UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the Quarterly Period Ended
OR
For the transition period from ______________ to ______________
Commission
File No.
(Exact name of the small business issuer as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(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 | ||
| 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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See the definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☐ | Smaller reporting company | ||
| Emerging growth company |
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 ☐
The number of shares of Common Stock, $0.0001 par value of the registrant outstanding on November 9, 2023, was .
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 |
PART I.
| Item 1. | Financial Statements. |
FDCTECH, INC.
Index to Consolidated Financial Statements
| F-1 |
FDCTECH, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 2023 | December 31, 2022 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $ | ||||||||
| Other current assets | ||||||||
| OID promissory note | ||||||||
| Total Current assets | ||||||||
| Fixed assets, net | ||||||||
| Capitalized software, net | ||||||||
| Acquired tangible assets | ||||||||
| Acquired intangible assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Line of credit | ||||||||
| Payroll tax payable | ||||||||
| Business acquisition loan | ||||||||
| Promissory note | ||||||||
| Cares act- paycheck protection program advance | ||||||||
| Other current liabilities | ||||||||
| Total Current liabilities | ||||||||
| SBA loan – non-current | ||||||||
| Deferred tax liabilities | ||||||||
| Accrued interest – non-current | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 9) | ||||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, par value $, shares authorized, issued and outstanding, as of September 30, 2023, and December 31, 2022 | ||||||||
| Common stock, par value $, shares authorized; and shares issued and outstanding, as of September 30, 2023 and December 31, 2022 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total FDCTech, Inc. stockholders’ equity (deficit) | ||||||||
| Noncontrolling interest | ||||||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
See accompanying notes to the financial statements.
| F-2 |
FDCTECH, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Revenues | ||||||||||||||||
| Technology & software | $ | $ | $ | $ | ||||||||||||
| Wealth management | ||||||||||||||||
| Trading revenue | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Cost of sales | ||||||||||||||||
| Technology & software | ||||||||||||||||
| Wealth management | ||||||||||||||||
| Total cost of sales | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating income (loss) | ( | ) | ( | ) | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Gain on purchase | ||||||||||||||||
| Other interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ( | ) | ( | ) | ||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ||||||||||
| Income (loss) before provision for income taxes | ( | ) | ( | ) | ||||||||||||
| Provision (benefit) for income taxes | ||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ||||||||||||
| Less: Net income attributable to noncontrolling interest | ( | ) | ( | ) | ||||||||||||
| Net income attributable to FDCTech’s shareholders | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net income (loss) per common share, basic and diluted | $ | ) | $ | ) | $ | $ | ) | |||||||||
| Weighted average number of common shares outstanding basic and diluted | ||||||||||||||||
See accompanying notes to the financial statements
| F-3 |
FDCTECH, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
| Preferred stock | Common stock | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ Equity | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Income | Deficit | (Deficit) | |||||||||||||||||||||||||
| Three months ended September 30, 2022 | ||||||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Common shares issued for cash valued at $ per share | - | |||||||||||||||||||||||||||||||
| Common shares issued for services valued at $ per share | - | |||||||||||||||||||||||||||||||
| Net income (loss) | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
| Three months ended September 30, 2023 | ||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||
| Forex gain (loss) on consolidation | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net income (loss) | - | - | ||||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
See accompanying notes to the financial statements
| F-4 |
FDCTECH, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
| Preferred stock | Common stock | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Income | Deficit | Deficit | |||||||||||||||||||||||||
| Nine months ended September 30, 2022 | ||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Common shares issued for cash valued at $ per share | - | |||||||||||||||||||||||||||||||
| Common shares issued for services valued at $ per share | - | |||||||||||||||||||||||||||||||
| Common shares issued for cash valued at $ per share | - | |||||||||||||||||||||||||||||||
| Common shares issued for cash valued at $ per share | - | |||||||||||||||||||||||||||||||
| Common shares issued for financing cost valued at $ per share | - | |||||||||||||||||||||||||||||||
| Common shares issued for cash valued at $ per share | - | |||||||||||||||||||||||||||||||
| Common shares issued for cash valued at $ per share | - | |||||||||||||||||||||||||||||||
| Forex gain (loss) on consolidation | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Common shares issued for cash valued at $ per share | - | |||||||||||||||||||||||||||||||
| Common shares issued for services valued at $ per share | - | |||||||||||||||||||||||||||||||
| Net income (loss) | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Nine Months Ended September 30, 2023 | ||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Common shares issued for cash valued at $ per share | - | |||||||||||||||||||||||||||||||
| Common shares issued for services valued at $ per share | - | |||||||||||||||||||||||||||||||
| Common shares issued for cash valued at $ per share | - | |||||||||||||||||||||||||||||||
| FX gain (loss) on consolidation | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net income (loss) | - | - | ||||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
| F-5 |
FDCTECH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Ended | ||||||||
September 30, 2023 | September 30, 2022 | |||||||
| Net Income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Software depreciation and amortization | ||||||||
| Common stock issued for services | ||||||||
| Acquired tangible assets | ( | ) | ||||||
| Acquired intangible assets | ( | ) | ||||||
| Change in assets and liabilities: | ||||||||
| Gross accounts receivable | ( | ) | ( | ) | ||||
| Fixed assets, net | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Other current liabilities | ||||||||
| OID of promissory note | ( | ) | ||||||
| Other current assets | ( | ) | ||||||
| Accrued interest | ||||||||
| Increase in accrued payroll tax | ||||||||
| Deferred tax liabilities | ||||||||
| Net cash used in operating activities | $ | ( | ) | $ | ( | ) | ||
| Investing Activities: | ||||||||
| Capitalized software | ( | ) | ( | ) | ||||
| Net cash used in investing activities | $ | ( | ) | $ | ( | ) | ||
| Financing Activities: | ||||||||
| Borrowing from (payments to) line of credit | ||||||||
| Proceeds from promissory note | ( | ) | ||||||
| Net proceeds (payment to) from SBA loan | ( | ) | ( | ) | ||||
| Business acquisition loan | ||||||||
| Net proceeds from common stock | ||||||||
| Related party advances | ( | ) | ||||||
| Increase (decrease) in non-controlling interest | ( | ) | ||||||
| Forex gain (loss) on consolidation | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | $ | $ | ||||||
| Net increase (decrease) in cash | ||||||||
| Cash at beginning of the period | ||||||||
| Cash at end of the period | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| Common stock issued for note conversion | ||||||||
See accompanying notes to the financial statements
| F-6 |
NOTE 1. BUSINESS DESCRIPTION AND NATURE OF OPERATIONS
Under Delaware laws, the founders incorporated the Company as Forex Development Corporation on January 21, 2016. 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 financial markets for OTC brokers. The Company provides innovative and cost-efficient financial technology (‘fintech’) and business solutions to OTC Online Brokerages (“customers”).
The Company intends to build a diversified global financial services company driven by proprietary Condor trading technologies, complementary regulatory licenses, and a proven executive team. The Company plans to acquire, integrate, transform, and scale legacy financial service companies. The Company believes its proprietary technology and software development capabilities allow legacy financial services companies immediate exposure to –forex, stocks, ETFs, commodities, social/copy trading, and other high-growth fintech markets.
From December 2021 onwards, the Company expects to grow from its acquisition strategy, specializing in buying and integrating small to mid-size legacy financial services companies. The Company intends to build a diversified global software-driven financial services company. The Company plans to acquire, integrate, transform, and scale legacy financial service companies. The Company replaces conventional legacy software infrastructure with its regulatory-grade proprietary Condor trading technologies, intending to improve end-user experience, increase client retention, and realize cost synergies.
Currently, we have three primary business segments: (1) Wealth Management, (2) Technology and Software Development, and (3) Margin Brokerage Business or Trading Revenue.
Wealth Management – AD Advisory Services Pty Ltd.
On December 22, 2021, the Company entered into a Share Exchange Agreement (the “Agreement”) with AD Financial Services Pty Ltd ACN 628 331 117 of Level 38/71 Eagle St, Brisbane, Queensland, Australia, 4000 (“ADFP” or “Target”). According to the Agreement, the Company acquired % of ADFP’s issued and outstanding shares of capital stock in exchange for (the “Consideration”) newly issued “restricted” common shares. The operating and licensed entity of ADFP is AD Advisory Services Pty Ltd. ADFP owns one hundred percent (%) equity interest in AD Advisory Services Pty Ltd (“ADS”). As a result, the Company is the % owner of ADS. The Company closed the acquisition on December 22, 2021, and combined the financial statements of ADS in its annual report, 10-K, filed with the SEC on March 28, 2022.
AD
Advisory Services Pty Ltd. (ADS) is an Australian-regulated wealth management company with 20 offices, 28 advisors, and $530+ million
in funds under advice. ADS provides licensing solutions for financial advisers & accountants in Australia. ADS offers financial planners
different licensing, compliance, and education solutions to meet their practice’s specific needs. ADS’ revenues, cost of
sales, and gross profits for the nine months ending September 30, 2023, were $
Margin Brokerage – Alchemy Markets Ltd. (formerly known as NSFX Ltd.) Acquisition
On
December 31, 2022, the Company announced the sales purchase agreement (“Agreement”) under which the Company acquired a
| F-7 |
NOTE 1. BUSINESS DESCRIPTION AND NATURE OF OPERATIONS (continued)
Alchemy (Malta) is authorized to deal with its account (market maker) as a Category 3 licensed entity by the MFSA, receive and transmit orders for retail and professional clients, and hold and control clients’ money and assets. Alchemy (Malta) services its customers in the English, French, German, Italian, and Arabic-speaking markets. The customers can trade in currency, commodity, equity, and other derivatives in real-time.
Alchemy (Malta)’s Balance Sheet as of June 30, 2023 (Acquisition Date):
| Description | Fair Value, $ | |||
| Cash and cash equivalents (1) | ||||
| Financial assets at fair value through profit and loss (2) | ||||
| Receivables (3) | ||||
| Fixed assets (4) | ||||
| - Current liabilities (5) | ( | ) | ||
| - Deferred tax liabilities (6) | ( | ) | ||
| Net assets (A) | ||||
| Purchase Price 50.10% (B) | ||||
| Non-controlling interest (C), 49.90% | ||||
| FDCTech gain on bargain purchase (A) – (B) – (C) | ||||
According to the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) Topic 805, “Business Combinations,” the accounting acquirer is the entity that obtains control of the acquiree. We have determined that the Company is the accounting acquirer based on the following factors:
| ● | The relative voting rights. The Company holds the majority of Alchemy (Malta)’s voting rights; therefore, we are the accounting acquirer. | |
| ● | The composition of the governing body. The Company is the governing body of Alchemy (Malta), and we are the accounting acquirer. | |
| ● | The composition of the senior management. If the senior management comprises primarily the management personnel from one of the combining entities, that entity is likely the accounting acquirer. |
We have determined the method of accounting for the business combination. The accounting acquirer applies the acquisition method and recognizes the acquiree’s identifiable assets, liabilities, and any noncontrolling interest in the acquiree at their fair values as of the acquisition date. The fair values of Alchemy (Malta)’s assets and liabilities equal their carrying amounts. Therefore, we did not need any adjustments to the carrying amounts of these assets and liabilities on the Company’s balance sheet.
| (1) | We recognize cash and cash equivalents held by Alchemy (Malta) and deposits in bank accounts that can be accessed on demand or within 90 days. They are included in our cash and cash equivalents in the consolidated balance sheet as of June 30, 2023. We hold client funds held by Alchemy (Malta) in the normal course of business in a fiduciary capacity; we do not include such funds in these financial statements. | |
| (2) | Financial assets at fair values for Alchemy (Malta) through profit and loss are derivative contracts in favor of Alchemy (Malta). They are included in our other current assets in the consolidated balance sheet as of June 30, 2023. We determine financial assets at fair values by reference to market prices or rates quoted at the end of the reporting period. Observable market prices or rates support the valuation techniques since their variables include only data from observable markets. We categorize Alchemy (Malta)’s derivative financial instruments as level 2. | |
| (3) | Alchemy (Malta)’s receivables mostly consist of amounts due from previous shareholders of New Star and are included in our accounts receivable in the consolidated balance sheet as of June 30, 2023. | |
| (4) | All property and equipment are initially recorded at historical cost and included in our fixed assets, net in the consolidated balance sheet as of June 30, 2023. Historical cost includes expenditures directly attributable to the acquisition of the items. We calculate depreciation using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives. | |
| (5) | We recognize deferred tax using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. We include deferred tax liabilities in our consolidated balance sheet as of June 30, 2023. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred tax is not accounted for if it stems from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates (and Malta laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred tax asset is realized, or the deferred tax liability is settled. |
CIM Acquisition Update
On
July 19, 2022, the Company signed a non-binding letter of intent to acquire fifty-one percent (
At July 31, 2023, the Company sent the notice of termination of the purchase agreement to CIM Securities as future events may result in a change of ownership in the CMA application. The Company believes that this would cause further delays in the approval process. Our board has mandated the management team to concentrate on expanding and developing our core non-US forex business to maximize shareholder value.
| F-8 |
NOTE 1. BUSINESS DESCRIPTION AND NATURE OF OPERATIONS (continued)
Technology & Software Development
The Company has three sources of revenue.
| ● | Technology Solutions – The Company licenses its proprietary and sometimes resells third-party technologies to customers. Our proprietary technology includes but is not limited to Condor Risk Management Back Office (“Condor Risk Management”), Condor Pro Multi-Asset Trading Platform (previously known as Condor FX Pro Trading Terminal), Condor Pricing Engine, Crypto Web Trader Platform, and other fintech-related solutions. | |
| ● | Customized Software Development – The Company develops software for Customers with unique requirements outlined in the Software Development Agreement (“Agreement”). | |
| ● | Consulting Services – The Company’s turnkey business solutions - Start-Your-Own-Brokerage (“SYOB”), Start-Your-Own-Prime Brokerage (“SYOPB”), FX/OTC liquidity solutions, and lead generations. |
The Company has completed the Condor Pro Multi-Asset Trading Platform, previously known as the Condor FX Trading Platform. The Condor Pro Multi-Asset Trading Platform is a regulatory-grade platform targeted at day traders and retail investors. The industry characterized such platforms by their ease of use and helpful features, such as the simplified front-end (user interface/user experience), back-end (reporting system), news feeds, and charting system. The Condor Pro Multi-Asset Trading Platform includes risk management (dealing desk, alert system, margin calls, etc.), a pricing engine (best bid/ask), and connectivity to multiple liquidity providers or market makers. We have tailored the Condor Pro Multi-Asset Trading Platform to markets such as forex, stocks, commodities, and other financial products.
The Company released, marketed, and distributed its Condor Pro Multi-Asset Trading Platform in the second quarter of the fiscal year, December 31, 2019. The Company has developed the Condor Back Office API to integrate third-party CRM and banking systems into Condor Back Office.
The Company has ten (10) licensing agreements for its Condor Pro Multi-Asset Trading Platform. The Company continuously negotiates additional licensing agreements with several retail online brokers to use the Condor Pro Multi-Asset Trading Platform. Condor Pro Multi-Asset Trading Platform is available in desktop, web, and mobile versions.
The Company’s upgraded Condor Back Office (Risk Management) meets various jurisdictions’ regulatory requirements. Condor Back Office meets the directives under the Markets in Financial Instruments Directive (MiFID II/MiFIR), legislation by the European Securities and Market Authority (ESMA) implemented across the European Union on January 3, 2018.
| F-9 |
NOTE 1. BUSINESS DESCRIPTION AND NATURE OF OPERATIONS (continued)
The Company is developing the Condor Investing & Trading App, a simplified trading platform for traders with varied experiences in trading stocks, ETFs, and other financial markets from their mobile phones. The Company expects to commercialize the Condor Investing & Trading App by the end of the second quarter of the fiscal year ending December 31, 2023.
The Company had developed NFT Marketplace, a decentralized NFT marketplace, a multichain platform with a lazy minting option to reduce and limit unnecessary blockchain usage fees, also known as gas fees. The Company has no plans to commercialize the NFT Marketplace in the fiscal year ending December 31, 2023, as the market for NFT has slowed considerably.
The Company and its subsidiary, ADS, intend to develop a digital wealth management company, initially including a Robo Advice Platform catering to Australia’s wealth management industry. The Company has decided not to build the Robo Advice Platform as of September 30, 2023.
The
Company generated Technology & Software Revenue of $
Subsidiaries of the Company
ADS is an Australian-regulated wealth management company with 20 offices, 28 advisors, and $530+ million funds under advice.
On
December 31, 2022, the Company announced the sales purchase agreement (“Agreement”) under which the Company acquired a
Alchemy (Malta) is authorized to deal with its account (market maker) as a Category 3 licensed entity by the MFSA, receive and transmit orders for retail and professional clients, and hold and control clients’ money and assets. Alchemy (Malta) services its customers in the English, French, German, Italian, and Arabic-speaking markets. The customers can trade in currency, commodity, equity, and other derivatives in real-time.
Settlement of the FRH Group Note
Between
February 22, 2016, and April 24, 2017, the Company borrowed $
Termination of Acquisition of Genesis Financial, Inc.
In
line with the new strategic direction, on June 2, 2021, the Company entered into a Stock Purchase Agreement (the “Genesis Agreement”)
with the Shareholders of Genesis Financial, Inc., a Wyoming corporation (“GFNL” or “Seller”). According to the
Agreement, the Company plans to acquire
On August 24, 2021, FDCTech, Inc., a Delaware corporation (“FDCT” or the “Company” or “Buyer”), terminated the Stock Purchase Agreement (the “Agreement”), dated June 2, 2021, with the Shareholders of Genesis Financial, Inc., a Wyoming corporation (“Genesis” or “Seller”). As of the termination date, the Company did not issue any Securities to the Seller. The Company could not complete nor qualify the Agreement as Genesis could not comply with several non-exhaustive material provisions, covenants, or conditions.
| F-10 |
NOTE 1. BUSINESS DESCRIPTION AND NATURE OF OPERATIONS (continued)
On
June 9, 2021, and in connection with the previous description of the Genesis Agreement, dated June 2, 2021, the Company appointed Warwick
Kerridge as Chairman of the Company’s Board of Directors. Effective August 24, 2021, the Company terminated the appointment of
Warwick Kerridge as the Board of Directors. The Company approved the termination upon the consent of the majority of the stockholders
representing at least
Equity Line of Credit
On
October 04, 2021, the Company filed a prospectus that relates to the resale of up to shares of our Common Stock issued or
issuable to selling shareholders for up to $
Related Party Loan
The
Company also received a net amount of $
Cares Act – Paycheck Protection Program (PPP Note)
On
May 01, 2020, the Company received proceeds of Fifty-Thousand Six Hundred and Thirty-Two ($
SBA Loan
On
May 22, 2020, the Company received hundred and forty-four thousand nine hundred and 00/100 Dollars ($
Promissory Note
On
January 27, 2022, the Company signed a promissory note (‘AJB Note’) with AJB Capital Investments, LLC (‘AJB Capital’),
a Delaware limited liability company, for the principal amount of $
Governmental Regulation
FDCTech is a publicly traded company subject to SEC and FINRA’s rules and regulations regarding public disclosure, financial reporting, internal controls, and corporate governance.
Our wealth management business, AD Advisory Services (ADS), is subject to enhanced regulatory scrutiny and is regulated by multiple regulators in Australia. The Australian Securities and Investments Commission (ASIC) administers a licensing regime for ‘financial services’ providers where ADS holds an Australian Financial Services License (AFSL) and meets various compliance, conduct, and disclosure obligations.
Alchemy (Malta) is an online trading brokerage firm regulated by the Malta Financial Services Authority (MFSA).
Board of Directors
Effective January 1, 2021, Naim Abdullah resigned as the Director of the Company.
On July 6, 2021, the Board of Directors of FDCTech, Inc. (the “Company”) increased from four to five directors and appointed Charles R. Provini, age 74, to the vacancy. Mr. Provini is considered independent under NYSE and NASDAQ listing standards. Mr. Provini has been the Chairman, CEO, and President of Natcore Technology Inc. since May 2009, a research and development company protected by 65 patents granted or pending. From November 1997 to October 2000, he was the President of Ladenburg Thalmann Asset Management and a Director of Ladenburg Thalmann, Inc., one of the oldest New York Stock Exchange members. He served as President of Laidlaw Asset Management and Chairman and Chief Investment Officer of Howe & Rusling, Laidlaw’s Portfolio Management Advisory Group, from November 1995 to September 1997. Mr. Provini served as Rodman & Renshaw’s Advisory Services President from February 1994 to August 1995. He was the President of LaSalle Street Corporation, a wholly-owned subsidiary of Donaldson, Lufkin & Jenrette, from January 1983 to April 1985. Mr. Provini has been a leadership instructor at the U.S. Naval Academy, Chairman of the U.S. Naval Academy’s Honor Board, and a former Marine Corp. officer. Mr. Provini holds an undergraduate Engineering degree from the U.S. Naval Academy in Annapolis, Maryland, and a post-graduate degree from the University of Oklahoma.
| F-11 |
NOTE 1. BUSINESS DESCRIPTION AND NATURE OF OPERATIONS (continued)
On September 30, 2022, the Company appointed Gope S. Kundnani as the Director of the Company. Upon the appointment of Mr. Kundnani, the Company currently has four Board of Directors. Mr. Kundnani is a seasoned entrepreneur with several decades of experience building successful businesses in the United States, the Middle East, and the United Kingdom. From May 2018 to the present, Mr. Kundnani was the founder and current Director of Alchemy Prime Markets, a financial brokerage services company regulated by the Financial Conduct Authority (FCA). From December 2018 to the present, Mr. Kundnani founded and is the Director of Blackthorn Finance Limited, an authorized payments financial services company regulated by the FCA. From May 2004 to April 2008, Mr. Kundnani was the Director of Tristar Group, responsible for investing and acquiring small retail businesses in the Texas region. From February 1999 to the present, Mr. Kundnani has been a partner and CEO of Flexo Pack, a polyethylene product manufacturer with a global customer base. Mr. Kundnani holds an undergraduate business degree from Mulund College of Commerce, Mumbai, India.
Upon Mr. Kerridge’s termination and Mr. Provini’s resignation, the Company currently had four Board of Directors. Mitchell M. Eaglstein is the acting Chairman of the Company. Mitchell M. Eaglstein and Imran Firoz are the executive directors and officers of the Company. Gope S. Kundnani is considered an executive director by owning the Company’s stock of at least 10%. Jonathan Baumgart is an independent director under NYSE and NASDAQ listing standards.
Changes in Registrant’s Certifying Accountant
On July 2, 2021, the Board of Directors of FDCTech, Inc. (the “Company”) approved the dismissal of Farber Hass Hurley LLP (“FHH”) as the Company’s independent registered public accounting firm. The reports of FHH on the Company’s consolidated financial statements for the fiscal years ended December 31, 2020, and 2019 did not contain an adverse opinion or a disclaimer of opinion. It was not qualified or modified for uncertainty audit scope or accounting principles.
On July 2, 2021, the Company appointed BF Borgers CPA PC (“BFB”) as the Company’s new independent registered public accounting firm, effective immediately, to perform independent audit services for the fiscal year ending December 31, 2021.
On April 18, 2023, the Board of Directors of FDCTech, Inc. (the “Company”) approved the dismissal of BFB as the Company’s independent registered public accounting firm. The reports of BFB on the Company’s consolidated financial statements for the fiscal years ended December 31, 2022, and 2021 did not contain an adverse opinion or a disclaimer of opinion. It was not qualified or modified for uncertainty audit scope or accounting principles.
On April 18, 2023, the Company appointed Bolko & Company (“Bolko”) as the Company’s new independent registered public accounting firm, effective immediately, to perform independent audit services for the fiscal year ending December 31, 2023.
| F-12 |
NOTE 1. BUSINESS DESCRIPTION AND NATURE OF OPERATIONS (continued)
Description of Company’s Securities to be Registered
Effective September 03, 2021, the Company incorporated by reference the description of its common stock, par value $ per share, to be registered hereunder contained under the heading “Description of Securities” in the Company’s Registration Statement on Form S-1 (File No. 333- 221726), as initially filed with the Securities and Exchange Commission (the “Commission”) on November 22, 2017, as subsequently amended (the “Registration Statement”). Since the Registration Statement filing, the Company has made all required filings pursuant to Section 15(d) and has continued to file all reports voluntarily.
Covid-19
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) pandemic throughout the United States. While the initial outbreak concentrated in China, it spread to several other countries, including Russia and Cyprus, and reported infections globally. Many countries worldwide, including the United States, have implemented significant governmental measures 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 trade. 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. These developments are highly uncertain. We cannot predict them with confidence, including the duration and severity of the outbreak and the actions required to contain the coronavirus or treat its impact. In particular, the 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 could harm our business, financial condition, and operation results.
Ukraine-Russia Conflict
The geopolitical situation in Eastern Europe intensified on February 24, 2022, with Russia’s invasion of Ukraine. The war between the two countries continues to evolve as military activity continues. The United States and certain European countries have imposed additional sanctions on Russia and specific individuals. By the end of August 2022, the Company closed its technical support and development office in Russia. We relocated our personnel to Turkey, currently considered a neutral zone. In April 2023, we relocated our personnel to Kazakhstan. No individual associated with the Company is banned or under the Special Designated Nationals and Blocked Person list. The relocation may impact our software development capabilities and the Company’s business plans if we cannot relocate our technical and development operations to a safer zone.
As of the date of this report, there has been no disruption in our operations.
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 consolidated financial statements consistent with the accounting policies adopted by the Company in its financial statements. The Company has measured and presented its consolidated financial statements in US Dollars, the currency of the primary economic environment in which it operates (also known as its functional currency).
Financial Statement Preparation and Use of Estimates
The Company prepared consolidated financial statements according to accounting principles generally accepted in the United States of America (“GAAP”). Preparing consolidated financial statements conforming with GAAP requires management to make certain estimates, judgments, and assumptions. This could affect the reported amounts of assets and liabilities, the related disclosures at the date of the consolidated financial statements, and 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. Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties, including uncertainty in the current economic environment due to the coronavirus (“COVID-19”).
Cash and Cash Equivalents
Cash
and cash equivalents include cash on hand, deposits held with banks, and other short-term, highly liquid investments with three months
or less of original maturities. On September 30, 2023, and December 31, 2022, the Company had $
| F-13 |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Accounts Receivable
Accounts Receivable primarily represents the amount due from three (3) technology customers. In some cases, the customer receivables are due immediately on demand; however, in most cases, the Company offers net 30 terms or n/30, where the payment is due in full 30 days after the invoice’s date. 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 historical experience, credit quality, the accounts receivable balances’ age, and 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
September 30, 2023, and December 31, 2022, the Management determined that allowance for doubtful accounts was $
Sales, Marketing, and Advertising
The Company recognizes sales, marketing, and advertising expenses when incurred.
The
Company incurred $
The
sales, marketing, and advertising expenses represented
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 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-14 |
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 considers 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. Each party can identify its rights, obligations, and payment terms; the contract has commercial substance. The Company will probably collect all of the consideration. Revenue is recognized when 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 the change in scope, price, or both as contract modifications. The parties describe contract modification as a change order, a variation, or an amendment. A contract modification exists when the parties approve a modification that either creates new or changes existing enforceable rights and obligations. The Company assumes a contract modification by oral agreement or implied by the customer’s customary business practice when agreed in writing. If the parties to the contract have not approved a contract modification, the Company continues to apply the existing contract’s guidance until the contract modification is approved. The Company recognizes contract modification in various forms –partial termination, an extension of the contract term with a corresponding price increase, adding new goods or services to the contract, with or without a corresponding price change, and reducing the contract price without a promised change in goods/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 agreement. Solutions and services that are incapable of being distinct and distinct within the contract context 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 the stand-alone selling price for each item at the transaction’s inception involving these multiple elements.
Since January 21, 2016 (‘Inception’), the Company has derived its revenues mainly from 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 on the consideration outlined in an arrangement or contract with a customer.
| F-15 |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company’s typic The Company’s typical performance obligations include the following:
| Performance Obligation | Types of Deliverables | When Performance Obligation is Typically Satisfied | ||
| Consulting Services | Consulting related to Start-Your-Own-Brokerage (“SYOB”), Start-Your-Own-Prime Brokerage (“SYOPB”), FX/OTC liquidity solutions, and lead generations. | The Company recognizes the consulting revenues when the customer receives services over the contract length. 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 | Licensing of Condor Risk Management Back Office (“Condor Risk Management”), Condor FX Pro Trading Terminal, Condor Pricing Engine, Crypto Trading Platform (“Crypto Web Trader Platform”), and other fintech-related solutions. | The Company recognizes ratably over the contractual period that the services are delivered, beginning on the date 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. The Company charges the customers a set-up fee for installing the platform, and implementation activities are insignificant and not subject to a separate fee. | ||
| Software Development | Design and build development software 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 contract. |
The Company assumes that the goods or services promised in the existing contract will be transferred to the customer to determine the transaction price. The Company believes 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 with an original term of one year and expects the customer to renew for a second year, the Company would determine the transaction price based on the initial one-year period. When choosing the transaction price, the company first identifies the fixed consideration, including non-refundable upfront payment amounts.
To allocate the transaction price, the Company gives an amount that best represents the consideration the entity expects to receive for transferring each promised good or service to the customer. The Company allocates the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis to meet the allocation objective. 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. The Company sometimes uses the adjusted market assessment approach to determine the standalone selling price. It evaluates the market in which it sells the goods or services and estimates the price customers would pay for those goods or services when sold separately.
| F-16 |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company recognizes revenue when or as it transfers the promised goods or services in the contract. The Company considers the “transfers” of the promised goods or services when the customer obtains control of the goods or services. The Company considers a customer “obtains control” of an asset when it can directly use and substantially obtain all the remaining benefits from an asset. The Company recognizes deferred revenue related to services it will deliver within one year as a current liability. The Company presents deferred revenue related to services that the Company will provide more than one year into the future as a non-current liability.
According to the contract’s terms and conditions, the Company invoices the customer at the beginning of the month for the month’s services. The invoice amount is due upon receipt. The Company recognizes the revenue at the end of each month, equal to the invoice amount.
AD Advisory Services Pty (ADS), the Company’s wealth management revenue, primarily consists of advisory revenue, commission revenue from insurance products, fees to prepare the statement of advice, rebalancing portfolio, and other financial planning activities. We recognize revenue upon transferring services to customers in an amount that reflects the consideration we expect to receive in exchange for those services. If we receive payments before services, we defer and recognize them as revenue when satisfied with our performance obligation. Advisory revenue includes fees charged to clients in advisory accounts for which we are the licensed investment advisor. We bill advisory fees weekly.
| F-17 |
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 account balances are within FDIC limits as of September 30, 2023, and December 31, 2022.
Revenues
Technology
& Software Revenue – The Company generated Technology & Software Revenue of $
Wealth
Management Revenue – The Company’s subsidiary ADS generated $
Wealth
Management Revenue – The Company’s subsidiary Alchemy (Malta) generated $
Accounts Receivable
Accounts Receivable primarily represents the amount due from three (3) active technology customers. In some cases, the customer receivables are due immediately on demand; however, in most cases, the Company offers net 30 terms or n/30, where the payment is due in full 30 days after the invoice’s date. 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 historical experience, credit quality, the accounts receivable balances’ age, and 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
September 30, 2023, and December 31, 2022, the Management determined that allowance for doubtful accounts was $
Research and Development (R and D) Cost
The
Company acknowledges that future benefits from research and development (R and D) are uncertain, so we cannot capitalize on R and D expenditure.
The GAAP accounting standards require us to expense all research and development expenditures as incurred. For the Three Months ended
September 30, 2023, and 2022, the Company incurred
Legal Proceedings
The Company discloses a loss contingency if at least there is a reasonable possibility that a material loss has been incurred. The Company records its best estimate of loss related to pending legal proceedings when the loss is considered probable and when we can estimate the amount. The Company can reasonably estimate a range of loss with no best estimate; the Company records the minimum estimated liability. As additional information becomes available, the Company assesses the potential liability related to pending legal proceedings, revises its estimates, and updates its disclosures accordingly. The Company’s legal costs associated with defending itself are recorded as expenses when incurred. The Company is currently not involved in any litigation.
| F-18 |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of Long-Lived Assets
The
Company reviews long-lived assets for impairment under 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 when the asset’s carrying value exceeds the fair value. There are
Provision for Income Taxes
The provision for income taxes is determined using the asset and liability method. This method calculates deferred tax assets and liabilities based on the temporary differences between the consolidated financial statement and income tax bases of assets and liabilities using the enacted tax rates applicable 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, more than 50%, likely to be realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and benefits, requiring periodic adjustments, 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 operations’ consolidated statements. The Company’s management does not expect the total amount of unrecognized tax benefits to change significantly in the next twelve (12) months.
Software Development Costs
By ASC 985-20, Software development costs, including costs to develop software sold, leased, or otherwise marketed, are capitalized after establishing technological feasibility, if significant. The Company amortizes the capitalized software development costs using the straight-line amortization method over the application software’s estimated useful life. By the end of February 2016, the Company completed the technical feasibility of the Condor FX Back Office, Condor Pro Multi-Asset Trading Platform Version, and Condor Pricing Engine. The Company established the technical feasibility of the Crypto Web Trader Platform in February 2018. The Company completed the technical feasibility of the Condor Investing and Trading App in January 2021.
The
Company estimates the useful life of the software to be three (
Amortization
expenses were $
The
Company is developing the Condor Investing and Trading App and NFT Marketplace. The Company is currently capitalizing the costs associated
with the development. The Company spent $
The Company capitalizes the significant costs incurred during the application development stage for internal-use software.
| F-19 |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign Currency Translation and Re-measurement
The Company translates its foreign operations to US dollars following ASC 830, “Foreign Currency Matters.”
We have translated the local currency of ADS, the Australian Dollar (“AUD”), and the Euro (“EUR”) as some of our clients pay in EUR; we have cash balances in EUR into US$1.00 at the following exchange rates for the respective dates.
Exchange rate at the reporting end date:
| September 30, 2023 | ||||
| USD: AUD | $ | |||
| USD: EUR | $ | |||
Average exchange rate for the period:
| July 1, 2023, to September 30, 2023 | ||||
| USD: AUD | $ | |||
| USD: EUR | $ | |||
The Company subsidiary’s functional currency is AUD, and the reporting currency is the US dollar.
The Company translates its records into USD as follows:
| ● | Assets and liabilities at the rate of exchange in effect at the balance sheet date | |
| ● | Equities at the historical rate | |
| ● | Revenue and expense items at the average rate of exchange prevailing during the period |
| F-20 |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Value
The Company uses current market values to recognize certain assets and liabilities at a fair value. The fair value is the estimated price at which the Company can sell the asset or settle a liability in an orderly transaction to a third party under current market conditions. The Company uses the following methods and valuation techniques for deriving fair values:
Market Approach – The market approach uses the prices associated with actual market transactions for similar or identical assets and liabilities to derive a fair value.
Income Approach – The income approach uses estimated future cash flows or earnings, adjusted by a discount rate representing the time value of money and the risk of cash flows not being achieved to derive a discounted present value.
Cost Approach – The cost approach uses the estimated cost to replace an asset adjusted for the obsolescence of the existing asset.
The Company ranks the fair value hierarchy of information sources from Level 1 (best) to Level 3 (worst). The Company uses these three levels to select inputs for valuation techniques:
| Level I | Level 2 | Level 3 | ||
| Level 1 is a quoted price for an identical item in an active market on the measurement date. Level 1 is the most reliable evidence of fair value and is used whenever this information is available. | Level 2 is directly or indirectly observable inputs other than quoted prices. An example of a Level 2 input is a valuation multiple for a business unit based on comparable companies’ sales, EBITDA, or net income. | Level 3 is an unobservable input. It may include the company’s data, adjusted for other reasonably available information. Examples of a Level 3 input are an internally-generated financial forecast. |
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 September 30, 2023, and December 31, 2022, the Company had and basic and dilutive shares issued and outstanding. The Company converted the four FRH Group convertible notes into dilutive shares. During the nine months ended September 30, 2023, and 2022, common stock equivalents were dilutive and anti-dilutive due to net income and a net loss of $ and $, respectively, for the period. Hence, the Company has not considered it in the computation.
Reclassifications
We have reclassified certain prior period amounts to conform to the current year’s presentation. None of these classifications impacted reported operating loss or net loss for any period presented.
| F-21 |
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; an 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 customers’ contracts. 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 to this standard is permitted for all entities. The Company must recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company adopted this policy as of January 1, 2020, and there is no material effect on its financial reporting.
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” The amendments modify the disclosure requirements in Topic 820 to add disclosures regarding changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty. The amendments removed and modified certain disclosure requirements in Topic 820. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Certain amendments are to be applied prospectively, while others are to be applied retrospectively. Early adoption is permitted.
The
Company adopted the ASU 2018-13 as of January 1, 2020. The Company used the Level 1 Fair Market Measurement to record, at cost, ADS’
intangible assets valued at $
ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, issued in August 2020 simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to present certain conversion features in equity separately. In addition, the amendments also simplify the guidance in ASC Subtopic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity, by removing certain criteria that must be satisfied to classify a contract as equity, which is expected to decrease the number of freestanding instruments and embedded derivatives accounted for as assets or liabilities. Finally, the amendments revise the guidance on calculating earnings per share, requiring the use of the if-converted method for all convertible instruments and rescinding an entity’s ability to rebut the presumption of share settlement for instruments that may be settled in cash or other assets. The amendments are effective for public companies for fiscal years beginning after December 15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The guidance must be adopted as of the beginning of the fiscal year of adoption. The Company does not expect this ASU 2020-06 to impact its condensed consolidated financial statements.
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.
| F-22 |
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 business course. At September 30, 2023, and December 31, 2022, the accumulated
deficit was $
During
the nine months ended September 30, 2023, and 2022, the Company incurred a net income and net loss of $
Since
its inception, the Company has sustained recurring losses and negative cash flows from operations. As of September 30, 2023, and December
31, 2022, the Company had $
The Company’s ability to continue as a going concern may depend on the 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 not continue as a going concern.
To the extent the Company’s operations are insufficient to fund the Company’s capital requirements, the Management may attempt to enter into a revolving loan agreement with financial institutions or raise capital through the sale of additional capital stock or issuance of debt.
The Management intends to continue its efforts to enhance its revenue from its diversified portfolio of technological solutions, become cash flow positive, and raise funds through private placement offerings and debt financing. See Note 8 for Notes Payable. As the Company increases its customer base globally, it intends to acquire long-lived assets that will provide a future economic benefit beyond fiscal 2023.
On
January 27, 2022, the Company signed a promissory note (‘AJB Note’) with AJB Capital Investments, LLC (‘AJB Capital’),
a Delaware limited liability company, for the principal amount of $
NOTE 4. CAPITALIZED SOFTWARE COSTS
During
the three months ended September 30, 2023, and 2022, the estimated remaining weighted-average useful life of the Company’s capitalized
software was three (
At
September 30, 2023, and December 31, 2022, the gross capitalized software assets were $
| F-23 |
NOTE 5. RELATED PARTY TRANSACTIONS
In April 2016, the Company established its wholly-owned subsidiary – FRH Prime Ltd. (“FRH Prime”), incorporated under section 14 of Bermuda’s Companies Act 1981. In January 2017, FRH Prime established its wholly-owned subsidiary – FXClients Limited (“FXClients”), under the United Kingdom Companies Act. The Company established FRH Prime and FXClients to conduct financial technology service activities. The Company established FRH Prime and FXClients to conduct financial technology service activities. At present, both companies have ceased to exist.
For
the fiscal year ended December 31, 2021, and 2020, FRH Prime has generated volume rebates of $
Between
February 22, 2016, and April 24, 2017, the Company borrowed $
Between
March 15 and 21, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued shares to Susan
Eaglstein and shares to Brent Eaglstein at $ per share, a cumulative cash amount of $
On
February 22, 2021, the Company entered into an Assignment of Debt Agreement (the “Agreement”) with FRH and FRH Group Corporation.
The Company eliminated all four FRH Group convertible notes, including interest, of $
The Company paid off all the outstanding related parties’ liabilities as of January 31, 2022.
In
September 2022, the Company issued common stock for cash consideration of $
In
January 2023, the Company issued common stock for cash consideration of $
On
September 30, 2023, FDCTech, Inc. (“FDC” or the “Company,” OTCQB: FDCT) signed the definitive agreement with
Alchemy Group where the Company acquired
The Company will issue shares of its Series B Preferred stock, or such other number of shares that the parties agree upon to shareholder(s) and employees of Alchemy Group, for the acquisition. The existing management team and board of directors will continue to oversee and manage the Company’s operations. This transaction was the result of extensive negotiations commencing in September 2022.
NOTE 6. LINE OF CREDIT
As
of June 24, 2016, the Company obtained an unsecured revolving line of credit of $
NOTE 7. NOTES PAYABLE
Convertible Notes Payable – Related Party
Between
February 22, 2016, and April 24, 2017, the Company borrowed $
At
December 31, 2020, the current portion of convertible notes payable and accrued interest was $
At
December 31, 2019, the current portion of convertible notes payable and accrued interest was $
At December 31, 2020, there was no non-current portion of the Notes payable and accrued interest.
The
Company will pay the Notes’ outstanding principal amount and interest at
| F-24 |
NOTE 7. NOTES PAYABLE (continued)
Convertible Notes Payable – Related Party
On
February 22, 2016, the Company issued and promised to pay a convertible note to FRH Group for the principal sum of One Hundred Thousand
and 00/100 Dollars ($
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 ($
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 ($
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 ($
| F-25 |
NOTE 7. NOTES PAYABLE (continued)
FRH Group Note Summary
| Date of Note: | 2/22/2016 | 5/16/2016 | 11/17/2016 | 4/24/2017 | ||||||||||||
| Original Amount of Note: | $ | $ | $ | $ | ||||||||||||
| Outstanding Principal Balance: | $ | $ | $ | $ | ||||||||||||
| Conversion Date (1): | ||||||||||||||||
| Interest Rate: | % | % | % | % | ||||||||||||
| Date to which interest has been paid: | ||||||||||||||||
| Conversion Rate on February 22, 2021: | $ | $ | $ | $ | ||||||||||||
| Floor Conversion Price: | $ | $ | $ | $ | ||||||||||||
| Number Shares Converted for Original Note: | ||||||||||||||||
| Number Shares Converted for Interest: | ||||||||||||||||
| (1) |
Cares Act – Paycheck Protection Program (PPP Note)
On
May 01, 2020, the Company received proceeds of Fifty-Thousand Six Hundred and Thirty-Two ($
SBA Loan
On
May 22, 2020, the Company received hundred and forty-four thousand nine hundred and 00/100 Dollars ($
AJB Note
On
January 27, 2022, the Company signed a promissory note (‘AJB Note’) with AJB Capital Investments, LLC (‘AJB Capital’),
a Delaware limited liability company, for the principal amount of $
Economic Injury Disaster Loan (EIDL)
The
Small Business Administration offers the Economic Injury Disaster Loan program. The CARES Act changed the program to provide an emergency
grant of up to $
| F-26 |
NOTE 8. COMMITMENTS AND CONTINGENCIES
Office Facility and Other Operating Leases
The
rental expenses were $
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) whole 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 on a need basis. The new rent payment or membership fee for Irvine Office is $
From
February 2019 to the present, the Company leased office space in Limassol District, Cyprus, from an unrelated party for a year. The office’s
rent payment is $
As
all leases are on a month-to-month basis or for less than one (
Employment Agreement
Accrued Interest
At
September 30, 2023, and December 31, 2022, the cumulative accrued interest for SBA and other loans defined as an accrued non-current
was $
Pending Litigation
The management is not aware 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 its officers’ reclassification from independent contractors to employees
from the fiscal ended December 31, 2017, to 2020. As of September 30, 2023, the Company has assessed federal and state payroll tax payments
in the aggregate amount of $
| F-27 |
NOTE 9. STOCKHOLDERS’ EQUITY (DEFICIT)
Authorized Shares
On
February 12, 2021, the Company filed the Certificate of Amendment with the Secretary of State of Delaware to change authorized shares.
As per the Amendment, the Company shall have the authority to issue
On February 17, 2022, the Company filed the Information Statement pursuant to Section 14C of the Securities Exchange Act of 1934 and informed all holders of record on February 10, 2022 (the “Record Date”) of the common stock, $ par value per share (the “Common Stock”), of the Company, in connection with the approval of the following actions taken by the Board of Directors of the Company (the “Board”) and by written consent of the holders of a majority of the voting power of Company’s issued and outstanding capital stock (the “Approving Stockholders”):
| 1. | To amend our certificate of incorporation, as amended (the “Certificate”), to increase the number of authorized shares of common stock from to (the “Authorized Share Increase” and together with the 2022 Equity Plan, the “Corporate Action”), and |
| 2. | To approve the Company’s 2022 Equity Plan (the “2022 Equity Plan”) |
On
February 10, 2022, our Board unanimously approved the Corporate Actions. To eliminate the costs and management time for a special meeting
and to effect the actions, the Company chose to obtain the written consent of a majority of the Company’s voting power to approve
the actions described in the Information Statement following Sections 228 and 242 of the Delaware General Corporation Law (the “DGCL”)
and per our bylaws. On February 10, 2022, the Approving Stockholders approved the Corporate Actions by written consent. The Approving
Stockholders (common stock only) own shares, representing
As of September 30, 2023, and December 31, 2022, the Company’s authorized capital stock consists of shares of preferred stock, a par value of $ per share, and shares of common stock, a par value of $ per share.
As of September 30, 2023, and December 31, 2022, the Company had and , respectively, common shares issued and outstanding and 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 , , and shares of Preferred Stock to Mitchell Eaglstein, Imran Firoz, and Felix R. Hong (FRH Group) as the founders in consideration of services rendered to the Company.
In January 2023, Eaglstein and Firoz transferred and shares to Gope S. Kundnani, the Director of the Company. As of September 30, 2023, the Company had preferred shares issued and outstanding, with Eaglstein, Kundnani, and Hong holding , , and shares, respectively.
Common Stock
On January 21, 2016, the Company collectively issued and common shares at par value to On January 21, 2016, the Company collectively issued and 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 common shares to the remaining two (2) founding members.
On
March 15, 2017, the Company issued restricted common shares for platform development valued at $
On
March 15, 2017, the Company issued restricted common shares for professional services to three (3) individuals valued at $
On
March 17, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued shares to Susan Eaglstein
for a cash amount of $
| F-28 |
NOTE 9. STOCKHOLDERS’ EQUITY (DEFICIT) (continued)
On
March 21, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued shares to Bret Eaglstein
for a cash amount of $
Ms. Eaglstein and Mr. Eaglstein are the Mother and Brother, respectively, of Mitchell Eaglstein, the CEO and Director of the Company.
From July 1, 2017, to October 03, 2017, the Company has issued units for a cash amount of $ under its offering Memorandum, where the unit consists of one (1) share of common stock and one Class A warrant (See Note 11).
On
October 31, 2017, the Company issued restricted common shares to management consultants valued at $
On
January 15, 2019, the Company issued restricted common shares for professional services to eight (8) consultants valued at $
From
January 29, 2019 to February 15, 2019, the Company issued registered shares under the Securities Act of 1933 for a cash amount
of $
Effective
June 3, 2020, the Company issued shares to Benchmark Investments, Inc. (“Broker-Dealer” or “Kingswood Capital
Markets”) of common stock at $ per share for a total value of $
On
October 1, 2020, the Company issued restricted common shares to a digital marketing consultant valued at $
On
January 31, 2021, the Company issued restricted common shares for professional services to two (2) consultants valued at $
On
February 22, 2021, the Company entered into an Assignment of Debt Agreement (the “Agreement”) with FRH and FRH Group Corporation.
The Company eliminated all four FRH Group convertible notes, including interest, of $
On
May 19, 2021, the Company issued restricted common shares for professional services to a consultant valued at $
| F-29 |
NOTE 9. STOCKHOLDERS’ EQUITY (DEFICIT) (continued)
On
June 02, 2021, the Company issued restricted common shares for Genesis Agreement to a consultant valued at $
On
June 15, 2021, the Company issued restricted common shares to a board member for services to a consultant valued at $
On
July 06, 2021, the Company issued restricted common shares to a board member for services to a consultant valued at $
On
July 20, 2021, the Company issued restricted common shares for professional services to a consultant valued at $
On
October 04, 2021, the Company filed a prospectus related to the resale of shares to White Lion and AD Securities America, LLC. The Company
issued shares to AD Securities America, LLC for $
On
October 5, 2021, the Company issued restricted common shares for professional services to a consultant valued at $
From
October 2021 to November 2021, the Company issued registered shares to White Lion for a gross cash amount of $
On
December 22, 2021, the Company issued restricted common shares to ADFP to acquire
In
December 2021, the Company issued restricted common shares to two board members, a consultant, and two officers, for services
and software development valued at $
On
January 4, 2022, the Company issued restricted common shares for professional services to a consultant valued at $
From
January 4, 2022, to February 10, 2022, the Company issued registered shares to White Lion for a gross cash amount of $
On
January 27, 2022, the Company signed a promissory note (‘AJB Note’) with AJB Capital Investments, LLC (‘AJB Capital’).
The Company issued common stock valued at $
On
July 31, 2022, the Company issued restricted common shares for professional services to a consultant valued at $
On
September 30, 2022, the Company issued restricted common shares for cash valued at $
On
September 30, 2022, the Company issued restricted common shares to Gope S. Kundnani for services valued at $
On
December 12, 2022, the Company issued restricted common shares to two officers for services valued at $
On
December 15, 2022, the Company issued restricted common shares to two officers for services valued at $
On
January 25, 2023, the Company issued restricted common shares to AJB to compensate for consideration shares related to the
AJB Note valued at $
On
January 25, 2023, the Company issued restricted common shares for cash valued at $
On
March 28, 2023, the Company issued restricted common shares for cash valued at $
| F-30 |
NOTE 10. WARRANTS
Effective
June 1, 2017, the Company is raising $
Each
Class A Warrant entitles the holder to purchase one (
Information About the Warrants Outstanding During Fiscal 2022 Follows
Original | Exercise Price per Common Share | Exercisable at December 31, 2020 | Became Exercisable | Exercised | Terminated | Exercisable | Expiration Date | |||||||||||||||||||||
| $ | ||||||||||||||||||||||||||||
The
Warrants are redeemable by the Company, upon thirty (30) day notice, at $
The exercise price and the number of shares of Common Stock or other securities issuable on the exercise of the Warrants are subject to adjustment in certain circumstances, including 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 this report’s date, holders have not exercised Class A Warrants, and all have expired.
The
Company issued common stock valued at $
NOTE 11. OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements affecting our liquidity, capital resources, market risk support, credit risk support, or other benefits.
NOTE 12. SUBSEQUENT EVENTS
None.
| F-31 |
| 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 is building a diversified global financial services company driven by proprietary Condor trading technologies, complementary regulatory licenses, and a proven executive team. The Company plans to acquire, integrate, transform, and scale legacy financial service companies. The Company believes its proprietary technology and software development capabilities allow legacy financial services companies immediate exposure to –forex, stocks, ETFs, commodities, social/copy trading, and other high-growth fintech markets.
From December 2021 onwards, the Company expects to grow from its acquisition strategy, specializing in buying and integrating small to mid-size legacy financial services companies. The Company intends to build a diversified global software-driven financial services company. The Company plans to acquire, integrate, transform, and scale legacy financial service companies. The Company replaces conventional legacy software infrastructure with its regulatory-grade proprietary Condor trading technologies, intending to improve end-user experience, increase client retention, and realize cost synergies.
Currently, we have three primary business segments, (1) Wealth Management, (2) Technology and Software Development, and (3) Margin Brokerage Business or Trading Revenue. The Company has signed a definitive agreement to acquire a controlling interest in the US Brokerage business pending regulatory approval.
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic that continues throughout the United States. While the outbreak was initially concentrated in China, it spread to several other countries, including Russia and Cyprus, and reported infections globally. Many countries worldwide, including the United States, have implemented significant governmental measures 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 our 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. These developments are highly uncertain. We cannot predict them with confidence, including the duration and severity of the outbreak and the actions required to contain the coronavirus or treat its impact. In particular, the 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 could harm our business, financial condition, and operation results.
The geopolitical situation in Eastern Europe intensified on February 24, 2022, with Russia’s invasion of Ukraine. The war between the two countries continues to evolve as military activity continues. The United States and certain European countries have imposed additional sanctions on Russia and specific individuals. By the end of August 2022, the Company closed its technical support and development office in Russia. We relocated our personnel to Turkey, currently considered a neutral zone. In April 2023, we relocated our personnel to Kazakhstan. No individual associated with the Company is banned or under the Special Designated Nationals and Blocked Person list. The relocation may impact our software development capabilities and the Company’s business plans if we cannot relocate our technical and development operations to a safer zone.
As of the date of this report, there has been no disruption in our operations.
| 4 |
Wealth Management
On December 22, 2021, the Company entered into a Share Exchange Agreement (the “Agreement”) with AD Financial Services Pty Ltd ACN 628 331 117 of Level 38/71 Eagle St, Brisbane, Queensland, Australia, 4000 (“ADFP” or “Target”). According to the Agreement, the Company acquired 51% of ADFP’s issued and outstanding shares of capital stock in exchange for 45,000,000 (the “Consideration”) newly issued “restricted” common shares. The operating and licensed entity of ADFP is AD Advisory Services Pty Ltd. ADFP owns one hundred percent (100%) equity interest in AD Advisory Services Pty Ltd (“ADS”). As a result, the Company is 51.00% owner of ADS. Our wealth management business, AD Advisory Services (ADS), is subject to enhanced regulatory scrutiny and is regulated by multiple regulators in Australia. The Australian Securities and Investments Commission (ASIC) administers a licensing regime for financial services providers. ADS holds an Australian Financial Services License (AFSL) and meets various compliance, conduct, and disclosure obligations.
AD Advisory Services Pty Ltd. (ADS) is an Australian-regulated wealth management company with 20 offices, 28 advisors, and $530+ million in funds under advice. ADS provides licensing solutions for financial advisers & accountants in Australia. ADS offers financial planners different licensing, compliance, and education solutions to meet their practice’s specific needs.
Wealth Management Revenue & Gross Margins:
Nine Months Ended September 30, 2023 (Unaudited) | Nine Months Ended September 30, 2022 (Unaudited) | |||||||
| Revenue, $ | 4,305,661 | 4,348,097 | ||||||
| Cost of sales, $ | 3,884,800 | 3,937,582 | ||||||
| Gross Profit (loss), $ | 420,861 | 410,515 | ||||||
| Gross margin, % | 9.77 | % | 9.44 | % | ||||
Technology & Software Development – Condor Trading Technology
The Company has three sources of revenue.
| ● | Technology Solutions – The Company licenses its proprietary and sometimes resells third-party technologies to customers. Our proprietary technology includes but is not limited to Condor Risk Management Back Office (“Condor Risk Management”), Condor Pro Multi-Asset Trading Platform (previously known as Condor FX Pro Trading Terminal), Condor Pricing Engine, Crypto Web Trader Platform, and other fintech-related solutions. | |
| ● | Customized Software Development – The Company develops software for Customers with unique requirements outlined in the Software Development Agreement (“Agreement”). | |
| ● | Consulting Services – The Company’s turnkey business solutions - Start-Your-Own-Brokerage (“SYOB”), Start-Your-Own-Prime Brokerage (“SYOPB”), FX/OTC liquidity solutions, and lead generations. |
The Company has completed the Condor Pro Multi-Asset Trading Platform, previously known as the Condor FX Trading Platform. The Condor Pro Multi-Asset Trading Platform is a regulatory-grade trading platform targeted at day traders and retail investors. The industry characterized such platforms by their ease of use and helpful features, such as the simplified front-end (user interface/user experience), back-end (reporting system), news feeds, and charting system. The Condor Pro Multi-Asset Trading Platform includes risk management (dealing desk, alert system, margin calls, etc.), a pricing engine (best bid/ask), and connectivity to multiple liquidity providers or market makers. We have tailored the Condor Pro Multi-Asset Trading Platform to markets such as forex, stocks, commodities, and other financial products.
| 5 |
The Company released, marketed, and distributed its Condor Pro Multi-Asset Trading Platform in the second quarter of the fiscal year, December 31, 2019. The Company has developed the Condor Back Office API to integrate third-party CRM and banking systems into Condor Back Office.
The Company has thirteen (13) licensing agreements for its Condor Pro Multi-Asset Trading Platform. The Company continuously negotiates additional licensing agreements with several retail online brokers to use the Condor Pro Multi-Asset Trading Platform. Condor Pro Multi-Asset Trading Platform is available in desktop, web, and mobile versions.
The Company’s upgraded Condor Back Office (Risk Management) meets various jurisdictions’ regulatory requirements. Condor Back Office meets the directives under the Markets in Financial Instruments Directive (MiFID II/MiFIR), legislation by European Securities and Market Authority (ESMA) implemented across the European Union on January 3, 2018.
The Company is developing the Condor Investing & Trading App, a simplified trading platform for traders with varied experiences in trading stocks, ETFs, and other financial markets from their mobile phones. The Company expects to commercialize the Condor Investing & Trading App by the end of the second quarter of the fiscal year ending December 31, 2023.
The Company had developed NFT Marketplace, a decentralized NFT marketplace, a multichain platform with a lazy minting option to reduce and limit unnecessary blockchain usage fees, also known as gas fees. The Company has no plans to commercialize the NFT Marketplace in the fiscal year ending December 31, 2023, as the market for NFT has slowed considerably.
The Company and its subsidiary, ADS, intend to develop a digital wealth management company, initially including a Robo Advice Platform catering to Australia’s wealth management industry. The Company is currently not building the Robo Advice Platform.
Technology & Software Development Revenue & Gross Margins:
Nine Months Ended September 30, 2023 (Unaudited) | Nine Months Ended September 30, 2022 (Unaudited) | |||||||
| Revenue, $ | 696,623 | 249,000 | ||||||
| Cost of sales, $ | 22,503 | 140,019 | ||||||
| Gross Profit (loss), $ | 674,120 | 108,981 | ||||||
| Gross Margins, % | 96.77 | % | 43.77 | % | ||||
For the nine months ended September 30, 2023, and 2022, the Company had sixteen (1) and six (6) active customers. The increase in customers increased Technology & Software Development Revenue for the three months ending September 30, 2023, compared to the previous period.
Margin Brokerage – Alchemy Markets Ltd. (formerly known as NSFX Ltd.) Acquisition
On December 31, 2022, the Company announced the sales purchase agreement (“Agreement”) under which the Company acquired a 50.10% equity interest in New Star Capital Trading Ltd., a British Virgin Island company (“New Star”) and its operating subsidiary Alchemy Markets Ltd., formerly known as NSFX Ltd., [(Alchemy (Malta)]. Alchemy (Malta) is an online trading brokerage firm regulated by the Malta Financial Services Authority (MFSA). The Company will assume a business acquisition loan liability of $350,000 to purchase the controlling interest in Alchemy (Malta). The Company amended the Agreement to February 28, 2023, to comply with the BVI Companies Act requirement for the change of ownership. The Company expects to consolidate the fair value of Alchemy (Malta)’s assets and liabilities on or after February 28, 2023, but no later than September 30, 2023. The Company closed Alchemy (Malta) transactions as of September 30, 2023.
Alchemy (Malta) is authorized to deal with its account (market maker) as a Category 3 licensed entity by the MFSA, receive and transmit orders for retail and professional clients, and hold and control clients’ money and assets. Alchemy (Malta) services its customers in the English, French, German, Italian, and Arabic-speaking markets. The customers can trade in currency, commodity, equity, and other derivatives in real-time.
For the nine and three months ended September 30, 2023, and 2022, the Company’s trading revenues were $1,955,382 and $0.
US Brokerage – CIM Securities, LLC
On July 19, 2022, the Company signed a non-binding letter of intent to acquire fifty-one percent (51%) equity interest in CIM Securities, LLC (“CIM Securities”), a FINRA and SIPC member firm. On September 30, 2022, the Company signed a definitive agreement pending regulatory approval, paid a $20,000 non-refundable deposit, and transferred $180,000 to the escrow account to complete the transaction. The Company filed the CMA form with FINRA in February 2023. Once the Company receives approval from FINRA and pays the balance of $180,000, it will start consolidating income statements and balance sheets as it holds the controlling interest in CIM Securities.
At July 31, 2023, the Company sent the notice of termination of the purchase agreement to CIM Securities as future events may result in a change of ownership in the CMA application. The Company believes that this would cause further delays in the approval process. Our board has mandated the management team to concentrate on expanding and developing our core non-US forex business to maximize shareholder value.
Consolidated Financial Summary
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 business course. The Company generated $15,654,831 in revenues from January 21, 2016 (inception) to September 30, 2023. For the nine months ending September 30, 2023, and 2022, the Company generated $6,957,666 and $4,597,097 in revenues. At September 30, 2023, the Company had a cash balance of $1,231,766 and an accumulated deficit of $2,968,930.
| 6 |
Financial Condition at September 30, 2023
On September 30, 2023, the accumulated deficit, cash balance, and working capital surplus were $2,968,930, $1,231,766, and $2,211,389, respectively.
On January 25, 2023, the Company issued 115,000,000 restricted common shares for cash valued at $550,000.
On March 28, 2023, the Company issued 2,000,000 restricted common shares for cash valued at $20,000.
The Company intends to continue its efforts to enhance its revenue from its diversified portfolio of technological solutions, become cash flow positive, and raise funds through private placement offerings and debt financing. As the Company increases its customer base globally, it intends to acquire long-lived assets that will provide a future economic benefit beyond fiscal 2023.
Financial Condition at December 31, 2022
On December 31, 2022, the accumulated deficit, cash balance, and working capital deficit were $4,335,053, $264,829, and 550,098, respectively.
On January 27, 2022, the Company signed a promissory note (‘AJB Note’) with AJB Capital Investments, LLC (‘AJB Capital’), a Delaware limited liability company, for the principal amount of $550,000 with a maturity date of July 27, 2022, and a coupon of 10%. The parties extended the AJB Note maturity date by another nine months till January 23, 2023. As part of the AJB Note, the Company entered into a securities purchase agreement, where AJB Capital will receive equity equal to US $155,000 of the Company’s common stock. The Company issued 2,214,286 common stock valued at $71,521 upon issuance of the Note (the “Shares”) and 1,000,000 3-year cash warrants (‘Warrants’) priced at $0.30. The Warrants and the Shares, collectively known as the ‘Incentive Fee,’ are issued upon execution of the agreement.
The Company executed five “Purchase Notice Rights” under an Investment Agreement with White Lion and received a net of $72,420 after deducting financing costs associated with the Investment Agreement for the nine months ended September 30, 2022.
On September 30, 2022, the Company issued 30,000,000 restricted common shares for cash valued at $300,000.
We do not believe that our cash balance is sufficient to fund our operations and growth; as a result, the Company plans to raise additional capital as disclosed in Subsequent Events. The Company intends to continue its efforts to enhance its revenue from its diversified portfolio of technological solutions, become cash flow positive, and raise funds through private placement offerings and debt financing. As the Company increases its customer base globally, it intends to acquire long-lived assets that will provide a future economic benefit beyond fiscal 2023.
| 7 |
RESULTS OF OPERATIONS
Three Months Ended September 30, 2023, compared with Three Months Ended September 30, 2022
For the three months ended September 30, 2023, and 2022, the Company had sixteen (16) and seven (7) active customers. Revenues generated from the top three (3) customers represented approximately 79.11% and 85.71% of Technology and Software revenue for the three months ended September 30, 2023, and 2022.
The consolidated revenues for the three months ended September 30, 2023, and 2022 were $3,646,830 and $1,530,126, respectively. During the three months ended September 30, 2023, and 2022, the Company incurred a net income and net loss of $638,084 and $226,065.
The total revenue breakdown for the three months ended September 30, 2023, and 2022 is below:
| Three Months Ended | September 30, 2023 | September 30, 2022 | ||||||
| Revenue Description | % of Total | % of Total | ||||||
| Wealth Management | 40.29 | % | 94.59 | % | ||||
| Trading Revenue | 53.62 | % | - | |||||
| Technology Solutions | 5.88 | % | 4.02 | % | ||||
| Software Development & Consulting | 0.21 | % | 1.39 | % | ||||
| Total | 100.00 | % | 100.00 | % | ||||
During the three months ended September 30, 2023, and 2022, the Company incurred general and administrative costs (“g and a”) of $1,607,809 and $324,918 (excluding amortization expenses), respectively. The increase in g and a costs for the three months ended September 30, 2023, is due to the rise in legal and professional fees, financing costs, ADS’, and Alchemy (Malta)’s g and a. The g and a expenses were 44.09% and 21.23% of the revenue for the three months ended September 30, 2023, and 2022, respectively. Amortization expenses were $0 and $19,032 for the three months ended September 30, 2023, and 2022, respectively, included in the Cost of sales.
The rental expense was $11,039 and $5,721 for the three months ended September 30, 2023, and 2022, respectively.
The Company incurred $10,987 and $69,692 in sales, marketing, and advertising costs (“sales and marketing”) for the nine months ended September 30, 2023, and 2022. The sales and marketing costs mainly included travel costs for tradeshows, customer meetings, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 0.30% and 4.55% of the sales for the fiscal year ending September 30, 2023, and 2022, respectively.
Nine Months Ended September 30, 2023, compared with Nine Months Ended September 30, 2022
For the nine months ended September 30, 2023, and 2022, the Company had sixteen (16) and seven (7) active customers. Revenues generated from the top three (3) customers represented approximately 58.98% and 86.16% of Technology and Software revenue for the three months ended September 30, 2023, and 2022.
The consolidated revenues for the nine months ended September 30, 2023, and 2022 were $6,957,666 and $4,597,097, respectively. During the nine months ended September 30, 2023, and 2022, the Company incurred a net income and net loss of $1,366,777 and $974,984.
The total revenue breakdown for the three months ended September 30, 2023, and 2022 is below:
| Three Months Ended | September 30, 2023 | September 30, 2022 | ||||||
| Revenue Description | % of Total | % of Total | ||||||
| Wealth Management | 61.88 | % | 94.90 | % | ||||
| Trading revenue | 28.10 | % | - | |||||
| Technology Solutions | 9.10 | % | 3.71 | % | ||||
| Software Development & Consulting | 0.91 | % | 1.39 | % | ||||
| Total | 100.00 | % | 100.00 | % | ||||
During the three months ended September 30, 2023, and 2022, the Company incurred general and administrative costs (“g and a”) of $2,587,518 and $1,169,972 (excluding amortization expenses), respectively. The increase in g and a costs for the three months ended September 30, 2023, is due to the rise in legal and professional fees, financing costs, ADS’, and Alchemy (Malta)’s g and a. The g and a expenses were 37.19% and 24.45% of the revenue for the three months ended September 30, 2023, and 2022, respectively. Amortization expense was $22,503 and $140,019 for the three months ended September 30, 2023, and 2022, respectively, included in the Cost of sales.
The rental expense was $23,828 and $20,323 for the three months ended September 30, 2023, and 2022, respectively.
The Company incurred $52,810 and $309,140 in sales, marketing, and advertising costs (“sales and marketing”) for the nine months ended September 30, 2023, and 2022. The sales and marketing costs mainly included travel costs for tradeshows, customer meetings, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 0.76% and 6.72% of the sales for the fiscal year ending September 30, 2023, and 2022, respectively.
| 8 |
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 2023, and December 31, 2022, we had a cash balance of $1,231,766 and $264,829, respectively.
In the next twelve (12) months, the Company will continue investing in sales, marketing, product development, new technology solutions, and existing technology support to serve our customers. We expect capital expenditures to increase to $500,000 in the next twelve (12) months to support the growth, including working capital, software development, sales & marketing, and purchasing computers and servers.
We expect 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 twelve (12) months. The availability of funds will fund our operating activities to meet the need for investing and financing, such as debt maturities and material capital expenditures. However, we may need additional funds to achieve a sustainable sales level to 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, the Company’s operations are insufficient to fund its capital requirements. The Company may attempt to restructure Notes, refinance existing Notes with financial institutions, or raise capital by selling additional capital stock or debt issuance. The Company intends to continue growing its operations and 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. Effective June 1, 2017, we raised $98,000 through our common stock’s private placement to our officers, directors, friends, relatives, and business associates. Between February 22, 2016, and April 24, 2017, the Company borrowed $1,000,000 from FRH Group, a founder and principal shareholder (“FRH”). The Company executed Convertible Promissory Notes, due between February 28, 2018, and April 24, 2019. The Notes were convertible into common stock initially at $0.10 per share but may be discounted under certain circumstances. In no event will the conversion price be less than $0.05 per share with a maximum of 20,000,000 shares.
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 February 22, 2021, the Company entered into an Assignment of Debt Agreement (the “Agreement”) with FRH and FRH Group Corporation. The Company eliminated all four FRH Group convertible notes, including interest, of $1,256,908, in return for the issuance of 12,569,080 of unregistered common stock of the Company (the “Shares”) to FRH. Following the Agreement, FRH assigned the Shares to FRH Group Corporation, also owned by Mr. Hong.
On May 01, 2020, the Company received proceeds of Fifty-Thou