SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-K/A (Amendment No. 1)10-KAnnual Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 For the fiscal year ended January 31,
20092020Commission file number 033-20966
---------------------------------------------Finotec Group, Inc.
------------------------------ (Exact(Exact name of registrant as specified in its charter)
Nevada 76-0251547 ------------------------------- ------------------- (State or other jurisdiction of (IRS Employer Incorporation or Organization) Identification No.) 228 East 45th Street Suite 1801 New York NY 10017 - -------------------------------------------------------------------------------- (Address of principal executive offices) Registrant's
Nevada | 76-0251547 | |
(State or other jurisdiction of | (IRS Employer | |
Incorporation or Organization) | Identification No.) |
3445 Lawrence Ave Oceanside, New York | 11572 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code 718-513-3620
-----------------------------
code: 646 768 8417
Securities registered pursuant to Section 12(b) of the Act:
None
Title of each class | Name of each exchange on which registered | |
N/A | N/A |
Securities registered pursuant to Section 12(g) of the Act:
(Title of each class)
Common stock of $0.001Stock, par value $0.001 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☒ No ☐
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 twelve12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]☐ No [_]
☒
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [_]☐ No [_]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B in this form, and no disclosure will be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
[X]
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated filer"” “accelerated filer,” “smaller reporting company,” and "smaller
reporting company"“emerging growth company” in Rule 12b-2 of the Exchange Act. [ ] Large accelerated filer [ ] Accelerated filer
[ ]Non-accelerated filer [x]
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☒ No ☐
State Issuer's Revenues for its most recent fiscal year. $2,641,116
Aggregatethe aggregate market value of the voting stockand non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of registrant:
Indicate the number of shares outstanding of each of the issuers classes ofsuch common equity, as of the latest practicable date: 86,721,825last business day of the registrant’s most recently completed second fiscal quarter on July 31, 2019, was $ N/A
As of November 10, 2020, the Registrant had 300,000,000 shares of Common Series 0.001
par value
Documents incorporated by reference: None.
TABLE OF CONTENTS
PART I
PAGE
Item 1. Organization and Business 3
Item 2. Properties 23
Item 3. Legal Proceedings 23
Item 4. Submission of Matters to a Vote of Security-Holders 24
PART II
Item 5. Market for the Registrant's Common Stock and 25
Related Stockholder Matters
Item 6. Management's Discussion and Analysis of Financial 26
Condition and Results of Operations
Item 7. Financial Statements and Supplementary Data 31
(Included in Item 14)
PART III
Item 8. Changes in and Disagreements with Accountants on 32
Accounting and Financial Disclosure
Item 8A. Controls and Procedures 32
Item 9. Directors and Executive Officers of the Registrant 35
Item 10. Management Remuneration 36
Item 11. Security Ownership of Certain Beneficial Owners and 36
Management
Item 12. Certain Relationships and Related Transactions 37
PART IV
Item 13. Exhibits, Financial Statements, Schedules and Reports 38
on Form 8-K
Item 1. Organization and Business
i
Introduction
The Finotec Group Inc. (the "Company" or "Finotec"(“Finotec”, “the Company”, “we”, “us”) has been dormant since November 2011. On March 16, 2020, as a result of a custodianship in Clark County, Nevada, Case Number: A-20-809716-B, Custodian Ventures LLC (“Custodian”) was formed underappointed custodian of the lawsCompany.
On 17st of Nevada on October 8, 1987, underMarch 2020, Custodian appointed David Lazar as the name "Condor West Corporation" for the
purposeCompany’s Chief Executive Officer, President, Secretary, Chief Financial Officer, Chief Executive Officer and Chairman of implementing an initial distribution of its stock and thereafter to
seek operating businesses as potential candidates for acquisition or other forms
of combination. The Company had no operations for a period of over three years
when it did a share for share merger and became Online International Corporation
in September, 1999. As Online International Corporation the Company was in the
business of designing, printing, and manufacturing lottery tickets and play
slips for automated on-line contractors and on track and off-track betting until
May 10, 2000 when the Board of Directors formalized its decision to discontinue
operations. On July 17, 2000Directors.
David Lazar, 30, has been CEO and Chairman of the Company since May 16, 2018. David Lazar is a private investor. Mr. Lazar has been a partner at Zenith Partners International since 2013, where he specializes in research and development, sales and marketing. From 2014 through 2015, David was the Chief Executive Officer of Dico, Inc., which was then sold allto Peekay Boutiques. Since February of its assets for2018, Mr. Lazar has been the managing member of Custodian Ventures LLC, where he specializes in assisting distressed public companies. Since March 2018, David has acted as the managing member of Activist Investing LLC, which specializes in active investing in distressed public companies. David has a combinationdiverse knowledge of cash, notesfinancial, legal and the assumption of debts by the purchasers. On
August 9, 2001,operations management; public company management, accounting, audit preparation, due diligence reviews and SEC regulations.
Business
Formerly the Company, purchased Finotec, Ltd. (formerly known as Priory
Marketing Ltd.) in exchange for 21,500,000 common shares, representing
approximately 62% of the Company's issued and outstanding voting shares. The
consideration paid by the Holding Company ("Finotec, Ltd.") in exchange for the
stock of the Registrant was all of the outstanding capital stock of Finotec,
Ltd., an Isle of Man company. Finotec, Ltd. owns 99.7% of the issued and
outstanding shares of capital stock of Forexcash Global Trading Ltd.
("Forexcash"), an Israeli company, which is the owner of certain software,
equipment, intellectual property and contracts. Via Forexcash, the Company is in
the business of developing and marketing software for electronic trading of
foreign currency through the Internet. In February, 2002, the Company changed
its name to Finotec Group, Inc. to better reflect its current business
operations.
The Company is fully reporting under The Securities Exchange Act of
1934. As a fully reporting company under The Securities Exchange Act of 1934,
the Company is required to file quarterly and annual and certain event triggered
reports with the Securities and Exchange Commission. These reporting
requirements add to the expense and timeliness of certain business transactions
which the Company may endeavor to undertake in the future -- such as a merger or
any other material business undertaking.
The Company's Common Stock trades on the OTCBB, under the trading
symbol "FTGI.OB."
The public may read and copy this document, and any other materials
the Company files with the Commission at the Commission's Public Reference Room,
450 Fifth Street, N.W., Washington, D.C. 20549. Information is available on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. Additionally, the Commission maintains an internet site
(http://www.sec.gov) that contains all reports, proxy and information
statements, and other information regarding companies which file electronically.
3
Introduction
Finotec Group Inc. is a public company. The company, through its
subsidiary, Finotec Trading Inc. (and such entity's subsidiary, Finotec Trading
UK Limited), offersoffered financial market trading to professional and retail clients over its web-based live and real-time proprietary trading system. The state of
the art web-based live
Fx and real-time proprietary trading system was developed
for the company by its other subsidiary ForexCash Global Trading Ltd. The
group's website may be accessed on www.finotec.com.
Company Structure
Finotec Group Inc. is a holding company with no activities other than holding
two wholly owned companies Finotec Trading Inc. and Forexcash Global Trading
Ltd. These companies, directly and through their subsidiaries, deal primarily in
two distinct areas:
1. Finotec Trading Inc. - marketing, sales, market trading and
facilitation; and
2. Forexcash Global Trading Ltd - financial technology development.
Finotec Trading Inc. (New York), or Finotec Trading Inc., was established
in November 2001 with the express intent of providing retail customers access to
the largest financial market for online foreign currency trading. Finotec
Trading Inc. (New York) is the market-making arm of the corporation,
distributing the live and instantaneously executable trading prices in global
currencies, equities, indices, commodities and interest rate products through
the group's online trading system. The centralized dealing room services
clients, aggregates globally derived risk in real-time and hedges residual
market exposure with the underlying markets.
In 2005 Finotec Trading Inc. established its dealing room in Cyprus through
a wholly owned subsidiary Finotec Trading Cyprus Ltd. In 2007, the dealing room
was moved to the UK. Currently, the subsidiary in Cyprus engages primarily in
sales and marketing of the Company's products.
During 2007, Finotec Trading Inc. additionally established three wholly
owned subsidiaries:
o In the United Kingdom, Finotec Trading UK Limited, or Finotec UK, for
the purpose of obtaining the necessary authorization to act as a
market maker in Foreign Exchange and CFD's in the UK and Europe. In
November 2007, Finotec UK received such authorization from the UK
Financial Services Authority ("FSA"). Such authorization was
accompanied by approvals from the other European countries allowing
Finotec UK to offer cross-border investment services within their
borders.
o In the United States, Finotec USA, Inc., a Delaware corporation, for
the purpose of obtaining the necessary authorization from the National
Futures Association (NFA) to act as a market maker in Foreign Exchange
in the US.
4
o In Poland, Finotec Trading Polska S. A., for the purpose of obtaining
the necessary authorization to act as a market maker in Foreign
Exchange and CFD's in Poland and Eastern Europe. As a result of the
FSA approval received by Finotec UK, and the accompanying approvals in
other European countries, including Poland, the Company decided to
discontinue the authorization process in Poland. In November 2008,
this subsidiary has been sold.
On August 9, 2001 (the "Merger Date"), Finotec Group, Inc., formerly Online
International Corporation ("Finotec Group"), a Nevada corporation without
significant operations, acquired all of the outstanding shares of Finotec Ltd.
("Finotec Ltd.") (formerly Priory Marketing Ltd.), an Isle of Man company. The
transaction was effected by the issuing of 21,500,000 shares of Finotec Group
common stock to the stockholders of Finotec Ltd. This resulted in the former
Finotec Ltd. stockholders owning approximately 61.5% of the outstanding shares
of Finotec Group. For financial reporting purposes, the transaction was recorded
as a recapitalization of Finotec Ltd., with Finotec Ltd. receiving the
$1,320,363 net assets (assets of $1,404,636, less liabilities of $84,273) of
Finotec Group as a capital contribution. Finotec Ltd. is the continuing
surviving entity for accounting purposes, but is adopting the capital structure
of Finotec Group, which is the continuing parent entity for legal purposes. All
references to common stock have been restated to reflect the equivalent number
of Finotec Group shares.
Finotec Ltd. was formed in December 2000, at which time it acquired 99.7%
of the outstanding stock of Forexcash Global Trading Ltd. ("Forexcash"), an
Israeli corporation, which had been incorporated on June 23, 1998. This
transaction is treated as a recapitalization of Forexcash with Forexcash as the
continuing accounting entity and Finotec Ltd. as the continuing parent for legal
purposes.
Finotec Group Inc. is traded on the OTC bulletin board under the symbol
FTGI.OB.
Customers can open accounts with Finotec Trading UK Ltd. by several methods;
1. Directly with Finotec Trading UK Ltd.
2. Via affiliates and Introducing Brokers ("IB's") that sign commission
sharing agreement with Finotec Trading UK Ltd.
As part of its code of conduct, all customer monies are segregated in
custodian accounts which have been set up in the United Kingdom and various
other countries.
Since its inception Finotec has secured a number of IB contracts, with
investment houses, financial institutions and high wealth individuals. Finotec's
website and trading system may be accessed on www.finotec.com. The system also
provides a `demo' trading system and an e-learning center that may be accessed
by registering on the website.
CFD Activities
The Company currently develops, through its subsidiaries, markets and
operates a software system delivering foreign exchange, commodities, and futures
(CFDs) investment services to the public through the Internet. The Company also
operatesoperated an Internet-based brokerage firm for institutional, professional and serious active individual traders in the financial instruments markets, especially foreign currency and CFDs. The Company offersoffered an electronic trading platform which seamlessly integrates strategy trading tools, historical and streaming real-time market data, and direct-access order-routing and execution.
In addition,
As part of its code of conduct, all customer monies were segregated in custodian accounts which have been set up in the Company operatesUnited Kingdom and various other countries.
Since its inception Finotec has secured a number of IB contracts, with investment houses, financial institutions and high wealth individuals. Finotec’s website and trading system may be accessed on www.finotec.com. The system also provides a ‘demo’ trading system and an internal risk management modulee-learning center that guidesmay be accessed by registering on the Company as to when to hedge positions or not and systems that provide
real time management of equity positions and margin requirements. website.
Technology
The Company also acts as a market maker in relevant jurisdictions.
5
Under our business model, we seek recurring revenues mainly by offering,
through use ofpreviously developed a software system developed by its subsidiary, Forexcash, online
real-time trading in financial instruments. Forexcash is a frontdelivering foreign exchange, commodities, and back office
market maker application for online real-time trading in financial instruments.
We use our capabilitiesfutures (CFDs) investment services to provide strategy trading tools, and the unique
quality and functionality of those tools attracts our target customer base of
institutional, professional and serious active individual traders. We market our
services primarilypublic through our subsidiaries that operate call centers and
Internet sites. the Internet.
Brokerage Services
The Company also intends to promote white-label systems directly
to financial institutions such as commercial banks. We also provide training in
online trading.
Recent Developments
In December 2008, the Company announced that it is implementing a new price
quoting method to allow its clients to be directly connected to market prices.
Under the method, instead of having quotes reflecting Finotec prices, clients
may now trade at market prices with the addition of a predefined and fixed
commission. This new method continues the Company's goal of providing its
clients with greater price transparency. Under the new price quoting method,
clients can be directly connected to very competitive market prices through
Finotec's trading platform which are available as a result of Finotec's high
monthly volume of trade - around 5 billion dollars per month - and its
relationship with 18 of the world's largest and most aggressive banks.
Industry Background
Over the past decade, the volume of trading in the world's foreign exchange
market has grown dramatically. The average daily trading volume is estimated to
be more than $3 trillion dollars. Recently, even more dramatic than the growth
in the foreign exchange markets, has been the explosive growth of direct-access
trading through electronic marketplaces. We believe that one of the reasons for
this explosive growth is the growing presence of direct-access trading
solutions.
We believe that technological innovation, including development of
sophisticated trading software tools, increased use of and reliance upon the
Internet, proliferation of online financial market data and information, and
market acceptance of electronic brokerage services, including direct-access
brokerage services, will continue to stimulate increased online trading
activity. We believe it to be inevitable that over time almost all trading will
be conducted electronically, in one form or another. We believe that direct
access is expected to become the industry standard for online trading. The
recent acquisitions by virtually every major online brokerage firm of
direct-access technology underscore this reality.
However, not all accounts are alike. Analysts have estimated that daily
online trading volume is highly concentrated in the most actively-traded online
accounts. The design of Forexcash has been focused on this "active trader"
market, as well as professional and institutional traders, such as small-sized
to mid-sized commercial banks.
With the proliferation of online brokerage services (and, now, the more
powerful and efficient direct-access online brokerage services), the increased
accessibility to market data, and the rapidly-growing capabilities of the
Internet, we believe that serious, active traders, professional and
non-professional, are demanding powerful, Internet-based, real-time strategy
trading platforms that are seamlessly integrated with the best-available order
execution technology and include analytical tools which support the design and
testing of custom trading strategies.
6
Products And Services
Finotec Group Inc. is a holding company with no activities other than
holding two wholly owned companies Finotec Trading Inc. and ForexCash Global
Trading Ltd. These companies deal in two distinct areas:
1. Finotec Trading Inc. - Market Trading and facilitation (brokerage); and
2. Forexcash Global Trading Ltd. - Financial Technology development
Brokerage Services
The Company, through its subsidiaries, offersoffered online brokerage services, in financial instruments (especially foreign currency and CFDs), using the Forexcash trading platform. Finotec'sFinotec’s targeted customer base for brokerage services includes active individual, professional and institutional traders.
Finotec earns the spread between the Bid and Ask price when there is some
compensation inside the system, or the price difference between the customer's
transaction price and the bank price. Finotec also runs a small portfolio of
uncovered customer transactions.
In January 2002, the Company launched the Forexcash trading platform. The
Forexcash platform includes our strategy trading features and functions,
streaming real-time charts and quotes, streaming news, state-of-the-art
analytical charting, time and sales data, quote lists, option chains, market
leaders data, profit/loss tracking, and wireless access.
Sales And Marketing
Offline Marketing
The Company attemptsattempted to reach its target customers through advertising campaigns for its products and services in local financial newspapers, articles providing in-depth market commentary on the specific Company products, one-day seminars, events and conventions. Finotec usesused the services of various advertising companies to reach targeted customers through advertising campaigns.
Online Marketing
Online marketing includesincluded campaigns in Google, business portals, search engines and other financial websites.
Call Center
Follow-up activities to the Company'sCompany’s marketing campaigns arewere performed by the Company'sCompany’s multi-lingual call center that directly contacts potential customers who have expressed an interest in the Company'sCompany’s products and services and arranges meetings with account representatives, when appropriate.
7
Partnerships
The Company'sCompany’s marketing strategy includesincluded the extension of its customer base through partnerships with relevant players in the financial markets. These partnerships include Franchising Agreements, Introducing Broker Agreements, Affiliate Agreements, White Label Agreements and Licensing Agreements with financial institutions whereby the institutions will referreferred clients to the Company and receive a commission from the Company for such referrals.
Distribution
In addition to its direct contacts with its customers, the Company actively seekssought brokerage firms and other financial institutions to whose customers it can offer the ability to trade with Finotec'sFinotec’s dealing room while sharing the income generated from the trading activity of such customers. The Company aims to further develop this system of forging relationships with Introducing Brokers and Affiliates on an international level. This use of the trading platform would allow Introducing Brokers to provide their customers access to the foreign currency and other financial markets without the cost of running a trading room and developing an electronic trading system themselves.
Customer Money
All customer money is deposited in the Company's custodian accounts in
banks in the United Kingdom and other countries. All money is managed by the
Company back office system in the Forexcash proprietary Customer Relationship
Management system.
In the US, HSBC holds client monies in trust in a segregated account and
in the UK, HSBC and Royal bank of Scotland do the same. In Cyprus, Finotec uses
Hellenic Bank and BNP Paribas bank as the client trust funds for clients all
over the world.
Forexcash
In January 2002, Finotec, via its subsidiary, Forexcash, launched the
Forexcash trading platform. The Forexcash service includes strategy trading
features and functions, streaming real-time charts and quotes, streaming news,
state-of-the-art analytical charting, time and sales data, quote lists, option
chains, market leaders data, profit/loss tracking, and wireless access.
Forexcash is a front and back office market maker and brokerage
application for online real-time trading in the financial instruments markets.
Forexcash gives spot and forward transaction prices with real-time execution
capabilities for most kinds of currency pairs as well as CFDs, commodities,
stocks and indices. Currently we have implemented the most liquid currency
pairs.
Forexcash's application servers were developed in Java Sun and PHP.
We believe that these technologies are compatible with most operating systems
and using them provides us the opportunity to offer numerous advantages, such as
ready-to-use software where no installation is necessary. Using well-accepted
Web technologies assists with the security of the data transfers, the offering
of real-time information and the technical analysis capabilities. The
communication in the system between the client systems and the servers are
encrypted with the RSA protocol based on an algorithm that was developed
internally.
Market data services.
The real-time market data included in Forexcash are licensed from
different content suppliers that include Reuters and various stock exchanges
around the world.
8
Technology Development
We believe that our success depends, in large part, on our ability to
offer unique, Internet-based strategy trading technologies with
state-of-the-art, intelligent direct-access order execution technologies, and
continuously enhance those technologies, as well as develop and implement a
well-designed and user-friendly all-in-one platform. We intend to consistently
improve our system and implement new features and protocols. For instance, we
are currently incorporating a new technology into our system that will give our
system the benefit of more design capabilities in addition to not requiring
downloads of plug-ins. By eliminating plug-ins, the customer will be able to
access the trading platform through firewalls on the computer.
We are also working to improve the style of the trading platform,
making it more user-friendly. A further technological development we have made
is adding chat capabilities to our system.
To date, we have relied primarily on internal development of our
products and services. We currently perform all quality assurance and develop
user education and other training materials internally. In the future, we may
continue to develop our technology internally or use outsourcing resources.
The market for strategy trading tools, streaming real-time market
data and news services, and online order execution services is characterized by:
rapidly changing technology; evolving industry standards in computer hardware,
programming tools and languages, operating systems, database technology and
information delivery systems; changes in customer requirements; and frequent new
product and service introductions and enhancements. Our success will depend in
part upon our ability to develop and maintain competitive technologies and to
develop and introduce new products, services and enhancements in a timely and
cost-effective manner that meets changing conditions such as evolving customer
needs, existing and new competitive product and service offerings, emerging
industry standards and changing technology. There can be no assurance that we
will be able to develop and market, on a timely basis, if at all, products,
services or enhancements that respond to changing market conditions or that will
be accepted by customers. Any failure by us to anticipate or to respond quickly
to changing market conditions, or any significant delays in the introduction of
new products and services or enhancements could cause customers to delay or
decide against the use of our products and services and could have a material
adverse effect on our business, financial condition and results of operations.
Customer Support and Training
We provide client services and support and product-use training in
the following ways:
CUSTOMER SERVICES AND SUPPORT. Finotec provides telephone customer
services to its brokerage customers through its dealing room as well as call
centers. Technical support to subscription and brokerage customers who use
Forexcash is provided by Finotec's technical support team via telephone,
electronic mail and fax.
PRODUCT-USE TRAINING. We consider user education important to try to
help our customers enhance their ability to use our products and services fully
and effectively. The majority of our training materials consist of extensive
online documentation and technical assistance information on our Web sites so
that our customers may learn to use and take full advantage of the sophisticated
technology of Forexcash.
9
Competition
The market for online brokerage services is intensely competitive and rapidly evolving, and there appears to be substantial consolidation in the industry of online brokerage services, Internet-based real-time market data services, and trading analysis software tools. We believe that, due to the current and anticipated rapid growth of the market for integrated trading tools, real-time market data and online brokerage services, competition, as well as consolidation, will substantially increase and intensify in the future. We believe our ability to compete will depend upon many factors both within and outside our control, including, but not limited to,: pricing; the timing and market acceptance of new products and services and enhancements developed by us and our competitors; technological developments; product content; our ability to design and support efficient, materially error-free Internet-based systems; market conditions, such as volatility in currency fluctuations, stock prices, inflation and recession; product and service functionality; data availability; ease of use; reliability; customer service and support; and sales and marketing efforts.
We face direct competition from several publicly-traded and
privately-held companies, principally online brokerage firms, including
providers of direct-access order execution services. Our competitors include
many foreign exchange online brokerage firms currently active in the United
States and Europe. Many online brokerage firms currently offer direct-access
service.
Many of our existing and potential competitors, which include online
discount and traditional brokerage firms, and financial institutions that are
focusing more closely on online services, including direct-access services for
active traders, have longer operating histories, significantly greater
financial, technical and marketing resources, greater name recognition and a
larger installed customer base than we do. Furthermore, there is the risk that
larger financial institutions which offer online brokerage services as only one
of many financial services may decide to use extremely low pricing rates in the
foreign currency market to acquire and accumulate customer accounts and assets
to derive interest income and income from their other financial services. We do
not currently offer other financial services; therefore, such pricing
techniques, should they become common in our industry, could have a material,
adverse effect on our results of operations, financial condition and business
model.
Generally, competitors may be able to respond more quickly to new or
emerging technologies or changes in customer requirements or to devote greater
resources to the development, promotion and sale of their products and services
than we do. There can be no assurance that our existing or potential competitors
will not develop products and services comparable or superior to those developed
and offered by us or adapt more quickly than us to new technologies, evolving
industry trends or changing customer requirements, or that we will be able to
timely and adequately complete the implementation, and appropriately maintain
and enhance the operation, of our business model. Increased competition could
result in price reductions, reduced margins, failure to obtain any significant
market share, or loss of market share, any of which could materially adversely
affect our business, financial condition and results of operations. There can be
no assurance that we will be able to compete successfully against current or
future competitors, or that competitive pressures faced by us will not have a
material adverse effect on our business, financial condition and results of
operations.
Intellectual Property
Our success is and will be heavily dependent on proprietary software
technology, including certain technology currently in development. We view our
software technology as proprietary, and rely, and will be relying, on a
combination of trade secret and trademark laws, nondisclosure agreements and
other contractual provisions and technical measures to establish and protect our
proprietary rights.
10
Despite efforts to protect our proprietary rights, unauthorized
parties may copy or otherwise may obtain, use or exploit our software or
technology independently. Policing unauthorized use of our software technology
is difficult, and it is extremely difficult to determine the extent to which
piracy of software technology exists. Piracy can be expected to be a persistent
problem, particularly in international markets and as a result of the growing
use of the Internet. In addition, effective protection of intellectual property
rights may be unavailable or limited in certain countries, including some in
which we may attempt to expand sales efforts. There can be no assurance that the
steps taken by us to protect our proprietary rights will be adequate or that our
competitors will not independently develop technologies that are substantially
equivalent or superior to ours.
There has been substantial litigation in the software industry
involving intellectual property rights. We do not believe that we are
infringing, or that any technology in development will infringe, the
intellectual property rights of others. The risk of infringement by us is
heightened with respect to our business model technology, as that technology has
not stood any significant test of time. There can be no assurance that
infringement claims would not have a material adverse effect on our business,
financial condition and results of operations. In addition, to the extent that
we acquire or license a portion of the software or data included in our products
or services from third parties (data is licensed from third parties), or market
products licensed from others generally, our exposure to infringement actions
may increase because we must rely upon such third parties for information as to
the origin and ownership of such acquired or licensed software or data
technology. In the future, litigation may be necessary to establish, define,
enforce and protect trade secrets, copyrights, trademarks and other intellectual
property rights. We may also be subject to litigation to defend against claimed
infringement of the rights of others or to determine the scope and validity of
the intellectual property rights of others. Any such litigation could be costly
and divert management's attention, which could have a material adverse effect on
our business, financial condition and results of operations. Adverse
determinations in such litigation could result in the loss of proprietary
rights, subject us to significant liabilities, require us to seek licenses from
third parties, which could be expensive, or prevent us from selling our products
or services or using our trademarks, any one of which could have a material
adverse effect on our business, financial condition and results of operations.
Government Regulation
In November 2007, Finotec UK received authorization from the FSA to
offer certain financial services in the UK. In connection therewith, Finotec has
received regulatory approval to offer cross border investment services in
various European countries, from its UK office.
In the Unites States, the Commodity Futures Trading Commission ("CFTC")
regulates the foreign currency futures market. Our subsidiary, Finotec USA, Inc.
has applied for registration with the National Futures Association ("NFA") as a
Futures Commission Merchant (FCM).
Finotec's mode of operation and profitability may be directly
affected by: additional legislation; changes in rules promulgated by the
Commodity Futures Trading Commission, the National Futures Association, the
Board of Governors of the Federal Reserve System, the FSA, the various stock and
futures exchanges and other self-regulatory organizations; and changes in the
interpretation or enforcement of existing rules and laws, particularly any
changes focused on online brokerage firms that target an active trader customer
base.
Governmental concern is focused in two basic areas: that the customer
has sufficient trading experience and has sufficient risk capital to engage in
active trading. Finotec requires a $200 opening balance to open an account with
us. We believe Finotec's minimum suitability requirements, as well as the
extensive user education documentation and tutorials offered on its Web site,
are consistent with the rules and regulations concerning active trading.
11
It is possible that other agencies will attempt to regulate our
current and planned online and other electronic service activities with rules
that may include compliance requirements relating to record keeping, data
processing, other operation methods, privacy, pricing, content and quality of
goods and services as the market for online commerce evolves. Because of the
growth in the electronic commerce market, Congress had held hearings on whether
to regulate providers of services and transactions in the electronic commerce
market. As a result, federal or state authorities could enact laws, rules or
regulations, not only with respect to online brokerage services, but other
online services we provide or may in the future provide. Such laws, rules and
regulations, if and when enacted, could have a material adverse effect on our
business, financial condition, results of operations and prospects. In addition,
since the Company's activities and customer base are international, regulatory
developments in other countries, including those of which the Company is
unaware, could have an effect on the Company and its operations.
Employees
As of January 31, 2009,November 9, 2020, we had 64 full-time employees. Ourno employees are not representedand our activities were being directed by any collective bargaining organization, and we have never
experienced a work stoppage and consider our relations with our employees to be
good.
Our future success depends, in significant part, upon the continued
service of our key senior management, technology and sales and marketing
personnel. The loss of the services of one or more of these key employees could
have a material adverse effect on us. There can be no assurance that we will be
able to retain our key personnel. Departures and additions of personnel, to the
extent disruptive, could have a material adverse effect on our business,
financial condition and results of operations.
Court-appointed custodian.
Item 1A. Risk Factors
FORWARD-LOOKING STATEMENTS; BUSINESS RISKS
This report contains statements that
We are forward-looking within the
meaning of Section 27A of the Securities Act of 1993, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These forward-looking
statementsa smaller reporting company are made pursuantnot required to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. When usedinclude this disclosure in this report, the words
"believes," "estimates," "plans," "expects," "intends," "anticipates,"
"contemplates," "may," "will," "shall," "assuming," "prospect," "should,"
"could," "would," "looking forward" and similar expressions, to the extent used,
are intended to identify the forward-looking statements. All forward-looking
statements are based on current expectations and beliefs concerning future
events that are subject to risks and uncertainties. Actual results may differ
materially from the results suggested in this report. Factors that may cause or
contribute to such differences, and our business risks generally, include, but
are not limited to, the items described below, as well as in other sections of
this report and in our other public filings and our press releases.
12
Our business and results of operations could be seriously harmed by any
of the following risks.
We have limited operating history upon which you may evaluate our
operations.
Our e-commerce marketplaces are in the early stages of their
development and we have limited operating history upon which you may evaluate
our business and prospects. Because our management team as a unit is relatively
new, it also has a very limited track record upon which you can make an
evaluation. In addition, our revenue model is evolving and because of our lack
of operating history, period-to-period comparisons of our results of operations
will not be meaningful in the short term and should not be relied upon as
indicators of future performance. Our business and prospects must be considered
in light of the risk, expense and difficulties frequently encountered by
companies in early stages of development, particularly companies in new and
rapidly evolving markets such as e-commerce. Our failure to address these risks
successfully could materially and adversely affect our business and operations.
We may have difficulty obtaining future funding sources, if
needed, and we might have to accept terms that would adversely affect
shareholders.
Instability in the Middle East region may adversely affect our business.
Political, economic and military conditions in Israel directly
affect the Company's operations. The Company could be adversely affected by
hostilities involving Israel, the interruption or curtailment of trade between
Israel and its trading partners, or a significant downturn in the economic or
financial condition of Israel. These conditions could disrupt the Company's
operations in Israel and its business, financial condition and results of
operations could be adversely affected.
The Company's costs of operations have at times been affected by
changes in the cost of its operations in Israel, resulting from changes in the
value of the Israeli shekel relative to the United States dollar, and from
difficulties in attracting and retaining qualified scientific, engineering and
technical personnel in Israel, where the availability of such personnel has at
times been severely limited. Changes in these cost factors have from time to
time been significant and difficult to predict, and could in the future have a
material adverse effect on the Company's results of operations.
The Company is closed during the Jewish Sabbath from Friday evening to Saturday
evening and during all Jewish holidays which in certain events may adversely
affect our business
The Company is closed on the Jewish Sabbath and during Jewish
holidays from on the eve of the Shabbat or eves of holidays, as of two hours
before the onset of Shabbat or the holiday, as well as during Shabbat and
holidays. During these times there is either a limited amount of employees or no
employees in the Company's offices. In the event of a power outage or any
disruption of services during these times there would be no employee available
to respond to the problem until the end of the Sabbath or Jewish holiday which
could have a material adverse affect on the Company's operations. A serious
disruption during such a time could disrupt the Company's operations and its
business, financial condition and results of operations could be adversely
affected.
13
Our success is dependent on retaining our current key personnel and attracting
additional key and other personnel, particularly in the areas of management,
technical services and customer support.
We believe that our success will depend on continued employment of
our senior management team and key technical personnel for the development of
our services. Their experience is important to the establishment of our
business. The loss of any one of our key personnel could disrupt and negatively
affect our business and operations. Our success also depends on having highly
trained technical and customer support personnel.
We have had and may continue to have difficulty attracting and
employing additional members to our senior management team and sufficient
technical and customer support personnel to keep up with our growth needs. This
shortage could limit our ability to increase sales and to sell services.
Competition for personnel is intense. If we cannot hire and retain suitable
personnel to meet our growth needs, our business and operations will be
negatively affected.
Our success is dependent upon our receipt and maintenance of regulatory
approvals in the major customer markets around the world.
The Company believes that its success, in large part, depends upon its
ability to receive and retain regulatory approvals in the major markets around
the world. Such approvals both expand the variety of services which the Company
can offer and bolster the Company's reputation among potential customers.
In November 2007, Finotec UK received authorization from the FSA to
offer certain financial services in the UK. In connection therewith, Finotec has
received regulatory approval to offer cross border investment services in the
various European countries, from its UK office. In order to retain its FSA
authorization, the Company must comply with numerous requirements, including
financial covenants as well as those related to its ongoing operations. The
Company's failure to meet these ongoing obligations could lead to the loss of
its FSA authorization which would have a material adverse effect on the Company
and its operations.
In addition, in the United States, Finotec USA Inc. has applied for
registration with the National Futures Association ("NFA") as a Futures
Commission Merchant (FCM). Such application is currently pending. Failure to
receive such authorization could have a material adverse effect on the Company's
ability to expand its operations. In addition, if such authorization is
received, in order to retain its NFA authorization, the Company must comply with
numerous requirements, including financial covenants as well as those related to
its ongoing operations.
Fluctuations in our quarterly results may adversely affect our
stock price.
Our quarterly operating results will likely vary in the future.
Our operating results will likely fall below the expectations of securities
analysts or investors in some future quarter or quarters. Our failure to meet
these expectations would likely adversely affect the market price of our common
stock.
14
Our quarterly operating results may vary depending on a number of
factors, including:
o demand of buyers and sellers to use and transact business on our
platform
o actions taken by our competitors, including new product
introductions, fee schedules, pricing policies and enhancements;
o cash flow problems that may occur;
o the quality and success of, and potential continuous changes in, sales
or marketing strategies (which have undergone significant changes
recently and are expected to continue to evolve) and the costs
allocated to marketing campaigns and the timing of those campaigns;
o the timing, completion, cost and effect of our development and launch
of planned enhancements to the Finotec trading platform;
o the size and frequency of any trading errors for which we ultimately
suffer the economic burden, in whole or in part;
o changes in demand for our products and services due to the rapid pace
in which new technology is offered to customers in our industry;
o costs or adverse financial consequences that may occur with respect to
regulatory compliance or other regulatory issues, particularly
relating to laws, rules or regulations that may be enacted with a
focus on the active trader market; and
o general economic and market factors that affect active trading,
including changes in the securities and financial markets.
our industry is intensely competitive, which makes it difficult to attract and
retain customers
The markets for online brokerage services, client software and
Internet-based trading tools, and real-time market data services are intensely
competitive and rapidly evolving, and there has been substantial consolidation
of those three products and services occurring in the industry. We believe that
competition from large online brokerage firms and smaller brokerage firms
focused on active traders, as well as consolidation, will substantially increase
and intensify in the future. Competition may be further intensified by the size
of the active trader market,. We believe our ability to compete will depend upon
many factors both within and outside our control. These include: price pressure;
the timing and market acceptance of new products and services and enhancements
developed by us and our competitors; the development and support of efficient,
materially error-free Internet-based systems; product and service functionality;
data availability and cost; clearing costs; ease of use; reliability; customer
service and support; and sales and marketing decisions and efforts.
Copyright and patent risks; software license risks.
While we seek to protect our technology, it is not possible for us
to detect all possible infringements of our software, text, designs and other
works of authorship. Also, copyright protection does not extend to functional
features of software and will not be effective to prevent third parties from
duplicating our software's capabilities through engineering research and
development. In addition, our technology and intellectual property may receive
limited or no protection in some countries, and the global nature of the
Internet makes it impossible to control the ultimate destination of our work.
15
We have not conducted searches to determine if our software
infringes on any patents of third parties. If our software is found to infringe
on the copyrights or patents of a third party, the third party or a court or
other administrative body could require us to pay royalties for past use and for
continued use, or to modify or replace the software to avoid infringement. We
cannot assure you that we would be able to modify or replace the software.
Any of these claims, with or without merit, could subject us to
costly litigation, divert our technical and management personnel and materially
and adversely affect our business and operations.
Trademarks and service marks risks.
Proprietary rights are important to our success and our
competitive position. Our actions may be inadequate to protect any trademarks
and other proprietary rights or to prevent others from claiming violations of
their trademarks and other proprietary rights. We may not be able to protect our
domain names for our websites as trademarks because those names may be too
generic or perceived as describing a product or service or its attributes rather
than serving a trademark function.
If we are unable to protect our proprietary rights in trademarks,
service marks and other indications of origin, competitors will be able to use
names and marks that are identical to ours or sufficiently similar to ours to
cause confusion among potential customers. This confusion may result in the
diversion of business to our competitors, the loss of customers and the
degradation of our reputation. Litigation against those who infringe upon our
service marks, trademarks and similar rights may be expensive. Because of the
difficulty in proving damages in trademark litigation, it may be very difficult
to recover damages.
Except for a search for the names Finotec Group and Finotec
Trading, we have not conducted searches to determine whether our service marks,
trademarks and similar items may infringe on the rights of third parties.
Despite having searched a mark, there may be a successful assertion of claims of
trademark or service mark infringement. If a third party successfully asserts
claims of trademark, service mark or other infringement, the third party or a
court or other administrative body may require us to change our service marks,
trademarks, company names, the design of our sites and materials and our
Internet domain name (web address), as well as to pay damages for any
infringement. A change in service marks, trademarks, company names, the design
of our sites and materials and Internet domain names may cause difficulties for
our customers in locating us or cause them to fail to connect our new names and
marks with our prior names and marks, resulting in loss of business.
The nature of our business results in potential liability to customers
Many aspects of the securities brokerage business, including online trading
services, involve substantial risks of liability. In recent years there has been
an increasing incidence of litigation involving the securities brokerage
industry, including class action and other suits that generally seek substantial
damages, including in some cases punitive damages. In particular, our
proprietary order routing technology is designed to automatically locate, with
immediacy, the best available price in completing execution of a trade triggered
by programmed market entry and exit rules. There are risks that the electronic
communications and other systems upon which these products and services rely,
16
and will continue to rely, or our products and services themselves, as a result
of flaws or other imperfections in their designs or performance, may operate too
slowly, fail or cause confusion or uncertainty to the user. Major failures of
this kind may affect all customers who are online simultaneously. Any such
litigation could have a material adverse effect on our business, financial
condition, results of operations and prospects.
We may not be able to make future acquisitions and new strategic
alliances, and, even if we do, such acquisitions and alliances may disrupt or
otherwise negatively affect our business.
Our business plan contemplates that we may make investments in
complementary companies, technologies and assets. Future acquisitions are
subject to the following risks:
o we may not be able to agree on the terms of the acquisition or
alliance, such as the amount or price of our acquired interest;
o acquisitions and alliances may cause a disruption in our ongoing
business, distract our relatively new management team and make it
difficult to implement or maintain our systems, controls and
procedures;
o we may acquire companies or make strategic alliances in markets
in which we have little experience;
o we may not be able successfully to integrate the services,
products and personnel of any acquisition or new alliance into
our operations;
o we may be required to incur debt or issue equity securities to
pay for acquisitions, which may be dilutive to existing
shareholders, or we may not be able to finance the acquisitions
at all; and
o our acquisitions and strategic alliances may not be successful,
and we may lose our entire investment.
In addition, we face competition from other parties, including
large public and private companies, venture capital firms, and other companies,
in our search for suitable acquisitions and alliances. Many of the companies we
compete with for acquisitions have substantially greater name recognition and
financial resources than we have, which may limit our opportunity to acquire
interests in new companies, technologies and assets or create strategic
alliances. Even if we are able to find suitable acquisition candidates or
develop acceptable strategic alliances, doing so may require more time and
expense than we expect because of intense competition.
We must maintain positive brand name awareness.
We believe that establishing and maintaining our brand names is
essential to expanding business. We also believe that the importance of brand
name recognition will increase in the future because of the growing number of
online companies that will need to differentiate themselves. Promotion and
enhancement of our brand names will depend largely on our ability to provide
consistently high quality software and related technology. If we are unable to
provide software and technology of comparable or superior quality to those of
our competition, the value of our brand name may suffer.
17
The international nature of our business adds additional
complexity and risks to our business.
The nature of the foreign currency business brings us into contact
with different countries and markets. We hope to expand further in international
markets. Our international business may be subject to a variety of risks,
including:
o market risk or loss of uncovered transactions;
o governmental regulation and political instability;
o collecting international accounts receivable and income;
o the imposition of barriers to trade and taxes; and
o difficulties associated with enforcing contractual obligations
and intellectual property rights.
These factors may have a negative effect on any future
international operations and may adversely affect our business and operations.
The interests of our significant shareholders may conflict with our
interests and the interests of our other shareholders.
Directors, officers and holders of more than 5% of the outstanding
shares of Finotec common stock collectively own a significant share of the
outstanding common stock. As a result of their stock ownership, one or more of
these shareholders may be in a position to affect significantly our corporate
actions, including, for example, mergers or takeover attempts, in a manner that
could conflict with the interests of our public shareholders.
Anti-takeover provisions and our right to issue preferred stock could
make a third party acquisition of us difficult.
Finotec is a Nevada corporation. Anti-takeover provisions of
Nevada law may make it difficult for a third party to acquire control of us,
even if a change in control would be beneficial to our shareholders. In
addition, our board of directors may issue preferred stock with voting or
conversion rights that may have the effect of delaying, deferring or preventing
a change of control. Preventing a change of control could adversely affect the
market price of Finotec common stock and the voting and other rights of holders
of Finotec common stock.
Our common stock price is likely to be highly volatile.
The market price of our common stock is likely to be highly
volatile, as the stock market in general, and the market for Internet-related
and technology companies in particular, has been highly volatile. Our
shareholders may not be able to resell their shares of our common stock
following periods of volatility because of the market's adverse reaction to this
volatility.
Factors that could cause this volatility may include, among other
things:
o announcements of technological innovations and the creation and
failure of B2B marketplaces;
o actual or anticipated variations in quarterly operating results;
o new sales formats or new products or services;
18
o changes in financial estimates by securities analysts;
o conditions or trends in the Internet, B2B and other industries;
o changes in the market valuations of other Internet companies;
o announcements by us or our competitors of significant
acquisitions, strategic partnerships or joint ventures;
o changes in capital commitments;
o additions or departures of key personnel;
o sales of our common stock; and
o general market conditions.
Many of these factors are beyond our control.
Service of process and enforcement of civil liabilities on us and our officers
may be difficult to obtain.
We are organized under the laws of the State of Nevada and will be
subject to service of process in the United States. However, most of our assets
are located outside the United States. In addition, certain of our directors and
officers are residents of Israel.
There is doubt as to the enforceability of civil liabilities under the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended, in original actions instituted in Israel. As a result, it may not be
possible for investors to enforce or effect service of process upon these
directors and executive officers or to judgments of U.S. courts predicated upon
the civil liability provisions of U.S. laws against our assets, as well as the
assets of these directors and executive officers. In addition, awards of
punitive damages in actions brought in the U.S. or elsewhere may be
unenforceable in Israel.
Risks Relating to Our E-Commerce Marketplaces
Our success depends on the development of the e-commerce market, which is
uncertain.
We rely on the Internet for the success of our businesses, as do
other e-commerce marketplaces. The development of the e-commerce market is in
its early stages. Our long-term success depends on widespread market acceptance
of B2B e-commerce. A number of factors could prevent such acceptance, including
the following:
o the unwillingness of business to shift from traditional
processes to e-commerce processes;
o the necessary network infrastructure for substantial growth in
usage of e-commerce may not be adequately developed;
o increased governmental regulation or taxation may adversely
affect the viability of e-commerce;
o insufficient availability of telecommunication services or
changes in telecommunication services could result in slower
response time for users of e-commerce; and
o concern and adverse publicity with respect to, and failure of,
security of e-commerce.
19
We may not be able to compete effectively with other providers of
e-commerce services.
Competition for Internet products and services and e-commerce
business is intense. If the market for e-commerce grows, we expect that
competition will intensify, and Finotec will continue to compete with other
technology companies and traditional service providers that seek to integrate
on-line business technologies with their traditional service mix. Barriers to
entry into the e-commerce environment are minimal, and competitors can launch
websites and offer products and services at relatively low costs. The companies
with which Finotec competes often have significantly greater name recognition
and financial, marketing and other resources than Finotec which may place our
e-commerce marketplaces at a disadvantage in responding to competitors' pricing
strategies, technological advances, advertising campaigns, strategic
partnerships and other initiative. If Finotec fails to differentiate itself from
other Internet industry participants, the value of its brand name could decline,
it may be unable to attract a critical mass of buyers and sellers, and its
prospects for future growth would diminish, which could materially and adversely
affect our business and operations.
Concerns regarding security of transactions and transmitting
confidential information over the Internet may adversely affect our e-commerce
business.
We believe that concern regarding the security of confidential
information transmitted over the Internet, including, for example, business
requirements, credit card numbers and other forms of payment methods, prevents
many potential customers from engaging in online trading. If we do not add
sufficient security features to future product releases, our services may not
gain market acceptance or we may face additional legal exposure.
Despite the measures we have taken in the areas of encryption and
password or other authentication software devices, our infrastructure, like
others, is potentially vulnerable to physical or electronic break-ins, computer
viruses, hackers or similar problems caused by employees, customers or other
Internet users. If a person circumvents our security measures, that person could
misappropriate proprietary information or cause interruptions in our operations.
Security breaches that result in access to confidential information could damage
our reputation and expose us to a risk of loss or liability. These risks may
require us to make significant investments and efforts to protect against or
remedy security breaches, which would increase the costs of maintaining our
websites.
Our e-commerce capability depends on real-time accurate product
information.
We may be responsible for loading information into our database
and categorizing the information for trading purposes. This process entails a
number of risks, including dependence on our suppliers both to provide us in a
timely manner with accurate, complete and current information and to update this
information promptly when it changes. If our suppliers do not provide us in a
timely manner with accurate, complete and current information, our database may
be less useful to our customers and users and may expose us to liability. We
cannot guarantee that the information available in our database will always be
accurate, complete and current or comply with governmental regulations either
due to third-party or internal errors. This could expose us to liability or
result in decreased acceptance of our products and services, which could have a
material and adverse affect on our business and operations. We are aware of
cases in which the data provided to us by third parties has not been
consistently accurate and, as a result of which, we have experienced customer
dissatisfaction and lawsuits by customers. In addition, our contracts with the
third-party data suppliers must be renewed on a regular basis and the costs for
such information may increase, with the Company having little or no negotiating
influence in such a situation.
20
Our market is characterized by rapid technological change, and we may
not be able to keep up with such change in a cost-effective way.
The e-commerce market is characterized by rapid technological
change and frequent new product announcements. Significant technological changes
could render our existing technology obsolete. If we are unable to respond
successfully to these developments or do not respond in a cost-effective way,
our business and operations will suffer. To be successful, we must adapt to our
rapidly changing market by continually improving the responsiveness, services
and features of our products and services, by developing or acquiring new
features to meet customer needs and by successfully developing and introducing
new versions of our Internet-based e-commerce business software on a timely
basis. The life cycles of the software used to support our e-commerce services
are difficult to predict because the market for our e-commerce is new and
emerging and is characterized by changing customer needs and industry standards.
The introduction of on-line products employing new technologies and industry
standards could render our existing system obsolete and unmarketable. If a new
software language becomes the industry standard, we may need to rewrite our
software to remain competitive, which we may not successfully accomplish in a
timely and cost-effective manner.
In addition, as traffic in our e-commerce business increases, we
may need to expand and upgrade our technology, transaction processing systems
and network hardware and software. We may not be able to project accurately the
rate of growth in our on-line businesses. We also may not be able to expand and
upgrade our systems and network hardware and software capabilities to
accommodate increased use of our on-line businesses, which would have a material
and adverse affect on our business and operations.
An unexpected event, such as a power or telecommunications
failure, fire or flood, or physical or electronic break-in at any of our
facilities or those of any third parties on which we rely, could cause a loss of
critical data and prevent us from offering services. If our hosting and
information technology services were interrupted, including from failure of
other parties' software that we integrate into our technology, our business and
the businesses of our e-commerce marketplaces using these services would be
disrupted, which could result in decreased revenues, lost customers and impaired
business reputation for us and them. As a result, we could experience greater
difficulty attracting new customers. A failure by us or any third parties on
which we rely to provide these services satisfactorily would impair our ability
to support the operations of our services and could subject us to legal claims.
In addition, to a large extent, the Company's profits are dependent
upon the operation of its internal risk management system. There is no guarantee
that such system will operate successfully in every eventuality.
Limited Internet infrastructure may affect service.
The accelerated growth and increasing volume of Internet traffic
may cause performance problems, slowing the adoption of our Internet-based
services. The growth of Internet traffic due to very high volumes of use over a
relatively short period of time has caused frequent periods of decreased
Internet performance, delays and, in some cases, system outages. This decreased
performance is caused by limitations inherent in the technology infrastructure
supporting the Internet and the internal networks of Internet users. In
addition, recently, there have been several instances of entire countries losing
Internet access as a result of natural disasters or accidents. If Internet usage
continues to grow rapidly, the infrastructure of the Internet and its users may
be unable to support the demands of growing e-commerce usage, and the Internet's
performance and reliability may decline. If our existing or potential customers
21
experience frequent or continuing outages or delays on the Internet, the
adoption or use of our Internet-based products and services may grow more slowly
than we expect or even decline. Our ability to increase the speed and
reliability of our Internet-based business model is limited by and depends upon
the reliability of both the Internet and the internal networks of our existing
and potential customers. As a result, if improvements in the infrastructure
supporting both the Internet and the internal networks of our customers and
suppliers are not made in a timely fashion, we may have difficulty obtaining new
customers, or maintaining our existing customers, either of which could reduce
our potential revenues and have a negative impact on our business and
operations.
Internet governance, regulation and administration are uncertain and
may adversely affect our business.
The future success of our business is dependent on our ability to
use the Internet to implement our e-commerce growth strategy. Because the
original role of the Internet was to link the government's computers with
academic institutions' computers, the Internet was historically administered by
organizations that were involved in sponsoring research. Over time, private
parties have assumed larger roles in the enhancement and maintenance of the
Internet infrastructure. Therefore, it is unclear what organization, if any,
will govern the administration of the Internet in the future, including the
authorization of domain names.
The lack of an appropriate organization to govern the
administration of the Internet infrastructure and the legal uncertainties that
may follow pose risks to the commercial Internet industry and our specific
website business. In addition, the effective operation of the Internet and our
business is also dependent on the continued mutual cooperation among several
organizations that have widely divergent interests, including the government,
Internet service providers and developers of system software and software
language. These organizations may find that achieving a consensus may become
difficult, impossible, time-consuming and costly.
Changes in the regulatory environment governing the Internet, either in
the US or abroad, could have a significant effect on our business.
We cannot predict whether or to what extent any new regulation
affecting e-commerce will occur. New regulations could increase our costs or
restrict our activities in a materially adverse manner. One or more states or
countries may seek to impose sales tax collection obligations on
out-of-state/foreign companies like ours that engage in or facilitate
e-commerce. A successful assertion by one or more states or any foreign country
that we should collect sales and other taxes on our system could increase costs
that we could have difficulty recovering from users of our websites.
Governmental agencies and their designees regulate the acquisition
and maintenance of web addresses generally. For example, in the United States,
the National Science Foundation had appointed Network Solutions, Inc. as the
exclusive registrar for the ".com," ".net" and ".org" generic top-level
addresses. Although Network Solutions no longer has exclusivity, it remains the
dominant registrar. The regulation of web addresses in the United States and in
foreign countries is subject to change. As a result, we may not be able to
acquire or maintain relevant web addresses in all countries where we conduct
business that are consistent with our brand names and marketing strategy.
Furthermore, the relationship between regulations governing website addresses
and laws protecting trademarks is unclear.
22
We may be subject to legal liability for publishing or distributing
content over the Internet.
Our e-commerce businesses may be subject to legal claims relating
to the content of our on-line websites, or the distribution of content.
Providers of Internet products and services have been sued in the past,
sometimes successfully, based on the content of material. The representations as
to the origin and ownership of licensed content that we generally obtain may not
adequately protect us.
In addition, we draw some of the content provided in our on-line
business communities from data compiled by other parties. This data may have
errors. If our content is improperly used or if we supply incorrect information,
it could result in unexpected liability. Our insurance may not cover claims of
this type or may not provide sufficient coverage. We are aware of cases in which
the data provided to us by third parties has not been consistently accurate and,
as a result of which, we have experienced customer dissatisfaction and lawsuits
by customers. Costs from these claims could damage our business and limit our
financial resources. In addition, there can be no assurance that we will not
make internal errors that could result in liability.
Report
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The Company's UK subsidiary and dealing room is located at 68 Great Eastern
Street, 3rd Floor, London EC2A 3JT, England, UK. There the Company rents 800
square feet of office space.
The company also has marketing and technology offices in Jerusalem at the Malha
Technology Park, Building 8, Jerusalem 96951, Israel. There, via an agreement by
Forexcash Global Trading Ltd. (which is a 99.7% owned subsidiary of the Company)
the Company rents approximately 1186 square meters of office space.
The Company also rents 197 square meters of offices in Limassol, Cyprus at 1
Griva Digheni& Chrysanthou Street.
Rent expense for the fiscal year ended January 31, 2009 was approximately
$255,054.
None
Item 3. Legal Proceedings
1. In May, 2004, the Tel-Aviv Stock Exchange Ltd. (the "Stock Exchange")
submitted a claim against the Company for a permanent and temporary restraining
order to prevent the Company from using the Tel-Aviv 25 Index and/
We are not involved in any material legal proceedings, nor are we aware of any legal proceedings threatened or in which any director or officer or any other
index owned by the Stock Exchange as part of the Company's online trading at its
website. The Company claimed that the Stock Exchange does not have copyrights
regarding the indexes and that it did not mislead the public in any way.
The Company answered the claim for a temporary restraining order, and in June,
2004, the Court accepted the Company's claim. In August, 2005, the Stock
Exchange appealed to the Supreme Court, and thereafter the Company submitted its
response to the appeal. The Supreme Court accepted the Company's claim. The case
is scheduled for a pre-trial meeting on June 22, 2008.
2. In February 2008, a shareholder of the Company filed a claim against the
Company in the District Court of Clark County, Nevada, relating to the
requirement by the Company's transfer agent, Standard Register and Transfer
Company that such shareholder provide collateral in order to replace a stock
certificate that shareholder claims to have lost. The shareholder claims that
the Company has instructed its transfer agent to require a high amount of
collateral. The Company and shareholder have entered into a ettlement Agreement.
23
3. Customer v. Finotec Trading UK Limited (in arbitration; previously before the
Tel Aviv Magistrates Court): Thistheir affiliates is a case in which a former customer of
Finotec Trading UK Limited ("Finotec UK"),party adverse to our Company or has sued for $41,973.00. The customer
asserts that Finotec UK's cancelation of certain trades in April and June 2008
was unlawful and that he is entitled to lost profits. In February 2009, at the
suggestion of the court, the parties agreed to submit the dispute to
arbitration. Two arbitration hearings were held in March 2009, and customer's
attorney has filed his written summations. We expect to file our written
summations within approximately three weeks. In connection with the agreement to
arbitrate, in the spring of 2009, Finotec deposited, in an attorney escrow
account, the amount claimed in the Action. Finotec UK intends to defend the
matter vigorously.
4. Customer v. Finotec Trading Ltd. (Tel Aviv Magistrates Court): This is a case
in which a customer of Finotec Trading Ltd. ("Finotec Israel"), has sued Finotec
Israel for NIS 154,000. The customer alleges that Finotec Israel acted
negligently in (a) recommending that he execute trades through a third-party,
and (b) failing to oversee such third party. Finotec Israel filed its statement
of defense in December 2008, and it intends to defend the case vigorously.
Customer's questionnaire and document demand were received on May 4, 2009.
5. Potential Claim of Customer: On or about Nov. 16, 2008, Finotec Israel
received a letter from counsel to a customer, concerning an alleged claim of
customer, who has been a customer of Finotec Israel. The essence of the claim in
the letter is that Finotec Israel unlawful cancelled certain trades of customer
in October 2007. The letter is not clear as to the amount of damages allegedly
owed to customer. The letter refers to customer's right to reinstate a
transaction in the amount of $5,000, and it also asserts that customer is
entitled to damages of NIS 2,000 To the best of our knowledge, no lawsuit has
been filed by customer (or on his behalf) against any Finotec entity.
Management does not expect these claims to have a material effect on the
Company's financial position or results of operations.
interest adverse to us.
Item 4. Submission of Matters to a Vote of Security Holders
On June 16, 2008, the Company entered into definitive agreements for the sale of
4,347,824 shares of Common Stock at a price of $0.23 per share. As a part of the
transaction, the Company agreed to issue accompanying warrants to purchase an
aggregate of 10,000,000 shares of Common Stock at an exercise price of $0.50 per
share. Four investors subscribed to the investment. The shares of Common Stock
sold in the private placement offering have not been registered and may not be
offered or sold absent registration or an applicable exemption from such
registration requirements. All such shares are subject as well to a registration
rights agreement. The transaction closed in mid-June 2008. 2,487,500 treasury
shares were issued as part of the 4,347,824 shares issued thereunder.
24
On July 29, 2008, the Company entered into a definitive agreement for the sale
of 3,333,333 shares of Common Stock at a price of $0.30 per share for a total of
$1 million. As a part of the transaction, the Company agreed to issue
accompanying warrants to purchase an aggregate of 1,428,571 shares of Common
Stock at an exercise price of $0.70 per share. The shares of Common Stock sold
in the private placement offering have not been registered and may not be
offered or sold absent registration or an applicable exemption from such
registration requirements. All such shares are subject as well to a registration
rights agreement. The transaction closed on July 31, 2008.
On October 31, 2008, the Company entered into definitive agreements and received
funds for the sale of 12,724,444 shares of Common Stock at a price of $0.18 per
share and 800,000 shares of Common Stock at a price of $0.25 per share. As a
part of the transaction, the Company agreed to issue accompanying warrants to
purchase 5,777,776 shares of Common Stock at an exercise price of $0.45 per
share and warrants to purchase 400,000 shares of Common Stock at an exercise
price of $0.50. Five new investors subscribed to the investment. The shares of
Common Stock sold in the private placement offering were not registered under
the Securities Act of 1933, as amended, and may not be offered or sold absent
registration or an applicable exemption from such registration requirements. All
such shares are subject as well to a registration rights agreement. The offering
closed on November 2, 2008.
Mine Safety Disclosures
Not applicable.
Item 5. Market for the Registrant'sRegistrant’s Common Stock andEquity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
(a) The Company's Common Stock isMarket Information.001
Our shares of common stock are currently quoted on the OTC Bulletin Board )OTCBB(Pink under the symbol "FTGI.OB" “FTGI”.
The following table sets forth the high and low bid prices as reported byprice for our common stock for each quarter during the National Association of Securities Dealers
(NASD) for the periods ending January 31, 2009. These quotationspast two fiscal years. The prices reflect inter-dealer prices, withoutquotations, do not include retail mark-up, mark-downmark-ups, markdowns or commissions and maydo not necessarily reflect actual transactions.
High Low
---- ---
2008
-----
First Quarter 1.01 .65
Second Quarter .85 .26
Third Quarter .20 .90
Fourth Quarter .15 .52
2007
-----
First Quarter n/
High | Low | |||||||
April 30, 2018 | $ | 0.00850 | $ | 0.00370 | ||||
July 3, 2018 | $ | 0.00371 | $ | 0.00100 | ||||
October 31, 2018 | $ | 0.00330 | $ | 0.00250 | ||||
January 31, 2019 | $ | 0.00260 | $ | 0.00200 | ||||
April 30, 2019 | $ | 0.00200 | $ | 0.00150 | ||||
July 31, 2019 | $ | 0.00200 | $ | 0.00150 | ||||
October 31, 2019 | $ | 0.00200 | $ | 0.00120 | ||||
January 30, 2020 | $ | 0.00190 | $ | 0.00090 |
(b) Holders
As of November 9, 2020, a n/total of 300,000,000 shares of the Company’s common stock are currently outstanding held by 1,118 shareholders of record. This figure does not take into account those shareholders whose certificates are held in the name of broker-dealers or other nominees.
(c) Dividends
We have not declared or paid any dividends on our common stock and intend to retain any future earnings to fund the development and growth of our business. Therefore, we do not anticipate paying dividends on our common stock for the foreseeable future. The payment of dividends in the future will depend upon, among other factors, our earnings, capital requirements, and operating financial conditions.
3
Item 6. Selected Financial Data
We are a Second Quarter n/smaller reporting company are not required to include this disclosure in this Report.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Business Overview
The Finotec Group Inc. has been dormant since November 2011. On March 16, 2020, as a n/result of a Third Quarter n/custodianship in Clark County, Nevada, Case Number: A-20-809716-B, Custodian Ventures LLC (“Custodian”) was appointed custodian of the Company.
On 17st of March 2020, Custodian appointed David Lazar as the Company’s Chief Executive Officer, President, Secretary, Chief Financial Officer, Chief Executive Officer and Chairman of the Board of Directors.
Management’s Plan of Operation
The following discussion contains forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use of words such as “anticipate”, “estimate”, “expect”, “project”, “intend”, “plan”, “believe”, and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. From time to time, we also may provide forward-looking statements in other materials we release to the public.
Overview
The Company’s current business objective is to seek a n/business combination with an operating company. We intend to use the Company’s limited personnel and financial resources in connection with such activities. The Company will utilize its capital stock, debt or a Fourth Quarter 1.54 .05
25
● | may significantly reduce the equity interest of our stockholders; |
● | will likely cause a change in control if a substantial number of our shares of capital stock are issued, and most likely will also result in the resignation or removal of our present officer and director; and |
● | may adversely affect the prevailing market price for our common stock. |
Similarly, if we issued debt securities, it could result in:
● | default and foreclosure on our assets if our operating revenues after a business combination were insufficient to pay our debt obligations; |
● | acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if the debt security contained covenants that required the maintenance of certain financial ratios or reserves and any such covenants were breached without a waiver or renegotiations of such covenants; |
● | our immediate payment of all principal and accrued interest, if any, if the debt security was payable on demand; and |
● | our inability to obtain additional financing, if necessary, if the debt security contained covenants restricting our ability to obtain additional financing while such security was outstanding. |
Liquidity and Capital Resources
As of January 31, 2009, we had 1,102 holders of record of our common
stock.
(b) No dividends were paid during2020, the fiscal year ending January 31, 2009. The
Articles of Merger restrict the Company's abilityCompany has no business operations and no cash resources other than that provided by Management. We are dependent upon interim funding provided by Management or an affiliated party to pay dividends. The
Companyprofessional fees and expenses. Our Management and an affiliated party have agreed to provide funding as may notbe required to pay dividends if doing so would result in a consolidated
current ratio of less than two, that is, current assets equaling less than
twice current liabilities.
Item 6.
FINOTEC GROUP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONS ABOUT FORWARD-LOOKING STATEMENTS
The following discussion of the financial conditionfor accounting fees and results of
operationsother administrative expenses of the Company shoulduntil the Company enters into a business combination. The Company would be readunable to continue as a going concern without interim financing provided by Mr. Lazar, the Court appointed custodian.
If we require additional financing, we cannot predict whether equity or debt financing will become available at terms acceptable to us, if at all. The Company depends upon services provided by Management and an affiliated party to fulfill its filing obligations under the Exchange Act. At present, the Company has no financial resources to pay for such services.
The Company does not currently engage in conjunction withany business activities that provide cash flow. The costs of investigating and analyzing business combinations, maintaining the Consolidated
Financial Statementsfiling of Exchange Act reports, the investigation, analyzing, and Notes thereto included elsewhere in this Form 10-K.
Certainconsummation of an acquisition for an unlimited period of time will be paid from additional money contributed by David Lazar, our sole officer and director, or an affiliated party.
During the statements contained in this Form 10-K which are not statements
of historical fact are forward-looking statementsnext 12 months we anticipate incurring costs related to:
● | filing of Exchange Act reports. |
● | franchise fees, registered agent fees, legal fees and accounting fees, and |
● | investigating, analyzing and consummating an acquisition or business combination. |
We estimate that involve risks and
uncertainties. Such forward-looking statements are made only as of the date of
this Form 10-K. The Company's actual results could differ materially from
those containedthese costs will be in the forward-looking statements. Factorsrange of $10,000-$15,000 per year, and that may cause such
differences include, but are not limitedwe will be able to those discussed under "Risk
Factors"meet these costs as well as those discussed elsewhere in this Form 10-K.
BUSINESS OVERVIEW
Finotec Group Inc. isnecessary, to be advanced/loaned to us by Management and/or an affiliated party.
We had a holding company with no activities other than holding
two wholly owned companies Finotec Trading Inc. and Forexcash Global Trading
Ltd. These companies, directly and through their subsidiaries, deal primarily in
two distinct areas:
1. Finotec Trading Inc - marketing, sales, market trading and
facilitation; and
2. Forexcash Global Trading Ltd - financial technology development
Finotec Group Inc. has a fiscal year endnegative cash flow from operations of January 31st and its stock symbol is
FTGI.OB.
Finotec Trading Inc. (New York) was established in November 2001 with the
express intent of providing retail customers access to the largest financial
market for online foreign currency trading. Finotec Trading Inc. (New York) is
the market-making arm of the corporation, distributing the live and
instantaneously executable trading prices in global currencies, equities,
indices, commodities and interest rate products through the group's online
trading system. The centralised dealing room services clients, aggregates
globally derived risk in real-time and hedges residual market exposure with the
underlying markets.
26
In 2005 Finotec Trading Inc. established its dealing room in Cyprus through a
wholly owned subsidiary Finotec Trading Cyprus Ltd. In 2007, the dealing room
was moved to the UK. Currently, the subsidiary in Cyprus engages primarily in
sales and marketing of the Company's products.
During 2006, Finotec Trading Inc. additionally established three wholly owned
subsidiaries: In the United Kingdom, Finotec Trading UK Limited, for the purpose
of obtaining the necessary authorization to act as a market maker in Foreign
Exchange and CFD's in the UK and Europe. In November 2007, Finotec UK received
such authorization from the UK Financial Services Authority ("FSA"). Such
authorization was accompanied by approvals from the other European countries
allowing Finotec UK to offer cross-border investment services within their
borders.
In the US, Finotec USA, Inc., incorporated under the laws of Delaware, for the
purpose of obtaining the necessary authorization from the National Futures
Association (NFA)to act as a market maker in Foreign Exchange in the US.
In Poland, Finotec Trading Polska S. A., for the purpose of obtaining the
necessary authorization to act as a market maker in Foreign Exchange and CFD's
in Poland and Eastern Europe. As a result of the FSA approval received by
Finotec UK, and the accompanying approvals in other European countries,
including Poland, the Company decided to discontinue the authorization process
in Poland. In November, 2008, this subsidiary has been sold.
Customers can open accounts with Finotec Trading UK Ltd. by several methods;
1.Directly with Finotec Trading UK Ltd.
2.Via affiliates and Introducing Brokers ("IB's") that sign commission
sharing agreement Finotec Trading UK Ltd.
As part of its code of conduct, all customer monies are segregated in custodian
accounts which have been set up in the United Kingdom and various other
countries.
Since its inception Finotec has secured a number of IB contracts, with
investment houses, financial institutions and high wealth individuals. Finotec's
website and trading system may be accessed on www.finotec.com. The system also
provides a `demo' trading system and an e-learning center that may be accessed
by registering on the website.
27
On August 9, 2001 (the "Merger Date"), Finotec Group, Inc., formerly Online
International Corporation ("Finotec Group"), a Nevada corporation without
significant operations, acquired all of the outstanding shares of Finotec Ltd.
("Finotec Ltd.") (formerly Priory Marketing Ltd.), an Isle of Man company. The
transaction was effected by the issuing of 21,500,000 shares of Finotec Group
common stock to the stockholders of Finotec Ltd. This resulted in the former
Finotec Ltd. stockholders owning approximately 61.5% of the outstanding shares
of Finotec Group. For financial reporting purposes, the transaction was recorded
as a recapitalization of Finotec Ltd., with Finotec Ltd. receiving the
$1,320,363 net assets (assets of $1,404,636, less liabilities of $84,273) of
Finotec Group as a capital contribution. Finotec Ltd. is the continuing
surviving entity for accounting purposes, but is adopting the capital structure
of Finotec Group, which is the continuing parent entity for legal purposes. All
references to common stock have been restated to reflect the equivalent number
of Finotec Group shares.
Finotec Ltd. was formed in December 2000, at which time it acquired 99.7%
of the outstanding stock of Forexcash Global Trading Ltd. ("Forexcash"), an
Israeli corporation, which had been incorporated on June 23, 1998. This
transaction is treated as a recapitalization of Forexcash with Forexcash as the
continuing accounting entity and Finotec Ltd. as the continuing parent for legal
purposes.
The Company currently develops, through its subsidiaries, markets
and operates a software system delivering foreign exchange, commodities, and
futures (CFDs) investment services to the public through the Internet. The
Company also operates an Internet-based brokerage firm for institutional,
professional and serious active individual traders in the financial instruments
markets, especially foreign currency and CFDs. The Company offers an electronic
trading platform which seamlessly integrates strategy trading tools, historical
and streaming real-time market data, and direct-access order-routing and
execution. In addition, the Company operates an internal risk management module
that guides the Company as to when to hedge positions or not and systems that
provide real time management of equity positions and margin requirements. The
Company also acts as a market maker.
Under our business model, we seek recurring revenues mainly by
offering, through use of a software system developed by its subsidiary,
Forexcash, online real-time trading in financial instruments. Forexcash is a
front and back office market maker application for online real-time trading in
financial instruments. We use our capabilities to provide strategy trading
tools, and the unique quality and functionality of those tools attracts our
target customer base of institutional, professional and serious active
individual traders. We market our services primarily through our subsidiaries
who operate call centers and Internet sites. The Company also intends to promote
white-label systems directly to financial institutions such as commercial banks.
We also provide training in online trading.
28
With the proliferation of powerful and efficient direct-access online
brokerage services, the increased accessibility to market data, and the
rapidly-growing capabilities of the Internet, we believe that serious, active
traders, professional and non-professional, are demanding powerful,
Internet-based, real-time strategy all-in-one trading platforms that are
seamlessly integrated with the best-available order execution technology and
include analytical tools which support the design and testing of custom trading
strategies.
To achieve profitability, the Company needs to aggressively market its
services. Included in its marketing strategy is the targeting of
introducing brokers ("IBs") and affiliates to develop a distribution network
with the Company as well as advertising campaigns by affiliates. The Company
also aims to reach a broader customer base and intends to offer a wider array of
financial products. We also intend to consistently improve our system and
implement new features and protocols. The Company is currently recruiting
institutional sales representatives to increase the Company's network of
affiliates and IBs.
The Company currently has subsidiaries in Cyprus, the U.K. and Israel that are
engaged in the marketing of Finotec products in these territories. The business
model for the Company envisions the opening of additional subsidiaries in other
countries. The Company intends for these subsidiaries to provide the Company's
services in the respective countries in which they are located. The Company may
raise financing in the upcoming year in order to finance the opening of new
subsidiaries in additional countries.
RESULTS OF OPERATIONS
Our current expense levels are based upon our expectations concerning
future revenue. However, such revenue levels cannot be guaranteed. Thus,
quarterly revenue and results of operations are difficult to project.
OVERALL
Net gain from foreign currency future operations was $2,641,116, for the
year ended January 31, 2009. There were net gains of $6,984,671 from foreign
currency future operations for the year ended January 31, 2008. This decrease of
$4,345,555 is attributable primarily to decreased spreads (commissions) on many
transactions.
OPERATING EXPENSES
RESEARCH AND DEVELOPMENT. Research and development expenses include
expenses associated with the development of new products, services and
technology; enhancements to existing products, services and technology; testing
of products and services; and the creation of documentation and other training
and educational materials. The Company's subsidiary, Forexcash Global Trading,
Ltd., owns all intellectual property rights relating to our business. Research
and development expenses were $308,935 for the year ended January 31, 2009, and
$387,620 for the year ended January 31, 2008, a decrease of $78,685. This
decrease was due to a decrease in research expenses.
29
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of employee-related costs for administrative personnel such as
executive, human resources, information technology employees;
telecommunications; rent; marketing; other facility expenses; and insurance.
General and administrative expenses were $1,053,625 for the year ended January
31, 2009, and $708,008 for the year ended January 31, 2008, an increase of
$345,617 due primarily to the Company's continuing development of its business,
and the acquisition of new computers, office furniture and equipment.
Liquidity and Capital Resources
The Company's cash balance decreased by $4,027,447 from a cash balance at
January 31, 2008 of $9,135,591 to $5,108,144 at January 31, 2009. The decrease
is primarily attributable to a significant decrease in cash provided by
operating activities offset by an increase in cash provided by financing
activities.
Net cash used in operating activities amounted to $7,767,822 for the year
ended January 31, 2009, while net cash provided by operating activities was
$4,328,866 for the year ended January 31, 2008, an increase of $12,096,688. The
increase in net cash used in operating activities primarily resulted from a
decrease in net income and a decrease in customers deposits.
Net cash used in investing activities for the year ended January 31, 2009, was
$136,703 while it was $564,929 used in investing activities for the year ended
January 31, 2008, a decrease of $428,226. The cash used in investing activities
for the year ended January 31, 2009, primarily resulted from the acquisition of
property and equipment.
The Company had cash provided in financing activities of $4,468,123$2,675 during the year ended January 31, 2009 compared2020. We financed our negative cash flow from operations during this period through advances made by our CEO amounting to net cash provided by$2,675.
The Company has no capital. Additional financing activities of $14,686 duringis necessary for the yearCompany to continue as a going concern. Our independent auditors have issued an unqualified audit opinion for the years ended January 31, 2008,2020 and 2019 with an increaseexplanatory paragraph on going concern.
Off-Balance Sheet Arrangements
As of $4,453,437. This increase primarily reflects the purchase by several investors
of shares of the Company in a private placement.
Our future capital requirementsJanuary 31, 2020 and the adequacy of available funds will
depend on numerous factors, including the successful commercialization of our
products, competing technological and market developments, and the development
of strategic alliances for the development and marketing of our products. The
Company has sufficient funds to satisfy its cash requirements until early June
2009, assuming monthly expenses of the Company at $750,000 and no revenue
generation by the Company. In April 2008, due to lower-than-expected revenues,
the Company laid off approximately 15% of its employees and engaged in other
cost-cutting measures. Such action may have a material adverse effect on the
Company's operations and results. The Company intends to try to obtain
additional funds through equity or debt financing, strategic alliances with
corporate partners and others, or through other sources. In the event Finotec's
plans change or its assumptions change or prove to be inaccurate or the funds
available prove to be insufficient to fund operations at the planned level (due
to further unanticipated expenses, delays, problems or otherwise), Finotec could
be required to obtain additional funds earlier than expected. Finotec does2019, we did not have any committed sourcesoff-balance sheet arrangements as defined in Item 303(a)(4)(ii) of additional financing,Regulation S-K promulgated under the Securities Act of 1934.
Contractual Obligations and there can be no
assurance that additional funding, if necessary, will be available on acceptable
terms, if at all. If adequate fundsCommitments
As of January 31, 2020 and 2019, we did not have any contractual obligations.
Critical Accounting Policies
Our significant accounting policies are described in the notes to our financial statements for the years ended January 31, 2020 and 2019, and are included elsewhere in this amended registration statement.
Item 7a. Quantitative And Qualitative Disclosures About Market Risk.
We are a smaller reporting company and are not available, we may be required to further delay, scale-back, or eliminate certain aspects of our operations or
attemptprovide the information under this item pursuant to obtain funds through arrangements with collaborative partners or
30
others that may require usRegulation S-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to relinquish rights to certain of our technologies,
product candidates, products, or potential markets. If adequate funds are not
available, Finotec's business, financial condition, and results of operations
will be materially and adversely affected.
Until required for operations, Finotec's policy is to invest its cash
reserves in bank deposits.
Finotec expects that its operating results will fluctuate significantly from
quarter to quarter in the future and will depend on a number of factors, most of
which are outside Finotec's control.
Item 7. Financial Statements, the notes thereto, and Supplementary Data
FINOTEC GROUP, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
JANUARY 31, 2009 AND 2009
31
Gvilli & Co. C.P.A. (isr.) 7 Haeshel St.
Cesarea Israel 38900
Phone: 04 - 6372740
Fax: 04 - 6272130
E-mail: ir@gvilicpa.co.il
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
the Report of Independent Public Accountants thereon commencing at page F-1 of this Report, which Financial Statements, notes and report are incorporated herein by reference.
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
To the Boardshareholders and the board of Directors
and Stockholdersdirectors of Finotec Group, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheetsheets of Finotec Group, Inc. (the "Company") as of January 31, 20092020 and 2008, and2019, the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for eachthe years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the twoCompany as of January 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the period ended January 31, 2009. United States.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidatedthe Company's financial statements based on our audits.
audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our auditsaudit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Anmisstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit includesof its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements. AnOur audit also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audit provides a reasonable basis for our opinion
In our opinion,opinion.
Substantial Doubt about the consolidatedCompany’s Ability to Continue as a Going Concern
The accompanying financial statements referred to above present
fairly, in all material respects,have been prepared assuming that the financial position of the company as of
January 31, 2009, and the results of their operations and their cash flows for
each of the two years in the period ended January 31, 2009, in conformity with
accounting principles generally accepted in the United States.
/s/ Gvilli and Co.
Gvilli & Co.
April 30, 2009
Caesarea, Israel
1
------------
Gvilli & Co.
------------
FINOTEC GROUP INC.,
AND SUBSIDIARIES
FINANCIAL STATEMENTS
FOR THE YEAR ENDED JANUARY 31, 2009
Page
F-2 Consolidated Balance sheet
- --------------------------------------------------------------------
F-3 Statement of Income
- --------------------------------------------------------------------
F-4 Statement of Stockholders' equity
- --------------------------------------------------------------------
F-5 Statement of cash flow operations
- --------------------------------------------------------------------
FINOTEC GROUP INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
===========================================================================================================
U.S Dollars
----------------------------------
January 31 January 31
----------------------------------
2009 2008
----------------------------------
ASSETS
Current Assets
Cash and cash equivalents 5,108,144 9,135,591
Securities - 486,151
Prepaid and other current assets 472,662 293,562
- -----------------------------------------------------------------------------------------------------------
Total Current Assets 5,580,806 9,915,304
Property and Equipment, Net 599,879 729,532
Forward transaction-Hedging 441,090 354,100
- -----------------------------------------------------------------------------------------------------------
Total Assets 6,621,775 10,998,936
===========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
short term bank credit 216 22,493
Accounts payable and accrued expenses 995,820 945,151
Customers deposits 4,924,316 6,151,755
Forward transaction-Customers and Hedging 27,649 546,578
Provision for severance 261,063 188,158
- -----------------------------------------------------------------------------------------------------------
Total current Liabilities 6,209,064 7,854,135
- -----------------------------------------------------------------------------------------------------------
Stockholders' Equity
Common stock, $0.001 par value, 100,000,000 shares authorized,
86,721,825 shares issued and outstanding 92,098 70,892
Treasury stock -- (156,513)
Additional paid-in capital 5,858,059 1,545,378
Foreign currency translation adjustment (732,344) (159,916)
Retained earnings (4,805,102) 1,844,960
- -----------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 412,711 3,144,801
- -----------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity 6,621,775 10,998,936
===========================================================================================================
See accompanying notes to consolidated financial statements.
F-2
FINOTEC GROUP INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
=========================================================================
===========================================
U.S Dollars
-------------------------------------------
January 31 January 31
2009 2008
-------------------------------------------
Revenues
Net (losses) gain from foreign currency future operations 2,641,116 6,984,671
Consulting 5,746 1,985
- ------------------------------------------------------------------- -------------- -----------
Total Revenues 2,646,862 6,986,656
- ------------------------------------------------------------------- -------------- -----------
Operating Expenses
Selling, General and Administrative 1,053,625 708,008
Salaries 2,948,013 2,146,560
Research and Development 308,935 387,620
Technology and computer 859,896 722,561
Commissions Brokers 0 (147,691)
Bonuses & cash back-Witholding 132,941 492,729
Marketing 1,608,866 1,097,674
Professional fees 710,772 543,388
Financial datas 232,754 192,871
Depreciation 265,378 213,744
Exceptional 224,323 7,513
Other expense 570,106 530,339
- ------------------------------------------------------------------- -------------- -----------
Total Operating Expenses 8,915,609 6,895,317
- ------------------------------------------------------------------- -------------- -----------
Operating P&L (6,268,748) 91,340
Financing Expenses
Interest (expense) income 79,300 452,940
Finance Charges (460,615) (645,241)
- ------------------------------------------------------------------- -------------- -----------
Financing P&L (381,315) (192,301)
Exceptional Expenses
Exceptional (expense) - Previous years
Exceptional P&L
Profit&Loss before income taxes (6,650,062) (100,961)
Income tax expense 0 0
- ------------------------------------------------------------------- -------------- -----------
Net Income (Loss) (6,650,062) (100,961)
=================================================================== ============== ===========
Weighted average number of shares outstanding
Basic 86,721,825 65,516,224
Net Income per common share- Basic -$0.1 -$0.0
=================================================================== ============== ===========
See accompanying notes to consolidated financial statements.
F-3
FINOTEC GROUP INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
=======================================================================================
U.S Dollars
-------------------------------------------
January 31 January 31
---------- ----------
2009 2008
---- ----
Cash Flows from Operating Activities
Net Income ( Loss) (6,650,062) (100,961)
Adjustment to reconcile Net Loss to
Net cash Used in Operating Activities
Depreciation 265,378 276,498
Loss on sold assets 19,593 -
Changes in Operating Assets and Liabilities
Decrease in prepaid and other current assets (179,098) (191,903)
Increase in accrued expenses 424 202,265
Decrease in other current liabilities 50,246 262,940
Increase in accrued severance payable 72,905 83,882
Increase (decrease) in receivable forward Clients Trs (86,990) 541,296
Increase (decrease) in payable forward Hedging Trs/option (518,929) -
Increase in marketable securities 486,151 1,171,250
Increase (decrease) in customers Deposits (1,227,439) 2,083,599
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) Operating Activities (7,767,822) 4,328,866
- -----------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Purchase of fixed Assets (170,660) (605,866)
Selling of fixed Assets 33,957 40,937
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by Investing Activities (136,703) (564,929)
- -----------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Short term bank credit (22,277) 1,185
Proceeds from treasury shares - 13,501
Stock issuance 4,490,400 -
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) Financing Activities 4,468,123 14,686
- -----------------------------------------------------------------------------------------------------------------------
Effect of Foreign Currency Translation (591,045) (137,976)
- -----------------------------------------------------------------------------------------------------------------------
Net increase in Cash and Cash Equivalent (4,027,447) 3,640,647
Cash and Cash Equivalents- beginning of year 9,135,591 5,494,944
- -----------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents- Ending 5,108,144 9,135,591
=======================================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the year for interest, net 2,996 40,873
=======================================================================================================================
See accompanying notes to consolidated financial statements.
F-4
FINOTEC GROUP INC AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
====================================================================================================================================
Common Stock
------------------
Accumulated
Additional Other Stock
Paid Deficit Comprehensive Treasury Subscription
Shares Amount in capital Accumulated income Stock Receivable Total
- ------------------------------------------------------------------------------------------------------------------------------
Balance at january 31, 2006 34,985,241 34,985 1,545,378 (532,949) (24,426) 0 1,022,988
==============================================================================================================================
Net Income (Loss) 2,478,870 2,478,870
Purchase of shares (2,687,500) 2,689 (169,813) (167,125)
Exercise of Options 33,018,483 33,018 33,018
Foreign currency translation 2,486 2,486
- ------------------------------------------------------------------------------------------------------------------------------
Balance at january 31, 2007 65,316,224 70,692 1,545,378 1,945,921 (21,940) (169,813) 0 3,370,238
==============================================================================================================================
Net Income (Loss) (100,961) (100,961)
Shares issued from Treasury stock 200,000 200 13,300 13,500
Purchase of shares 0
Exercise of Options 0
Foreign currency translation (137,976) (137,976)
- ------------------------------------------------------------------------------------------------------------------------------
Balance at January 31, 2008 65,516,224 70,892 1,545,378 1,844,960 (159,916) (156,513) 0 3,144,801
==============================================================================================================================
Net Income (Loss) (6,650,062) (6,650,062)
Shares issued 2,487,500 2,488 413,124 156,513 572,125
New shares issuing 1,860,324 1,860 426,015 427,876
New shares issuing 3,333,333 3,333 996,667 1,000,000
New shares issuing 2,793,889 2,794 500,106 502,900
New shares issuing 7,222,222 7,222 1,292,778 1,300,000
New shares issuing 2,708,333 2,708 484,792 487,500
New shares issuing 600,000 600 149,400 150,000
New shares issuing 200,000 200 49,800 50,000
Total issued : 21,205,601
Exercise of Options 0
Foreign currency translation (572,428) (572,428)
- ------------------------------------------------------------------------------------------------------------------------------
Balance at January 31, 2009 86,721,825 92,098 5,858,059 (4,805,103) (732,344) 0 0 412,710
==============================================================================================================================
F-5
FINOTEC GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. Description of
Business Finotec Group, Inc. ("Finotec, Inc.), a Nevada
corporation, is principally engaged, through its
wholly-owned subsidiaries, in offering foreign
currency market trading to professionals and
retail clients over its web-based trading
system.
Shares in Finotec began trading on the Over the
Counter Bulletin Board listings. (OTCBB: FTGI).
Finotec Group's United Kingdom subsidiary,
Finotec Trading UK, Limited, has been authorized
by the UK's Financial Services Authority (FSA)
to actCompany will continue as a Market Maker, as defined by the FSA,
in the United Kingdom.going concern. As of November 9, 2007,
Finotec Trading UK, Limited, is approved by the
FSA as a Market Maker and Principal, and thus
Finotec Trading UK, Limited, may now offer UK
clients certain regulated investment instruments
such as Commodity Futures, Commodity options and
options on commodity futures, Contract for
Differences, Futures, Options, Rights to or
interests in investments, Rolling spot forex
contracts, and Spread Bets.
Risk Management
These Finotec Group activities give rise to
risks which are monitored and managed as
follows:
Credit risk
Clients are required to deposit cleared funds as
margin before they can trade. If the client
margin falls below the minimum required to
maintain a position, they will be notified that
they are on margin call and can only reduce
their positions or provide additional funds. At
any time the client is on margin call, the
company may, at its discretion, liquidate some
or all of that client's positions in order to
bring them back into line with their margin
requirements.
The company also has potential credit risk
exposure to market counterparties with which it
hedges and with banks. The company has a defined
risk appetite for exposure to each market
counterparty and bank to which it has credit
exposure.
Liquidity risk
The company has significant net cash balances as
at the balance sheet date and continually
monitors its capital adequacy.
Foreign currency risk
The company has financial instruments which are
denominated predominantly in US dollars. The
gains and losses arising from the company's
exposure are recognised in the profit and loss
account.
Market price risk
Market risk arises from open contracts with
customers and counterparties. Exposure to market
risk is closely monitored in accordance with
limits and reduced through hedging.
F-6
FINOTEC GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
2. Summary of Significant Accounting Policies
Principles of
Consolidation The consolidated financial statements include
the accounts of Finotec Inc. and its wholly
owned subsidiaries, Finotec Trading, Inc.
("Finotec Trading") and its owned subsidiaries
Finotec Trading Cyprus Ltd. Finotec USA Inc.,
Finotec Trading Polska S.A., Finotec Trading UK
Ltd, and Finotec Ltd.'s 99.7% owned subsidiary,
Forexcash Global Trading Ltd. ("Forexcash")
(collectively referred to as the "Company",
unless otherwise indicated). All material
intercompany transactions and balances have been
eliminated in consolidation.
Since the liabilities of Forexcash exceed its
assets, and the owner of the 0.3% minority
interest has no obligation to supply additional
capital, no minority interest has been recorded
in the consolidated financial statements.
Fixed Assets Fixed assets are stated at cost, less
accumulated depreciation. Office furniture and
equipment are depreciated using the
straight-line method over seven years. Computer
equipment and software are depreciated using the
straight-line method over three years. Leasehold
improvements are amortized on a straight-line
basis over the lesser of the useful life or the
life of the lease. Repairs and maintenance costs
are expensed as incurred. Costs of software
acquired along with payroll costs and consulting
fees relating to the development of internal use
software, including that used to provide
internet solutions, are capitalized. Once the
software is placed in service, the costs are
amortized over the estimated useful life.
Cash and Cash
Equivalents The Company considers all highly liquid debt
instruments purchased with original maturities
of three months or less to be cash equivalents.
Revenue recognition
Finotec acts as a market maker for its customers
based on the prices traded in the interbank
market, and recognizes a loss or revenue both
when customers close transactions in foreign
currencies and also on the open customer
positions showing gain or loss. When there is no
Compensation inside the system with its
customers, Finotec turns to other institutions
to clear the contracts and recognizes a loss or
revenue from actions in derivative financial
instruments.
F-7
FINOTEC GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
2. Summary of Significant Accounting Policies
(Continued)
Income Taxes Deferred taxes are determined based on the
differences between financial reporting and tax
basis of assets and liabilities, and are
estimated using the tax rates and laws in effect
when the differences are expected to reverse. A
valuation allowance is provided based on the
weight of available evidence, if it is
considered more likely than not that some
portion of or all of, the deferred tax assets
will not be realized.
Advertising Expense The Company expenses advertising costs as
incurred. Advertising expenses included in the
profit and losses in the total amount of
Marketing for the years ended January 31, 2009
and 2008 amounted to $1,084,562 and $742,599,
respectively.
Use of Estimates The preparation of financial statements in
conformity with accounting principles generally
accepted in the United States of America
requires management to make estimates and
assumptions that affect certain reported amounts
and disclosures. Actual results could differ
from those estimates.
Shareholders' Equity
On June 16, 2008, the Company entered into
definitive agreements for the sale of 4,347,824
shares of Common Stock at a price of $0.23 per
share. As a part of the transaction, the Company
agreed to issue accompanying warrants to
purchase an aggregate of 10,000,000 shares of
Common Stock at an exercise price of $0.50 per
share. Four investors subscribed to the
investment. The shares of Common Stock sold in
the private placement offering have not been
registered and may not be offered or sold absent
registration or an applicable exemption from
such registration requirements. All such shares
are subject as well to a registration rights
agreement. The transaction closed in mid-June
2008. 2,487,500 treasury shares were issued as
part of the 4,347,824 shares issued thereunder.
On July 29, 2008, the Company entered into a
definitive agreement for the sale of 3,333,333
shares of Common Stock at a price of $0.30 per
share for a total of $1 million. As a part of
the transaction, the Company agreed to issue
accompanying warrants to purchase an aggregate
of 1,428,571 shares of Common Stock at an
exercise price of $0.70 per share. The shares of
Common Stock sold in the private placement
offering have not been registered and may not be
offered or sold absent registration or an
applicable exemption from such registration
requirements. All such shares are subject as
well to a registration rights agreement. The
transaction closed on July 31, 2008
F-8
FINOTEC GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Shareholders' Equity
(Continued)
On October 31, 2008, the Company entered into
definitive agreements and received funds for the
sale of 12,724,444 shares of Common Stock at a
price of $0.18 per share and 800,000 shares of
Common Stock at a price of $0.25 per share. As a
part of the transaction, the Company agreed to
issue accompanying warrants to purchase
5,777,776 shares of Common Stock at an exercise
price of $0.45 per share and warrants to
purchase 400,000 shares of Common Stock at an
exercise price of $0.50. Five new investors
subscribed to the investment. The shares of
Common Stock sold in the private placement
offering were not registered under the
Securities Act of 1933, as amended, and may not
be offered or sold absent registration or an
applicable exemption from such registration
requirements. All such shares are subject as
well to a registration rights agreement. The
offering closed on November 2, 2008.
Translation of Foreign
Currencies Forexcash Ltd and Finotec Trading Cyprus Ltd,
Finotec Trading UK Ltd and Finotec Trading
Polska SA Ltd are operated primarily in local
currencies, which represent the functional
currencies of those subsidiaries. Forexcash
Ltd, Finotec Trading UK Ltd and Finotec Trading
Cyprus Ltd encompass substantial part of the
Company's operations. All assets and
liabilities of Forexcash Ltd and FinotecTrading
Cyprus Ltd Finotec Trading UK Ltd and Finotec
Trading Polska SA Ltd were translated into U.S.
dollars using the exchange rate prevailing at
the balance sheet date, while income and
expense amounts were translated at average
exchange rates during the year. Translation
adjustments are included in accumulated other
comprehensive income (loss), a separate
component of stockholders' equity.
Fair Value of Financial
Instruments SFAS No. 107, Disclosures About Fair Value of
Financial Instruments, requires disclosure of
the fair value of certain financial instruments.
The carrying value of financial instruments,
which include cash and cash equivalents, loans
payable, customer deposits and accrued expenses,
approximate their fair values due to the
short-term nature of these financial
instruments. The carrying value of the Company's
note receivable approximates its fair value
based on management's best estimate of future
cash collections.
Earning Per Common
Share Basic earnings per share is based on the
weighted effect of all common shares issued and
outstanding, and is calculated by dividing net
income (loss) by the weighted average shares
outstanding during the period. Diluted earnings
per share is calculated by dividing net income
(loss) by the weighted average number of common
shares used in the basic earnings per share
calculation plus the number of common shares
that would be issued assuming exercise or
conversion of all stock options. The dilutive
effect of stock options was not assumed for the
years ended January 31, 2009 and 2008, because
the effect of these securities is antidilutive.
F-9
FINOTEC GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Comprehensive
Income SFAS No. 130, Reporting Comprehensive Income,
requires a full set of general-purpose financial
statements to be expanded to include the
reporting of comprehensive income. Comprehensive
income is comprised of two components, net
income and other comprehensive income.
Comprehensive income is defined as the change in
equity of a business enterprise during a period
from transactions and other events and
circumstances from nonowner sources. As of
January 31, 2008 foreign currency translation
adjustments were the only items of other
comprehensive income for the Company.
Derivative Financial
Instruments The Company follows SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities,
and its related amendments to account for its
derivative transactions. The Company accounts
for its forward foreign currency exchange
contracts as derivative financial instruments.
The Company uses derivative instruments as part
of its asset/liability management activities to
meet the risk management needs of its clients as
part of its trading activity for its own
account. These derivative financial instruments
are carried at fair value, with realized and
unrealized gains and losses included in net gain
from foreign currency future operations.
Critical accounting policies
A summary of significant accounting policies is
includeddiscussed in Note 2 to the financial statements, the Company’s minimal activities raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company's auditor since 2020
Lakewood, CO
November 17, 2020
BALANCE SHEETS
January 31, | January 31, | |||||||
2020 | 2019 | |||||||
ASSETS | ||||||||
Total Assets | $ | - | $ | - | ||||
LIABILITIES & STOCKHOLDERS’ DEFICIT | ||||||||
Note payable related parties | 2,675 | - | ||||||
Total liabilities | 2,675 | - | ||||||
Commitments and Contingencies | - | - | ||||||
Stockholders’ Equity | ||||||||
Common stock, $0.001 par value; 300,000,000 shares authorized, 300,000,000 shares issued and outstanding January 31, 2020 and January 31, 2019 | 300,000 | 300,000 | ||||||
Additional paid in capital | 13,261,548 | 13,261,548 | ||||||
Retained earnings (deficit) | (13,564,223 | ) | (13,561,548 | ) | ||||
Total Stockholders’ (Deficit) | (2,675 | ) | - | |||||
Total Liabilities and Stockholders’ (Equity) | $ | - | $ | - |
The accompanying notes are an integral part of these financial statements.
STATEMENTS OF OPERATIONS
YEARS ENDED | ||||||||
January 31, | January 31, | |||||||
2020 | 2019 | |||||||
Revenue | $ | - | $ | - | ||||
Operating Expenses: | ||||||||
Administrative expenses -related party | 2,675 | - | ||||||
Total operating expenses | 2,675 | - | ||||||
(Loss) from operations | (2,675 | ) | - | |||||
Other expense | ||||||||
Other (expense) net | - | - | ||||||
Income (loss) before provision for income taxes | (2,675 | ) | - | |||||
Provision for income taxes | - | - | ||||||
Net (Loss) | $ | (2,675 | ) | $ | - | |||
Basic and diluted earnings(loss) per common share | $ | (0.00 | ) | $ | - | |||
Weighted average number of shares outstanding | 300,000,000 | 300,000,000 |
The accompanying notes are an integral part of these financial statements.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Additional | Total | |||||||||||||||||||
Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||
Shares | Value | Capital | Deficit | Equity | ||||||||||||||||
Balance, January 31, 2018 | 300,000,000 | $ | 300,000 | $ | 13,261,548 | $ | (13,561,548 | ) | $ | - | ||||||||||
Net loss | - | - | ||||||||||||||||||
Balance, January 31, 2019 | 300,000,000 | $ | 300,000 | $ | 13,261,548 | $ | (13,561,548 | ) | $ | - | ||||||||||
Net loss | (2,675 | ) | (2,675 | ) | ||||||||||||||||
Balance, Janaury 31, 2020 | 300,000,000 | $ | 300,000 | $ | 13,261,548 | $ | (13,564,223 | ) | $ | (2,675 | ) |
The accompanying notes are an integral part of the financial statements.
STATEMENTS OF CASH FLOWS
January 31, | January 31, | |||||||
2020 | 2019 | |||||||
Cash Flows From Operating Activities: | ||||||||
Net loss | $ | (2,675 | ) | $ | - | |||
Adjustments to reconcile net income to net cash provided by (used for) operating activities | ||||||||
Net cash provided by (used for) operating activities | (2,675 | ) | - | |||||
Cash Flows From Investing Activities: | ||||||||
Net cash provided by (used for) investing activities | - | - | ||||||
Cash Flows From Financing Activities: | ||||||||
Proceeds from related party loans | 2,675 | |||||||
Net cash provided by (used for) financing activities | 2,675 | - | ||||||
Net Increase (Decrease) In Cash | - | - | ||||||
Cash At The Beginning Of The Period | - | - | ||||||
Cash At The End Of The Period | $ | - | $ | - | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | - | $ | - |
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
The Company’s accounting year-end is January 31.
On July 20, 2020 Custodian Ventures, LLC was appointed as the custodian of the Company by the Eighth Judicial Court of Nevada pursuant to Case No. A-20-816267-B.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements. We believe thatstatements have been prepared in accordance with the applicationFinancial Accounting Standards Board (“FASB”) “FASB Accounting Standard Codification™” (the “Codification”) which is the source of these policies on a consistent basis enables our
companyauthoritative accounting principles recognized by the FASB to provide useful and reliable financial
information aboutbe applied by nongovernmental entities in the company's operating
results and financial condition. The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States.
Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these financial statements. The Company has incurred operating losses since inception. As of January 31, 2020 the Company had a working capital deficit of $2,675 and negative retained earnings of 13,564,223
Because the Company does not expect that existing operational cash flow will be sufficient to fund presently anticipated operations, this raises substantial doubt about the Company’s ability to continue as a going concern. Therefore, the Company will need to raise additional funds and is currently exploring alternative sources of financing. The Company is currently being funded by David Lazar who is extending interest free demand loans to the Company. Historically, the Company has raised capital through private placements, as an interim measure to finance working capital needs and may continue to raise additional capital through the sale of common stock or other securities and obtaining some short-term loans. The Company will be required to continue to so until its operations become profitable. Also, the Company has, in the past, paid for consulting services with its common stock to maximize working capital, and intends to continue this practice where feasible.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the liability for the excess share issuance, and disclosure of contingent assets and liabilities at the date of the financial statementsstatements. The most significant estimates relate to income taxes and contingencies. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the reportedquality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of revenuesassets and expenses during the
reporting period.liabilities that are not readily apparent from other sources. Actual results maycould differ from these estimates.
Revenue Recognition
On July 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). Results for reporting periods beginning after January 1, 2018, are presented under ASC 606. As of and for the year ended April 30, 2020 the financial statements were not impacted due to the application of Topic 606 because the Company had no revenues.
Cash and cash equivalents
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. On January 31, 2020, and January 31, 2019, the Company’s cash equivalents totaled $-0- and $-0- respectively.
Income taxes
The Company accounts for income taxes under FASB ASC 740, “Accounting for Income Taxes”. Under FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those estimates.
We accounttemporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. FASB ASC 740-10-05, “Accounting for stock options issuedUncertainty in Income Taxes” prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to employeesbe taken in accordance witha tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
The amount recognized is measured as the provisionslargest amount of SFAS No.
123(R), "Share-Based Payment". In December 2004,benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company assesses the validity of its conclusions regarding uncertain tax positions quarterly to determine if facts or circumstances have arisen that might cause it to change its judgment regarding the likelihood of a tax position’s sustainability under audit.
Stock-based Compensation
The Company accounts for stock-based compensation using the fair value method following the guidance outlined in Section 718-10 of the FASB issued SFAS No. 123(R) which replaces
SFAS No. 123 and supersedes APB Opinion No. 25.
Under SFAS No. 123(R), companies are requiredAccounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the compensation costscost of share based
compensation arrangementsemployee services received in exchange for an award of equity instruments based on the grant
dategrant-date fair value and recognizeof the costs in the
financial statementsaward (with limited exceptions). That cost will be recognized over the period during which employees arean employee is required to provide services. Share based compensation arrangements
include stock options, restricted share plans,
performance based awards, share appreciation
rights and employee share purchase plans.
F-10
FINOTEC GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Critical accounting policies
(Continued)
In March 2005service in exchange for the SEC issued Staff Accounting
Bulletin No. 107, or "SAB107"award- the requisite service period (usually the vesting period). SAB 107 expresses
views of the staff regarding the interaction
between SFAS No. 123(R) and certain SEC rules
and regulations and provides the staff's views
regarding the valuation of share based payment
arrangements for public companies. SFAS No.
123(R) permits public companies to adopt its
requirements using one of two methods. On April
14, 2005, the SEC adopted a new rule amending
the compliance dates for SFAS 123R. Companies
may elect to apply this statement either
prospectively, or on a modified version of
retrospective application under which financial
statements for prior periods are adjusted on a
basis consistent with the pro forma disclosures
required for those periods under SFAS123.
Effective January 1, 2007, we fully adopted the
provisions of SFAS No. 123R and related
interpretations as provided by SAB 107. As such,No compensation cost is measured onrecognized for equity instruments for which employees do not render the date of
grantrequisite service.
Net Loss per Share
Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as the excess of the current market price
of the underlying stock over the exercise price.
Such compensation amounts, if any, are amortized
over the respective vesting periods of the
option grant. We apply this statement
prospectively. The valuation of such share based
payments requires significant judgment. We
exercise our judgment in determining the various
assumptions associated with the associated share
based payments as well as the expected
volatility related to their fair value. We base
our estimate of the share based payments on our
interpretation of the underlying agreements and
historical volatility of our stock price.
We account for our investment in equity
securities pursuant to Statement ofdefined by Financial Accounting Standards, ("SFAS"ASC Topic 260, “Earnings per Share.” Basic earnings per common share (“EPS”) No.115. Thiscalculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a new lease accounting model for lessees. The updated guidance requires an entity to recognize assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. In March 2019, the FASB issued ASU 2019-01, Codification Improvements, which clarifies certain aspects of the new lease standard. The FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases in July 2018. Also in 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, which provides an optional transition method whereby the new lease standard requires such investments in equity
securities thatis applied at the adoption date and recognized as an adjustment to retained earnings. The amendments have readily determinable fair
values be measured at fair value in the balance
sheetsame effective date and that unrealized holding gainstransition requirements as the new lease standard.
We intend to adopt ASC 842 on July 1, 2020. The adoption of this guidance is not expected to have any impact on our financial statements.
Stockholders’ Equity and losses for investments in available for sale
equity securities and investments in trading
equity securities be recorded asAccrued Liability Excess stock Issuance
The Company has authorized 300,000,000 shares of Common Stock with a component of
stockholders' equity and statement of
operations, respectively. Furthermore, it
provides that if factors lead us to determine
that the fairpar value of certain financial
instruments is impaired, that we should adjust
the carrying value of such investments to its
fair value. Marketable securities consist
principally of corporate stocks. Management has
classified the Company's marketable securities
as available for sale securities in the
accompanying consolidated financial statements.
Marketable Securities Available-for-sale securities are carried at
fair value, with unrealized gains and losses
reported as a separate component of
stockholders' equity. Realized gains and losses
on available-for-sale securities are included in
interest income. Gains and losses, both realized
and unrealized, are measured using the specific
identification method. Market value is
determined by the most recently traded price of
the security at the balance sheet date.$0.001. As of January 31, 2009 the market value of the
security equals its cost.
F-11
FINOTEC GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
3. Property2020, and Equipment Consist of the following:
As of January 31, 2009
Computer equipment $ 862,272
Purchased software 222,647
Office furniture and equipment 234,647
Leasehold improvements 117,666
-----------------------------------------------------------
Total Property and Equipment at Cost 1,437,494
Less accumulated depreciation and amortization 837,615
-----------------------------------------------------------
Property and Equipment - Net $ 599,879
===========================================================
4. Related Party
Transactions/Loans Finotec Inc. is a holding Company which operates
via its wholly owned subsidiaries and their
subsidiaries. Within the GroupJanuary 31, 2019, respectively, there are various
inter- company agreements setting out the
different undertakings of the companies and the
commissions paid in such transactions.
The Company has in place, from time to time,
inter-company loans which are granted at
interest rates which the Company believes
reflect market conditions at such time.
5. Due to Stockholder The amount due to stockholder consists primarily
of unpaid compensation.
6. Stock Options
and Awards In April of 2003, the Board of Directors of
Finotec Group, Inc. (the "Company") approved a
resolution to provide for the automatic grant to
Didier Essemini, the Chief Executive Officer of
the Company, of a stock option award of
33,018,483 shares of Common Stock. On March 17,
2004, the shareholders of the Company voted to
approve the grant to Didier Essemini, the Chief
Executive Officer of the Company, of stock
options for 33,018,483 shares of Common Stock.
The Registrant awarded Mr. Essemini 33,018,483
options to purchase common stock at an exercise
price of $0.001 per share. On January 27, 2007
Mr. Essemini exercised the options for
33,018,483were 300,000,000 shares of Common Stock issued and outstanding, respectively.
NOTE 4 – COMMITMENTS AND CONTINGENCIES
The Company did not have any contractual commitments of January 31, 2020, and 2019
NOTE 5 –NOTES PAYABLE-RELATED PARY
Mr. Lazar, the principal member of the Company.
During the year 2007, 200,000 shares were issued
to an outside legal advisor as partial payment
for legal services rendered in connection with
the filing ofCompany’s Court-appointed custodian is considered a registration statement by the
Company.
F-12
FINOTEC GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
7. Derivative Financial
Instruments Derivative financial instruments consist of the
Company's forward foreign exchange currency
contracts, which are agreements to exchange
specific amounts of currencies at a future date,
at a specific rate of exchange. Foreign exchange
contracts are entered into primarily to meet the
foreign exchange risk management needs of the
Company's clients. The major risk associated
with this instrument is that foreign exchange
rates could change in an unanticipated manner,
resulting in a loss in the underlying value of
the instrument. The Company mitigates this risk
by using hedging techniques that limit the
exchange rate exposure. As the Company accounts
for the foreign exchange contracts as fair value
hedges (per FASB No. 133), all gains and losses
are recognized in earnings and the fair value of
the instruments are reported as other
assets/liabilities on the consolidated balance
sheet..related party. During the year ended January 31, 20092020, he extended $2,675 in interest free demand loans to the Company. These management services provided by Mr. Lazar, the Company’s only employee, are to manage the day to day operations of the Company; and take the necessary actions to enable the Company recognized gainsto become a viable operating entity
NOTE 6 – SUBSEQUENT EVENTS
On April 27, 2020 the Company filed a Certificate of Designation with the State of Nevada to authorize 10,000,000 shares of Series A Preferred Stock (“Series A”). Each share of Series A is convertible into 20 shares of Common Stock. April 28, 2020 the Company awarded 10,000,000 shares of Series A to Custodian Ventures, LLC. managed by David Lazar in an amount of
$182,897 fromreturn for services provided
Item 14. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure
In its forward foreign currency
contracts. As of January 31, 2009,two most recent fiscal years, the Company has entered into a number of forward foreign
exchange currency contracts that were hedged in
February, 2009. The Company recognized a gain of
approximately $50,410 on these contracts, during
the first quarter of fiscal 2009..
8. Legal Proceedings
1- Customer v. Finotec Trading UK Limited (in
arbitration; previously before the Tel Aviv
Magistrates Court): This is a case in which a
former customer of Finotec Trading UK Limited
("Finotec UK"), has sued for $41,973.00. The
customer asserts that Finotec UK's cancelation
of certain trades in April and June 2008 was
unlawful and that he is entitled to lost
profits. In February 2009, at the suggestion of
the court, the parties agreed to submit the
dispute to arbitration. Two arbitration hearings
were held in March 2009, and customer's attorney
has filed his written summations. We expect to
file our written summations within approximately
three weeks. In connection with the agreement
to arbitrate, in the spring of 2009, Finotec
deposited, in an attorney escrow account, the
amount claimed in the Action. Finotec UK
intends to defend the matter vigorously.
2- Customer v. Finotec Trading Ltd. (Tel Aviv
Magistrates Court): This is a case in which a
customer of Finotec Trading Ltd. ("Finotec
Israel"), has sued Finotec Israel for NIS
154,000. The customer alleges that Finotec
Israel acted negligently in (a) recommending
that he execute trades through a third-party,
and (b) failing to oversee such third party.
Finotec Israel filed its statement of defense in
December 2008, and it intends to defend the case
vigorously. Customer's questionnaire and
document demand were received on May 4, 2009.
F-13
FINOTEC GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
8. Legal Proceedings
(continued)
3-. Potential Claim of Customer: On or about
Nov. 16, 2008, Finotec Israel received a letter
from counsel to a customer, concerning an
alleged claim of customer, who has been a
customer of Finotec Israel. The essence of the
claim in the letter is that Finotec Israel
unlawful cancelled certain trades of customer in
October 2007. The letter is not clear as to the
amount of damages allegedly owed to customer.
The letter refers to customer's right to
reinstate a transaction in the amount of $5,000,
and it also asserts that customer is entitled to
damages of NIS 2,000 To the best of our
knowledge,had no lawsuit has been filed by customer
(or on his behalf) against any Finotec entity.
Management does not expect either claim to have
a material effect on the Company's financial
position or results of operations.
9. Commitments Forexcash Ltd, Finotec Trading (Cyprus) Ltd and
Finotec Trading UK Ltd lease their offices space
facilities on a month-to-month basis. Rent
expense included in the profit and losses in the
total amount of Selling, General and
Administrative for the years ended January 31,
2009 and 2008 amounted to $255,054 and $204,340,
respectively.
10. Income Taxes Realization of the future tax benefits related
to the deferred tax assets is dependent on many
factors including the Company's ability to
generate taxable income within the net operating
loss carryforward period. The Company has
provided a valuation allowance for the full
amount of its net deferred tax assets due to the
uncertainty of generating future profits that
would allow for the realization of such deferred
tax asset.
11. Subsequent Events A subsidiary company has submitted an
application for registration in the U.S. with
the National Futures Associations (NFA). If
approved, this registration will make it more
attractive to do business with the Company and
increase the potential for the Company to do
business in the U.S. market.
See Note 9 regarding legal proceedings.
F-14
PART III
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There have been no changes in or disagreements with the Company's
accountants on accounting and financial disclosure for the year ended January
31, 2009.
its independent accountants.
Item 8A. Controls and Procedures.
(a) Evaluation of 9. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure
None
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Management of the Company,
Disclosure Controls and Procedures–Our management, with the participation of theour Chief Executive Officer (who also serves as theand Chief Financial Officer),Officer, have evaluated the effectiveness of the design and operation of the Company'sour disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Report.
These controls are designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Securities Exchange Act), asAct of October 31,
2008. 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure.
Based uponon this evaluation, the Chief Executive Officer (who also serves
as the Chief Financial Officer) hasour management, including our CEO and CFO, concluded that the Company'sour disclosure controls and procedures were not effective as of OctoberJanuary 31, 2008 due2020, at reasonable assurance levels
We believe that our financial statements presented in this annual report on Form 10-K fairly present, in all material respects, our financial position, results of operations, and cash flows for all periods presented herein.
Inherent Limitations – Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the material weaknessesinherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.
Changes in Internal Control over Financial Reporting – There were no changes in our internal control over financial reporting as described
below.
(b) Management'sduring our fiscal year ended January 31, 2020, which were identified in conjunction with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report.
Management Report on Internal Control Overover Financial Reporting
Management of the Company
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) ofor 15d-15(f) promulgated under the Exchange Act. Those rules define internal control over financial reporting as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
● | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; |
● | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and the receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the Company; and |
● | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of the company’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal controlcontrols over financial reporting may not prevent or detect misstatements. Also, projectionsProjections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness represents a significant deficiency (as defined in the
Public Company Accounting Oversight Board's Auditing Standard No. 5), or a
combination of significant deficiencies, that results in more than a remote
likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected on a timely basis.
32
Management conducted an assessment ofassessed the effectiveness of the Company'sour internal control over financial reporting as of OctoberDecember 31, 2008 based on2019. In making this assessment, our management used the framework publishedcriteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Tread
wayTreadway Commission Internal Control -- Integrated Framework. Management(COSO) 2013.
Based on its assessment, management has identified the following material weaknesses in the Company'sconcluded that as of December 31, 2019, our disclosure controls and procedures and internal control over financial reporting as of October 31, 2008.
Material weaknesses identified in Finotec Group, Inc are as follows:
Entity Level Controls:
- ----------------------
o The Audit Committee is inactive.
o There is no internal audit function.
o Management does not perform a periodic check of the access rights of
all users to ensure that their access is suitable to their positions
and functions.
o Remediation Plan: The Audit Committee will be activated.
o The Company will implement an internal audit function.
o The CFO will extract from the information system an access list for
all employees and ensure that each function, screen and field is
suitable to the employee's job description.
o The CFO will ensure that the access rights are adequately segregated.
Financial Statements:
- ---------------------
o Lack of documentation at the financial statement preparation process
creates the potential of the occurrence of a material error occurring
in the financial statements.
Remediation Plan:
- -----------------
o The Company will retain evidence of all the controls performed in the
financial statement preparation process.
Treasury and Cash Management:
- -----------------------------
o Lack of documentation in the Treasury and Cash Management process
creates the potential of the occurrence of a material error occurring
in the financial statements.
Remediation Plan:
- -----------------
o The Company will retain evidence of all the controls performed in the
process.
Revenue:
- --------
o Lack of documentation in the Order to Cash process creates the
potential of the occurrence of a material error occurring in the
financial statements.
33
Remediation Plan:
- -----------------
o The Company will retain evidence of all the controls performed in the
process.
Human Resources & Payroll:
- --------------------------
o Lack of documentation in the human resources and payroll processes
creates the potential of the occurrence of a material error occurring
in the financial statements.
Remediation Plan:
- -----------------
o The Company will retain evidence of all the controls performed in the
process.
Information Technology:
- -----------------------
o The Company does not have a permission and access right table
specifying group authorizations. Some employees have more
authorizations than their role definition. There is no authorization
procedure.
o The Company does not have password complexity procedure. User
passwords do not require any complexity, and there is no requirement
for password change.
o No Formal system development, acquisition and program change policies
and procedures exist for development/acquisitions of new systems and
changes to existing systems.
o The developers have access to the production.
Remediation Plan:
- -----------------
o The Company will examine and minimize user rights and will prepare
permissions table and access rights that includes group permissions
and prepare access to programs and data procedures.
o The Company will prepare "Access to Programs and Data" procedure.
Passwords to the database will be managed and complex.
o The Company will write a methodology for system development,
acquisitions and change management.
o The Company will prevent the developers from accessing the production
environment.
34
Item 9. Directors, Executive Officers, Promoters, and Control Persons.
The officers of the Company are as follows:
NAME POSITION(S) TERM OF OFFICE
Didier Essemini (37) President, Chief Financial 1 year
Officer, Director
Guy Senbel (56) Secretary, Director 1 year
Gil Ovadia (43) Director 1 year
Victor Essemini (63) Director 1 year
Albert Layani (68) Director 1 year
Didier Essemini
Mr. Essemini is the President and a Director for the Company. Mr. Essemini
graduated from the Sorbonne University in Paris with an MBA. He worked at Bank
Hapoalim in Israel from 1994 to 1998. In 1998 Mr. Essemini started a brokerage
company and implemented a front end internet solution for currency trading known
as "Forexcash"were effective. . Today Forexcash is a fully owned subsidiary of the Company.
Guy Senbel
Mr. Senbel is the Secretary and a Director for the Company. Mr. Senbel was
President of the holding company of BS Decoration. Mr. Senbel attended
University in France.
Gil Ovadia
Mr. Ovadia is a director of the Company. Mr. Ovadia graduated with degrees
in Law & Economics from Keele University (UK). Mr. Ovadia has worked as a
Solicitor in London for the last 12 years. Mr. Ovadia founded Silvergate
Management Ltd. a property and financial services company which provides
property and corporate management services.
Victor Essemini
Mr. Essemini has extensive experience in human resources management,
as manager of a medical analysis laboratory for 20 years and management of the
analysis department of the largest laboratory in Paris Laboratoire Deloy. Mr.
Victor Essemini is the father of Mr. Didier Essemini.
Albert Layani
Mr. Layani was the founder of one of the largest textile
distribution store chains in France with 92 stores in France and another 26
stores in Israel under the brand names Fly and Makin. Mr. Layani is the
father-in-law of Mr. Didier Essemini.
Code of Conduct
The Company has adopted a Code of Conduct for its employees which will be made
available, without charge, upon written request to ir@finotec.com.
35
None
ITEM 10. MANAGEMENT REMUNERATION
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth information regarding our executive officers and directors:
Name | Age | Position | ||
David Lazar | 30 | Chief Executive Officer, President, and Chairman of the Board |
The above-listed officers and directors will serve until the next annual meeting of the shareholders or until their death, resignation, retirement, removal, or disqualification, or until their successors have been duly elected and qualified. Vacancies in the existing Board of Directors are filled by majority vote of the remaining Directors. Officers serve at the will of the Board of Directors.
David Lazar, 30, has been CEO and Chairman of the Company since May 16, 2018. David Lazar is a private investor with business experience. Mr. Lazar has been a partner at Zenith Partners International since 2013, where he specializes in research and development, sales and marketing. Since February of 2018, Mr. Lazar has been the managing member of Custodian Ventures LLC, where he specializes in assisting distressed public companies. Since March 2018, David has acted as the managing member of Activist Investing LLC, which specializes in active investing in distressed public companies. David has a diverse knowledge of financial, legal and operations management; public company management, accounting, audit preparation, due diligence reviews and SEC regulations.
Board Committees
As of the date of this Report, we do not have any committees of our Board of Directors. We expect to appoint outside Directors to serve on our Board in the near future, but as of the date of this Report, we have not identified such prospective Directors. Once appointed and we become a reporting company, of which there is no assurance, we expect to form an Audit Committee, a Compensation Committee, a Corporate Governance Committee, and a Nominating Committee.
Family Relationships
There are no family relationships between any of our Directors or executive officers.
Involvement in Certain Legal Proceedings
To our knowledge, our directors and executive officers have not been involved in any of the following events during the past ten years:
● | Any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; |
● | Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
● | Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities; |
● | Being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
● | Being subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
● | Being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity, or organization that has disciplinary authority over its members or persons associated with a member. |
Director Independence
Our Board is currently composed of three members. Our Common Stock is not currently listed for trading on a national securities exchange and, as such, we are not subject to any director independence standards. No member of our Board of Directors is considered an independent director. We evaluated independence in accordance with the rules of The New York Stock Exchange, Inc., which generally provides that a director is not independent if: (i) the director is, or in the past three years has been, an employee of ours; (ii) a member of the director’s immediate family is, or in the past three years has been, an executive officer of ours; (iii) the director or a member of the director’s immediate family has received more than $120,000 per year in direct compensation from us other than for service as a director (or for a family member, as a non-executive employee); (iv) the director or a member of the director’s immediate family is, or in the past three years has been, employed in a professional capacity by our independent public accountants, or has worked for such firm in any capacity on our audit; (v) the director or a member of the director’s immediate family is, or in the past three years has been, employed as an executive officer of a company where one of our executive officers serves on the compensation paidcommittee; or (vi) the director or a member of the director’s immediate family is an executive officer of a company that makes payments to, or receives payments from, us in an amount which, in any twelve-month period during the fiscalpast three years, exceeds the greater of $1,000,000 or 2% of that other company’s consolidated gross revenues.
Once we achieve trading status, of which there can be no assurance, we will insure that our committees, as well as our Board of Directors, complies with all the requirements of a public company under the auspices of the OTC Marketplace.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the “34 Act”) requires our officers and directors and persons owning more than ten percent of the Common Stock, to file initial reports of ownership and changes in ownership with the Securities and Exchange Commission (“SEC”). Additionally, Item 405 of Regulation S-K under the 34 Act requires us to identify in our Form 10-K and proxy statement those individuals for whom one of the above-referenced reports was not filed on a timely basis during the most recent year or prior years. To our best knowledge, there has been no change in the holdings of any of our affiliates and no reports were required to be filed.
Code of Ethics
Our board of directors has not adopted a code of ethics but plans to do so in the near future.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to our executive officers. We do not currently have an established policy to provide compensation to members of our Board of Directors for their services in that capacity, although we may choose to adopt a policy in the future.
SUMMARY COMPENSATION TABLE
No compensation was granted ot David Lazar during the years ended January 31, 2009,2020 and January 31, 2019.
Salaries are established by our Board of Directors. We currently do not have a Compensation Committee but expect to have one in place in the Company's Chief Executive Officerfuture once we have independent directors. None of our employees are employed pursuant to an employment agreement.
Outstanding Equity Awards at Fiscal Year-End
The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer as of January 31, 2020.
None
Compensation of Directors
Other than the Company'scompensation described above in the Summary Compensation Table, our officers and directors. No other person received compensation equaldirectors are reimbursed for actual expenses incurred.
None
Stock Plan
We have not adopted a stock plan.
Employment Agreements
David Lazar is not party to or exceeding $100,000 in fiscal 2008.
ITEM 12. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information known to the Company
regarding the beneficial ownership of Common Stock and Preferred Stock voting with the Common Stock as of January 31, 2009,the date of this Report by (i) each Directorperson known to us to own more than 5% of our outstanding Common Stock as of the Company,date of this Report, (ii) each of our directors, (iii) each of our executive officerofficers, and (iv) all of the Company,
(iii) allour directors and executive officers as a group,group. Unless otherwise indicated, all shares are owned directly and (iv) eachthe indicated person known to the Company to be the beneficial owner of more than 5% of its
outstanding shares of Common Stock.
36
Shares Beneficially Owned
-------------------------
Percentage
Directorshas sole voting and Executive Officers Shares Held Owned (1)
- ---------------------------------- ----------- ---------
Didier Essemini 36,175,983 41%
Guy Senbel 2,302,650 3%
Gil Ovadia option to purchase 100,000 shares
Directors and Officers as a Group 38,478,633 44%
(1) Percentage of ownershipinvestment power. The information provided is based on 86,721,825 shares ofupon 300,000,000 Common StockShares issued and outstanding as of January 31, 2009.
BENEFICIAL OWNERS OF OVER 5%
- ----------------------------
Gan Paradis Ltd. owns 6,115,000 unregistered Shares or 7%the date of the Company.
Registered Office
Kings Court
PO Box N-3944
Bay Street
Nassau, Bahamas
Director
Allistair Matthew Cunningham
3,057,500 of Didier Essemini's 36,175,983 shares consist of his 50% ownership of
Gan Paradis Ltd.
Tableland Ltd owns 7,222,222 registered Shares or 8% of the Company.
Item 12.this Report.
Class of Shares | Name and Address | # of Shares | % of Class | |||||||
Preferred | David Lazar, Chief Executive Officer and Director (1)(2) 1185 Avenue of the Americas, 3rd Floor. New York, New York 10036 | 10,000,0000 | (2) | 40.1 | % | |||||
Common | ||||||||||
Common | All Officers and Directors as a Group (1 persons) | |||||||||
Common | Other 5% Shareholders | |||||||||
Common | Didier Essemini | 31,018,483 | ||||||||
Common | Yedidya Capital Group Inc. | 177,203,069 |
(1) | Officer and director of our Company. |
(2) | Each share of Series A Preferred Stock convertible to 20 shares of Common Stock. Also includes 466,849 shares of common stock |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS TRANSACTIONS WITH MANAGEMENT AND OTHERS
DIRECTOR INDEPENDENCE
Related Party Transactions
There have beenare no other materialrelated party transactions series of similar
transactions, or currently proposed transactions, to which the Company was or isthat are required to be disclosed pursuant to Regulation S-K promulgated under the Securities Act of 1933, as amended.
Director Independence
None of our current directors are deemed “independent” pursuant to SEC rules. We anticipate appointing independent directors in the foreseeable future.
10
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Fees Paid to Independent Registered Public Accounting Firms
The following table presents fees for professional audit services rendered by B F Borgers CPA PC, our independent auditors, during our fiscal years ended January 31, 2020 and 2019:
December 31, 2019 | December 31, 2018 | |||||||
Audit Fees | $ | - | $ | - | ||||
Tax Fees | ||||||||
All Other Fees | ||||||||
Total | $ | - | $ | - |
Audit Fees. Consist of amounts billed for professional services rendered for our annual financial statements our Annual Report on Forms 10-K for our fiscal years ended January 31, 2020 and 2019, respectively, and for reviews of our interim financial statements included in our Quarterly Reports on Form 10-Q.
Tax Fees. Consists of amounts billed for professional services rendered for tax return preparation, tax planning, and tax advice.
All Other Fees. Consists of amounts billed for services other than Audit Fees.
We do not have an audit committee and as a party, in whichresult, our entire Board of Directors performs the amount involved exceeds $60,000duties of an audit committee. Our Board of Directors evaluates the scope and in which any
director or executive officer, or any security holder who is known to the
Company to own of record or beneficially more than five percentcost of the Company's
Common Stock, or any memberengagement of an auditor before the auditor renders audit and non-audit services.
11
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following exhibits are included herewith:
Exhibit No. | Description | |
31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 | |
101.INS | XBRL Instances Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
Following are a list of exhibits which we previously filed in other reports which we filed with the SEC, including the Exhibit No., description of the immediate family of anyexhibit and the identity of the foregoing
persons, had a material interest.
37
CERTAIN BUSINESS RELATIONSHIPS
Report where the exhibit was filed.
Exhibit No. | Description | |
12
In January, 2003 the Company borrowed $30,000 from Dunleigh Investments
Limited, a company whose shareholder is also a shareholder in Finotec Inc. The
loan bears interest at the rate of 4% and is payable on demand. The loan was
repaid by the Company.
There have been no other material transactions, series of similar
transactions, currently proposed transactions, or series of similar
transactions, to which the Company was or is to be a party, in which the amount
involved exceeds $60,000 and in which any director or executive officer, or any
security holder who is known to the Company to own of record or beneficially
more than five percent of the Company's Common Stock, or any member of the
immediate family of any of the foregoing persons, had a material interest other
than as listed in this Form 10K.
Item 13. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
(a) All required exhibits are incorporated herein by reference from the
Company's Form 10-K and Amendments thereto.
38
SIGNATURES
Pursuant toaccordance with the requirements of Section 13 or 15(d) of the Securities Exchange Act, of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DATE: June 5, 2009 By: /s/ Didier Essemini
-------------------
Didier Essemini
President
39
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and dates indicated.
Signature Title Date
/s/ Didier Essemini
- --------------------
Didier Essemini President, Chief Financial
June 5, 2009 Officer and a Director
/s/ Guy Senbel
- ---------------
Guy Senbel Secretary and a Director June 5, 2009
/s/ Gil Ovadia
- ---------------
Gil Ovadia Director June 5, 2009
/s/ Albert Layani
- ---------------
Albert Layani Director June 5, 2009
/s/ Victor Essemini
- ---------------
Victor Essemini Director June 5, 2009
40
Finotec Group, Inc. | ||
(Registrant) | ||
Date: November 18, 2020 | By: | /s/ David Lazar |
David Lazar, CEO and CFO |