ||||||
| Accumulated deficit | (1,258,660 | ) | (1,035,494 | ) | ||||
| Total stockholders’ deficit | (146,456 | ) | (609,554 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 1,466,521 | $ | 739,366 | ||||
See accompanying notes to the financial statements
| F-2 |
(Formerly known as Forex Development Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Revenues | $ | 46,500 | $ | 92,267 | 130,407 | $ | 266,802 | |||||||||
| Cost of sales | 65,144 | 9,562 | 114,728 | 19,843 | ||||||||||||
| Gross Profit | (18,644 | ) | 82,705 | 15,679 | 246,959 | |||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | 133,446 | 95,473 | 209,069 | 222,632 | ||||||||||||
| Sales and marketing | 527 | 6,325 | 1,753 | 16,181 | ||||||||||||
| Total operating expenses | 133,973 | 101,798 | 210,822 | 238,813 | ||||||||||||
| Operating income (loss) | (152,617 | ) | (19,093 | ) | (195,143 | ) | 8,145 | |||||||||
| Other income (expense): | ||||||||||||||||
| Related-party interest expense | (15,000 | ) | (15,000 | ) | (30,000 | ) | (30,000 | ) | ||||||||
| Other interest expense | (938 | ) | - | (938 | ) | - | ||||||||||
| Other income (expense) | 4,974 | 1 | 2,915 | 12 | ||||||||||||
| Total other expense | (10,964 | ) | (14,999 | ) | (28,023 | ) | (29,988 | ) | ||||||||
| Income (loss) before provision for income taxes | (163,581 | ) | (34,091 | ) | (223,166 | ) | (21,842 | ) | ||||||||
| Provision (benefit) for income taxes | - | (2,572 | ) | - | - | |||||||||||
| Net income (loss ) | $ | (163,581 | ) | $ | (31,519 | ) | (223,166 | ) | $ | (21,842 | ) | |||||
| Net income (loss) per common share, basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | (0.00 | ) | $ | (0.00 | ) | |||||
| Weighted average number of common shares outstanding basic and diluted | 69,440,798 | 68,626,332 | 69,033,565 | 68,614,732 | ||||||||||||
See accompanying notes to the financial statements
| F-3 |
(Formerly known as Forex Development Corporation)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (UNAUDITED)
| Preferred stock | Common stock | Additional Paid-in | Accumulated | Total Stockholders' | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Three Months Ended June 30, 2019 | ||||||||||||||||||||||||||||
| Balance, March 31, 2019 | 4,000,000 | $ | 400 | 68,626,332 | $ | 6,862 | $ | 415,175 | $ | (770,128 | ) | $ | (347,691 | ) | ||||||||||||||
| Net loss | - | - | - | - | - | (31,519 | ) | (31,519 | ) | |||||||||||||||||||
| Balance, June 30, 2019 | 4,000,000 | $ | 400 | 68,626,332 | $ | 6,862 | $ | 415,175 | $ | (801,647 | ) | $ | (379,210 | ) | ||||||||||||||
| Three Months Ended June 30, 2020 | ||||||||||||||||||||||||||||
| Balance, March 31, 2020 | 4,000,000 | $ | 400 | 68,626,332 | $ | 6,862 | $ | 418,678 | $ | (1,095,079 | ) | $ | (669,139 | ) | ||||||||||||||
| Common shares issued for services valued at $0.25 per share | - | - | 2,745,053 | 275 | 685,989 | - | 686,264 | |||||||||||||||||||||
| Net loss | - | - | - | - | - | (163,581 | ) | (163,581 | ) | |||||||||||||||||||
| Balance, June 30, 2020 | 4,000,000 | $ | 400 | 71,371,385 | $ | 7,137 | $ | 1,104,667 | $ | (1,258,660 | ) | $ | (146,456 | ) | ||||||||||||||
See accompanying notes to the financial statements
| F-4 |
FDCTECH, INC.
(Formerly known as Forex Development Corporation)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (UNAUDITED)
| Preferred stock | Common stock | Additional Paid-in | Accumulated | Total Stockholders' | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Six Months Ended June 30, 2019 | ||||||||||||||||||||||||||||
| Balance, December 31, 2018 | 4,000,000 | $ | 400 | 68,533,332 | $ | 6,853 | $ | 401,234 | $ | (779,804 | ) | $ | (371,317 | ) | ||||||||||||||
| Common shares issued for cash at $0.15 per share | - | - | 33,000 | 3 | 4,947 | - | 4,950 | |||||||||||||||||||||
| Common shares issued for services valued at $0.15 per share | - | - | 60,000 | 6 | 8,994 | - | 9,000 | |||||||||||||||||||||
| Net loss | - | - | - | - | - | (21,842 | ) | (21,842 | ) | |||||||||||||||||||
| Balance, June 30, 2019 | 4,000,000 | $ | 400 | 68,626,332 | $ | 6,862 | $ | 415,175 | $ | (801,646 | ) | $ | (379,210 | ) | ||||||||||||||
| Six Months Ended June 30, 2020 | ||||||||||||||||||||||||||||
| Balance, December 31, 2019 | 4,000,000 | $ | 400 | 68,626,332 | $ | 6,862 | $ | 418,678 | $ | (1,035,494 | ) | $ | (609,554 | ) | ||||||||||||||
| Common shares issued for services valued at $0.25 per share | - | - | 2,745,053 | 275 | 685,989 | - | 686,264 | |||||||||||||||||||||
| Net loss | - | - | - | - | - | (223,166 | ) | (223,166 | ) | |||||||||||||||||||
| Balance, June 30, 2020 | 4,000,000 | $ | 400 | 71,371,385 | $ | 7,137 | $ | 1,104,667 | $ | (1,258,660 | ) | $ | (146,456 | ) | ||||||||||||||
See accompanying notes to the financial statements
| F-5 |
(Formerly known as Forex Development Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six Months Year Ended | ||||||||
| June 30, 2020 | June 30, 2019 | |||||||
| Net loss | $ | (223,166 | ) | $ | (21,842 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Software depreciation and amortization | 114,728 | 19,843 | ||||||
| Common stock issued for services | 686,264 | 9,000 | ||||||
| Accounts receivable allowance | 17,875 | 9,412 | ||||||
| Change in assets and liabilities: | ||||||||
| Gross accounts receivable | (14,361 | ) | (12,335 | ) | ||||
| Accounts payable | 20,000 | (5,500 | ) | |||||
| Prepaid expenses | (645,499 | ) | (5,378 | ) | ||||
| Accrued interest | 30,938 | 30,000 | ||||||
| Accrued payroll tax expenses | 10,477 | - | ||||||
| Deferred revenue | - | 1,000 | ||||||
| Net cash provided by (used in) operating activities | $ | (2,744 | ) | $ | 24,200 | |||
| Investing Activities: | ||||||||
| Capitalized software | (103,258 | ) | (142,937 | ) | ||||
| Net cash used in investing activities | $ | (103,258 | ) | $ | (142,937 | ) | ||
| Financing Activities: | ||||||||
| Borrowing from (payments to) line of credit | 7,110 | (1,266 | ) | |||||
| Net proceeds from common stock issuance for cash | - | 4,950 | ||||||
| Net proceeds from cares act - paycheck protection program | 50,632 | - | ||||||
| Net proceeds from SBA loan | 144,900 | - | ||||||
| Net cash provided by (used in) financing activities | $ | 202,642 | $ | 3,685 | ||||
| Net decrease in cash | 96,640 | (115,053 | ) | |||||
| Cash at beginning of the period | 27,884 | 210,064 | ||||||
| Cash at end of the period | $ | 124,524 | $ | 95,011 | ||||
| Cash paid for income taxes | $ | - | $ | - | ||||
| Cash paid for interest | $ | - | $ | - | ||||
| Non - cash investing and financing activities: | ||||||||
| Common stock issued for capitalized software | $ | - | $ | - | ||||
See accompanying notes to the financial statements
| F-6 |
NOTE 1. BUSINESS DESCRIPTION AND NATURE OF OPERATIONS
The Company was incorporated on January 21, 2016, as Forex Development Corporation, under the laws of the State of Delaware. On February 27, 2018, the Company changed its name to FDCTech, Inc. The name change reflects the Company’s commitment to expanding its products and services in the FX, and cryptocurrency markets for OTC brokers. The Company provides innovative and cost-efficient financial technology (‘fintech’) and business solution to OTC Online Brokerages and cryptocurrency businesses (“customers”).
Company’s products are designed to provide a complete solution for all operating aspects of customer’s business, including but not limited to trading terminal, back office, customer relationship management, and risk management systems. The Company provides business and management consulting, which includes management consulting and the development of customers’ B2B sales and marketing divisions. The Company provides turnkey business solutions to entrepreneurs and other non-broker entities seeking to enter FX, cryptocurrency, and other OTC markets. The Company takes on customized software development projects specific to meet the needs of its customers. The Company also acts as a general technical support provider for customers and other fintech companies.
The Company’s business solutions allow its customers to run their overall business better, increase trading revenues, cut operating costs, and enable them to anticipate market challenges using our proprietary based processes, state-of-the-art technologies, risk management tools, customized software development, and turnkey prime-of-prime business solution.
We are a development company in the financial technology sector with limited operations. The Company has prepared consolidated financial statements on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the ordinary course of business.
At present, the Company does not have any patents or trademarks on its proprietary technology solutions.
At present, the Company has three sources of revenue.
| ● | Consulting Services – The Company’s turnkey business solutions - Start-Your-Own-Brokerage (“SYOB”), Start-Your-Own-Prime Brokerage (“SYOPB”), Start-Your-Own-Crypto Exchange (“SYOC”), FX/OTC liquidity solutions and lead generations. | |
| ● | Technology Solutions – The Company licenses its proprietary and, in some cases, act as a reseller of third-party technologies to customers. Our proprietary technology includes but not limited to Condor Risk Management Back Office (“Condor Risk Management”), Condor FX Pro Trading Terminal, Condor Pricing Engine, Crypto Web Trader Platform, and other cryptocurrency-related solutions. | |
| ● | Customized Software Development – The Company develops software for Customers with unique requirements as outlined in the Software Development Agreement (“Agreement”). |
In the retail foreign exchange trading space where individuals speculate on the exchange rate between different currencies, our customers are forex brokerages, prime of prime brokers, prime brokers, and banks. The Company generates revenues by licensing its trading technology infrastructure, including but not limited to the trading platform (desktop, web, mobile), back office, and CRM and banking integration technology.
In the cryptocurrency and blockchain space, we act as an adviser/strategic consultant and reseller of its proprietary technologies. The Company expects to generate additional revenue from its crypto-related solutions, such as from the development of custom crypto exchange platform for customers, the sale of the non-exclusive source code of crypto exchange platform to third parties, white-label fees of crypto exchange platforms, and the sale of aggregated cryptocurrency data price feed from various crypto exchanges to OTC brokers. The Company initially plans to develop the technology architecture of the crypto exchange platform for its customers. The initial capital required to produce such technologies comes from our customers as the Company takes on design-build software development projects for customers, where the Company develops these projects to meet the design criteria and performance requirements as specified by the customer.
There are several steps required to set-up a functional crypto exchange platform. Our customers seek necessary licensing approval and meet registration requirements in their respective jurisdictions. Customers are also responsible for establishing a relationship with the payment processing partner, such as a bank. Subsequently, the Company intends to provide and maintain a payment gateway API, which will give users the power of adding and withdrawing funds. Liquidity is an essential aspect of the success of a cryptocurrency exchange marketplace. The trades at an exchange drive its liquidity, and a robust crypto exchange platform requires seamless trading activity. To manage this liquidity at the customer’s crypto exchange business, the Company will integrate its customer crypto exchange’s liquidity position to other existing exchanges. The Company will provide a modern and robust API interface that connects liquidity and trade volume data between various crypto exchanges.
| F-7 |
Note 1 – Business Description and Nature of Operations (continued)
The Company is responsible for arranging, developing, and maintaining the technology architecture of the crypto exchange platform. This architecture includes but not limited to the trading engine, front-end user interface, functional website, cryptocurrency wallet, and administration console. The trading engine serves as the core of exchange, and it is essential to smart order transaction execution, calculate balances, access, and aggregation of the order book and match all the buy/sell transactions on an exchange. The front-end user interface is a user-friendly and intuitive interface with a minimalistic approach to offer an exceptional trading experience. The front-end user includes but not limited to user registration, funds deposit/withdrawal, view order book, transactions, balance, statistics, charts, buy/sell orders, and support features. The Company can customize the features of a console according to the specific business requirement of our customers, such as the option to edit trading fees, managing cryptocurrency listing, adding new currencies, crediting/debiting funds to wallets and addressing support issues. The Company’s involvement is limited to creating an interface between the crypto exchange platform and the digital asset owner, and it is not responsible for holding and maintaining the digital assets in the wallet.
The Company purely acts as a technology provider and software developer in the crypto space. The Company does not mine, trade, speculate, or act as a trading counterparty in cryptocurrencies. Consequently, the Company does not intend to register as a custodian with state or federal regulators, including but not limited to obtaining a money service business or money transmitter license with Financial Crimes Enforcement Network (FinCEN) and respective State’s money transmission laws. The Company also does not need to register under the Securities Exchange Act of 1934, as amended, as a national securities exchange, an alternative trading system, or a broker-dealer, since the Company is not a broker-dealer nor does it intend to become a broker-dealer.
Third-Party Industry Accreditation
In July 2016, the Financial Commission, a leading financial services industry external dispute resolution (EDR) organization with a diverse membership of online brokerages and independent services providers (ISPs), provided the technology certification for the Company. Financial Commission conducted its rigorous review of the Company’s platforms, including its Condor Risk Management Back Office, to ensure it met the technical information requirements of the Commission’s technology certification evaluation process. The Financial Commission established a comprehensive list of requirements to verify system security, capacity, business disaster recovery, and continuity plan, as well as reporting and record-keeping, among other fields deemed necessary for the technical certification of the Company. In October 2018, Financial Commission added the Company as an approved service provider to its Partner section website. Financial Commission has created its Partners section for service providers approved to offer their solutions to our members.
Business Strategy
Our experienced management and in-house software development team have carefully designed various B2B business solutions to meet the needs of OTC Online Brokers. Our solution targets OTC Online brokers of all sizes and stages - whether our potential customer is a start-up company or an established OTC Online broker, it is easier, less risky, and more cost-efficient for customers to enter Prime of Prime or OTC Online broker space using our turnkey solution. Our advisory services and proprietary technologies enable customers to adapt to regulatory changes and market shifts quickly while enhancing the end-user/trader experience.
We intend to grow our core business, increase market share, and improve profitability principally by deploying the following growth strategies:
| ● | Continue to enhance and promote our core proprietary technologies and business solutions including but not limited to Condor Risk Management Back Office, SYOPB, SYOB and introduce other innovative trading tools for B2B and futures markets; | |
| ● | Future growth will depend on the timely development and successful distribution of Condor FX Pro Trading Platform and Condor Pricing Engine; | |
| ● | Increase our software development capabilities to develop disruptive and next-generation technologies to grow software license revenues; | |
| ● | Strategically expand our operations in Asia and Europe, and grow customer base through accretive acquisitions, opportunistic investments, and beneficial partnerships; and | |
| ● | Recognize and enter high-growth markets to expand our services to meet the demand for other financial products to cater to retail or non-professional customers. |
Marketing and Sales
The Company aims to be flexible and responsive to its sales and marketing strategies to provide an omnichannel customer experience. Therefore, our primary focus is on different customer acquisition channels to expand our customer base. The Company is actively being integrating both digital (online marketing, website, blogs, and social media) and traditional marketing channels (conferences, trade shows, phones, direct meetings) effectively.
| F-8 |
Note 1 – Business Description and Nature of Operations (continued)
We implement an effective marketing funnel where we map out our customer’s journey from when a customer is a lead and then put specific strategies in place that will encourage them to move through this funnel. We create awareness of our solutions through direct marketing strategy, where we use a combination of approaches. The omnichannel strategy includes – banner advertising, SEO marketing, email outreach, event promotion, including educational seminars, conferences, and public and media relations, all of which we have designed at driving prospective customers to fdctech.com or encourage them to contact one of our specialists. We also encourage customers to participate in the demo or webinar or consultation call where our expert shows them why they need our solutions and exactly how it will benefit them.
We also utilize many indirect channels where a network of industry professionals, introducing and referring brokers (collectively “RB/IB”) as third parties, promote our services in exchange for performance-based compensation. In most cases, RB/IB performs the lead generation function while our staff provides the customer and technical service.
Most of the marketing and branding initiatives are taken in-house by our team, where we effectively leverage social media, content marketing, and integrated models to keep the continuity of our message and maintain critical customer relationships on a one on one basis.
Subsidiaries of the Company
In April 2016, the Company established its wholly-owned subsidiary – FRH Prime Ltd. (“FRH Prime”), a company incorporated under section 14 of the Companies Act 1981 of Bermuda. In January 2017, FRH Prime established its wholly-owned subsidiary – FXClients Limited (“FXClients”) under the United Kingdom Companies Act 2006 as a private company. The Company established FRH Prime, and FXClients to conduct financial technology service activities. For the six months ending June 30, 2020, and 2019, FRH Prime has generated volume rebates of $1,861 and $1,281, respectively, from Condor Risk Management Back Office. The Company has included rebates in revenue in the consolidated income statements. There have been no significant operating activities in FXClients.
Board of Directors
The Company currently has three directors.
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements include the accounts of FDCTech, Inc. and its wholly-owned subsidiary. We have eliminated all intercompany balances and transactions. The Company has prepared the consolidated financial statements in a manner consistent with the accounting policies adopted by the Company in its financial statements. The Company has measured and presented the consolidated financial statements of the Company in US Dollars, which is the currency of the primary economic environment in which the Company operates (also known as its functional currency).
Financial Statement Preparation and Use of Estimates
The Company prepared consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Estimates include revenue recognition, the allowance for doubtful accounts, website and internal-use software development costs, recoverability of intangible assets with finite lives, and other long-lived assets. Actual results could materially differ from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits held with banks, and other short-term highly liquid investments with original maturities of three months or less. On June 30, 2020, and December 31, 2019, the Company had $124,524 and $27,884 cash and cash equivalent held at the financial institution.
| F-9 |
Note 2 – Summary of Significant Accounting Policies (continued)
Accounts Receivable
Accounts Receivable primarily represents the amount due from eight (08) customers. In some cases, Receivables from the customer are due immediately on demand; however, in most cases, the Company offers net 30 terms, where the payment is due in full 30 days after the date of the invoice. The Company has based the allowance for doubtful accounts on its assessment of the collectability of customer accounts. The Company regularly reviews the allowance by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, economic conditions that may affect a customer’s ability to pay and expected default frequency rates. Trade receivables are written off at the point when they are considered uncollectible.
At June 30, 2020, and December 31, 2019, the Company has determined that allowance for doubtful accounts was $95,961 and $78,087, respectively. Bad debt expense for the three months ended June 30, 2020 and 2019, was $17,875 and $20,000, respectively. Bad debt expense for the six months ended June 30, 2020 and 2019, was $17,875 and $20,000, respectively.
Sales, Marketing and Advertising
The Company recognizes sales, marketing, and advertising expenses when incurred.
The Company incurred $527 and $6,325 in sales, marketing, and advertising costs (“sales and marketing”) for the three months ended June 30, 2020, and 2019 respectively. The sales and marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 1.13% and 6.86% of the sales for the three months ended June 30, 2020, and 2019 respectively.
The Company incurred $1,753 and $16,181 in sales, marketing, and advertising costs (“sales and marketing”) for the six months ended June 30, 2020, and 2019 respectively. The sales and marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 1.34% and 6.06% of the sales for the six months ended June 30, 2020, and 2019 respectively.
Office Lease
Effective October 29, 2019, the Company leased office space at 200 Spectrum Center Drive, Suite 300, Irvine, CA 92618. As per the Commitment Term of the lease (“Agreement”), this Agreement shall continue on a month-to-month basis (any term after the Commitment Term, also known as “Renewal Term”). The Commitment Term and all subsequent Renewal Terms shall constitute the “Term.” The Company may terminate this Agreement by delivering to the lessor Form (“Exit Form”) at least one (1) full calendar month before the month in which the Company intends to terminate this Agreement (“Termination Effective Month”). The Company is entitled to use the office and conference space as on need basis. Previously, the Company leased office space at 1460 Broadway, New York, NY 10036, from an unrelated party. The new rent payment or membership fee is $90 per month compared to the previous rent payment or membership fee at the office of $890 per month, which is included it in the general and administrative expenses.
Effective February 2019, the Company leases office space at Suite 205, Building 9, Potamos Germasogeia, 4047, Limassol District, Cyprus from an unrelated party for one (1) year. The rent payment at the office is $1,750 per month, and we have included it in the General and administrative expenses. From February 2020, this agreement is extended for one year period at $1,750 per month. The Company uses the office for sales and marketing in Europe and Asia.
Effective April 2019, the Company leased office space at Suite 512, 83 Plan, Chelyabinsk, Russia, from an unrelated party for an eleven months term. The rent payment at the office is $500 per month, and we have included it in the general and administrative expenses. From March 2020, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the terms of the agreement by giving thirty (30) days’ notice. The Company uses the office for software development and technical support.
As all leases are either on a month to month basis or less than one (1) year term, the Company is not required to recognize assets and liabilities for our rental leases. The Company has included all rental expenses in the General and Administrative expenses.
Revenue Recognition
On January 1, 2019, the Company adopted ASU 2014-09 Revenue from Contracts with Customers. The majority of the Company’s revenues come from two contracts – IT support and maintenance (‘IT Agreement’) and software development (‘Second Amendment’) that fall within the scope of ASC 606.
The Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to receive in exchange for those goods or services as per the contract with the customer. As a result, the Company accounts for revenue contracts with customers by applying the requirements of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic 606), which includes the following steps:
| ● | Identify the contract or contracts, and subsequent amendments with the customer. | |
| ● | Identify all the performance obligations in the contract and subsequent amendments. | |
| ● | Determine the transaction price for completing performance obligations. | |
| ● | Allocate the transaction price to the performance obligations in the contract. | |
| ● | Recognize the revenue when, or as, the Company satisfies a performance obligation. |
| F-10 |
Note 2 - Summary of Significant Accounting Policies (continued)
The Company adopted ASC 606 using the modified retrospective method applied to all contracts not completed as of January 1, 2019. The Company presents results for reporting periods beginning after January 1, 2019, under ASC 606 while prior period amounts are reported following legacy GAAP. In addition to the above guidelines, the Company also considers implementation guidance on warranties, customer options, licensing, and other topics. The Company takes into account revenue collectability, methods for measuring progress toward complete satisfaction of a performance obligation, warranties, customer options for additional goods or services, nonrefundable upfront fees, licensing, customer acceptance, and other relevant categories.
The Company accounts for a contract when the Company and the customer (‘parties’) have approved the contract and are committed to performing their respective obligations, where each party can identify their rights, obligations, and payment terms, the contract has commercial substance, and it is probable that the Company will collect substantially all of the consideration. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of the promised service to a customer. The Company fixes the transaction price for goods and services at contract inception. The Company’s standard payment terms are generally net 30 days and in some cases due upon receipt of the invoice.
The Company considers contract modification as a change in the scope or price (or both) of a contract that is approved by the parties. The parties describe contract modification as a change order, a variation, or an amendment. A contract modification exists when the parties to the contract approve a modification that either creates new or changes existing enforceable rights and obligations of the parties to the contract. The Company assumes a contract modification when approved in writing, by oral agreement, or implied by the customary business practice of the customer. If the parties to the contract have not approved a contract modification, the Company continues to apply the guidance to the existing contract until the contract modification is approved. The Company recognizes contract modification in various forms – including but not limited to partial termination, an extension of the contract term with a corresponding increase in price, adding new goods and/or services to the contract, with or without a corresponding change in price, and reducing the contract price without a change in goods or services promised.
For all its goods and services, at contract inception, the Company assesses the solutions or services, or bundles of solutions and services, obligated in the contract with a customer to identify each performance obligation within the contract, and then evaluate whether the performance obligations are capable of being distinct and distinct within the context of the contract. Solutions and services that are not both capable of being distinct and distinct within the context of the contract are combined and treated as a single performance obligation in determining the allocation and recognition of revenue. For multi-element transactions, the Company allocates the transaction price to each performance obligation on a relative stand-alone selling price basis. The Company determines that stand-alone selling price for each item at the inception of the transaction involving these multiple elements.
Since January 21, 2016 (‘Inception’), the Company has derived its revenues mainly from three sources – consulting services, technology solutions, and customized software development. The Company recognizes revenue when it has satisfied a performance obligation by transferring control over a product or delivering a service to a customer. We measure revenue based upon the consideration outlined in an arrangement or contract with a customer.
The Company’s typical performance obligations include the following:
| Performance Obligation | Types of Deliverables | When Performance Obligation is Typically Satisfied | ||
| Consulting Services | Services related to Start-Your-Own-Brokerage (“SYOB”), Start-Your-Own-Prime Brokerage (“SYOPB”), Start-Your-Own-Crypto Exchange (“SYOC”), FX/OTC liquidity solutions and lead generations. | The Company recognizes the consulting revenues when the customer receives services over the length of the contract. If the customer pays the Company in advance for these services, the Company records such payment as deferred revenue until the Company completes the services. | ||
| Technology Services | Software licensing of Condor Risk Management Back Office for MT4 (“Condor Risk Management”), Condor FX Pro Trading Terminal, Condor Pricing Engine, Crypto Trading Platform (“Crypto Web Trader Platform”), and other cryptocurrency-related solutions. | The Company recognizes ratably over the contractual period for services delivered, beginning on the date in which such service is made available to the customer. Licensing agreements are typically one year in length with an option to cancel by giving notice; customers have the right to terminate their agreements if the Company materially breaches its obligations under the agreement. Licensing agreements do not provide customers the right to take possession of the software at any time. The Company charges the customers a set-up fee for the installation of the platform, and implementation activities are insignificant and not subject to a separate fee. | ||
| Software Development | Design-build software development projects for customers, where the Company develops the project to meet the design criteria and performance requirements as specified in the contract. | The Company recognizes the software development revenues when the Customer obtains control of the deliverables, as stated in the Statement-of-Work in the contract. |
| F-11 |
Note 2 - Summary of Significant Accounting Policies (continued)
For purposes of determining the transaction price, the Company assumes that the goods or services promised in the existing contract will be transferred to the customer. The Company assumes that the contract will not be canceled, renewed, or modified; therefore, the transaction price includes only those amounts to which the Company has rights under the present contract. For example, if the Company enters into a contract with a customer that has an original term of one year and the Company expects the customer to renew for a second year, the Company would determine the transaction price based on the original one-year term. When determining the transaction price, the Company first identifies the fixed consideration, which includes any nonrefundable upfront payment amounts.
For purposes of allocating the transaction price, the Company allocates an amount that best represents consideration that the entity expects to receive for transferring each promised good or service to the customer. To meet the allocation objective, the Company allocates the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis. In determining the standalone selling price, the Company uses the best evidence of the stand-alone selling price that the Company charges to similar customers in similar circumstances. In some cases, the Company uses the adjusted market assessment approach to determine the standalone selling price, where it evaluates the market in which it sells the goods or services and estimates the price that customers in that market would pay for those goods or services when sold separately.
The Company recognizes revenue when or as it transfers the promised goods or services in the contract. The Company considers the “transfers” the promised goods or services when, or as, the customer obtains control of the goods or services. The Company considers a customer “obtains control” of an asset when, or as, it can direct the use of, and obtain all the remaining benefits from, an asset substantially. The Company recognizes deferred revenue related to services which it will deliver within one year as a current liability. The Company presents deferred revenue related to services that the Company will deliver more than one year into the future as a non-current liability.
For the period ending June 30, 2020, the Company’s three revenue streams accounted for under ASC 606 follows:
IT Support
On February 5, 2018 (‘Effective Date’), the Company signed IT support and maintenance agreement (‘IT Agreement’) with an FX/OTC broker (‘FX Broker’) regulated by the Malta Financial Services Authority. The Company earns the recurring monthly payment from the FX Broker for delivering IT support and maintenance services (‘Services’) to FX Broker’s legacy technology infrastructure. The term of this Agreement commenced on the Effective Date and shall continue until terminated by either party either for cause, bankruptcy, and other default clauses. The Company completes and satisfies its performance obligation upon accomplishment of all support and maintenance activities every month. The Company invoices the FX Broker at the beginning of the month for services performed, delivered, and accepted for the prior month. At the time of the invoice, the Company renders all Services, and any cash received for Services is non-refundable.
Licensing Fees
The Company receives monthly licensing fees for its Condor Prime Back Office and Condor FX Pro Trading Terminal. Licensing revenues are allocated to software licenses and recognized when the Company transfers the software control to the customer.
Software Development
The Company receives $75 per hour for the first 100 hours/month of approved development services and $45 per hour for all services over 100 hours per month. The Company invoices the Customer for all development services rendered, and any cash received for the development services is non-refundable.
The Company invoices the customer at the beginning of the month for services delivered for the month. The invoice amount is due upon receipt. The Company recognizes the revenue at the end of each month, which is equal to the invoice amount.
| F-12 |
Note 2 - Summary of Significant Accounting Policies (continued)
Concentrations of Credit Risk
Cash
The Company maintains its cash balances at a single financial institution. The balances do not exceed FDIC limits as of June 30, 2020 and December 31, 2019.
Revenues
For the six months ended June 30, 2020 and 2019, the Company had six (6) and ten (10) active customers, respectively. Revenues generated from the top three (3) customers represented approximately 81.94% and 95.51% of total revenue for the six months ended June 30, 2020 and 2019 respectively.
Accounts Receivable
At June 30, 2020, and December 31, 2019, Company’s top four (4) customers comprise roughly 74.82% and 66.89% of total A/R, respectively. The loss of any of the top four customers would have a significant impact on the Company’s operations.
Research and Development (R and D) Cost
The Company acknowledges that future benefits from research and development (R and D) are uncertain, and as a result, we cannot capitalize on R and D expenditures. The GAAP accounting standards require us to expense all research and development expenditures as incurred. For the three and six months ended June 30, 2020 and 2019, the Company did not incur R and D cost.
Legal Proceedings
The Company discloses a loss contingency if there is at least a reasonable possibility that a material loss has incurred. The Company records its best estimate of loss related to pending legal proceedings when the loss is considered probable, and the amount can be reasonably estimated. Where the Company can reasonably estimate a range of loss with no best estimate in the range, the Company records the minimum estimated liability. As additional information becomes available, the Company assesses the potential liability related to pending legal proceedings and revises its estimates and updates its disclosures accordingly. The Company’s legal costs associated with defending itself are recorded to expense as incurred. The Company is currently not involved in any litigation.
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment in accordance with FASB ASC 360, Property, Plant, and Equipment. Under the standard, long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. An impairment charge is recognized for the amount if and when the carrying value of the asset exceeds the fair value. On June 30, 2020, and December 31, 2019, there are no impairment charges.
Provision for Income Taxes
The provision for income taxes is determined using the asset and liability method. Under this method, deferred tax assets and liabilities are calculated based upon the temporary differences between the consolidated financial statement and income tax bases of assets and liabilities using the enacted tax rates that are applicable in each year.
The Company utilizes a two-step approach to recognizing and measuring uncertain tax positions (“tax contingencies”). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely to be realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments, and which may not accurately forecast actual outcomes. The Company includes interest and penalties related to tax contingencies in the provision of income taxes in the consolidated statements of operations. Management of the Company does not expect the total amount of unrecognized tax benefits to change in the next twelve (12) months significantly.
Software Development Costs
By ASC 985-20, Software development costs, including costs to develop software sold, leased, or otherwise marketed, that are incurred after the establishment of technological feasibility, are capitalized if significant. Capitalized software development costs are amortized using the straight-line amortization method over the estimated useful life of the application software. By the end of February 2016, the Company completed the activities (planning, designing, coding, and testing) necessary to establish that it can produce and meet the design specifications of the Condor FX Back Office Version, Condor FX Pro Trading Terminal Version, and Condor Pricing Engine. The Company established the technological feasibility of the Crypto Web Trader Platform in 2018. The Company estimates the useful life of the software to be three (3) years.
| F-13 |
Note 2 - Summary of Significant Accounting Policies (continued)
Amortization expense was $65,144 and $9,562 for the three months ended June 30, 2020 and 2019 respectively, and the Company classifies such cost as the Cost of Sales. Amortization expense was $114,728 and $19,843 for the six months ended June 30, 2020 and 2019 respectively, and the Company classifies such cost as the Cost of Sales. The increase in amortization expense for the three months ending June 30, 2020, is due to the cumulative amortization expense of Condor Back Office, Condor Crypto Trading Platform, and Condor FX Trading Platform (Desktop).
The Company capitalizes significant costs incurred during the application development stage for internal-use software. The Company does not believe that the capitalization of software development costs is material to date.
Convertible Debentures
The cash conversion guidance in ASC 470-20, Debt with Conversion and Other Options, is considered when evaluating the accounting for convertible debt instruments (this includes certain convertible preferred stock that is classified as a liability) to determine whether the conversion feature should be recognized as a separate component of equity. The cash conversion guidance applies to all convertible debt instruments that upon conversion may be settled entirely or partially in cash or other assets where the conversion option is not bifurcated and separately accounted for pursuant to ASC 815.
If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). The Company records BCF as a debt discount pursuant to ASC Topic 470-20, Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.
As of June 30, 2020, the conversion features of conventional FRH Group convertible notes dated February 22, 2016, May 16, 2016, November 17, 2016, and April 24, 2017 (See Note 8) provide for a rate of conversion where the conversion price is below the market value. As a result, the conversion feature on all FRH Group convertible notes has as a beneficial conversion feature (“BCF”) to the extent of the price difference. The Company extended the due date on the four (4) tranches of FRH Group convertible notes. Management performed an analysis to determine the fair value of the BCF on the four (4) tranches and noted that the value of the BCF for each note was insignificant; thus, the Company did not record any debt discount as of June 30, 2020.
For FRH Group convertible note dated April 24, 2017, the value of the stock at issuance date was above the floor conversion price; this feature is characterized as a beneficial conversion feature (“BCF”). The Company records a BCF as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” As a result, the convertible debt is recorded net of the discount related to the BCF. As of December 31, 2017, the Company has amortized the discount of $97,996 to interest expense at the date of issuance because the debt is convertible at the date of issuance.
The $97,996 amount equaled to the intrinsic value and the Company allocated it to additional paid-in capital in 2017.
Basic and Diluted Income (loss) per Share
The Company follows ASC 260, Earnings Per Share, to account for earnings per share. Basic earnings per share (“EPS”) calculations are determined by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. As of June 30, 2020, and December 31, 2019, the Company had 71,371,385 and 68,626,332 basic and dilutive shares issued and outstanding, respectively. The Company had 20,000,000 million potentially dilutive shares related to four outstanding FRH Group convertible notes, which were excluded from the diluted net loss per share as the effects would have been anti-dilutive. During the six months ended June 30, 2020 and 2019, common stock equivalents were anti-dilutive due to a net loss of $223,166 and $21,842, respectively, for the period. During the three and six months ended June 30, 2020, common stock equivalents were anti-dilutive due to a net loss for the period. Hence, the Company has not considered in the computation.
Reclassifications
We have reclassified certain prior period amounts to conform to the current year’s presentation. None of these classifications had an impact on reported operating loss or net loss for any of the periods presented.
| F-14 |
Note 2 - Summary of Significant Accounting Policies (continued)
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific requirements. ASU 2014-09 establishes a five-step revenue recognition process in which entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows from contracts with customers. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date of ASU 2014-09 by one (1) year. The Company adopted ASC 606 using the modified retrospective method applied to all contracts not completed as of January 1, 2019. The Company presents results for reporting periods beginning after January 1, 2019, under ASC 606 while prior period amounts are reported following legacy GAAP. Refer to Note 2 Revenue from Major Contracts with Customers for further discussion on the Company’s accounting policies for revenue sources within the scope of ASC 606.
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 to this standard are effective for fiscal years beginning after December 15, 2019. 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.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force) and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.
NOTE 3. MANAGEMENT’S PLANS
The Company has prepared consolidated financial statements on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the ordinary course of business. At June 30, 2020, and December 31, 2019, the accumulated deficit was $1,258,660 and $1,035,494, respectively.
During the three months ended June 30, 2020, and 2019, the Company incurred a net loss of $163,581 and $31,519, respectively. During the six months ended June 30, 2020, and 2019, the Company incurred a net loss of $223,166 and $21,842, respectively.
Since its inception, the Company has sustained recurring losses, and negative cash flows from operations. As of June 30, 2020 and December 31, 2019, the Company had $124,524 and $27,884 cash on hand, respectively. The Company believes that future cash flows may not be sufficient for the Company to meet its debt obligations as they become due in the ordinary course of business for twelve (12) months. The Company continues to experience negative cash flows from operations, as well as the ongoing requirement for substantial additional capital investment for the development of its financial technologies. The Company expects that it will need to raise substantial additional capital to accomplish its growth plan over the next twelve months. The Company expects to seek to obtain additional funding through private equity or public markets. However, there can be no assurance as to the availability or terms upon which such financing and capital might be available.
The Company’s ability to continue as a going concern may be dependent on the success of management’s plans discussed below. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
To the extent the Company’s operations are not sufficient to fund the Company’s capital requirements, the Company may attempt to enter into a revolving loan agreement with financial institutions or attempt to raise capital through the sale of additional capital stock or the issuance of debt.
The Company intends to continue its efforts in enhancing its revenue from its diversified portfolio of technological solutions and becoming cash flow positive, as well as raising funds through private placement offering and debt financing. See Note 8 for Notes Payable. In the future, as the Company increases its customer base across the globe, the Company intends to acquire long-lived assets that will provide a future economic benefit beyond fiscal 2020.
| F-15 |
NOTE 4. CAPITALIZED SOFTWARE COSTS
During the three months ended June 30, 2020, and 2019, the estimated remaining weighted-average useful life of the Company’s capitalized software was three (3) years. The Company recognizes amortization expense for capitalized software on a straight-line basis.
At June 30, 2020, and December 31, 2019, the gross capitalized software asset was $932,758 and $829,500, respectively. At the end of June 30, 2020, and December 31, 2019, the accumulated software depreciation and amortization expenses were $254,603 and $139,875, respectively. As a result, the unamortized balance of capitalized software at June 30, 2020, and December 31, 2019, was $678,155 and $689,625, respectively.
NOTE 5. PROPERTY AND EQUIPMENT
Effective October 29, 2019, the Company rents its servers, computers, and data center from an unrelated third party. The lessor provides furniture and fixtures and any leasehold improvements at 200 Spectrum Drive, Suite 300, Irvine, CA 92618 under the rent Agreement, as discussed in Note 2.
Effective February 2019, the Company leases office space at Suite 205, Building 9, Potamos Germasogeia, 4047, Limassol District, Cyprus from an unrelated party for a year. The rent payment at the office is $1,750 per month, and we have included it in the General and administrative expenses. From February 2020, this agreement is extended for one year period at $1,750 per month. The Company uses the office for sales and marketing in Europe and Asia.
Effective April 2019, the Company leases office space at Suite 512, 83 Plan, Chelyabinsk, Russia, from an unrelated party for an eleven (11) month term. The rent payment at the office is $500 per month, and we have included it in the General and administrative expenses. From March 2020, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the terms of the agreement by giving thirty (30) days’ notice. The Company uses the office for software development and technical support.
NOTE 6. RELATED PARTY TRANSACTIONS
In April 2016, the Company established its wholly-owned subsidiary – FRH Prime Ltd. (“FRH Prime”), a company incorporated under section 14 of the Companies Act 1981 of Bermuda. In January 2017, FRH Prime established its wholly-owned subsidiary – FXClients Limited (“FXClients”) under the United Kingdom Companies Act 2006 as a private company. The Company established FRH Prime and FXClients to conduct financial technology service activities. For the six months ended June 30, 2020, and 2019, FRH Prime has generated volume rebates of $1,861 and $1,281, respectively, from Condor Risk Management Back Office. There have been no significant operating activities in FXClients.
Between February 22, 2016, and April 24, 2017, the Company borrowed $1,000,000 from FRH Group (“FRH”), a founder and principal shareholder of the Company. The Company executed Convertible Promissory Notes due between April 24, 2019 and June 30, 2019. The Notes are convertible into common stock initially at $0.10 per share but maybe discounted under certain circumstances, but in no event will the conversion price be less than $0.05 per share. The Notes carry an interest rate of 6% per annum, which is due and payable at the maturity date.
Between March 15 and 21, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued 1,000,000 shares to Susan Eaglstein and 400,000 shares to Brent Eaglstein for a cash amount of $70,000. Ms. Eaglstein and Mr. Eaglstein are the Mother and Brother, respectively, of Mitchell Eaglstein, who is the CEO and Director of the Company.
NOTE 7. LINE OF CREDIT
From June 24, 2016, the Company obtained an unsecured revolving line of credit of $40,000 from Bank of America to fund various purchases and travel expenses for the Company. The line of credit has an average interest rate at the close of business on June 30, 2020, for purchases and cash drawn at 12% and 25%, respectively. As of June 30, 2020, the Company complies with terms and conditions of the line of credit. At June 30, 2020, and December 31, 2019, the outstanding balance was $38,624 and $31,514, respectively.
NOTE 8. NOTES PAYABLE
Convertible Notes Payable – Related Party
On February 22, 2016, the Company issued and promised to pay a convertible note to FRH Group Ltd. (“FRH Group,” shareholder) for the principal sum of One Hundred Thousand and 00/100 Dollars ($100,000) on February 28, 2018 (the “Maturity Date”). The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020. The Company will pay the outstanding principal amount of this Note, together with interest at 6% per annum, in cash on the Maturity Date to the registered holder of this Note. The Company will pay, on-demand, interest on the amount of any overdue payment of principal or interest for the period following the due date at a rate of ten percent (10%) per annum.
The initial conversion rate will be $0.10 per share or 1,000,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events as set forth below. The conversion price shall be discounted by 30% if the fair market value of the Company’s common stock is less than $0.10 per share. However, in no event will the conversion price be less than $0.05 per share with a maximum of 2,000,000 shares if FRH Group converts the entire Note subject to adjustments in certain events. The Company will not issue fractional share or scrip representing a fractional share upon conversion of the Notes.
| F-16 |
NOTE 8. NOTES PAYABLE (continued)
Convertible Notes Payable – Related Party
On May 16, 2016, the Company issued and promised to pay a convertible note to FRH Group for the principal sum of Four Hundred Thousand and 00/100 Dollars ($400,000) on May 31, 2018 (the “Maturity Date”). The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020. The Company will pay the outstanding principal amount of this Note, together with interest at 6% per annum, in cash on the Maturity Date to the registered holder of this Note. The Company will pay, on-demand, interest on the amount of any overdue payment of principal or interest for the period following the due date at a rate of ten percent (10%) per annum.
The initial conversion rate will be $0.10 per share or 4,000,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events as set forth below. The conversion price shall be discounted by 30% if the fair market value of the Company’s common stock is less than $0.10 per share. However, in no event will the conversion price be less than $0.05 per share with a maximum of 8,000,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events. The Company will not issue fractional share or scrip representing a fractional share upon conversion of the Notes.
On November 17, 2016, the Company issued and promised to pay a convertible note to FRH Group for the principal sum of Two Hundred and Fifty Thousand and 00/100 Dollars ($250,000) on November 30, 2018, and additional extension to June 30, 2019. The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020. The Company will pay the outstanding principal amount of this Note, together with interest at 6% per annum, in cash on the Maturity Date to the registered holder of this Note. The Company will pay, on-demand, interest on the amount of any overdue payment of principal or interest for the period following the due date at a rate of ten percent (10%) per annum.
The initial conversion rate will be $0.10 per share or 2,500,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events as set forth below. The conversion price shall be discounted by 30% if the fair market value of the Company’s common stock is less than $0.10 per share. However, in no event will the conversion price be less than $0.05 per share with a maximum of 5,000,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events. The Company will not issue fractional share or scrip representing a fractional share upon conversion of the Notes.
On April 24, 2017, the Company issued and promised to pay a convertible note to FRH Group for the principal sum of Two Hundred and Fifty Thousand and 00/100 Dollars ($250,000) on April 24, 2019 (the “Maturity Date”). The Company will pay the outstanding principal amount of this Note, together with interest at 6% per annum, in cash on the Maturity Date to the registered holder of this Note. The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020. The Company will pay the outstanding principal amount of this Note, together with interest at 6% per annum, in cash on the Maturity Date to the registered holder of this Note. The Company will pay, on-demand, interest on the amount of any overdue payment of principal or interest for the period following the due date at a rate of ten percent (10%) per annum.
The initial conversion rate will be $0.10 per share or 2,500,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events as set forth below. The conversion price shall be discounted by 30% if the fair market value of the Company’s common stock is less than $0.10 per share. However, in no event will the conversion price be less than $0.05 per share with a maximum of 5,000,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events. The Company will not issue fractional share or scrip representing a fractional share upon conversion of the Notes.
FRH Group Note Summary
| Date of Note: | 2/22/2016 | 5/16/2016 | 11/17/2016 | 4/24/2017 | ||||||||||||
| Original Amount of Note: | $ | 100,000 | $ | 400,000 | $ | 250,000 | $ | 250,000 | ||||||||
| Outstanding Principal Balance: | $ | 100,000 | $ | 400,000 | $ | 250,000 | $ | 250,000 | ||||||||
| Maturity Date (1): | 12/31/2020 | 12/31/2020 | 12/31/2020 | 12/31/2020 | ||||||||||||
| Interest Rate: | 6 | % | 6 | % | 6 | % | 6 | % | ||||||||
| Date to which interest has been paid: | Accrued | Accrued | Accrued | Accrued | ||||||||||||
| Conversion Rate: | $ | 0.10 | $ | 0.10 | $ | 0.10 | $ | 0.10 | ||||||||
| Floor Conversion Price: | $ | 0.05 | $ | 0.05 | $ | 0.05 | $ | 0.05 |
(1) Note Extension – The Convertible Promissory Note with the face value of $100,000 coupon 6%, dated February 22, 2016, was amended to extend the maturity date from June 30, 2019, to June 30, 2020. The Convertible Promissory Note with the face value of $400,000, coupon 6% issue, dated May 16, 2016, was amended to extend the maturity date from June 30, 2019, to December 31, 2020. The Convertible Promissory Note with the face value of $250,000, coupon 6% issue, dated November 17, 2016, was amended to extend the maturity date from June 30, 2019, to December 31, 2020. The Company, by the execution of the note extension agreement, represents and warrants that as of the date hereof, no Event of Default exists or is continuing concerning the Promissory Note.
| F-17 |
NOTE 8. NOTES PAYABLE (continued)
Convertible Notes Payable – Related Party
At June 30, 2020, the current portion of convertible notes payable and accrued interest was $1,000,000 and $226,908, respectively. There was no non-current portion of convertible notes payable and accrued interest.
At December 31, 2019, the current portion of convertible notes payable and accrued interest was $1,000,000 and $196,908, respectively. There was no non-current portion of convertible notes payable and accrued interest.
Related Party Advance – Officer Loan
On April 1, 2020, the Company received $15,000 from the Officer as a loan. The Company repaid the loan in full as of May 29, 2020.
Cares Act – Paycheck Protection Program (PPP Note)
On May 01, 2020, the Company received proceeds of Fifty-Thousand Six Hundred and Thirty-Two ($50,632) from the Promissory Note (“PPP Note”) under the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The funding of the PPP Note is conditioned upon approval of the Company’s application by Small Business Administration (SBA) and Bank of America (“Bank”) receiving confirmation from the SBA that the Bank may proceed with the PPP Note. If the SBA does not confirm forgiveness of the PPP Note, or only partly confirms forgiveness of the PPP Note or the Company fails to apply for PPP Note forgiveness, the Company will be obligated to repay to the Bank the total outstanding balance remaining due under the PPP Note, including principal and interest (the “PPP Note Balance”). In such case, Bank will establish the terms for repayment of the PPP Note Balance in a separate letter to be provided to the Company, which letter will set forth the PPP Note Balance, the amount of each monthly payment, the interest rate (not above a fixed rate of one percent (1.00%) per annum), the term of the PPP Note, and the maturity date of two (2) years from the funding date of the PPP Note. No principal or interest payments will be due before the end of the Deferment Period, which is six months period from May 01, 2020.
SBA Loan
On May 22, 2020, the Company received proceeds in the amount of one hundred and forty-four thousand nine hundred and 00/100 Dollars ($144,900.00). The Company received one hundred and forty-four thousand nine hundred and eight hundred 00/100 Dollars ($144,800.00). The installment payments will include principal and interest, of $707 monthly, will begin Twelve (12) months from the date of the promissory Note. The balance of principal and interest will be payable Thirty (30) years from the date of the promissory Note. Interest will accrue at the rate of 3.75% per annum and will accrue only on $144,900 funds advanced from May 22, 2020, the date of the advance.
Economic Injury Disaster Loan (EIDL)
The Economic Injury Disaster Loan program is offered through the Small Business Administration. The CARES Act changed the program to offer an emergency grant up to $10,000 per business, which are forgivable like the PPP Note. This grant doesn’t have to be repaid. On May 14, 2020, the Company received $4,000 in EIDL grants. The Company has recorded it as other income since the EIDL grant is forgivable.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Office Facility and Other Operating Leases
The rental expense was $14,905 and $12,524 for the six months ended June 30, 2020, and 2019 respectively. The increase in rent expense is due to two (2) additional leases for the fiscal year ended December 31, 2019. Effective October 29, 2019, the Company rents its servers, computers, and data center from an unrelated third party. The lessor provides furniture and fixtures and any leasehold improvements at 200 Spectrum Drive, Suite 300, Irvine, CA 92618 under the rent Agreement, as discussed in Note 2. Effective February 2019, the Company leases office space at Suite 205, Building 9, Potamos Germasogeia, 4047, Limassol District, Cyprus from an unrelated party for a year. The rent payment at the office is $1,750 per month, and we have included it in the General and administrative expenses. From February 2020, this agreement is extended for one year period at $1,750 per month. The Company uses the office for sales and marketing in Europe and Asia. Effective April 2019, the Company leases office space at Suite 512, 83 Plan, Chelyabinsk, Russia, from an unrelated party for an eleven (11) month term. The rent payment at the office is $500 per month, and we have included it in the General and administrative expenses. From March 2019, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the terms of the agreement by giving thirty (30) days’ notice. The Company uses the office for software development and technical support.
Employment Agreement
The Company has not entered into a formalized employment agreement with its Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), collectively Officers. Effective September 2018, the CEO and the CFO have agreed to receive monthly compensation of $5,000. There are also provisions for performance-based bonuses. The Company has not formalized these agreements.
Accrued Interest
At June 30, 2020, and December 31, 2019, Company’s exposure to cumulative accrued interest at 6% per annum on FRH Group Note(s) was $226,908, and $196,908 respectively.
Pending Litigation
The management is unaware of any actions, suits, investigations or proceedings (public or private) pending against or threatened against or affecting any of the assets or any affiliate of the Company.
Tax Compliance Matters
The Company has estimated payroll tax liabilities based on the reclassification of its officers from independent contractors to employees from fiscal ended December 31, 2017, to 2019. As of June 30, 2020, the Company has assessed federal and state payroll tax payments in the aggregate amount of $11,376, and we have included it in the General and administrative expenses.
| F-18 |
NOTE 10. STOCKHOLDERS’ DEFICIT
Authorized Shares
As of June 30, 2020, and December 31, 2019, the authorized capital stock of the Company consists of 10,000,000 shares of preferred stock, par value $0.0001 per share, and 100,000,000 shares of common stock, par value $0.0001 per share. As of June 30, 2020, and December 31, 2019, the Company had 71,371,385 and 68,626,332, respectively, common shares issued and outstanding and 4,000,000 preferred shares issued and outstanding. The preferred stock has fifty votes for each share of preferred shares owned. The preferred shares have no other rights, privileges, and higher claims on the Company’s assets and earnings than common stock.
Preferred Stock
On December 12, 2016, the Board agreed to issue 2,600,000, 400,000 and 1,000,000 shares of Preferred Stock to Mitchell Eaglstein, Imran Firoz and FRH Group respectively as the founders in consideration of services rendered to the Company. As of June 30, 2020, the Company had 4,000,000 preferred shares issued and outstanding.
Common Stock
On January 21, 2016, the Company collectively issued 30,000,000 and 5,310,000 common shares at par value to Mitchell Eaglstein and Imran Firoz, respectively, as the founders in consideration of services rendered to the Company.
On December 12, 2016, the Company issued 28,600,000 common shares to the remaining two founding members of the Company.
On March 15, 2017, the Company issued 1,000,000 restricted common shares for platform development valued at $50,000. The Company issued the securities with a restrictive legend.
On March 15, 2017, the Company issued 1,500,000 restricted common shares for professional services to three individuals valued at $75,000. The Company issued the securities with a restrictive legend.
On March 17, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued 1,000,000 shares to Susan Eaglstein for a cash amount of $50,000. The Company issued the securities with a restrictive legend.
| F-19 |
Note 10 – Stockholders’ Deficit (continued)
On March 21, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued 400,000 shares to Bret Eaglstein for a cash amount of $20,000. The Company issued the securities with a restrictive legend.
Ms. Eaglstein and Mr. Eaglstein are the Mother and Brother, respectively, of Mitchell Eaglstein, who is the CEO and Director of the Company.
From July 1, 2017, to October 03, 2017, the Company has issued 653,332 units for a cash amount of $98,000 under its offering Memorandum, where the unit consists of one share of common stock and one Class A warrant (See Note 11).
On October 31, 2017, the Company issued 70,000 restricted common shares to a management consultant valued at $10,500. The Company issued the securities with a restrictive legend.
On January 15, 2019, the Company issued 60,000 restricted common shares for professional services to ten (10) consultants valued at $9,000.
From January 29, 2019 to February 15, 2019, the Company issued 33,000 registered shares under the Securities Act of 1933 for a cash amount of $4,950. On February 26, 2019, the Company filed the Post-Effective Amendment No. 1 (the “Amendment”) related to the Registration Statement on Form S-1and its amendments thereto, filed with the U.S. Securities and Exchange Commission on November 22, 2017, and declared effective on August 7, 2018 (Registration No. 333-221726) (the “Registration Statement”) of FDCTech, Inc., a Delaware corporation (the “Registrant”), amended the Registration Statement to remove from registration all shares of common stock that were offered for sale by the Registrant but were not sold prior to the termination of the offering made pursuant to the Registration Statement. At the termination of the offering made pursuant to the Registration Statement, 2,967,000 shares of common stock which were offered for sale by the Registrant were not sold or issued.
Effective June 03, 2020, the Company issued 2,745,053 shares to Benchmark Investments, Inc. (“Broker-Dealer” or “Kingswood Capital Markets”) of common stock at $0.25 per share for a total value of $686,263. The Broker-Dealer is retained to provide general financial advisory to the Company for the next twelve months. The Company has expensed the prepaid-compensation through the income statement following a regular straight-line amortization schedule over the life of the contract, which is for twelve months—the time during which Kingswodd Capital Markets presumably will produce benefits for the Company.
NOTE 11. WARRANTS
Effective June 1, 2017, the Company planned to raise $600,000 through a Private Placement Memorandum (the “Memorandum”) of up to 4,000,000 Units. Each unit (a “Unit”) consists of one share of Common Stock, par value $.0001 per share (the “Common Stock) and one redeemable Class A Warrant (the “Class A Warrant(s)”) of the Company. The Company closed the private placement effective December 15, 2017.
Each Class A Warrant entitles the holder to purchase one (1) share of Common Stock for $0.30 per share at any time until April 30, 2019 (‘Expiration Date’). The Company issued the securities with a restrictive legend.
Information About the Warrants Outstanding During Fiscal 2020 Follows
| Original Number of Warrants Issued | Exercise Price per Common Share | Exercisable at December 31, 2019 | Became Exercisable | Exercised | Terminated / Canceled / Expired | Exercisable at June 30, 2020 | Expiration Date | |||||||||||||||||||||
| 653,332 | $ | 0.30 | - | - | - | 653,332 | - | April 2019 | ||||||||||||||||||||
The Warrants are redeemable by the Company, upon thirty (30) day notice, at a price of $.05 per Warrant, provided the average of the closing bid price of the Common Stock, as reported by the National Association of Securities Dealers Automated Quotation (“NASDAQ”) System (or the average of the last sale price if the Common Stock is then listed on the NASDAQ National Market System or a securities exchange), shall equal or exceed $1.00 per share (subject to adjustment) for ten (10) consecutive trading days prior to the date on which the Company gives notice of redemption. The holders of Warrants called for redemption have exercise rights until the close of business on the date fixed for redemption.
The exercise price and a number of shares of Common Stock or other securities issuable on exercise of the Warrants are subject to adjustment in certain circumstances, including in the event of a stock dividend, recapitalization, reorganization, merger or consolidation of the Company. However, no Warrant is subject to adjustment for issuances of Common Stock at a price below the exercise price of that Warrant.
As of the date of this report, the holders have not exercised any Class A Warrants. All Class A Warrants have expired.
NOTE 12. OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements, including arrangements that would affect our liquidity, capital resources, market risk support, and credit risk support or other benefits.
NOTE 13. SUBSEQUENT EVENTS
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States. While initially the outbreak was largely concentrated in China, it has now spread to several other countries, including Russia and Cyprus, and infections have been reported globally. Many countries around the world, including in the United States, have significant governmental measures being implemented to control the spread of the virus, including temporary closure of businesses, severe restrictions on travel and the movement of people, and other material limitations on the conduct of business. These measures have resulted in work stoppages, absenteeism in the Company’s labor workforce, and other disruptions. The extent to which the coronavirus impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak, and the actions that may be required to contain the coronavirus or treat its impact. In particular, the continued spread of the coronavirus globally, could adversely impact our operations and workforce, including our marketing and sales activities and ability to raise additional capital, which in turn could have an adverse impact on our business, financial condition and results of operation.
| F-20 |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
This Quarterly Report Form 10-Q contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with the unaudited condensed financial statements and accompanying notes and the other financial information appearing elsewhere in this report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events.
The Company has completed the Condor FX Pro Trading Platform. The Company currently has four (4) licensing agreements for its Condor FX Trading Platform. The Company is continuously negotiating additional licensing agreements with several retail FX brokers for the use of Condor FX Pro Trading Platform. At the time of the release of this report, the Company has developed two versions of each of the Condor FX Pro Web and Mobile Trading Platform.
The Company has upgraded its Condor Back Office (Risk Management) to meet the regulatory requirements under various jurisdictions. Condor Back Office meets the directives under Markets in Financial Instruments Directive (MiFID II/MiFIR), legislation by European Securities and Market Authority (ESMA) implemented across the European Union on January 3rd, 2018. In the second quarter of the fiscal year ending December 31, 2019, the Company released, market, and distribute it’s Condor FX Pro Trading Terminal, which allows traders to trade on Condor FX Pro Trading front-end and other industry trading platform via single wallet. The Company has developed the Condor Back Office API to integrate any third-party CRM and banking systems to Condor Back Office.
The Company completed the basic version of its Crypto Web Trader in December 2018. The Company is currently evaluating the demand of its Crypto Web Trader and expects to launch its crypto exchange platform by the second quarter of the fiscal year ended December 31, 2020.
The Company has prepared consolidated financial statements on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the ordinary course of business. The Company has earned $1,698,770 in revenues from January 21, 2016 (inception) to June 30, 2020. For the three months ended June 30, 2020, and 2019, the Company earned revenues of $46,500 and $92,267, respectively. For the six months ended June 30, 2020, and 2019, the Company earned revenues of $130,407 and $266,802, respectively.
As of June 30, 2020, the Company has issued four convertible notes collectively known as FRH Group Note (“Note for net cash proceeds of $1,000,000. The Company has extended the maturity date of the FRH Group Note to June 30, 2020. On April 24, 2020, the Company further extended the maturity date of the FRH Group Note to December 31, 2020.
The Company secures and earns revenues by signing an agreement with its customers. The Company considers a signed agreement with its customers, a binding contract with the customer, or other similar documentation reflecting the terms and conditions under which the Company will provide products or services as persuasive evidence of an arrangement. Each agreement is specific to the customer, and clearly defines the fee schedule, duties and responsibilities of each party, renewal and termination terms, confidentiality agreement, dispute resolution and other clauses necessary for such agreement. The material terms of agreements with customers depend on the nature of services and solutions. Each agreement is specific to the customer, and clearly defines the fee schedule, duties and responsibilities of each party, renewal and termination terms, confidentiality agreement, dispute resolution and other clauses necessary for such agreement.
Financial Condition at June 30, 2020
At June 30, 2020, the current portion of convertible notes payable and accrued interest was $1,000,000 and $226,908, respectively. There was no non-current portion of convertible notes payable and accrued interest. On June 30, 2020, the accumulated deficit was $1,258,660. The Company received $50,632 from Cares Act’s Paycheck Protection Program. No principal or interest payments will be due before the end of the Deferment Period, which is six months period from May 01, 2020. The Company received proceeds for one hundred and forty-four thousand nine hundred and 00/100 Dollars ($144,900.00) from U.S. Small Business Administration (SBA). The installment payments will include principal and interest, of $707 monthly, will begin Twelve (12) months from the date of the promissory Note. The balance of principal and interest will be payable Thirty (30) years from the date of the promissory Note. Interest will accrue at the rate of 3.75% per annum and will accrue only on $144,900 funds advanced from May 22, 2020, the date of the advance.
Our cash balance is $124,524 as of June 30, 2020. We do not believe that our cash balance is sufficient to fund our operations.
The Company intends to continue its efforts in enhancing its revenue from its diversified portfolio of technological solutions and becoming cash flow positive, as well as raising funds through private placement offering and debt financing. In the future, as the Company increases its customer base across the globe, the Company intends to acquire long-lived assets that will provide a future economic benefit beyond fiscal 2020.
Financial Condition at December 31, 2019
At December 31, 2019, the current portion of convertible notes payable and accrued interest was $1,000,000 and $196,908, respectively. There was no non-current portion of convertible notes payable and accrued interest.
On December 31, 2019, the accumulated deficit was $1,035,494.
Our cash balance was $27,884 as of December 31, 2019. We do not believe that our cash balance is sufficient to fund our operations.
The Company intends to continue its efforts in enhancing its revenue from its diversified portfolio of technological solutions and becoming cash flow positive, as well as raising funds through private placement offering and debt financing. In the future, as the Company increases its customer base across the globe, the Company intends to acquire long-lived assets that will provide a future economic benefit beyond fiscal 2020.
| 4 |
RESULTS OF OPERATIONS
Three months Ended June 30, 2020 and 2019
For the three months ended June 30, 2020, and 2019, the Company had active six (6) and ten (10) customers, respectively. Revenues generated from the top three customers represented approximately 87.10% and 93.84% of total revenue for the three months ended June 30, 2020, and 2019 respectively. The revenues generated for the three months ended June 30, 2020, and 2019 were $46,500 and $92,267, respectively. During the three months ended June 30, 2020, and 2019, the Company earned a net loss and a net income of $163,581 and $31,519, respectively.
The total revenue breakdown for the three months ended June 30, 2020, and 2019 is below:
| Three months Ended | June 30, 2020 | June 30, 2019 | ||||||
| Revenue Description | % of Total | % of Total | ||||||
| Technology Solutions | 100.00 | % | 100.00 | % | ||||
| Total | 100.00 | % | 100.00 | % | ||||
During the three months ended June 30, 2020, and 2019, the Company incurred general and administrative costs (“g and a”) of $133,446 and $95,473 (excluding amortization expenses), respectively. The increased g and a costs for the three months ended June 30, 2020 is due to the financing and audit fees. The g and a expenses were 286.98% and 103.47% of the revenue for the three months ended June 30, 2020, and 2019 respectively. Amortization expense was $65,144 and $9,562 for the three months ended June 30, 2020, and 2019 respectively, included in the Cost of sales expense. The increase in amortization expense for the three months ended June 30, 2020, is due to the cumulative amortization expense of Condor Back Office, Condor Crypto Trading Platform, Condor FX Trading Platform (Desktop), and Condor Web Trader.
The rental expense was $6,626 and $9,774 for the three months ended June 30, 2020, and 2019 respectively. Effective October 29, 2019, the Company rents its servers, computers, and data center from an unrelated third party. The lessor provides furniture and fixtures and any leasehold improvements at 200 Spectrum Drive, Suite 300, Irvine, CA 92618 under the rent Agreement, as discussed in Note 2. Effective February 2019, the Company leases office space at Suite 205, Building 9, Potamos Germasogeia, 4047, Limassol District, Cyprus from an unrelated party for a year. The rent payment at the office is $1,750 per month, and we have included it in the General and administrative expenses. From February 2020, this agreement is extended for one year period at $1,750 per month. The Company uses the office for sales and marketing in Europe and Asia. Effective April 2019, the Company leases office space at Suite 512, 83 Plan, Chelyabinsk, Russia, from an unrelated party for an eleven months term. The rent payment at the office is $500 per month, and we have included it in the General and administrative expenses. From March 2020, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the terms of the agreement by giving thirty days’ notice. The Company uses the office for software development and technical support.
The Company incurred approximately $527 and $6,325 in sales, marketing, and advertising costs (“sales and marketing”) for the three months ended June 30, 2020, and 2019 respectively. The sales and marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 1.13% and 6.86% of the sales for the three months ended June 30, 2020, and 2019 respectively.
In April 2016, the Company established its wholly-owned subsidiary – FRH Prime Ltd. (“FRH Prime”), a company incorporated under section 14 of the Companies Act 1981 of Bermuda. In January 2017, FRH Prime established its wholly-owned subsidiary – FXClients Limited (“FXClients”) under the United Kingdom Companies Act 2006 as a private company. The Company established FRH Prime and FXClients to conduct financial technology service activities. For the three months ended June 30, 2020 and 2019, FRH Prime has generated volume rebates of $0 and $333 respectively from Condor Risk Management Back Office for MT4 Platform. The Company has included rebates in revenue in the consolidated income statements. There have been no significant operating activities in FXClients.
Six months Ended June 30, 2020 and 2019
For the six months ended June 30, 2020, and 2019, the Company had active six (6) and ten (10) customers, respectively. Revenues generated from the top three customers represented approximately 81.94% and 95.51% of total revenue for the six months ended June 30, 2020, and 2019 respectively. The revenues generated for the six months ended June 30, 2020, and 2019 were $130,407 and $266,802, respectively. During the six months ended June 30, 2020, and 2019, the Company earned a net loss of $223,166 and $21,842, respectively.
The total revenue breakdown for the six months ended June 30, 2020, and 2019 is below:
| Six months Ended | June 30, 2020 | June 30, 2019 | ||||||
| Revenue Description | % of Total | % of Total | ||||||
| Technology Solutions | 100.00 | % | 100.00 | % | ||||
| Total | 100.00 | % | 100.00 | % | ||||
During the six months ended June 30, 2020, and 2019, the Company incurred general and administrative costs (“g and a”) of $209,069 and $222,632 (excluding amortization expenses), respectively. The reduced g and a costs for the six months ended June 30, 2020 is due to the lower professional & consulting fees. The g and a expenses were 160.32% and 83.44% of the revenue for the six months ended June 30, 2020, and 2019 respectively. Amortization expense was $114,728 and $19,843 for the six months ended June 30, 2020, and 2019 respectively, included in the Cost of sales expense. The increase in amortization expense for the six months ended June 30, 2020, is due to the cumulative amortization expense of Condor Back Office, Condor Crypto Trading Platform, Condor FX Trading Platform (Desktop), and Condor Web Trader.
The rental expense was $14,905 and $12,524 for the six months ended June 30, 2020, and 2019 respectively. The increase in rent expense is due to two (2) additional leases for the fiscal year ended December 31, 2019. Effective October 29, 2019, the Company rents its servers, computers, and data center from an unrelated third party. The lessor provides furniture and fixtures and any leasehold improvements at 200 Spectrum Drive, Suite 300, Irvine, CA 92618 under the rent Agreement, as discussed in Note 2. Effective February 2019, the Company leases office space at Suite 205, Building 9, Potamos Germasogeia, 4047, Limassol District, Cyprus from an unrelated party for a year. The rent payment at the office is $1,750 per month, and we have included it in the General and administrative expenses. From February 2020, this agreement is extended for one year period at $1,750 per month. The Company uses the office for sales and marketing in Europe and Asia. Effective April 2019, the Company leases office space at Suite 512, 83 Plan, Chelyabinsk, Russia, from an unrelated party for an eleven months term. The rent payment at the office is $500 per month, and we have included it in the General and administrative expenses. From March 2020, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the terms of the agreement by giving thirty days’ notice. The Company uses the office for software development and technical support.
The Company incurred approximately $1,753 and $16,181 in sales, marketing, and advertising costs (“sales and marketing”) for the six months ended June 30, 2020, and 2019 respectively. The sales and marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 1.34% and 6.06% of the sales for the six months ended June 30, 2020, and 2019 respectively.
In April 2016, the Company established its wholly-owned subsidiary – FRH Prime Ltd. (“FRH Prime”), a company incorporated under section 14 of the Companies Act 1981 of Bermuda. In January 2017, FRH Prime established its wholly-owned subsidiary – FXClients Limited (“FXClients”) under the United Kingdom Companies Act 2006 as a private company. The Company established FRH Prime and FXClients to conduct financial technology service activities. For the six months ended June 30, 2020 and 2019, FRH Prime has generated volume rebates of $1,861 and $1,281 respectively from Condor Risk Management Back Office for MT4 Platform. The Company has included rebates in revenue in the consolidated income statements. There have been no significant operating activities in FXClients.
| 5 |
LIQUIDITY AND CAPITAL RESOURCES
On June 30, 2020 and December 31, 2019, we had a cash balance of $124,524 and $27,884, respectively.
In the next twelve (12) months, the Company will continue to invest in sales, marketing, product support, development of new technology solutions, and enhancement of existing technology to serve our customers. We expect capital expenditures to increase to up to $100,000 in the next twelve (12) months to support the growth, which mainly includes software development and purchase of computers and servers. Also, the Company estimates additional expenditure needed to be $200,000, which provides for $50,000 and $150,000 for sales and marketing and working capital, respectively.
We expect that the combination of existing cash, cash equivalents, cash flows from operations, and access to private equity and capital markets to be sufficient for at least the next twelve (12) months. The availability of funds will fund our operating activities, meet the need for investing and financing activities, such as debt maturities, and material capital expenditures. However, we may need additional funds to achieve a sustainable sales level where we can fund our ongoing operations out of revenues. There is no assurance that any additional financing will be available or, if available, on terms that will be acceptable to us.
Should we require additional capital to the extent the Company’s operations are not sufficient to fund its capital requirements, the Company may attempt to enter the restructuring of Notes, or refinance existing Notes with financial institutions or attempt to raise capital through the sale of additional capital stock or the issuance of debt. The Company intends to continue its efforts in growing its operations, as well as raising funds through private equity and debt financing.
Between February 22, 2016, and April 24, 2017, the Company borrowed $1,000,000 from FRH Group, a founder and principal shareholder of the Company (“FRH”). Effective June 1, 2017, to date, we have raised an aggregate of $98,000 through a private placement of our common stock to our officers, directors, and their friends and relatives and business associates.
From January 29, 2019, to February 15, 2019, the Company issued 33,000 registered shares under the Securities Act of 1933 for a cash amount of $4,950. The Company closed its offering effective February 26, 2019.
On July 15, 2020, the Company engaged Kingswood Capital Markets, a division of Benchmark Investments, Inc. to act as its exclusive general financial advisor for strategic corporate planning and investment banking services.
| 6 |
GOING CONCERN CONSIDERATION
We have not generated significant revenues since inception to June 30, 2020. As of June 30, 2020, and December 31, 2019, the Company had an accumulated deficit of $1,258,660 and $1,035,494, respectively. Our independent auditors included an explanatory paragraph in their report on the audited financial statements for the fiscal year ended December 31, 2019, and 2018, and the period from January 21, 2016 (inception) to December 31, 2016, regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors. Our financial statements do not include any adjustments related to the recoverability or classification of asset carrying amounts or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
Critical Accounting Policies and Significant Judgments and Estimates
We have based our management’s discussion and analysis of our financial condition and results of operations on our financial statements, which we have prepared in accordance with the U.S. generally accepted accounting principles. In preparing our financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Our actual results could differ from these estimates, and such differences could be material.
We have described significant accounting policies in more detail in Note 2 of our annual financial statements included in our 10-K for the fiscal year ended December 31, 2019, filed with the SEC on April 6, 2020. We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as appropriate based on changing conditions.
JOBS Act Accounting Election
We are an “emerging growth company,” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued after the enactment of the JOBS Act until those standards apply to private companies. As an emerging growth company, we have applied for exemption, as a result, the Company may delay the adoption of certain accounting standards until the standards would otherwise apply to private companies.
Off-Balance Sheet Arrangements and Contractual Obligations
We have not engaged in any off-balance sheet arrangements as defined in Item 303(c) of the SEC’s Regulation S-B. We did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes.
Recent Accounting Pronouncements
The amendments in the ASU are effective for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. We have adopted this ASU as of March 31, 2020 for ASC 606, Revenue Recognition and Amended ASU 2016-02, Leases (Topic 840). The ASU is currently not expected to have a material impact on our consolidated financial statements. While we have described significant accounting policies in more details in Note 2 of our annual financial statements included in our 10-K for the fiscal year ended December 31, 2019, filed with the SEC on April 6, 2020, we believe the accounting policies as described in Note 2 to be critical to the judgments and estimates used in the preparation of our financial statements.
| 7 |
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS. |
Not Applicable.
| ITEM 4. | CONTROLS AND PROCEDURES. |
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this report under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures as of June 30, 2020 were not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The term “disclosure controls and procedures,” as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a 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 SEC’s rules and forms. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Notwithstanding the identified material weaknesses, management believes the financial statements included in this quarterly report on Form 10-Q fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the three months ended June 30, 2020 and 2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| 8 |
| ITEM 1. | LEGAL PROCEEDINGS. |
There are no legal proceedings against the Company and the Company is unaware of any proceedings contemplated against it.
| Item 1A. | Risk Factors. |
In accordance with the requirements of Form 10-Q, the Company, as a smaller reporting company, is not required to make the disclosure under this item.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
None
| Item 3. | Defaults Upon Senior Securities. |
None
| Item 4. | Mine Safety Disclosures. |
None
| Item 5. | Other Information. |
None
| Item 6. | Exhibits. |
(a) Exhibits.
| 9 |
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.
| FDCTECH, INC. | |
| Date: August 10, 2020 | /s/ Mitchell Eaglstein |
Mitchell Eaglstein, President and CEO (Principal Executive Officer) |
| Date: August 10, 2020 | /s/ Imran Firoz |
Imran Firoz, CFO (Principal Accounting Officer) |
| 10 |
| 11 |
EXHIBIT 31.1
CERTIFICATION
I, Mitchell Eaglstein, certify that:
| 1. | I have reviewed this report on Form 10-Q of FDCTech, Inc. (“Registrant”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
| 4. | The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
| a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| c. | disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
| 5. | The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
| a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and | |
| b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
| /s/ Mitchell Eaglstein | |
| Mitchell Eaglstein | |
| President (Principal Executive Officer) | |
| August 10, 2020 |
EXHIBIT 31.2
CERTIFICATION
I, Imran Firoz, certify that:
| 1. | I have reviewed this report on Form 10-Q of FDCTech, Inc. (“Registrant”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
| 4. | The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have: |
| a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| c. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
| 5. | The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions): |
| a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and | |
| b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
| /s/ Imran Firoz | |
| Imran Firoz, Chief Financial Officer | |
| (Principal Accounting Officer) | |
| August 10, 2020 |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the report of FDCTech, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| /s/ Mitchell Eaglstein | |
| Mitchell Eaglstein | |
| President (Principal Executive Officer) | |
| /s/ Imran Firoz | |
| Imran Firoz | |
| Chief Financial Officer (Principal Accounting Officer) | |
| August 10, 2020 |
Document and Entity Information - shares |
6 Months Ended | |
|---|---|---|
Jun. 30, 2020 |
Aug. 10, 2020 |
|
| Cover [Abstract] | ||
| Entity Registrant Name | FDCTECH, INC. | |
| Entity Central Index Key | 0001722731 | |
| Document Type | 10-Q | |
| Document Period End Date | Jun. 30, 2020 | |
| Amendment Flag | false | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Current Reporting Status | Yes | |
| Entity Interactive Data Current | Yes | |
| Entity Filer Category | Non-accelerated Filer | |
| Entity Small Business Flag | true | |
| Entity Emerging Growth Company | true | |
| Entity Ex transition Period | false | |
| Entity Shell Company | false | |
| Entity Common Stock, Shares Outstanding | 71,371,385 | |
| Document Fiscal Period Focus | Q2 | |
| Document Fiscal Year Focus | 2020 |
Consolidated Balance Sheets (Parenthetical) - USD ($) |
Jun. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Allowance for doubtful, accounts receivable | $ 95,961 | $ 78,087 |
| Preferred stock, par value | $ 0.0001 | $ 0.0001 |
| Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
| Preferred stock, shares issued | 4,000,000 | 4,000,000 |
| Preferred stock, shares outstanding | 4,000,000 | 4,000,000 |
| Common stock, par value | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 100,000,000 | 100,000,000 |
| Common stock, shares issued | 71,371,385 | 68,626,332 |
| Common stock, shares outstanding | 71,371,385 | 68,626,332 |
Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
| Income Statement [Abstract] | ||||
| Revenues | $ 46,500 | $ 92,267 | $ 130,407 | $ 266,802 |
| Cost of sales | 65,144 | 9,562 | 114,728 | 19,843 |
| Gross Profit | (18,644) | 82,705 | 15,679 | 246,959 |
| Operating expenses: | ||||
| General and administrative | 133,446 | 95,473 | 209,069 | 222,632 |
| Sales and marketing | 527 | 6,325 | 1,753 | 16,181 |
| Total operating expenses | 133,973 | 101,798 | 210,822 | 238,813 |
| Operating income (loss) | (152,617) | (19,093) | (195,143) | 8,145 |
| Other income (expense): | ||||
| Related-party interest expense | (15,000) | (15,000) | (30,000) | (30,000) |
| Other interest expense | (938) | (938) | ||
| Other income (expense) | 4,974 | 1 | 2,915 | 12 |
| Total other expense | (10,964) | (14,999) | (28,023) | (29,988) |
| Income (loss) before provision for income taxes | (163,581) | (34,091) | (223,166) | (21,842) |
| Provision (benefit) for income taxes | (2,572) | |||
| Net income (loss ) | $ (163,581) | $ (31,519) | $ (223,166) | $ (21,842) |
| Net income (loss) per common share, basic and diluted | $ (0.00) | $ (0.00) | $ (0.00) | $ (0.00) |
| Weighted average number of common shares outstanding basic and diluted | 69,440,798 | 68,626,332 | 69,033,565 | 68,614,732 |
Consolidated Statements of Stockholders' Deficit (Unaudited) - USD ($) |
Preferred Stock [Member] |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Accumulated Deficit [Member] |
Total |
|---|---|---|---|---|---|
| Balance at Dec. 31, 2018 | $ 400 | $ 6,853 | $ 401,234 | $ (779,804) | $ (371,317) |
| Balance shares at Dec. 31, 2018 | 4,000,000 | 68,533,332 | |||
| Common shares issued for cash at $0.15 per share | $ 3 | 4,947 | 4,950 | ||
| Common shares issued for cash at $0.15 per share, shares | 33,000 | ||||
| Common shares issued for services valued | $ 6 | 8,994 | 9,000 | ||
| Common shares issued for services valued, shares | 60,000 | ||||
| Net Loss | (21,842) | (21,842) | |||
| Balance at Jun. 30, 2019 | $ 400 | $ 6,862 | 415,175 | (801,647) | (379,210) |
| Balance shares at Jun. 30, 2019 | 4,000,000 | 68,626,332 | |||
| Balance at Mar. 31, 2019 | $ 400 | $ 6,862 | 415,175 | (770,128) | (347,691) |
| Balance shares at Mar. 31, 2019 | 4,000,000 | 68,626,332 | |||
| Net Loss | (31,519) | (31,519) | |||
| Balance at Jun. 30, 2019 | $ 400 | $ 6,862 | 415,175 | (801,647) | (379,210) |
| Balance shares at Jun. 30, 2019 | 4,000,000 | 68,626,332 | |||
| Balance at Dec. 31, 2019 | $ 400 | $ 6,862 | 418,678 | (1,035,494) | (609,554) |
| Balance shares at Dec. 31, 2019 | 4,000,000 | 68,626,332 | |||
| Common shares issued for services valued | $ 275 | 685,989 | 686,264 | ||
| Common shares issued for services valued, shares | 2,745,053 | ||||
| Net Loss | (223,166) | (223,166) | |||
| Balance at Jun. 30, 2020 | $ 400 | $ 7,137 | 1,104,667 | (1,258,660) | (146,456) |
| Balance shares at Jun. 30, 2020 | 4,000,000 | 71,371,385 | |||
| Balance at Mar. 31, 2020 | $ 400 | $ 6,862 | 418,678 | (1,095,079) | (669,139) |
| Balance shares at Mar. 31, 2020 | 4,000,000 | 68,626,332 | |||
| Common shares issued for services valued | $ 275 | 685,989 | 686,264 | ||
| Common shares issued for services valued, shares | 2,745,053 | ||||
| Net Loss | (163,581) | (163,581) | |||
| Balance at Jun. 30, 2020 | $ 400 | $ 7,137 | $ 1,104,667 | $ (1,258,660) | $ (146,456) |
| Balance shares at Jun. 30, 2020 | 4,000,000 | 71,371,385 |
Consolidated Statements of Stockholders' Deficit (Unaudited) (Parenthetical) - $ / shares |
Jun. 30, 2020 |
Jun. 30, 2019 |
|---|---|---|
| Statement of Stockholders' Equity [Abstract] | ||
| Shares issued price per share | $ 0.15 | |
| Shares issued price per share for services | $ 0.25 | $ 0.25 |
Business Description and Nature of Operations |
6 Months Ended | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2020 | |||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||
| Business Description and Nature of Operations | NOTE 1. BUSINESS DESCRIPTION AND NATURE OF OPERATIONS
The Company was incorporated on January 21, 2016, as Forex Development Corporation, under the laws of the State of Delaware. On February 27, 2018, the Company changed its name to FDCTech, Inc. The name change reflects the Company’s commitment to expanding its products and services in the FX, and cryptocurrency markets for OTC brokers. The Company provides innovative and cost-efficient financial technology (‘fintech’) and business solution to OTC Online Brokerages and cryptocurrency businesses (“customers”).
Company’s products are designed to provide a complete solution for all operating aspects of customer’s business, including but not limited to trading terminal, back office, customer relationship management, and risk management systems. The Company provides business and management consulting, which includes management consulting and the development of customers’ B2B sales and marketing divisions. The Company provides turnkey business solutions to entrepreneurs and other non-broker entities seeking to enter FX, cryptocurrency, and other OTC markets. The Company takes on customized software development projects specific to meet the needs of its customers. The Company also acts as a general technical support provider for customers and other fintech companies.
The Company’s business solutions allow its customers to run their overall business better, increase trading revenues, cut operating costs, and enable them to anticipate market challenges using our proprietary based processes, state-of-the-art technologies, risk management tools, customized software development, and turnkey prime-of-prime business solution.
We are a development company in the financial technology sector with limited operations. The Company has prepared consolidated financial statements on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the ordinary course of business.
At present, the Company does not have any patents or trademarks on its proprietary technology solutions.
At present, the Company has three sources of revenue.
In the retail foreign exchange trading space where individuals speculate on the exchange rate between different currencies, our customers are forex brokerages, prime of prime brokers, prime brokers, and banks. The Company generates revenues by licensing its trading technology infrastructure, including but not limited to the trading platform (desktop, web, mobile), back office, and CRM and banking integration technology.
In the cryptocurrency and blockchain space, we act as an adviser/strategic consultant and reseller of its proprietary technologies. The Company expects to generate additional revenue from its crypto-related solutions, such as from the development of custom crypto exchange platform for customers, the sale of the non-exclusive source code of crypto exchange platform to third parties, white-label fees of crypto exchange platforms, and the sale of aggregated cryptocurrency data price feed from various crypto exchanges to OTC brokers. The Company initially plans to develop the technology architecture of the crypto exchange platform for its customers. The initial capital required to produce such technologies comes from our customers as the Company takes on design-build software development projects for customers, where the Company develops these projects to meet the design criteria and performance requirements as specified by the customer.
There are several steps required to set-up a functional crypto exchange platform. Our customers seek necessary licensing approval and meet registration requirements in their respective jurisdictions. Customers are also responsible for establishing a relationship with the payment processing partner, such as a bank. Subsequently, the Company intends to provide and maintain a payment gateway API, which will give users the power of adding and withdrawing funds. Liquidity is an essential aspect of the success of a cryptocurrency exchange marketplace. The trades at an exchange drive its liquidity, and a robust crypto exchange platform requires seamless trading activity. To manage this liquidity at the customer’s crypto exchange business, the Company will integrate its customer crypto exchange’s liquidity position to other existing exchanges. The Company will provide a modern and robust API interface that connects liquidity and trade volume data between various crypto exchanges.
The Company is responsible for arranging, developing, and maintaining the technology architecture of the crypto exchange platform. This architecture includes but not limited to the trading engine, front-end user interface, functional website, cryptocurrency wallet, and administration console. The trading engine serves as the core of exchange, and it is essential to smart order transaction execution, calculate balances, access, and aggregation of the order book and match all the buy/sell transactions on an exchange. The front-end user interface is a user-friendly and intuitive interface with a minimalistic approach to offer an exceptional trading experience. The front-end user includes but not limited to user registration, funds deposit/withdrawal, view order book, transactions, balance, statistics, charts, buy/sell orders, and support features. The Company can customize the features of a console according to the specific business requirement of our customers, such as the option to edit trading fees, managing cryptocurrency listing, adding new currencies, crediting/debiting funds to wallets and addressing support issues. The Company’s involvement is limited to creating an interface between the crypto exchange platform and the digital asset owner, and it is not responsible for holding and maintaining the digital assets in the wallet.
The Company purely acts as a technology provider and software developer in the crypto space. The Company does not mine, trade, speculate, or act as a trading counterparty in cryptocurrencies. Consequently, the Company does not intend to register as a custodian with state or federal regulators, including but not limited to obtaining a money service business or money transmitter license with Financial Crimes Enforcement Network (FinCEN) and respective State’s money transmission laws. The Company also does not need to register under the Securities Exchange Act of 1934, as amended, as a national securities exchange, an alternative trading system, or a broker-dealer, since the Company is not a broker-dealer nor does it intend to become a broker-dealer.
Third-Party Industry Accreditation
In July 2016, the Financial Commission, a leading financial services industry external dispute resolution (EDR) organization with a diverse membership of online brokerages and independent services providers (ISPs), provided the technology certification for the Company. Financial Commission conducted its rigorous review of the Company’s platforms, including its Condor Risk Management Back Office, to ensure it met the technical information requirements of the Commission’s technology certification evaluation process. The Financial Commission established a comprehensive list of requirements to verify system security, capacity, business disaster recovery, and continuity plan, as well as reporting and record-keeping, among other fields deemed necessary for the technical certification of the Company. In October 2018, Financial Commission added the Company as an approved service provider to its Partner section website. Financial Commission has created its Partners section for service providers approved to offer their solutions to our members.
Business Strategy
Our experienced management and in-house software development team have carefully designed various B2B business solutions to meet the needs of OTC Online Brokers. Our solution targets OTC Online brokers of all sizes and stages - whether our potential customer is a start-up company or an established OTC Online broker, it is easier, less risky, and more cost-efficient for customers to enter Prime of Prime or OTC Online broker space using our turnkey solution. Our advisory services and proprietary technologies enable customers to adapt to regulatory changes and market shifts quickly while enhancing the end-user/trader experience.
We intend to grow our core business, increase market share, and improve profitability principally by deploying the following growth strategies:
Marketing and Sales
The Company aims to be flexible and responsive to its sales and marketing strategies to provide an omnichannel customer experience. Therefore, our primary focus is on different customer acquisition channels to expand our customer base. The Company is actively being integrating both digital (online marketing, website, blogs, and social media) and traditional marketing channels (conferences, trade shows, phones, direct meetings) effectively.
We implement an effective marketing funnel where we map out our customer’s journey from when a customer is a lead and then put specific strategies in place that will encourage them to move through this funnel. We create awareness of our solutions through direct marketing strategy, where we use a combination of approaches. The omnichannel strategy includes – banner advertising, SEO marketing, email outreach, event promotion, including educational seminars, conferences, and public and media relations, all of which we have designed at driving prospective customers to fdctech.com or encourage them to contact one of our specialists. We also encourage customers to participate in the demo or webinar or consultation call where our expert shows them why they need our solutions and exactly how it will benefit them.
We also utilize many indirect channels where a network of industry professionals, introducing and referring brokers (collectively “RB/IB”) as third parties, promote our services in exchange for performance-based compensation. In most cases, RB/IB performs the lead generation function while our staff provides the customer and technical service.
Most of the marketing and branding initiatives are taken in-house by our team, where we effectively leverage social media, content marketing, and integrated models to keep the continuity of our message and maintain critical customer relationships on a one on one basis.
Subsidiaries of the Company
In April 2016, the Company established its wholly-owned subsidiary – FRH Prime Ltd. (“FRH Prime”), a company incorporated under section 14 of the Companies Act 1981 of Bermuda. In January 2017, FRH Prime established its wholly-owned subsidiary – FXClients Limited (“FXClients”) under the United Kingdom Companies Act 2006 as a private company. The Company established FRH Prime, and FXClients to conduct financial technology service activities. For the six months ending June 30, 2020, and 2019, FRH Prime has generated volume rebates of $1,861 and $1,281, respectively, from Condor Risk Management Back Office. The Company has included rebates in revenue in the consolidated income statements. There have been no significant operating activities in FXClients.
Board of Directors
The Company currently has three directors. |
Summary of Significant Accounting Policies |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies | Note 2 - Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements include the accounts of FDCTech, Inc. and its wholly-owned subsidiary. We have eliminated all intercompany balances and transactions. The Company has prepared the consolidated financial statements in a manner consistent with the accounting policies adopted by the Company in its financial statements. The Company has measured and presented the consolidated financial statements of the Company in US Dollars, which is the currency of the primary economic environment in which the Company operates (also known as its functional currency).
Financial Statement Preparation and Use of Estimates
The Company prepared consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Estimates include revenue recognition, the allowance for doubtful accounts, website and internal-use software development costs, recoverability of intangible assets with finite lives, and other long-lived assets. Actual results could materially differ from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits held with banks, and other short-term highly liquid investments with original maturities of three months or less. On June 30, 2020, and December 31, 2019, the Company had $124,524 and $27,884 cash and cash equivalent held at the financial institution.
Accounts Receivable
Accounts Receivable primarily represents the amount due from eight (08) customers. In some cases, Receivables from the customer are due immediately on demand; however, in most cases, the Company offers net 30 terms, where the payment is due in full 30 days after the date of the invoice. The Company has based the allowance for doubtful accounts on its assessment of the collectability of customer accounts. The Company regularly reviews the allowance by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, economic conditions that may affect a customer’s ability to pay and expected default frequency rates. Trade receivables are written off at the point when they are considered uncollectible.
At June 30, 2020, and December 31, 2019, the Company has determined that allowance for doubtful accounts was $95,961 and $78,087, respectively. Bad debt expense for the three months ended June 30, 2020 and 2019, was $17,875 and $20,000, respectively. Bad debt expense for the six months ended June 30, 2020 and 2019, was $17,875 and $20,000, respectively.
Sales, Marketing and Advertising
The Company recognizes sales, marketing, and advertising expenses when incurred.
The Company incurred $527 and $6,325 in sales, marketing, and advertising costs (“sales and marketing”) for the three months ended June 30, 2020, and 2019 respectively. The sales and marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 1.13% and 6.86% of the sales for the three months ended June 30, 2020, and 2019 respectively.
The Company incurred $1,753 and $16,181 in sales, marketing, and advertising costs (“sales and marketing”) for the six months ended June 30, 2020, and 2019 respectively. The sales and marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 1.34% and 6.06% of the sales for the six months ended June 30, 2020, and 2019 respectively.
Office Lease
Effective October 29, 2019, the Company leased office space at 200 Spectrum Center Drive, Suite 300, Irvine, CA 92618. As per the Commitment Term of the lease (“Agreement”), this Agreement shall continue on a month-to-month basis (any term after the Commitment Term, also known as “Renewal Term”). The Commitment Term and all subsequent Renewal Terms shall constitute the “Term.” The Company may terminate this Agreement by delivering to the lessor Form (“Exit Form”) at least one (1) full calendar month before the month in which the Company intends to terminate this Agreement (“Termination Effective Month”). The Company is entitled to use the office and conference space as on need basis. Previously, the Company leased office space at 1460 Broadway, New York, NY 10036, from an unrelated party. The new rent payment or membership fee is $90 per month compared to the previous rent payment or membership fee at the office of $890 per month, which is included it in the general and administrative expenses.
Effective February 2019, the Company leases office space at Suite 205, Building 9, Potamos Germasogeia, 4047, Limassol District, Cyprus from an unrelated party for one (1) year. The rent payment at the office is $1,750 per month, and we have included it in the General and administrative expenses. From February 2020, this agreement is extended for one year period at $1,750 per month. The Company uses the office for sales and marketing in Europe and Asia.
Effective April 2019, the Company leased office space at Suite 512, 83 Plan, Chelyabinsk, Russia, from an unrelated party for an eleven months term. The rent payment at the office is $500 per month, and we have included it in the general and administrative expenses. From March 2020, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the terms of the agreement by giving thirty (30) days’ notice. The Company uses the office for software development and technical support.
As all leases are either on a month to month basis or less than one (1) year term, the Company is not required to recognize assets and liabilities for our rental leases. The Company has included all rental expenses in the General and Administrative expenses.
Revenue Recognition
On January 1, 2019, the Company adopted ASU 2014-09 Revenue from Contracts with Customers. The majority of the Company’s revenues come from two contracts – IT support and maintenance (‘IT Agreement’) and software development (‘Second Amendment’) that fall within the scope of ASC 606.
The Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to receive in exchange for those goods or services as per the contract with the customer. As a result, the Company accounts for revenue contracts with customers by applying the requirements of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic 606), which includes the following steps:
The Company adopted ASC 606 using the modified retrospective method applied to all contracts not completed as of January 1, 2019. The Company presents results for reporting periods beginning after January 1, 2019, under ASC 606 while prior period amounts are reported following legacy GAAP. In addition to the above guidelines, the Company also considers implementation guidance on warranties, customer options, licensing, and other topics. The Company takes into account revenue collectability, methods for measuring progress toward complete satisfaction of a performance obligation, warranties, customer options for additional goods or services, nonrefundable upfront fees, licensing, customer acceptance, and other relevant categories.
The Company accounts for a contract when the Company and the customer (‘parties’) have approved the contract and are committed to performing their respective obligations, where each party can identify their rights, obligations, and payment terms, the contract has commercial substance, and it is probable that the Company will collect substantially all of the consideration. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of the promised service to a customer. The Company fixes the transaction price for goods and services at contract inception. The Company’s standard payment terms are generally net 30 days and in some cases due upon receipt of the invoice.
The Company considers contract modification as a change in the scope or price (or both) of a contract that is approved by the parties. The parties describe contract modification as a change order, a variation, or an amendment. A contract modification exists when the parties to the contract approve a modification that either creates new or changes existing enforceable rights and obligations of the parties to the contract. The Company assumes a contract modification when approved in writing, by oral agreement, or implied by the customary business practice of the customer. If the parties to the contract have not approved a contract modification, the Company continues to apply the guidance to the existing contract until the contract modification is approved. The Company recognizes contract modification in various forms – including but not limited to partial termination, an extension of the contract term with a corresponding increase in price, adding new goods and/or services to the contract, with or without a corresponding change in price, and reducing the contract price without a change in goods or services promised.
For all its goods and services, at contract inception, the Company assesses the solutions or services, or bundles of solutions and services, obligated in the contract with a customer to identify each performance obligation within the contract, and then evaluate whether the performance obligations are capable of being distinct and distinct within the context of the contract. Solutions and services that are not both capable of being distinct and distinct within the context of the contract are combined and treated as a single performance obligation in determining the allocation and recognition of revenue. For multi-element transactions, the Company allocates the transaction price to each performance obligation on a relative stand-alone selling price basis. The Company determines that stand-alone selling price for each item at the inception of the transaction involving these multiple elements.
Since January 21, 2016 (‘Inception’), the Company has derived its revenues mainly from three sources – consulting services, technology solutions, and customized software development. The Company recognizes revenue when it has satisfied a performance obligation by transferring control over a product or delivering a service to a customer. We measure revenue based upon the consideration outlined in an arrangement or contract with a customer.
The Company’s typical performance obligations include the following:
For purposes of determining the transaction price, the Company assumes that the goods or services promised in the existing contract will be transferred to the customer. The Company assumes that the contract will not be canceled, renewed, or modified; therefore, the transaction price includes only those amounts to which the Company has rights under the present contract. For example, if the Company enters into a contract with a customer that has an original term of one year and the Company expects the customer to renew for a second year, the Company would determine the transaction price based on the original one-year term. When determining the transaction price, the Company first identifies the fixed consideration, which includes any nonrefundable upfront payment amounts.
For purposes of allocating the transaction price, the Company allocates an amount that best represents consideration that the entity expects to receive for transferring each promised good or service to the customer. To meet the allocation objective, the Company allocates the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis. In determining the standalone selling price, the Company uses the best evidence of the stand-alone selling price that the Company charges to similar customers in similar circumstances. In some cases, the Company uses the adjusted market assessment approach to determine the standalone selling price, where it evaluates the market in which it sells the goods or services and estimates the price that customers in that market would pay for those goods or services when sold separately.
The Company recognizes revenue when or as it transfers the promised goods or services in the contract. The Company considers the “transfers” the promised goods or services when, or as, the customer obtains control of the goods or services. The Company considers a customer “obtains control” of an asset when, or as, it can direct the use of, and obtain all the remaining benefits from, an asset substantially. The Company recognizes deferred revenue related to services which it will deliver within one year as a current liability. The Company presents deferred revenue related to services that the Company will deliver more than one year into the future as a non-current liability.
For the period ending June 30, 2020, the Company’s three revenue streams accounted for under ASC 606 follows:
IT Support
On February 5, 2018 (‘Effective Date’), the Company signed IT support and maintenance agreement (‘IT Agreement’) with an FX/OTC broker (‘FX Broker’) regulated by the Malta Financial Services Authority. The Company earns the recurring monthly payment from the FX Broker for delivering IT support and maintenance services (‘Services’) to FX Broker’s legacy technology infrastructure. The term of this Agreement commenced on the Effective Date and shall continue until terminated by either party either for cause, bankruptcy, and other default clauses. The Company completes and satisfies its performance obligation upon accomplishment of all support and maintenance activities every month. The Company invoices the FX Broker at the beginning of the month for services performed, delivered, and accepted for the prior month. At the time of the invoice, the Company renders all Services, and any cash received for Services is non-refundable.
Licensing Fees
The Company receives monthly licensing fees for its Condor Prime Back Office and Condor FX Pro Trading Terminal. Licensing revenues are allocated to software licenses and recognized when the Company transfers the software control to the customer.
Software Development
The Company receives $75 per hour for the first 100 hours/month of approved development services and $45 per hour for all services over 100 hours per month. The Company invoices the Customer for all development services rendered, and any cash received for the development services is non-refundable.
The Company invoices the customer at the beginning of the month for services delivered for the month. The invoice amount is due upon receipt. The Company recognizes the revenue at the end of each month, which is equal to the invoice amount.
Concentrations of Credit Risk
Cash
The Company maintains its cash balances at a single financial institution. The balances do not exceed FDIC limits as of June 30, 2020 and December 31, 2019.
Revenues
For the six months ended June 30, 2020 and 2019, the Company had six (6) and ten (10) active customers, respectively. Revenues generated from the top three (3) customers represented approximately 81.94% and 95.51% of total revenue for the six months ended June 30, 2020 and 2019 respectively.
Accounts Receivable
At June 30, 2020, and December 31, 2019, Company’s top four (4) customers comprise roughly 74.82% and 66.89% of total A/R, respectively. The loss of any of the top four customers would have a significant impact on the Company’s operations.
Research and Development (R and D) Cost
The Company acknowledges that future benefits from research and development (R and D) are uncertain, and as a result, we cannot capitalize on R and D expenditures. The GAAP accounting standards require us to expense all research and development expenditures as incurred. For the three and six months ended June 30, 2020 and 2019, the Company did not incur R and D cost.
Legal Proceedings
The Company discloses a loss contingency if there is at least a reasonable possibility that a material loss has incurred. The Company records its best estimate of loss related to pending legal proceedings when the loss is considered probable, and the amount can be reasonably estimated. Where the Company can reasonably estimate a range of loss with no best estimate in the range, the Company records the minimum estimated liability. As additional information becomes available, the Company assesses the potential liability related to pending legal proceedings and revises its estimates and updates its disclosures accordingly. The Company’s legal costs associated with defending itself are recorded to expense as incurred. The Company is currently not involved in any litigation.
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment in accordance with FASB ASC 360, Property, Plant, and Equipment. Under the standard, long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. An impairment charge is recognized for the amount if and when the carrying value of the asset exceeds the fair value. On June 30, 2020, and December 31, 2019, there are no impairment charges.
Provision for Income Taxes
The provision for income taxes is determined using the asset and liability method. Under this method, deferred tax assets and liabilities are calculated based upon the temporary differences between the consolidated financial statement and income tax bases of assets and liabilities using the enacted tax rates that are applicable in each year.
The Company utilizes a two-step approach to recognizing and measuring uncertain tax positions (“tax contingencies”). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely to be realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments, and which may not accurately forecast actual outcomes. The Company includes interest and penalties related to tax contingencies in the provision of income taxes in the consolidated statements of operations. Management of the Company does not expect the total amount of unrecognized tax benefits to change in the next twelve (12) months significantly.
Software Development Costs
By ASC 985-20, Software development costs, including costs to develop software sold, leased, or otherwise marketed, that are incurred after the establishment of technological feasibility, are capitalized if significant. Capitalized software development costs are amortized using the straight-line amortization method over the estimated useful life of the application software. By the end of February 2016, the Company completed the activities (planning, designing, coding, and testing) necessary to establish that it can produce and meet the design specifications of the Condor FX Back Office Version, Condor FX Pro Trading Terminal Version, and Condor Pricing Engine. The Company established the technological feasibility of the Crypto Web Trader Platform in 2018. The Company estimates the useful life of the software to be three (3) years.
Amortization expense was $65,144 and $9,562 for the three months ended June 30, 2020 and 2019 respectively, and the Company classifies such cost as the Cost of Sales. Amortization expense was $114,728 and $19,843 for the six months ended June 30, 2020 and 2019 respectively, and the Company classifies such cost as the Cost of Sales. The increase in amortization expense for the three months ending June 30, 2020, is due to the cumulative amortization expense of Condor Back Office, Condor Crypto Trading Platform, and Condor FX Trading Platform (Desktop).
The Company capitalizes significant costs incurred during the application development stage for internal-use software. The Company does not believe that the capitalization of software development costs is material to date.
Convertible Debentures
The cash conversion guidance in ASC 470-20, Debt with Conversion and Other Options, is considered when evaluating the accounting for convertible debt instruments (this includes certain convertible preferred stock that is classified as a liability) to determine whether the conversion feature should be recognized as a separate component of equity. The cash conversion guidance applies to all convertible debt instruments that upon conversion may be settled entirely or partially in cash or other assets where the conversion option is not bifurcated and separately accounted for pursuant to ASC 815.
If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). The Company records BCF as a debt discount pursuant to ASC Topic 470-20, Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.
As of June 30, 2020, the conversion features of conventional FRH Group convertible notes dated February 22, 2016, May 16, 2016, November 17, 2016, and April 24, 2017 (See Note 8) provide for a rate of conversion where the conversion price is below the market value. As a result, the conversion feature on all FRH Group convertible notes has as a beneficial conversion feature (“BCF”) to the extent of the price difference. The Company extended the due date on the four (4) tranches of FRH Group convertible notes. Management performed an analysis to determine the fair value of the BCF on the four (4) tranches and noted that the value of the BCF for each note was insignificant; thus, the Company did not record any debt discount as of June 30, 2020.
For FRH Group convertible note dated April 24, 2017, the value of the stock at issuance date was above the floor conversion price; this feature is characterized as a beneficial conversion feature (“BCF”). The Company records a BCF as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” As a result, the convertible debt is recorded net of the discount related to the BCF. As of December 31, 2017, the Company has amortized the discount of $97,996 to interest expense at the date of issuance because the debt is convertible at the date of issuance.
The $97,996 amount equaled to the intrinsic value and the Company allocated it to additional paid-in capital in 2017.
Basic and Diluted Income (loss) per Share
The Company follows ASC 260, Earnings Per Share, to account for earnings per share. Basic earnings per share (“EPS”) calculations are determined by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. As of June 30, 2020, and December 31, 2019, the Company had 71,371,385 and 68,626,332 basic and dilutive shares issued and outstanding, respectively. The Company had 20,000,000 million potentially dilutive shares related to four outstanding FRH Group convertible notes, which were excluded from the diluted net loss per share as the effects would have been anti-dilutive. During the six months ended June 30, 2020 and 2019, common stock equivalents were anti-dilutive due to a net loss of $223,166 and $21,842, respectively, for the period. During the three and six months ended June 30, 2020, common stock equivalents were anti-dilutive due to a net loss for the period. Hence, the Company has not considered in the computation.
Reclassifications
We have reclassified certain prior period amounts to conform to the current year’s presentation. None of these classifications had an impact on reported operating loss or net loss for any of the periods presented.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific requirements. ASU 2014-09 establishes a five-step revenue recognition process in which entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows from contracts with customers. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date of ASU 2014-09 by one (1) year. The Company adopted ASC 606 using the modified retrospective method applied to all contracts not completed as of January 1, 2019. The Company presents results for reporting periods beginning after January 1, 2019, under ASC 606 while prior period amounts are reported following legacy GAAP. Refer to Note 2 Revenue from Major Contracts with Customers for further discussion on the Company’s accounting policies for revenue sources within the scope of ASC 606.
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 to this standard are effective for fiscal years beginning after December 15, 2019. 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.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force) and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements. |
Management's Plans |
6 Months Ended |
|---|---|
Jun. 30, 2020 | |
| Managements Plans | |
| Management's Plans | NOTE 3. MANAGEMENT’S PLANS
The Company has prepared consolidated financial statements on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the ordinary course of business. At June 30, 2020, and December 31, 2019, the accumulated deficit was $1,258,660 and $1,035,494, respectively.
During the three months ended June 30, 2020, and 2019, the Company incurred a net loss of $163,581 and $31,519, respectively. During the six months ended June 30, 2020, and 2019, the Company incurred a net loss of $223,166 and $21,842, respectively.
Since its inception, the Company has sustained recurring losses, and negative cash flows from operations. As of June 30, 2020 and December 31, 2019, the Company had $124,524 and $27,884 cash on hand, respectively. The Company believes that future cash flows may not be sufficient for the Company to meet its debt obligations as they become due in the ordinary course of business for twelve (12) months. The Company continues to experience negative cash flows from operations, as well as the ongoing requirement for substantial additional capital investment for the development of its financial technologies. The Company expects that it will need to raise substantial additional capital to accomplish its growth plan over the next twelve months. The Company expects to seek to obtain additional funding through private equity or public markets. However, there can be no assurance as to the availability or terms upon which such financing and capital might be available.
The Company’s ability to continue as a going concern may be dependent on the success of management’s plans discussed below. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
To the extent the Company’s operations are not sufficient to fund the Company’s capital requirements, the Company may attempt to enter into a revolving loan agreement with financial institutions or attempt to raise capital through the sale of additional capital stock or the issuance of debt.
The Company intends to continue its efforts in enhancing its revenue from its diversified portfolio of technological solutions and becoming cash flow positive, as well as raising funds through private placement offering and debt financing. See Note 8 for Notes Payable. In the future, as the Company increases its customer base across the globe, the Company intends to acquire long-lived assets that will provide a future economic benefit beyond fiscal 2020. |
Capitalized Software Costs |
6 Months Ended |
|---|---|
Jun. 30, 2020 | |
| Capitalized Software Costs | |
| Capitalized Software Costs | NOTE 4. CAPITALIZED SOFTWARE COSTS
During the three months ended June 30, 2020, and 2019, the estimated remaining weighted-average useful life of the Company’s capitalized software was three (3) years. The Company recognizes amortization expense for capitalized software on a straight-line basis.
At June 30, 2020, and December 31, 2019, the gross capitalized software asset was $932,758 and $829,500, respectively. At the end of June 30, 2020, and December 31, 2019, the accumulated software depreciation and amortization expenses were $254,603 and $139,875, respectively. As a result, the unamortized balance of capitalized software at June 30, 2020, and December 31, 2019, was $678,155 and $689,625, respectively. |
Property and Equipment |
6 Months Ended |
|---|---|
Jun. 30, 2020 | |
| Property, Plant and Equipment [Abstract] | |
| Property and Equipment | NOTE 5. PROPERTY AND EQUIPMENT
Effective October 29, 2019, the Company rents its servers, computers, and data center from an unrelated third party. The lessor provides furniture and fixtures and any leasehold improvements at 200 Spectrum Drive, Suite 300, Irvine, CA 92618 under the rent Agreement, as discussed in Note 2.
Effective February 2019, the Company leases office space at Suite 205, Building 9, Potamos Germasogeia, 4047, Limassol District, Cyprus from an unrelated party for a year. The rent payment at the office is $1,750 per month, and we have included it in the General and administrative expenses. From February 2020, this agreement is extended for one year period at $1,750 per month. The Company uses the office for sales and marketing in Europe and Asia.
Effective April 2019, the Company leases office space at Suite 512, 83 Plan, Chelyabinsk, Russia, from an unrelated party for an eleven (11) month term. The rent payment at the office is $500 per month, and we have included it in the General and administrative expenses. From March 2020, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the terms of the agreement by giving thirty (30) days’ notice. The Company uses the office for software development and technical support. |
Related Party Transactions |
6 Months Ended |
|---|---|
Jun. 30, 2020 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions | NOTE 6. RELATED PARTY TRANSACTIONS
In April 2016, the Company established its wholly-owned subsidiary – FRH Prime Ltd. (“FRH Prime”), a company incorporated under section 14 of the Companies Act 1981 of Bermuda. In January 2017, FRH Prime established its wholly-owned subsidiary – FXClients Limited (“FXClients”) under the United Kingdom Companies Act 2006 as a private company. The Company established FRH Prime and FXClients to conduct financial technology service activities. For the six months ended June 30, 2020, and 2019, FRH Prime has generated volume rebates of $1,861 and $1,281, respectively, from Condor Risk Management Back Office. There have been no significant operating activities in FXClients.
Between February 22, 2016, and April 24, 2017, the Company borrowed $1,000,000 from FRH Group (“FRH”), a founder and principal shareholder of the Company. The Company executed Convertible Promissory Notes due between April 24, 2019 and June 30, 2019. The Notes are convertible into common stock initially at $0.10 per share but maybe discounted under certain circumstances, but in no event will the conversion price be less than $0.05 per share. The Notes carry an interest rate of 6% per annum, which is due and payable at the maturity date.
Between March 15 and 21, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued 1,000,000 shares to Susan Eaglstein and 400,000 shares to Brent Eaglstein for a cash amount of $70,000. Ms. Eaglstein and Mr. Eaglstein are the Mother and Brother, respectively, of Mitchell Eaglstein, who is the CEO and Director of the Company. |
Line of Credit |
6 Months Ended |
|---|---|
Jun. 30, 2020 | |
| Line of Credit Facility [Abstract] | |
| Line of Credit | NOTE 7. LINE OF CREDIT
From June 24, 2016, the Company obtained an unsecured revolving line of credit of $40,000 from Bank of America to fund various purchases and travel expenses for the Company. The line of credit has an average interest rate at the close of business on June 30, 2020, for purchases and cash drawn at 12% and 25%, respectively. As of June 30, 2020, the Company complies with terms and conditions of the line of credit. At June 30, 2020, and December 31, 2019, the outstanding balance was $38,624 and $31,514, respectively. |
Notes Payable |
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| Notes Payable | NOTE 8. NOTES PAYABLE
Convertible Notes Payable – Related Party
On February 22, 2016, the Company issued and promised to pay a convertible note to FRH Group Ltd. (“FRH Group,” shareholder) for the principal sum of One Hundred Thousand and 00/100 Dollars ($100,000) on February 28, 2018 (the “Maturity Date”). The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020. The Company will pay the outstanding principal amount of this Note, together with interest at 6% per annum, in cash on the Maturity Date to the registered holder of this Note. The Company will pay, on-demand, interest on the amount of any overdue payment of principal or interest for the period following the due date at a rate of ten percent (10%) per annum.
The initial conversion rate will be $0.10 per share or 1,000,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events as set forth below. The conversion price shall be discounted by 30% if the fair market value of the Company’s common stock is less than $0.10 per share. However, in no event will the conversion price be less than $0.05 per share with a maximum of 2,000,000 shares if FRH Group converts the entire Note subject to adjustments in certain events. The Company will not issue fractional share or scrip representing a fractional share upon conversion of the Notes.
Convertible Notes Payable – Related Party
On May 16, 2016, the Company issued and promised to pay a convertible note to FRH Group for the principal sum of Four Hundred Thousand and 00/100 Dollars ($400,000) on May 31, 2018 (the “Maturity Date”). The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020. The Company will pay the outstanding principal amount of this Note, together with interest at 6% per annum, in cash on the Maturity Date to the registered holder of this Note. The Company will pay, on-demand, interest on the amount of any overdue payment of principal or interest for the period following the due date at a rate of ten percent (10%) per annum.
The initial conversion rate will be $0.10 per share or 4,000,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events as set forth below. The conversion price shall be discounted by 30% if the fair market value of the Company’s common stock is less than $0.10 per share. However, in no event will the conversion price be less than $0.05 per share with a maximum of 8,000,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events. The Company will not issue fractional share or scrip representing a fractional share upon conversion of the Notes.
On November 17, 2016, the Company issued and promised to pay a convertible note to FRH Group for the principal sum of Two Hundred and Fifty Thousand and 00/100 Dollars ($250,000) on November 30, 2018, and additional extension to June 30, 2019. The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020. The Company will pay the outstanding principal amount of this Note, together with interest at 6% per annum, in cash on the Maturity Date to the registered holder of this Note. The Company will pay, on-demand, interest on the amount of any overdue payment of principal or interest for the period following the due date at a rate of ten percent (10%) per annum.
The initial conversion rate will be $0.10 per share or 2,500,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events as set forth below. The conversion price shall be discounted by 30% if the fair market value of the Company’s common stock is less than $0.10 per share. However, in no event will the conversion price be less than $0.05 per share with a maximum of 5,000,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events. The Company will not issue fractional share or scrip representing a fractional share upon conversion of the Notes.
On April 24, 2017, the Company issued and promised to pay a convertible note to FRH Group for the principal sum of Two Hundred and Fifty Thousand and 00/100 Dollars ($250,000) on April 24, 2019 (the “Maturity Date”). The Company will pay the outstanding principal amount of this Note, together with interest at 6% per annum, in cash on the Maturity Date to the registered holder of this Note. The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020. The Company will pay the outstanding principal amount of this Note, together with interest at 6% per annum, in cash on the Maturity Date to the registered holder of this Note. The Company will pay, on-demand, interest on the amount of any overdue payment of principal or interest for the period following the due date at a rate of ten percent (10%) per annum.
The initial conversion rate will be $0.10 per share or 2,500,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events as set forth below. The conversion price shall be discounted by 30% if the fair market value of the Company’s common stock is less than $0.10 per share. However, in no event will the conversion price be less than $0.05 per share with a maximum of 5,000,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events. The Company will not issue fractional share or scrip representing a fractional share upon conversion of the Notes.
FRH Group Note Summary
(1) Note Extension – The Convertible Promissory Note with the face value of $100,000 coupon 6%, dated February 22, 2016, was amended to extend the maturity date from June 30, 2019, to June 30, 2020. The Convertible Promissory Note with the face value of $400,000, coupon 6% issue, dated May 16, 2016, was amended to extend the maturity date from June 30, 2019, to December 31, 2020. The Convertible Promissory Note with the face value of $250,000, coupon 6% issue, dated November 17, 2016, was amended to extend the maturity date from June 30, 2019, to December 31, 2020. The Company, by the execution of the note extension agreement, represents and warrants that as of the date hereof, no Event of Default exists or is continuing concerning the Promissory Note.
Convertible Notes Payable – Related Party
At June 30, 2020, the current portion of convertible notes payable and accrued interest was $1,000,000 and $226,908, respectively. There was no non-current portion of convertible notes payable and accrued interest.
At December 31, 2019, the current portion of convertible notes payable and accrued interest was $1,000,000 and $196,908, respectively. There was no non-current portion of convertible notes payable and accrued interest.
Related Party Advance – Officer Loan
On April 1, 2020, the Company received $15,000 from the Officer as a loan. The Company repaid the loan in full as of May 29, 2020.
Cares Act – Paycheck Protection Program (PPP Note)
On May 01, 2020, the Company received proceeds of Fifty-Thousand Six Hundred and Thirty-Two ($50,632) from the Promissory Note (“PPP Note”) under the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The funding of the PPP Note is conditioned upon approval of the Company’s application by Small Business Administration (SBA) and Bank of America (“Bank”) receiving confirmation from the SBA that the Bank may proceed with the PPP Note. If the SBA does not confirm forgiveness of the PPP Note, or only partly confirms forgiveness of the PPP Note or the Company fails to apply for PPP Note forgiveness, the Company will be obligated to repay to the Bank the total outstanding balance remaining due under the PPP Note, including principal and interest (the “PPP Note Balance”). In such case, Bank will establish the terms for repayment of the PPP Note Balance in a separate letter to be provided to the Company, which letter will set forth the PPP Note Balance, the amount of each monthly payment, the interest rate (not above a fixed rate of one percent (1.00%) per annum), the term of the PPP Note, and the maturity date of two (2) years from the funding date of the PPP Note. No principal or interest payments will be due before the end of the Deferment Period, which is six months period from May 01, 2020.
SBA Loan
On May 22, 2020, the Company received proceeds in the amount of one hundred and forty-four thousand nine hundred and 00/100 Dollars ($144,900.00). The Company received one hundred and forty-four thousand nine hundred and eight hundred 00/100 Dollars ($144,800.00). The installment payments will include principal and interest, of $707 monthly, will begin Twelve (12) months from the date of the promissory Note. The balance of principal and interest will be payable Thirty (30) years from the date of the promissory Note. Interest will accrue at the rate of 3.75% per annum and will accrue only on $144,900 funds advanced from May 22, 2020, the date of the advance.
Economic Injury Disaster Loan (EIDL)
The Economic Injury Disaster Loan program is offered through the Small Business Administration. The CARES Act changed the program to offer an emergency grant up to $10,000 per business, which are forgivable like the PPP Note. This grant doesn’t have to be repaid. On May 14, 2020, the Company received $4,000 in EIDL grants. The Company has recorded it as other income since the EIDL grant is forgivable. |
Commitments and Contingencies |
6 Months Ended |
|---|---|
Jun. 30, 2020 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | NOTE 9. COMMITMENTS AND CONTINGENCIES
Office Facility and Other Operating Leases
The rental expense was $14,905 and $12,524 for the six months ended June 30, 2020, and 2019 respectively. The increase in rent expense is due to two (2) additional leases for the fiscal year ended December 31, 2019. Effective October 29, 2019, the Company rents its servers, computers, and data center from an unrelated third party. The lessor provides furniture and fixtures and any leasehold improvements at 200 Spectrum Drive, Suite 300, Irvine, CA 92618 under the rent Agreement, as discussed in Note 2. Effective February 2019, the Company leases office space at Suite 205, Building 9, Potamos Germasogeia, 4047, Limassol District, Cyprus from an unrelated party for a year. The rent payment at the office is $1,750 per month, and we have included it in the General and administrative expenses. From February 2020, this agreement is extended for one year period at $1,750 per month. The Company uses the office for sales and marketing in Europe and Asia. Effective April 2019, the Company leases office space at Suite 512, 83 Plan, Chelyabinsk, Russia, from an unrelated party for an eleven (11) month term. The rent payment at the office is $500 per month, and we have included it in the General and administrative expenses. From March 2019, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the terms of the agreement by giving thirty (30) days’ notice. The Company uses the office for software development and technical support.
Employment Agreement
The Company has not entered into a formalized employment agreement with its Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), collectively Officers. Effective September 2018, the CEO and the CFO have agreed to receive monthly compensation of $5,000. There are also provisions for performance-based bonuses. The Company has not formalized these agreements.
Accrued Interest
At June 30, 2020, and December 31, 2019, Company’s exposure to cumulative accrued interest at 6% per annum on FRH Group Note(s) was $226,908, and $196,908 respectively.
Pending Litigation
The management is unaware of any actions, suits, investigations or proceedings (public or private) pending against or threatened against or affecting any of the assets or any affiliate of the Company.
Tax Compliance Matters
The Company has estimated payroll tax liabilities based on the reclassification of its officers from independent contractors to employees from fiscal ended December 31, 2017, to 2019. As of June 30, 2020, the Company has assessed federal and state payroll tax payments in the aggregate amount of $11,376, and we have included it in the General and administrative expenses. |
Stockholders' Deficit |
6 Months Ended |
|---|---|
Jun. 30, 2020 | |
| Equity [Abstract] | |
| Stockholders' Deficit | NOTE 10. STOCKHOLDERS’ DEFICIT
Authorized Shares
As of June 30, 2020, and December 31, 2019, the authorized capital stock of the Company consists of 10,000,000 shares of preferred stock, par value $0.0001 per share, and 100,000,000 shares of common stock, par value $0.0001 per share. As of June 30, 2020, and December 31, 2019, the Company had 71,371,385 and 68,626,332, respectively, common shares issued and outstanding and 4,000,000 preferred shares issued and outstanding. The preferred stock has fifty votes for each share of preferred shares owned. The preferred shares have no other rights, privileges, and higher claims on the Company’s assets and earnings than common stock.
Preferred Stock
On December 12, 2016, the Board agreed to issue 2,600,000, 400,000 and 1,000,000 shares of Preferred Stock to Mitchell Eaglstein, Imran Firoz and FRH Group respectively as the founders in consideration of services rendered to the Company. As of June 30, 2020, the Company had 4,000,000 preferred shares issued and outstanding.
Common Stock
On January 21, 2016, the Company collectively issued 30,000,000 and 5,310,000 common shares at par value to Mitchell Eaglstein and Imran Firoz, respectively, as the founders in consideration of services rendered to the Company.
On December 12, 2016, the Company issued 28,600,000 common shares to the remaining two founding members of the Company.
On March 15, 2017, the Company issued 1,000,000 restricted common shares for platform development valued at $50,000. The Company issued the securities with a restrictive legend.
On March 15, 2017, the Company issued 1,500,000 restricted common shares for professional services to three individuals valued at $75,000. The Company issued the securities with a restrictive legend.
On March 17, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued 1,000,000 shares to Susan Eaglstein for a cash amount of $50,000. The Company issued the securities with a restrictive legend.
On March 21, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued 400,000 shares to Bret Eaglstein for a cash amount of $20,000. The Company issued the securities with a restrictive legend.
Ms. Eaglstein and Mr. Eaglstein are the Mother and Brother, respectively, of Mitchell Eaglstein, who is the CEO and Director of the Company.
From July 1, 2017, to October 03, 2017, the Company has issued 653,332 units for a cash amount of $98,000 under its offering Memorandum, where the unit consists of one share of common stock and one Class A warrant (See Note 11).
On October 31, 2017, the Company issued 70,000 restricted common shares to a management consultant valued at $10,500. The Company issued the securities with a restrictive legend.
On January 15, 2019, the Company issued 60,000 restricted common shares for professional services to ten (10) consultants valued at $9,000.
From January 29, 2019 to February 15, 2019, the Company issued 33,000 registered shares under the Securities Act of 1933 for a cash amount of $4,950. On February 26, 2019, the Company filed the Post-Effective Amendment No. 1 (the “Amendment”) related to the Registration Statement on Form S-1and its amendments thereto, filed with the U.S. Securities and Exchange Commission on November 22, 2017, and declared effective on August 7, 2018 (Registration No. 333-221726) (the “Registration Statement”) of FDCTech, Inc., a Delaware corporation (the “Registrant”), amended the Registration Statement to remove from registration all shares of common stock that were offered for sale by the Registrant but were not sold prior to the termination of the offering made pursuant to the Registration Statement. At the termination of the offering made pursuant to the Registration Statement, 2,967,000 shares of common stock which were offered for sale by the Registrant were not sold or issued.
Effective June 03, 2020, the Company issued 2,745,053 shares to Benchmark Investments, Inc. (“Broker-Dealer” or “Kingswood Capital Markets”) of common stock at $0.25 per share for a total value of $686,263. The Broker-Dealer is retained to provide general financial advisory to the Company for the next twelve months. The Company has expensed the prepaid-compensation through the income statement following a regular straight-line amortization schedule over the life of the contract, which is for twelve months—the time during which Kingswodd Capital Markets presumably will produce benefits for the Company. |
Warrants |
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| Warrants and Rights Note Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warrants | NOTE 11. WARRANTS
Effective June 1, 2017, the Company planned to raise $600,000 through a Private Placement Memorandum (the “Memorandum”) of up to 4,000,000 Units. Each unit (a “Unit”) consists of one share of Common Stock, par value $.0001 per share (the “Common Stock) and one redeemable Class A Warrant (the “Class A Warrant(s)”) of the Company. The Company closed the private placement effective December 15, 2017.
Each Class A Warrant entitles the holder to purchase one (1) share of Common Stock for $0.30 per share at any time until April 30, 2019 (‘Expiration Date’). The Company issued the securities with a restrictive legend.
Information About the Warrants Outstanding During Fiscal 2020 Follows
The Warrants are redeemable by the Company, upon thirty (30) day notice, at a price of $.05 per Warrant, provided the average of the closing bid price of the Common Stock, as reported by the National Association of Securities Dealers Automated Quotation (“NASDAQ”) System (or the average of the last sale price if the Common Stock is then listed on the NASDAQ National Market System or a securities exchange), shall equal or exceed $1.00 per share (subject to adjustment) for ten (10) consecutive trading days prior to the date on which the Company gives notice of redemption. The holders of Warrants called for redemption have exercise rights until the close of business on the date fixed for redemption.
The exercise price and a number of shares of Common Stock or other securities issuable on exercise of the Warrants are subject to adjustment in certain circumstances, including in the event of a stock dividend, recapitalization, reorganization, merger or consolidation of the Company. However, no Warrant is subject to adjustment for issuances of Common Stock at a price below the exercise price of that Warrant.
As of the date of this report, the holders have not exercised any Class A Warrants. All Class A Warrants have expired. |
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Off-Balance Sheet Arrangements |
6 Months Ended |
|---|---|
Jun. 30, 2020 | |
| Off-balance Sheet Arrangements | |
| Off-Balance Sheet Arrangements | NOTE 12. OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements, including arrangements that would affect our liquidity, capital resources, market risk support, and credit risk support or other benefits. |
Subsequent Events |
6 Months Ended |
|---|---|
Jun. 30, 2020 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | NOTE 13. SUBSEQUENT EVENTS
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States. While initially the outbreak was largely concentrated in China, it has now spread to several other countries, including Russia and Cyprus, and infections have been reported globally. Many countries around the world, including in the United States, have significant governmental measures being implemented to control the spread of the virus, including temporary closure of businesses, severe restrictions on travel and the movement of people, and other material limitations on the conduct of business. These measures have resulted in work stoppages, absenteeism in the Company’s labor workforce, and other disruptions. The extent to which the coronavirus impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak, and the actions that may be required to contain the coronavirus or treat its impact. In particular, the continued spread of the coronavirus globally, could adversely impact our operations and workforce, including our marketing and sales activities and ability to raise additional capital, which in turn could have an adverse impact on our business, financial condition and results of operation. |
Summary of Significant Accounting Policies (Policies) |
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements include the accounts of FDCTech, Inc. and its wholly-owned subsidiary. We have eliminated all intercompany balances and transactions. The Company has prepared the consolidated financial statements in a manner consistent with the accounting policies adopted by the Company in its financial statements. The Company has measured and presented the consolidated financial statements of the Company in US Dollars, which is the currency of the primary economic environment in which the Company operates (also known as its functional currency). |
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| Financial Statement Preparation and Use of Estimates | Financial Statement Preparation and Use of Estimates
The Company prepared consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Estimates include revenue recognition, the allowance for doubtful accounts, website and internal-use software development costs, recoverability of intangible assets with finite lives, and other long-lived assets. Actual results could materially differ from these estimates.
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| Cash and Cash Equivalents | Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits held with banks, and other short-term highly liquid investments with original maturities of three months or less. On June 30, 2020, and December 31, 2019, the Company had $124,524 and $27,884 cash and cash equivalent held at the financial institution. |
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| Accounts Receivable | Accounts Receivable
Accounts Receivable primarily represents the amount due from eight (08) customers. In some cases, Receivables from the customer are due immediately on demand; however, in most cases, the Company offers net 30 terms, where the payment is due in full 30 days after the date of the invoice. The Company has based the allowance for doubtful accounts on its assessment of the collectability of customer accounts. The Company regularly reviews the allowance by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, economic conditions that may affect a customer’s ability to pay and expected default frequency rates. Trade receivables are written off at the point when they are considered uncollectible.
At June 30, 2020, and December 31, 2019, the Company has determined that allowance for doubtful accounts was $95,961 and $78,087, respectively. Bad debt expense for the three months ended June 30, 2020 and 2019, was $17,875 and $20,000, respectively. Bad debt expense for the six months ended June 30, 2020 and 2019, was $17,875 and $20,000, respectively. |
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| Sales, Marketing and Advertising | Sales, Marketing and Advertising
The Company recognizes sales, marketing, and advertising expenses when incurred.
The Company incurred $527 and $6,325 in sales, marketing, and advertising costs (“sales and marketing”) for the three months ended June 30, 2020, and 2019 respectively. The sales and marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 1.13% and 6.86% of the sales for the three months ended June 30, 2020, and 2019 respectively.
The Company incurred $1,753 and $16,181 in sales, marketing, and advertising costs (“sales and marketing”) for the six months ended June 30, 2020, and 2019 respectively. The sales and marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 1.34% and 6.06% of the sales for the six months ended June 30, 2020, and 2019 respectively. |
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| Office Lease | Office Lease
Effective October 29, 2019, the Company leased office space at 200 Spectrum Center Drive, Suite 300, Irvine, CA 92618. As per the Commitment Term of the lease (“Agreement”), this Agreement shall continue on a month-to-month basis (any term after the Commitment Term, also known as “Renewal Term”). The Commitment Term and all subsequent Renewal Terms shall constitute the “Term.” The Company may terminate this Agreement by delivering to the lessor Form (“Exit Form”) at least one (1) full calendar month before the month in which the Company intends to terminate this Agreement (“Termination Effective Month”). The Company is entitled to use the office and conference space as on need basis. Previously, the Company leased office space at 1460 Broadway, New York, NY 10036, from an unrelated party. The new rent payment or membership fee is $90 per month compared to the previous rent payment or membership fee at the office of $890 per month, which is included it in the general and administrative expenses.
Effective February 2019, the Company leases office space at Suite 205, Building 9, Potamos Germasogeia, 4047, Limassol District, Cyprus from an unrelated party for one (1) year. The rent payment at the office is $1,750 per month, and we have included it in the General and administrative expenses. From February 2020, this agreement is extended for one year period at $1,750 per month. The Company uses the office for sales and marketing in Europe and Asia.
Effective April 2019, the Company leased office space at Suite 512, 83 Plan, Chelyabinsk, Russia, from an unrelated party for an eleven months term. The rent payment at the office is $500 per month, and we have included it in the general and administrative expenses. From March 2020, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the terms of the agreement by giving thirty (30) days’ notice. The Company uses the office for software development and technical support.
As all leases are either on a month to month basis or less than one (1) year term, the Company is not required to recognize assets and liabilities for our rental leases. The Company has included all rental expenses in the General and Administrative expenses. |
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| Revenue Recognition | Revenue Recognition
On January 1, 2019, the Company adopted ASU 2014-09 Revenue from Contracts with Customers. The majority of the Company’s revenues come from two contracts – IT support and maintenance (‘IT Agreement’) and software development (‘Second Amendment’) that fall within the scope of ASC 606.
The Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to receive in exchange for those goods or services as per the contract with the customer. As a result, the Company accounts for revenue contracts with customers by applying the requirements of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic 606), which includes the following steps:
The Company adopted ASC 606 using the modified retrospective method applied to all contracts not completed as of January 1, 2019. The Company presents results for reporting periods beginning after January 1, 2019, under ASC 606 while prior period amounts are reported following legacy GAAP. In addition to the above guidelines, the Company also considers implementation guidance on warranties, customer options, licensing, and other topics. The Company takes into account revenue collectability, methods for measuring progress toward complete satisfaction of a performance obligation, warranties, customer options for additional goods or services, nonrefundable upfront fees, licensing, customer acceptance, and other relevant categories.
The Company accounts for a contract when the Company and the customer (‘parties’) have approved the contract and are committed to performing their respective obligations, where each party can identify their rights, obligations, and payment terms, the contract has commercial substance, and it is probable that the Company will collect substantially all of the consideration. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of the promised service to a customer. The Company fixes the transaction price for goods and services at contract inception. The Company’s standard payment terms are generally net 30 days and in some cases due upon receipt of the invoice.
The Company considers contract modification as a change in the scope or price (or both) of a contract that is approved by the parties. The parties describe contract modification as a change order, a variation, or an amendment. A contract modification exists when the parties to the contract approve a modification that either creates new or changes existing enforceable rights and obligations of the parties to the contract. The Company assumes a contract modification when approved in writing, by oral agreement, or implied by the customary business practice of the customer. If the parties to the contract have not approved a contract modification, the Company continues to apply the guidance to the existing contract until the contract modification is approved. The Company recognizes contract modification in various forms – including but not limited to partial termination, an extension of the contract term with a corresponding increase in price, adding new goods and/or services to the contract, with or without a corresponding change in price, and reducing the contract price without a change in goods or services promised.
For all its goods and services, at contract inception, the Company assesses the solutions or services, or bundles of solutions and services, obligated in the contract with a customer to identify each performance obligation within the contract, and then evaluate whether the performance obligations are capable of being distinct and distinct within the context of the contract. Solutions and services that are not both capable of being distinct and distinct within the context of the contract are combined and treated as a single performance obligation in determining the allocation and recognition of revenue. For multi-element transactions, the Company allocates the transaction price to each performance obligation on a relative stand-alone selling price basis. The Company determines that stand-alone selling price for each item at the inception of the transaction involving these multiple elements.
Since January 21, 2016 (‘Inception’), the Company has derived its revenues mainly from three sources – consulting services, technology solutions, and customized software development. The Company recognizes revenue when it has satisfied a performance obligation by transferring control over a product or delivering a service to a customer. We measure revenue based upon the consideration outlined in an arrangement or contract with a customer.
The Company’s typical performance obligations include the following:
For purposes of determining the transaction price, the Company assumes that the goods or services promised in the existing contract will be transferred to the customer. The Company assumes that the contract will not be canceled, renewed, or modified; therefore, the transaction price includes only those amounts to which the Company has rights under the present contract. For example, if the Company enters into a contract with a customer that has an original term of one year and the Company expects the customer to renew for a second year, the Company would determine the transaction price based on the original one-year term. When determining the transaction price, the Company first identifies the fixed consideration, which includes any nonrefundable upfront payment amounts.
For purposes of allocating the transaction price, the Company allocates an amount that best represents consideration that the entity expects to receive for transferring each promised good or service to the customer. To meet the allocation objective, the Company allocates the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis. In determining the standalone selling price, the Company uses the best evidence of the stand-alone selling price that the Company charges to similar customers in similar circumstances. In some cases, the Company uses the adjusted market assessment approach to determine the standalone selling price, where it evaluates the market in which it sells the goods or services and estimates the price that customers in that market would pay for those goods or services when sold separately.
The Company recognizes revenue when or as it transfers the promised goods or services in the contract. The Company considers the “transfers” the promised goods or services when, or as, the customer obtains control of the goods or services. The Company considers a customer “obtains control” of an asset when, or as, it can direct the use of, and obtain all the remaining benefits from, an asset substantially. The Company recognizes deferred revenue related to services which it will deliver within one year as a current liability. The Company presents deferred revenue related to services that the Company will deliver more than one year into the future as a non-current liability.
For the period ending June 30, 2020, the Company’s three revenue streams accounted for under ASC 606 follows:
IT Support
On February 5, 2018 (‘Effective Date’), the Company signed IT support and maintenance agreement (‘IT Agreement’) with an FX/OTC broker (‘FX Broker’) regulated by the Malta Financial Services Authority. The Company earns the recurring monthly payment from the FX Broker for delivering IT support and maintenance services (‘Services’) to FX Broker’s legacy technology infrastructure. The term of this Agreement commenced on the Effective Date and shall continue until terminated by either party either for cause, bankruptcy, and other default clauses. The Company completes and satisfies its performance obligation upon accomplishment of all support and maintenance activities every month. The Company invoices the FX Broker at the beginning of the month for services performed, delivered, and accepted for the prior month. At the time of the invoice, the Company renders all Services, and any cash received for Services is non-refundable.
Licensing Fees
The Company receives monthly licensing fees for its Condor Prime Back Office and Condor FX Pro Trading Terminal. Licensing revenues are allocated to software licenses and recognized when the Company transfers the software control to the customer.
Software Development
The Company receives $75 per hour for the first 100 hours/month of approved development services and $45 per hour for all services over 100 hours per month. The Company invoices the Customer for all development services rendered, and any cash received for the development services is non-refundable.
The Company invoices the customer at the beginning of the month for services delivered for the month. The invoice amount is due upon receipt. The Company recognizes the revenue at the end of each month, which is equal to the invoice amount. |
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| Concentrations of Credit Risk | Concentrations of Credit Risk
Cash
The Company maintains its cash balances at a single financial institution. The balances do not exceed FDIC limits as of June 30, 2020 and December 31, 2019.
Revenues
For the six months ended June 30, 2020 and 2019, the Company had six (6) and ten (10) active customers, respectively. Revenues generated from the top three (3) customers represented approximately 81.94% and 95.51% of total revenue for the six months ended June 30, 2020 and 2019 respectively.
Accounts Receivable
At June 30, 2020, and December 31, 2019, Company’s top four (4) customers comprise roughly 74.82% and 66.89% of total A/R, respectively. The loss of any of the top four customers would have a significant impact on the Company’s operations. |
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| Research and Development (R and D) Cost | Research and Development (R and D) Cost
The Company acknowledges that future benefits from research and development (R and D) are uncertain, and as a result, we cannot capitalize on R and D expenditures. The GAAP accounting standards require us to expense all research and development expenditures as incurred. For the three and six months ended June 30, 2020 and 2019, the Company did not incur R and D cost. |
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| Legal Proceedings | Legal Proceedings
The Company discloses a loss contingency if there is at least a reasonable possibility that a material loss has incurred. The Company records its best estimate of loss related to pending legal proceedings when the loss is considered probable, and the amount can be reasonably estimated. Where the Company can reasonably estimate a range of loss with no best estimate in the range, the Company records the minimum estimated liability. As additional information becomes available, the Company assesses the potential liability related to pending legal proceedings and revises its estimates and updates its disclosures accordingly. The Company’s legal costs associated with defending itself are recorded to expense as incurred. The Company is currently not involved in any litigation. |
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| Impairment of Long-Lived Assets | Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment in accordance with FASB ASC 360, Property, Plant, and Equipment. Under the standard, long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. An impairment charge is recognized for the amount if and when the carrying value of the asset exceeds the fair value. On June 30, 2020, and December 31, 2019, there are no impairment charges. |
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| Provision for Income Taxes | Provision for Income Taxes
The provision for income taxes is determined using the asset and liability method. Under this method, deferred tax assets and liabilities are calculated based upon the temporary differences between the consolidated financial statement and income tax bases of assets and liabilities using the enacted tax rates that are applicable in each year.
The Company utilizes a two-step approach to recognizing and measuring uncertain tax positions (“tax contingencies”). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely to be realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments, and which may not accurately forecast actual outcomes. The Company includes interest and penalties related to tax contingencies in the provision of income taxes in the consolidated statements of operations. Management of the Company does not expect the total amount of unrecognized tax benefits to change in the next twelve (12) months significantly. |
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| Software Development Costs | Software Development Costs
By ASC 985-20, Software development costs, including costs to develop software sold, leased, or otherwise marketed, that are incurred after the establishment of technological feasibility, are capitalized if significant. Capitalized software development costs are amortized using the straight-line amortization method over the estimated useful life of the application software. By the end of February 2016, the Company completed the activities (planning, designing, coding, and testing) necessary to establish that it can produce and meet the design specifications of the Condor FX Back Office Version, Condor FX Pro Trading Terminal Version, and Condor Pricing Engine. The Company established the technological feasibility of the Crypto Web Trader Platform in 2018. The Company estimates the useful life of the software to be three (3) years.
Amortization expense was $65,144 and $9,562 for the three months ended June 30, 2020 and 2019 respectively, and the Company classifies such cost as the Cost of Sales. Amortization expense was $114,728 and $19,843 for the six months ended June 30, 2020 and 2019 respectively, and the Company classifies such cost as the Cost of Sales. The increase in amortization expense for the three months ending June 30, 2020, is due to the cumulative amortization expense of Condor Back Office, Condor Crypto Trading Platform, and Condor FX Trading Platform (Desktop).
The Company capitalizes significant costs incurred during the application development stage for internal-use software. The Company does not believe that the capitalization of software development costs is material to date. |
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| Convertible Debentures | Convertible Debentures
The cash conversion guidance in ASC 470-20, Debt with Conversion and Other Options, is considered when evaluating the accounting for convertible debt instruments (this includes certain convertible preferred stock that is classified as a liability) to determine whether the conversion feature should be recognized as a separate component of equity. The cash conversion guidance applies to all convertible debt instruments that upon conversion may be settled entirely or partially in cash or other assets where the conversion option is not bifurcated and separately accounted for pursuant to ASC 815.
If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). The Company records BCF as a debt discount pursuant to ASC Topic 470-20, Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.
As of June 30, 2020, the conversion features of conventional FRH Group convertible notes dated February 22, 2016, May 16, 2016, November 17, 2016, and April 24, 2017 (See Note 8) provide for a rate of conversion where the conversion price is below the market value. As a result, the conversion feature on all FRH Group convertible notes has as a beneficial conversion feature (“BCF”) to the extent of the price difference. The Company extended the due date on the four (4) tranches of FRH Group convertible notes. Management performed an analysis to determine the fair value of the BCF on the four (4) tranches and noted that the value of the BCF for each note was insignificant; thus, the Company did not record any debt discount as of June 30, 2020.
For FRH Group convertible note dated April 24, 2017, the value of the stock at issuance date was above the floor conversion price; this feature is characterized as a beneficial conversion feature (“BCF”). The Company records a BCF as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” As a result, the convertible debt is recorded net of the discount related to the BCF. As of December 31, 2017, the Company has amortized the discount of $97,996 to interest expense at the date of issuance because the debt is convertible at the date of issuance.
The $97,996 amount equaled to the intrinsic value and the Company allocated it to additional paid-in capital in 2017. |
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| Basic and Diluted Income (loss) per Share | Basic and Diluted Income (loss) per Share
The Company follows ASC 260, Earnings Per Share, to account for earnings per share. Basic earnings per share (“EPS”) calculations are determined by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. As of June 30, 2020, and December 31, 2019, the Company had 71,371,385 and 68,626,332 basic and dilutive shares issued and outstanding, respectively. The Company had 20,000,000 million potentially dilutive shares related to four outstanding FRH Group convertible notes, which were excluded from the diluted net loss per share as the effects would have been anti-dilutive. During the six months ended June 30, 2020 and 2019, common stock equivalents were anti-dilutive due to a net loss of $223,166 and $21,842, respectively, for the period. During the three and six months ended June 30, 2020, common stock equivalents were anti-dilutive due to a net loss for the period. Hence, the Company has not considered in the computation. |
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| Reclassifications | Reclassifications
We have reclassified certain prior period amounts to conform to the current year’s presentation. None of these classifications had an impact on reported operating loss or net loss for any of the periods presented. |
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific requirements. ASU 2014-09 establishes a five-step revenue recognition process in which entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows from contracts with customers. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date of ASU 2014-09 by one (1) year. The Company adopted ASC 606 using the modified retrospective method applied to all contracts not completed as of January 1, 2019. The Company presents results for reporting periods beginning after January 1, 2019, under ASC 606 while prior period amounts are reported following legacy GAAP. Refer to Note 2 Revenue from Major Contracts with Customers for further discussion on the Company’s accounting policies for revenue sources within the scope of ASC 606.
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 to this standard are effective for fiscal years beginning after December 15, 2019. 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.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force) and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements. |
Notes Payable (Tables) |
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Notes Payable | FRH Group Note Summary
(1) Note Extension – The Convertible Promissory Note with the face value of $100,000 coupon 6%, dated February 22, 2016, was amended to extend the maturity date from June 30, 2019, to June 30, 2020. The Convertible Promissory Note with the face value of $400,000, coupon 6% issue, dated May 16, 2016, was amended to extend the maturity date from June 30, 2019, to December 31, 2020. The Convertible Promissory Note with the face value of $250,000, coupon 6% issue, dated November 17, 2016, was amended to extend the maturity date from June 30, 2019, to December 31, 2020. The Company, by the execution of the note extension agreement, represents and warrants that as of the date hereof, no Event of Default exists or is continuing concerning the Promissory Note. |
Warrants (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warrants and Rights Note Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Warrants Activity | Information About the Warrants Outstanding During Fiscal 2020 Follows
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Business Description and Nature of Operations (Details Narrative) - FRH Prime Ltd. [Member] |
6 Months Ended | |
|---|---|---|
|
Jun. 30, 2020
USD ($)
Integer
|
Jun. 30, 2019
USD ($)
|
|
| Generated volume rebates | $ | $ 1,861 | $ 1,281 |
| Number of directors | Integer | 3 | |
Summary of Significant Accounting Policies (Details Narrative) |
1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
|---|---|---|---|---|---|---|---|---|
|
Apr. 30, 2019
USD ($)
|
Feb. 28, 2019
USD ($)
|
Jun. 30, 2020
USD ($)
shares
|
Jun. 30, 2019
USD ($)
shares
|
Jun. 30, 2020
USD ($)
Integer
shares
|
Jun. 30, 2019
USD ($)
Integer
shares
|
Dec. 31, 2019
USD ($)
Integer
shares
|
Dec. 31, 2017
USD ($)
|
|
| Cash and cash equivalents | $ 124,524 | $ 124,524 | $ 27,884 | |||||
| Allowance for doubtful, accounts receivable | 95,961 | 95,961 | 78,087 | |||||
| Bad debt expense | 17,875 | $ 20,000 | 17,875 | $ 20,000 | ||||
| Sales and marketing | $ 527 | $ 6,325 | $ 1,753 | $ 16,181 | ||||
| Sales percentage | 1.13% | 6.86% | 1.34% | 6.06% | ||||
| Membership fees | $ 90 | |||||||
| Rent payment per month | $ 890 | |||||||
| Office lease, term | 11 months | 1 year | ||||||
| Office lease, description | From March 2020, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the terms of the agreement by giving thirty (30) days' notice. | From February 2020, this agreement is extended for one year period at $1,750 per month. The Company uses the office for sales and marketing in Europe and Asia. | ||||||
| Performance obligations, description | The Company receives $75 per hour for the first 100 hours/month of approved development services and $45 per hour for all services over 100 hours per month. | |||||||
| Research and development cost | ||||||||
| Impairment charges | ||||||||
| Estimated useful life of the software | 3 years | 3 years | ||||||
| Amortization expense | $ 65,144 | $ 9,562 | $ 114,728 | $ 19,843 | ||||
| Amortized discount | $ 97,996 | |||||||
| Intrinsic value | $ 97,996 | |||||||
| Number of common shares basic and diluted | shares | 69,440,798 | 68,626,332 | 69,033,565 | 68,614,732 | 68,626,332 | |||
| Common stock equivalents, dilutive net income | $ 223,166 | $ 21,842 | ||||||
| Four Outstanding FRH Group Convertible Notes [Member] | ||||||||
| Potentially dilutive shares | shares | 20,000,000 | |||||||
| Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | Top Three Customers [Member] | ||||||||
| Sales percentage | 81.94% | 95.51% | ||||||
| Number of active customers | Integer | 6 | 10 | ||||||
| Customer Concentration Risk [Member] | Accounts Receivable [Member] | Top Four Customers [Member] | ||||||||
| Sales percentage | 74.82% | 66.89% | ||||||
| Number of active customers | Integer | 4 | 4 | ||||||
| General and Administrative Expense [Member] | ||||||||
| Rent payment per month | $ 500 | $ 1,750 | ||||||
Management's Plans (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
Dec. 31, 2019 |
|
| Managements Plans | |||||
| Accumulated deficit | $ (1,258,660) | $ (1,258,660) | $ (1,035,494) | ||
| Net loss | (163,581) | $ (31,519) | (223,166) | $ (21,842) | |
| Cash on hand | $ 124,524 | $ 124,524 | $ 27,884 | ||
Capitalized Software Costs (Details Narrative) - USD ($) |
6 Months Ended | ||
|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Dec. 31, 2019 |
|
| Capitalized Software Costs | |||
| Estimated useful life of capitalized software | 3 years | 3 years | |
| Gross capitalized software asset | $ 932,758 | $ 829,500 | |
| Accumulated software depreciation and amortization expenses | 254,603 | 139,875 | |
| Unamortized balance of capitalized software | $ 678,155 | $ 689,625 | |
Property and Equipment (Details Narrative) - USD ($) |
1 Months Ended | 6 Months Ended | |
|---|---|---|---|
Apr. 30, 2019 |
Feb. 28, 2019 |
Jun. 30, 2020 |
|
| Office lease, term | 11 months | 1 year | |
| Office rent payment for per month | $ 890 | ||
| Office lease, description | From March 2020, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the terms of the agreement by giving thirty (30) days' notice. | From February 2020, this agreement is extended for one year period at $1,750 per month. The Company uses the office for sales and marketing in Europe and Asia. | |
| General and Administrative Expense [Member] | |||
| Office rent payment for per month | $ 500 | $ 1,750 | |
Line of Credit (Details Narrative) - USD ($) |
6 Months Ended | ||
|---|---|---|---|
Jun. 30, 2020 |
Dec. 31, 2019 |
Jun. 24, 2016 |
|
| Line of credit average interest rate, purchases | 12.00% | ||
| Line of credit average interest rate, cash drawn | 25.00% | ||
| Line of credit outstanding balance | $ 38,624 | $ 31,514 | |
| Bank of America [Member] | |||
| Revolving line of credit | $ 40,000 |
Notes Payable (Details Narrative) - USD ($) |
6 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
May 22, 2020 |
May 14, 2020 |
May 01, 2020 |
Apr. 24, 2017 |
Nov. 17, 2016 |
May 16, 2016 |
Feb. 22, 2016 |
Jun. 30, 2020 |
Dec. 31, 2019 |
|
| Convertible notes payable, current | $ 1,000,000 | $ 1,000,000 | |||||||
| Accrued interest, current | 226,908 | $ 196,908 | |||||||
| Loans | $ 144,800 | ||||||||
| Officer [Member] | |||||||||
| Loans | $ 15,000 | ||||||||
| Small Business Administration [Member] | |||||||||
| Debt interest rate | 3.75% | ||||||||
| Accrued interest, current | $ 144,900 | ||||||||
| Loans | 144,900 | ||||||||
| Debt instrument, periodic payment | $ 707 | ||||||||
| Debt instrument, description | The installment payments will include principal and interest, of $707 monthly, will begin Twelve (12) months from the date of the promissory Note. The balance of principal and interest will be payable Thirty (30) years from the date of the promissory Note. | ||||||||
| Convertible Notes [Member] | FRH Group Ltd [Member] | |||||||||
| Debt instrument, face value | $ 250,000 | $ 250,000 | $ 400,000 | $ 100,000 | |||||
| Debt instrument maturity date | Apr. 24, 2019 | Nov. 30, 2018 | May 31, 2018 | Feb. 28, 2018 | |||||
| Debt instrument maturity date, description | The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020 | Additional extension to June 30, 2019. The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020. | The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020. | The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020. | |||||
| Debt interest rate | 6.00% | 6.00% | 6.00% | 6.00% | |||||
| Debt interest rate for periodical payments | 10.00% | 10.00% | 10.00% | 10.00% | |||||
| Debt instrument conversion rate per share | $ 0.10 | $ 0.10 | $ 0.10 | $ 0.10 | |||||
| Debt instrument conversion shares | 2,500,000 | 2,500,000 | 4,000,000 | 1,000,000 | |||||
| Debt instrument conversion rate | 30.00% | 30.00% | 30.00% | 30.00% | |||||
| Convertible Notes [Member] | FRH Group Ltd [Member] | Maximum [Member] | |||||||||
| Debt instrument conversion rate per share | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.05 | |||||
| Debt instrument conversion shares | 5,000,000 | 5,000,000 | 8,000,000 | 2,000,000 | |||||
| Convertible Notes [Member] | FRH Group Ltd [Member] | Common Stock [Member] | Maximum [Member] | |||||||||
| Debt instrument conversion rate per share | $ 0.10 | $ 0.10 | $ 0.10 | $ 0.10 | |||||
| Paycheck Protection Program [Member] | |||||||||
| Debt instrument maturity date, description | The maturity date of two (2) years from the funding date of the PPP Note. | ||||||||
| Debt interest rate | 1.00% | ||||||||
| Proceeds from promissory note | $ 50,632 | ||||||||
| Economic Injury Disaster Loan [Member] | |||||||||
| Amount received in grants | $ 4,000 | ||||||||
| Economic Injury Disaster Loan [Member] | Maximum [Member] | |||||||||
| Program to offer emergency grant | $ 10,000 |
Notes Payable - Schedule of Notes Payable (Details) - FRH Group Note [Member] - USD ($) |
Apr. 24, 2017 |
Nov. 17, 2016 |
May 16, 2016 |
Feb. 22, 2016 |
Jun. 30, 2020 |
Dec. 31, 2019 |
||
|---|---|---|---|---|---|---|---|---|
| Original Amount of Note: | $ 250,000 | $ 250,000 | $ 400,000 | $ 100,000 | ||||
| Outstanding Principal Balance: | $ 250,000 | $ 250,000 | $ 400,000 | $ 100,000 | ||||
| Maturity Date: | [1] | Dec. 31, 2020 | Dec. 31, 2020 | Dec. 31, 2020 | Dec. 31, 2020 | |||
| Interest Rate: | 6.00% | 6.00% | 6.00% | 6.00% | 6.00% | 6.00% | ||
| Date to which interest has been paid: | Accrued | Accrued | Accrued | Accrued | ||||
| Conversion Rate: | $ 0.10 | $ 0.10 | $ 0.10 | $ 0.10 | ||||
| Floor Conversion Price: | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.05 | ||||
| ||||||||
Notes Payable - Schedule of Notes Payable (Details) (Parenthetical) - Convertible Promissory Notes [Member] - USD ($) |
Nov. 17, 2016 |
May 16, 2016 |
Feb. 22, 2016 |
|---|---|---|---|
| Debt instrument, face value | $ 250,000 | $ 400,000 | $ 100,000 |
| Coupon rate | 6.00% | 6.00% | 6.00% |
| Debt instrument maturity date, description | Extend the maturity date from June 30, 2019, to December 31, 2020. | Extend the maturity date from June 30, 2019, to December 31, 2020. | Extend the maturity date from June 30, 2019, to June 30, 2020. |
Commitments and Contingencies (Details Narrative) - USD ($) |
1 Months Ended | 6 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Apr. 30, 2019 |
Feb. 28, 2019 |
Sep. 30, 2018 |
Jun. 30, 2020 |
Jun. 30, 2019 |
Dec. 31, 2019 |
Apr. 24, 2017 |
Nov. 17, 2016 |
May 16, 2016 |
Feb. 22, 2016 |
|
| Rental expense | $ 14,905 | $ 12,524 | ||||||||
| Office lease, term | 11 months | 1 year | ||||||||
| Rent payment per month | 890 | |||||||||
| Office lease, description | From March 2020, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the terms of the agreement by giving thirty (30) days' notice. | From February 2020, this agreement is extended for one year period at $1,750 per month. The Company uses the office for sales and marketing in Europe and Asia. | ||||||||
| Accrued interest | 226,908 | $ 196,908 | ||||||||
| Payroll tax amount | $ 10,477 | |||||||||
| FRH Group Note [Member] | ||||||||||
| Debt interest rate | 6.00% | 6.00% | 6.00% | 6.00% | 6.00% | 6.00% | ||||
| Accrued interest | $ 226,908 | $ 196,908 | ||||||||
| Chief Executive Officer and Chief Financial Officer [Member] | ||||||||||
| Monthly compensation | $ 5,000 | |||||||||
| General and Administrative Expense [Member] | ||||||||||
| Rent payment per month | $ 500 | $ 1,750 | ||||||||
| Payroll tax amount | $ 11,376 | |||||||||
Warrants (Details Narrative) |
6 Months Ended | ||||
|---|---|---|---|---|---|
|
Feb. 26, 2019
shares
|
Jun. 01, 2017
USD ($)
$ / shares
shares
|
Jun. 30, 2020
Integer
$ / shares
shares
|
Dec. 31, 2019
$ / shares
|
Jun. 30, 2019
$ / shares
|
|
| Number of units offering during period | shares | 2,967,000 | ||||
| Common stock, par value | $ 0.0001 | $ 0.0001 | |||
| Common stock, per share | $ 0.15 | ||||
| Class A Warrant [Member] | |||||
| Warrants to purchase shares | shares | 1 | ||||
| Common stock, per share | $ 0.30 | ||||
| Warrant expiration date | Apr. 30, 2019 | ||||
| Warrant [Member] | |||||
| Common stock, per share | $ 1.00 | ||||
| Warrant exercise price | $ 0.05 | ||||
| Trading days | Integer | 10 | ||||
| Private Placement [Member] | |||||
| Proceeds from private placement | $ | $ 600,000 | ||||
| Description of warrants | Each unit (a "Unit") consists of one share of Common Stock, par value $.0001 per share (the "Common Stock) and one redeemable Class A Warrant (the "Class A Warrant(s)") of the Company. The Company closed the private placement effective December 15, 2017. | ||||
| Common stock, par value | $ 0.0001 | ||||
| Private Placement [Member] | Maximum [Member] | |||||
| Number of units offering during period | shares | 4,000,000 |
Warrants - Schedule of Warrants Activity (Details) |
6 Months Ended |
|---|---|
|
Jun. 30, 2020
$ / shares
shares
| |
| Warrants and Rights Note Disclosure [Abstract] | |
| Original Number of Warrants Issued | 653,332 |
| Exercise Price per Common Share | $ / shares | $ 0.30 |
| Exercisable at December 31, 2019 | |
| Became Exercisable | |
| Exercised | |
| Terminated/Canceled/Expired | 653,332 |
| Exercisable at June 30, 2020 | |
| Expiration Date | Apr. 30, 2019 |