UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X]☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 20202021
OR
[ ]☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File No. 333-221726000-56338
FDCTECH, INC.
(Exact name of the small business issuer as specified in its charter)
| 81-1265459 | ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
200 Spectrum Center Drive, Suite 300
Irvine, CA92618
(Address of principal executive offices)
(877) (877)445-6047
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock, par value $0.0001 | FDCT | OTC Markets |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] ☒ No [ ]☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] ☒ No [ ]☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | Accelerated filer | ||
| Non-accelerated filer | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] ☐ No [X] ☒
The number of shares of Common Stock, $0.0001 par value, of the registrant outstanding on November 02, 2020,05, 2021, was 68,626,332..
TABLE OF CONTENTS
| 2 |
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Form 10-Q”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies, and objectives of management for future operations; any statements concerning proposed new products or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.
Forward-looking statements may include the words “may,” “could,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “desire,” “goal,” “should,” “objective,” “seek,” “plan,” “strive” or “anticipate,” as well as variations of such words or similar expressions, or the negatives of these words. These forward-looking statements present our estimates and assumptions only as of the date of this Form 10-Q. Except for our ongoing obligation to disclose material information as required by the federal securities laws, we do not intend and undertake no obligation to update any forward-looking statement. We caution readers not to place undue reliance on any such forward-looking statements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes will likely vary materially from those indicated.
| 3 |
| Item 1. | Financial Statements. |
FDCTECH, INC.
(Formerly known as Forex Development Corporation)
Index to Consolidated Financial Statements
| F-1 |
(Formerly known as Forex Development Corporation)
CONSOLIDATED BALANCE SHEETS
| September 30, 2020 | December 31, 2019 | September 30, 2021 | December 31, 2020 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Assets | ||||||||||||||||
| Current assets: | ||||||||||||||||
| Cash | $ | 59,024 | $ | 27,884 | $ | 4,251 | $ | 22,467 | ||||||||
| Accounts receivable, net of allowance for doubtful accounts of $95,961 and $78,087, respectively | 15,365 | 16,479 | ||||||||||||||
| Other current assets | 26,628 | 5,378 | ||||||||||||||
| Accounts receivable, net of allowance for doubtful accounts of $95,961 and $95,961, respectively | 49,498 | 16,541 | ||||||||||||||
| Other assets – current | 702,430 | 27,878 | ||||||||||||||
| Total Current assets | 101,017 | 49,741 | 756,179 | 66,886 | ||||||||||||
| Other assets – non-current | 86,318 | - | ||||||||||||||
| Capitalized software, net | 656,840 | 689,625 | 632,177 | 632,324 | ||||||||||||
| Total assets | $ | 757,857 | $ | 739,366 | $ | 1,474,674 | $ | 699,210 | ||||||||
| Liabilities and Stockholders’ Deficit | ||||||||||||||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||||||||||
| Current liabilities: | ||||||||||||||||
| Accounts payable | $ | 53,500 | $ | 21,000 | $ | 351,015 | $ | 116,500 | ||||||||
| Line of credit | 35,723 | 31,514 | 39,614 | 39,071 | ||||||||||||
| Payroll tax payable | 114,925 | 99,498 | 155,203 | 125,387 | ||||||||||||
| Related-party convertible notes payable – current | 1,000,000 | 1,000,000 | - | 1,000,000 | ||||||||||||
| Related-party accrued interest – current | 241,908 | 196,908 | - | 256,908 | ||||||||||||
| Related-party advances | 95,000 | - | ||||||||||||||
| Cares act- paycheck protection program advance | 23,081 | - | 46,393 | 33,698 | ||||||||||||
| Total Current liabilities | 1,469,137 | 1,348,920 | 687,226 | 1,571,564 | ||||||||||||
| SBA loan – non-current | 144,900 | - | 141,826 | 144,900 | ||||||||||||
| Cares act- paycheck protection program advance – non-current | 27,551 | 4,239 | 16,934 | |||||||||||||
| Accrued interest – non-current | 2,340 | - | 7,799 | 3,856 | ||||||||||||
| Total liabilities | 1,643,928 | 1,348,920 | 841,090 | 1,737,254 | ||||||||||||
| Commitments and Contingencies (Note 9) | - | - | - | - | ||||||||||||
| Stockholders’ Deficit: | ||||||||||||||||
| Preferred stock, par value $0.0001, 10,000,000 shares authorized, 4,000,000 issued and outstanding, as of September 30, 2020 and December 31, 2019 | 400 | 400 | ||||||||||||||
| Common stock, par value $0.0001, 100,000,000 shares authorized; 71,371,385 and 68,626,332 shares issued and outstanding, as of September 30, 2020 and December 31, 2019 | 6,862 | 6,862 | ||||||||||||||
| Stockholders’ Equity (Deficit): | ||||||||||||||||
| Preferred stock, par value $, shares authorized, issued and outstanding, as of September 30, 2021 and December 31, 2020 | 400 | 400 | ||||||||||||||
| Common stock, par value $, shares authorized; and shares issued and outstanding, as of September 30, 2021 and December 31, 2020 | 8,891 | 6,887 | ||||||||||||||
| Additional paid-in capital | 418,678 | 418,678 | 3,096,210 | 448,653 | ||||||||||||
| Accumulated deficit | (1,312,011 | ) | (1,035,494 | ) | (2,471,917 | ) | (1,493,984 | ) | ||||||||
| Total stockholders’ deficit | (886,071 | ) | (609,554 | ) | ||||||||||||
| Total liabilities and stockholders’ deficit | $ | 757,857 | $ | 739,366 | ||||||||||||
| Total stockholders’ equity (deficit) | 633,584 | (1,038,044 | ) | |||||||||||||
| Total liabilities and stockholders’ equity | $ | 1,474,674 | $ | 699,210 | ||||||||||||
See accompanying notes to the financial statements
| F-2 |
(Formerly known as Forex Development Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
| September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | September 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | |||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||
| Revenues | $ | 43,000 | $ | 57,760 | 173,407 | $ | 324,562 | $ | 73,925 | $ | 43,000 | 221,003 | $ | 173,407 | ||||||||||||||||||
| Cost of sales | 68,616 | 48,127 | 183,344 | 67,970 | 68,616 | 68,616 | 205,847 | 183,344 | ||||||||||||||||||||||||
| Gross Profit | (25,616 | ) | 9,633 | (9,937 | ) | 256,592 | 5,309 | (25,616 | ) | 15,156 | (9,937 | ) | ||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||
| General and administrative | 7,796 | 55,177 | 216,865 | 277,809 | 215,039 | 7,796 | 487,320 | 216,865 | ||||||||||||||||||||||||
| Sales and marketing | 3,894 | 3,636 | 5,647 | 19,817 | 277,327 | 3,894 | 499,320 | 5,647 | ||||||||||||||||||||||||
| Total operating expenses | 11,690 | 58,813 | 222,512 | 297,626 | 492,366 | 11,690 | 986,640 | 222,512 | ||||||||||||||||||||||||
| Operating income (loss) | (37,306 | ) | (49,180 | ) | (232,449 | ) | (41,034 | ) | (487,057 | ) | (37,306 | ) | (971,484 | ) | (232,449 | ) | ||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||||||||||
| Related-party interest expense | (15,000 | ) | (15,000 | ) | (45,000 | ) | (45,000 | ) | - | (15,000 | ) | (10,399 | ) | (45,000 | ) | |||||||||||||||||
| Other interest expense | (1,402 | ) | - | (2,340 | ) | - | (1,448 | ) | (1,402 | ) | (2,942 | ) | (2,340 | ) | ||||||||||||||||||
| Other income (expense) | 357 | - | 3,272 | 12 | (1,886 | ) | 357 | 6,892 | 3,272 | |||||||||||||||||||||||
| Total other expense | (16,045 | ) | (15,000 | ) | (44,068 | ) | (44,988 | ) | (3,334 | ) | (16,045 | ) | (6,449 | ) | (44,068 | ) | ||||||||||||||||
| Income (loss) before provision for income taxes | (53,351 | ) | (64,180 | ) | (276,517 | ) | (86,022 | ) | (490,391 | ) | (53,351 | ) | (977,933 | ) | (276,517 | ) | ||||||||||||||||
| Provision (benefit) for income taxes | - | - | - | - | - | - | - | |||||||||||||||||||||||||
| Net income (loss ) | $ | (53,351 | ) | $ | (64,180 | ) | (276,517 | ) | $ | (86,022 | ) | $ | (490,391 | ) | $ | (53,351 | ) | (977,933 | ) | $ | (276,517 | ) | ||||||||||
| Net income (loss) per common share, basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.00 | ) | (0.01 | ) | $ | (0.00 | ) | ||||||||||
| Weighted average number of common shares outstanding basic and diluted | 70,297,234 | 68,626,332 | 69,467,881 | 68,618,343 | 88,415,427 | 70,297,234 | 83,150,225 | 69,467,881 | ||||||||||||||||||||||||
See accompanying notes to the financial statements
| F-3 |
(Formerly known as Forex Development Corporation)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (UNAUDITED)EQUITY (DEFICIT)
| Preferred stock | Common stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Three Months Ended September 30, 2019 | ||||||||||||||||||||||||||||
| Balance, June 30, 2019 | 4,000,000 | $ | 400 | 68,626,332 | $ | 6,862 | $ | 415,175 | $ | (801,646 | ) | $ | (379,209 | ) | ||||||||||||||
| Net loss | - | - | - | - | - | (64,180 | ) | (64,180 | ) | |||||||||||||||||||
| Balance, September 30, 2019 | 4,000,000 | $ | 400 | 68,626,332 | $ | 6,862 | $ | 415,175 | $ | (865,826 | ) | $ | (443,389 | ) | ||||||||||||||
| Three Months Ended September 30, 2020 | ||||||||||||||||||||||||||||
| Balance, June 30, 2020 | 4,000,000 | $ | 400 | 71,371,385 | $ | 7,137 | $ | 1,104,667 | $ | (1,258,660 | ) | $ | (146,456 | ) | ||||||||||||||
| Shares cancelled for non-service | - | - | (2,745,053 | ) | (275 | ) | (685,989 | ) | - | (686,264 | ) | |||||||||||||||||
| Net loss | - | - | - | - | - | (53,351 | ) | (53,351 | ) | |||||||||||||||||||
| Balance, September 30, 2020 | 4,000,000 | $ | 400 | 68,626,332 | $ | 6,862 | $ | 418,678 | $ | (1,312,011 | ) | $ | (886,071 | ) | ||||||||||||||
(UNAUDITED)
| Preferred stock | Common stock | Additional Paid-in | Accumulated | Total Stockholders’ Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Three Months Ended September 30, 2020 | ||||||||||||||||||||||||||||
| Balance, June 30, 2020 | 4,000,000 | $ | 400 | 71,371,385 | $ | 7,137 | $ | 1,104,667 | $ | (1,258,660 | ) | $ | (146,456 | ) | ||||||||||||||
| Shares cancelled for non-service | - | - | (2,745,053 | ) | (275 | ) | (685,989 | ) | - | (686,264 | ) | |||||||||||||||||
| Common shares issued for services valued at $0.22 per share | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.22 per share, shares | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.18 per share | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.18 per share, shares | ||||||||||||||||||||||||||||
| Common shares issued for cash valued at $0.10 per share | ||||||||||||||||||||||||||||
| Common shares issued for cash valued at $0.10 per share, shares | ||||||||||||||||||||||||||||
| Common shares issued for financing cost valued at $0.12 per share | ||||||||||||||||||||||||||||
| Common shares issued for financing cost valued at $0.12 per share, shares | ||||||||||||||||||||||||||||
| Common shares cancelled for services valued at $0.25 per share | ||||||||||||||||||||||||||||
| Common shares cancelled for services valued at $0.25 per share, shares | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.27 | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.27, shares | ||||||||||||||||||||||||||||
| Common shares issued for FRH Group note conversion at $0.10 per share | ||||||||||||||||||||||||||||
| Common shares issued for FRH Group note conversion at $0.10 per share, shares | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.20 | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.20, shares | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.21 | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.21, shares | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.25 | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.25, shares | ||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | (53,351 | ) | (53,351 | ) | |||||||||||||||||||
| Balance, September 30, 2020 | 4,000,000 | $ | 400 | 68,626,332 | $ | 6,862 | $ | 418,678 | $ | (1,312,011 | ) | $ | (886,071 | ) | ||||||||||||||
| Three Months Ended September 30, 2021 | ||||||||||||||||||||||||||||
| Balance, June 30, 2021 | 4,000,000 | $ | 400 | 87,345,412 | $ | 8,734 | $ | 3,133,214 | $ | (1,981,526 | ) | $ | 1,160,822 | |||||||||||||||
| Common shares issued for services valued at $ per share | - | - | 100,000 | 10 | 21,990 | - | 22,000 | |||||||||||||||||||||
| Common shares issued for services valued at $ per share | - | - | 545,852 | 55 | 98,198 | - | 98,253 | |||||||||||||||||||||
| Common shares issued for cash valued at $ per share | - | - | 2,000,000 | 200 | 199,800 | - | 200,000 | |||||||||||||||||||||
| Common shares issued for financing cost valued at $ per share | - | - | 670,000 | 67 | 80,333 | - | 80,400 | |||||||||||||||||||||
| Common shares cancelled for services valued at $ per share | - | - | (1,750,000 | ) | (175 | ) | (437,325 | ) | - | (437,500 | ) | |||||||||||||||||
| Net loss | - | - | - | - | - | (490,391 | ) | (490,391 | ) | |||||||||||||||||||
| Balance, September 30, 2021 | 4,000,000 | $ | 400 | 88,911,264 | $ | 8,891 | $ | 3,096,210 | $ | (2,471,917 | ) | $ | 633,584 | |||||||||||||||
See accompanying notes to the financial statements
| F-4 |
FDCTECH, INC.
(Formerly known as Forex Development Corporation)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (UNAUDITED)EQUITY (DEFICIT)
| Preferred stock | Common stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Nine Months Ended September 30, 2019 | ||||||||||||||||||||||||||||
| Balance, December 31, 2018 | 4,000,000 | $ | 400 | 68,533,332 | $ | 6,853 | $ | 401,234 | $ | (779,804 | ) | $ | (371,317 | ) | ||||||||||||||
| Common shares issued for cash at $0.15 per share | - | - | 33,000 | 3 | 4,947 | - | 4,950 | |||||||||||||||||||||
| Common shares issued for services valued at $0.15 per share | - | - | 60,000 | 6 | 8,994 | - | 9,000 | |||||||||||||||||||||
| Net loss | - | - | - | - | - | (86,022 | ) | (86,022 | ) | |||||||||||||||||||
| Balance, September 30, 2019 | 4,000,000 | $ | 400 | 68,626,332 | $ | 6,862 | $ | 415,175 | $ | (865,826 | ) | $ | (443,389 | ) | ||||||||||||||
| Nine Months Ended September 30, 2020 | ||||||||||||||||||||||||||||
| Balance, December 31, 2019 | 4,000,000 | $ | 400 | 68,626,332 | $ | 6,862 | $ | 418,678 | $ | (1,035,494 | ) | $ | (609,554 | ) | ||||||||||||||
| Common shares issued for services valued at $0.25 per share | - | - | 2,745,053 | 275 | 685,989 | - | 686,264 | |||||||||||||||||||||
| Shares cancelled for non-service | - | - | (2,745,053 | ) | (275 | ) | (685,989 | ) | - | (686,264 | ) | |||||||||||||||||
| Net loss | - | - | - | - | - | (276,517 | ) | (276,517 | ) | |||||||||||||||||||
| Balance, September 30, 2020 | 4,000,000 | $ | 400 | 68,626,332 | $ | 6,862 | $ | 418,678 | $ | (1,312,011 | ) | $ | (886,071 | ) | ||||||||||||||
(UNAUDITED)
| Preferred stock | Common stock | Additional Paid-in | Accumulated | Total Stockholders’ Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Nine Months Ended September 30, 2020 | ||||||||||||||||||||||||||||
| Balance, December 31, 2019 | 4,000,000 | $ | 400 | 68,626,332 | $ | 6,862 | $ | 418,678 | $ | (1,035,494 | ) | $ | (609,554 | ) | ||||||||||||||
| Common shares issued for services valued at $ per share | - | - | 2,745,053 | 275 | 685,989 | - | 686,264 | |||||||||||||||||||||
| Common shares issued for services valued at $0.27 | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.27, shares | ||||||||||||||||||||||||||||
| Common shares issued for FRH Group note conversion at $0.10 per share | ||||||||||||||||||||||||||||
| Common shares issued for FRH Group note conversion at $0.10 per share, shares | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.20 | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.20, shares | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.21 | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.21, shares | ||||||||||||||||||||||||||||
| Shares cancelled for non-service | - | - | (2,745,053 | ) | (275 | ) | (685,989 | ) | - | (686,264 | ) | |||||||||||||||||
| Net loss | - | - | - | - | - | (276,517 | ) | (276,517 | ) | |||||||||||||||||||
| Balance, September 30, 2020 | 4,000,000 | $ | 400 | 68,626,332 | $ | 6,862 | $ | 418,678 | $ | (1,312,011 | ) | $ | (886,071 | ) | ||||||||||||||
| Nine months ended September 30, 2021 | ||||||||||||||||||||||||||||
| Balance, December 31, 2020 | 4,000,000 | $ | 400 | 68,876,332 | $ | 6,887 | $ | 448,653 | $ | (1,493,984 | ) | $ | (1,038,044 | ) | ||||||||||||||
| Common shares issued for services valued at $ | - | - | 2,300,000 | 230 | 620,770 | - | 621,000 | |||||||||||||||||||||
| Common shares issued for FRH Group note conversion at $0.10 per share | - | - | 12,569,080 | 1,257 | 1,255,651 | - | 1,256,908 | |||||||||||||||||||||
| Common shares issued for services valued at $ | - | - | 1,750,000 | 175 | 349,825 | - | 350,000 | |||||||||||||||||||||
| Common shares issued for services valued at $ | - | - | 1,750,000 | 175 | 437,325 | - | 437,500 | |||||||||||||||||||||
| Common shares issued for services valued at $ | - | - | 100,000 | 10 | 20,990 | - | 21,000 | |||||||||||||||||||||
| Common shares issued for services valued at $ per share | - | - | 100,000 | 10 | 21,990 | - | 22,000 | |||||||||||||||||||||
| Common shares issued for services valued at $ per share | - | - | 545,852 | 55 | 98,198 | - | 98,253 | |||||||||||||||||||||
| Common shares issued for cash valued at $ per share | - | - | 2,000,000 | 20 | 199,800 | - | 200,000 | |||||||||||||||||||||
| Common shares issued for financing cost valued at $ per share | - | - | 670,000 | 67 | 80,333 | - | 80,400 | |||||||||||||||||||||
| Common shares cancelled for services valued at $ per share | - | - | (1,750,000 | ) | (175 | ) | (437,325 | ) | - | (437,500 | ) | |||||||||||||||||
| Net loss | - | - | - | - | - | (977,933 | ) | (977,933 | ) | |||||||||||||||||||
| Balance, September 30, 2021 | 4,000,000 | $ | 400 | 88,911,264 | $ | 8,891 | $ | 3,096,210 | $ | (2,471,917 | ) | $ | 633,584 | |||||||||||||||
See accompanying notes to the financial statements
| F-5 |
(Formerly known as Forex Development Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Year Ended | Nine Months Year Ended | |||||||||||||||
| September 30, 2020 | September 30, 2019 | September 30, 2021 | September 30, 2020 | |||||||||||||
| Net loss | $ | (276,517 | ) | $ | (86,022 | ) | $ | (977,933 | ) | $ | (276,517 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
| Software depreciation and amortization | 183,344 | 67,970 | ||||||||||||||
| Software amortization | 205,847 | 183,344 | ||||||||||||||
| Common stock issued for services | - | 9,000 | 1,192,653 | - | ||||||||||||
| Accounts receivable allowance | 17,875 | 9,412 | - | 17,875 | ||||||||||||
| Subscription receivable | (200,000 | ) | - | |||||||||||||
| Change in assets and liabilities: | ||||||||||||||||
| Gross accounts receivable | (16,761 | ) | 11,865 | (32,957 | ) | (16,761 | ) | |||||||||
| Accounts payable | 32,500 | (5,500 | ) | 234,515 | 32,500 | |||||||||||
| Prepaid expenses | (21,250 | ) | (5,378 | ) | ||||||||||||
| Other assets | (560,869 | ) | (21,250 | ) | ||||||||||||
| Accrued interest | 47,340 | 45,000 | 3,943 | 47,340 | ||||||||||||
| Accrued payroll tax expenses | 15,427 | - | 29,816 | 15,427 | ||||||||||||
| Deferred revenue | - | 3,000 | ||||||||||||||
| Net cash provided by (used in) operating activities | $ | (18,042 | ) | $ | 49,347 | $ | (104,985 | ) | $ | (18,042 | ) | |||||
| Investing Activities: | ||||||||||||||||
| Capitalized software | (150,559 | ) | (204,787 | ) | (205,700 | ) | (150,559 | ) | ||||||||
| Net cash used in investing activities | $ | (150,559 | ) | $ | (204,787 | ) | $ | (205,700 | ) | $ | (150,559 | ) | ||||
| Financing Activities: | ||||||||||||||||
| Borrowing from (payments to) line of credit | 4,209 | 5,979 | 543 | 4,209 | ||||||||||||
| Net proceeds from common stock issuance for cash | - | 4,950 | ||||||||||||||
| Net proceeds from cares act - paycheck protection program | 50,632 | - | - | 50,632 | ||||||||||||
| Net proceeds from SBA loan | 144,900 | - | (3,074 | ) | 144,900 | |||||||||||
| Related party advances | 95,000 | - | ||||||||||||||
| Common stock issued for cash | 200,000 | - | ||||||||||||||
| Net cash provided by (used in) financing activities | $ | 199,741 | $ | 10,929 | $ | 292,469 | $ | 199,741 | ||||||||
| Net decrease in cash | 31,140 | (144,511 | ) | (18,216 | ) | 31,140 | ||||||||||
| Cash at beginning of the period | 27,884 | 210,064 | 22,467 | 27,884 | ||||||||||||
| Cash at end of the period | $ | 59,024 | $ | 65,553 | $ | 4,251 | $ | 59,024 | ||||||||
| Cash paid for income taxes | $ | - | $ | - | $ | - | $ | - | ||||||||
| Cash paid for interest | $ | - | $ | - | $ | - | $ | - | ||||||||
| Non - cash investing and financing activities: | ||||||||||||||||
| Common stock issued for capitalized software | $ | - | $ | - | ||||||||||||
| Common stock issued for note conversion | $ | 1,256,908 | $ | - | ||||||||||||
See accompanying notes to the financial statements
| F-6 |
NOTE 1. BUSINESS DESCRIPTION AND NATURE OF OPERATIONS
The Company was incorporated on January 21, 2016, as Forex Development Corporation, under the State of Delaware laws. On February 27, 2018, the Company changed its name to FDCTech, Inc. The name change reflects the Company’s commitment to expanding its products and services in the forex (FX)FX and cryptocurrency markets for OTC brokers. The Company provides innovative and cost-efficient financial technology (‘fintech’) and business solutionsolutions to OTC Online Brokerages and cryptocurrency businesses (“customers”).
The Company’s products are designedCompany intends to providebuild a complete solution for all operating aspectsdiversified global financial services company driven by proprietary Condor trading technologies, complementary regulatory licenses, and a proven executive team. The Company plans to acquire, integrate, transform, and scale legacy financial service companies. The Company believes that its proprietary technology and software development capabilities allow legacy financial services companies immediate exposure to –forex, stocks, ETFs, commodities, crypto, social/copy trading, and other high-growth fintech markets.
The Company has completed the Condor Pro Multi-Asset Trading Platform, previously known as Condor FX Trading Platform. The Condor Pro Multi-Asset Trading Platform is a commercial trading platform targeted at day traders and retail investors. The industry characterized such platforms by the ease of customer’s business, including but not limited to trading terminal, back office, customer relationship management,use and various helpful features, such as the simplified front-end (user interface/user experience), back-end (reporting system), news feeds, and charting system. The Condor Pro Multi-Asset Trading Platform further includes risk management systems. (dealing desk, alert system, margin calls, etc.), pricing engine (best bid/ask), and connectivity to multiple liquidity providers or market makers. We have tailored the Condor Pro Multi-Asset Trading Platform to different markets, such as forex, stocks, commodities, cryptocurrencies, and other financial products.
The Company provides business and management consulting, including management consulting and customer’s B2B sales and marketing divisions.currently has six (6) licensing agreements for its Condor Pro Multi-Asset Trading Platform. The Company provides turnkey business solutionsis continuously negotiating additional licensing agreements with several retail forex brokers to entrepreneurs and other non-broker entities seeking to enter FX, cryptocurrency, and other OTC markets.use the Condor Pro Multi-Asset Trading Platform. The Company takes on customized software development projects specifichas developed two versions of each Condor forex Pro Web and Mobile Trading Platform.
The Company has upgraded its Condor Back Office (Risk Management) to meet the needsregulatory requirements under various jurisdictions. Condor Back Office meets the directives under Markets in Financial Instruments Directive (MiFID II/MiFIR), legislation by European Securities and Market Authority (ESMA) implemented across the European Union on January 3, 2018. The Company released, marketed, and distributed its Condor Pro Multi-Asset Trading Platform in the second quarter of the fiscal year, December 31, 2019. The Company has developed the Condor Back Office API to integrate third-party CRM and banking systems to Condor Back Office.
The Company is in the process of developing Condor Stocks and an ETF platform. The Company expects to commercialize the Condor Stocks and ETF platform by the end of the fourth quarter of the fiscal year ended December 31, 2021.
The Company secures and earns revenues by signing an agreement with its customers. The Company also acts asconsiders a general technical support provider for customers and other fintech companies.
The Company’s business solutions allowsigned agreement with its customers, to run their overall brokerage business better by increasing trading revenues, cutting operating costs, and enabling them to anticipate market challenges through the use of our proprietary based processes, state-of-the-art technologies, risk management tools, customized software development, and turnkey prime-of-prime business solution.
We are a development company in the financial technology sector with limited operations. The Company has prepared consolidated financial statements on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the ordinary business course.
At present, the Company does not have any patents or trademarks on its proprietary technology solutions.
At present, the Company has three sources of revenue.
In the retail foreign exchange trading space where individuals speculate on the exchange rate between different currencies, our customers are forex brokerages, prime of prime brokers, prime brokers, and banks. The Company generates revenues by licensing its trading technology infrastructure, including but not limited to the trading platform (desktop, web, mobile), back office, and CRM and banking integration technology.
We act as an adviser/strategic consultant and reseller of its proprietary technologies in the cryptocurrency and blockchain space. The Company expects to generate additional revenue from its crypto-related solutions, such as from the development of custom crypto exchange platform for customers, the sale of the non-exclusive source code of crypto exchange platform to third parties, white-label fees of crypto exchange platforms, and the sale of aggregated cryptocurrency data price feed from various crypto exchanges to OTC brokers. The Company initially plans to develop the technology architecture of the crypto exchange platform for its customers. The initial capital required to produce such technologies comes from our customers as the Company takes on design-build software development projects for customers. The Company develops these projects to meet the design criteria and performance requirements as specified by the customer.
There are several steps required to set-up a functional crypto exchange platform. Our customers seek necessary licensing approval and meet registration requirements in their respective jurisdictions. Customers are also responsible for establishing a relationshipbinding contract with the payment processing partner, such as a bank. Subsequently,customer, or other similar documentation reflecting the Company intends to provideterms and maintain a payment gateway API, giving users the power to add and withdraw funds. Liquidity is an essential aspect of the success of a cryptocurrency exchange marketplace. The trades at an exchange drive its liquidity, and a robust crypto exchange platform requires seamless trading activity. To manage this liquidity at the customer’s crypto exchange business,conditions under which the Company will integrate its customer crypto exchange’s liquidity position to other existing exchanges. The Company will provide a modern and robust API interface that connects liquidity and trade volume data between various crypto exchanges.
Note 1 – Business Description and Natureproducts or services as persuasive evidence of Operations (continued)
The Companyan arrangement. Each agreement is responsible for arranging, developing, and maintaining the crypto exchange platform’s technology architecture. This architecture includes but is not limitedspecific to the trading engine, front-end user interface, functional website, cryptocurrency wallet,customer and administration console.clearly defines each party’s fee schedule, duties and responsibilities, renewal and termination terms, confidentiality agreement, dispute resolution, and other clauses necessary for such contract. The trading engine serves asmaterial terms of contracts with customers depend on the corenature of exchange. Itservices and solutions. Each contract is essentialspecific to smart order transaction execution, calculate balances, access,the customer and aggregation of the order bookclearly defines each party’s fee schedule, duties and match all the buy/sell transactions on an exchange. The front-end user interface is a user-friendlyresponsibilities, renewal and intuitive interface with a minimalistic approach to an exceptional trading experience. The front-end user includes but is not limited to user registration, funds deposit/withdrawal, view order book, transactions, balance, statistics, charts, buy/sell orders,termination terms, confidentiality agreement, dispute resolution, and support features. other clauses necessary for such contract.
The Company can customize a console’s features according to our customers’ specific business requirements, such as editing trading fees, managing cryptocurrency listing, adding new currencies, and crediting/debiting funds wallets, and addressing support issues. The Company’s involvement is limited to creating an interface between the crypto exchange platform and the digital asset owner. It is not responsible for holding and maintaining the digital assets in the wallet.
The Company purely acts as a technology provider and software developer in the cryptocryptocurrency or digital asset space. The Company does not mine any digital assets or trade speculate, or act as a trading counterparty in cryptocurrencies. Consequently, the Company does not intend to register as a custodian with state or federal regulators, including but not limited to obtaining a money service business or money transmitter license with Financial Crimes Enforcement Network (FinCEN) and respective State’s money transmission laws. The Company also does not need to register under the Securities Exchange Act of 1934, as amended, as a national securities exchange, an alternative trading system, or a broker-dealer, since the Company is not a broker-dealer nor does it intend to become a broker-dealer. In some cases, customers compensate us in Bitcoin through our custodian Gemini Trust Company, LLC (“Gemini”). Gemini is a licensed New York trust company that undergoes regular bank exams and is subject to the cybersecurity audits conducted by the New York Department of Financial Services.
Third-Party Industry AccreditationWe are a development company in the financial technology sector with limited operations. The Company has prepared consolidated financial statements on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the ordinary business course.
In July 2016, the Financial Commission, a leading financial services industry external dispute resolution (EDR) organization with a diverse membership of online brokerages and independent services providers (ISPs), provided the technology certification for the Company. Financial Commission conducted its rigorous review of the Company’s platforms, including its Condor Risk Management Back Office, to ensure it met the technical information requirements of the Commission’s technology certification evaluation process. The Financial Commission established a comprehensive list of requirements to verify system security, capacity, business disaster recovery, and continuity plan, as well as reporting and record-keeping, among other fields deemed necessary for the technical certification of the Company. In October 2018, Financial Commission addedAt present, the Company as an approved service provider todoes not have any patents or trademarks on its Partner section website. Financial Commissionproprietary technology solutions.
At present, the Company has created its Partners section for service providers approved to offer their solutions to our members.three sources of revenue.
Business Strategy
Our experienced management and in-house software development team have carefully designed various B2B business solutions to meet the needs of OTC Online Brokers. Our solution targets OTC Online brokers of all sizes and stages. Our potential customer can be a start-up company or an established OTC Online broker. It is comparatively easier, less risky, and more cost-efficient for customers to enter Prime of Prime or OTC Online broker space using our turnkey solution. Our advisory services and proprietary technologies enable customers to adapt to regulatory changes and market shifts quickly while enhancing the end-user/trader experience.
We intend to grow our core business, increase market share, and improve profitability principally by deploying the following growth strategies:
| ● | ||
| ● | Technology Solutions – The Company licenses its proprietary and, in some cases, acts as a reseller of third-party technologies to customers. Our proprietary technology includes but is not limited to Condor Risk Management Back Office | |
| ● | ||
MarketingIn the retail foreign exchange trading space, where individuals speculate on the exchange rate between different currencies, our customers are forex brokerages, prime of prime brokers, prime brokers, and Sales
banks. The Company aimsgenerates revenues by licensing its trading technology infrastructure, including but not limited to be flexiblethe trading platform (desktop, web, mobile), back office, and responsive to its salesCRM and marketing strategies to provide an omnichannel customer experience. Therefore, our primary focus is on different customer acquisition channels to expand our customer base. banking integration technology.
The Company is actively integrating digital (online marketing, website, blogs,acts as an adviser/strategic consultant and social media)reseller of its proprietary technologies in the cryptocurrency and traditional marketing channels (conferences, trade shows, phones, direct meetings) effectively.blockchain space. The Company expects to generate additional revenue from its crypto-related solutions. Such solutions include revenues from the development of a custom crypto exchange platform for customers, the sale of the non-exclusive source code of the crypto exchange platform to third parties, white-label fees of crypto exchange platforms, and the sale of aggregated cryptocurrency data price feed from various crypto exchanges to OTC brokers. The Company initially plans to develop the technology architecture of the crypto exchange platform for its customers. The initial capital required to produce such technologies comes from our customers as the Company takes on design-build software development projects for customers. The Company develops these projects to meet the design criteria and performance requirements as specified by the customer.
Note 1 – Business Description and NatureNOTE 1. BUSINESS DESCRIPTION AND NATURE OF OPERATIONS (continued)
Termination of Operations (continued)Acquisition of Genesis Financial, Inc.
We implement an effective marketing funnelIn line with the new strategic direction, on June 2, 2021, the Company entered into a Stock Purchase Agreement (the “Genesis Agreement”) with the Shareholders of Genesis Financial, Inc., a Wyoming corporation (“GFNL” or “Seller”). According to map out our customer’s journey from when a customer is a lead and then put specific strategiesthe Agreement, the Company plans to encourage them to move through this funnel. We create awareness of our solutions through a direct marketing strategy, where we use a combination of approaches. The omnichannel strategy includes – banner advertising, SEO marketing, email outreach, event promotion, including educational seminars, conferences, and public and media relations, all of which we have designed at driving prospective customers to fdctech.com or encourage them to contact one of our specialists. We also encourage customers to participate in the demo or webinar, or consultation call where our expert shows them why they need our solutions and how it will benefit them.
We also utilize many indirect channels where a network of industry professionals, introducing and referring brokers (collectively “RB/IB”) as third parties, promote our services in exchange for performance-based compensation. In most cases, RB/IB performs the lead generation function while our staff provides the customer and technical service.
Mostacquire 100% of the marketingissued and branding initiatives are taken in-house by our team. We effectively leverage social media, content marketing,outstanding equity interests of GNFL, including its wholly-owned subsidiaries and integrated modelsother variable interest entities, in consideration for shares of the Company’s restricted common stock (the” “Securities”) valued at thirty-five Million U.S. Dollars ($35,000,000).
On August 24, 2021, FDCTech, Inc., a Delaware corporation (“FDCT” or the “Company” or “Buyer”), terminated the Stock Purchase Agreement (the “Agreement”), dated June 2, 2021, with the Shareholders of Genesis Financial, Inc., a Wyoming corporation (“Genesis” or “Seller”). As of the date of termination, the Company did not issue any Securities to keep our message’s continuitythe Seller. The Company could not complete nor qualify the Agreement as Genesis could not comply with several non-exhaustive material provisions, covenants, or conditions.
On June 9, 2021, and maintain critical customer relationships on a one-on-one basis.in connection with the previous description of the Genesis Agreement, dated June 2, 2021, the Company appointed Warwick Kerridge as Chairman of the Company’s Board of Directors. Effective August 24, 2021, upon the consent of the majority of the stockholders of the Corporation representing at least % of the issued and outstanding shares of the Company and per Section 222 of the General Corporation Law of the State of Delaware, voted in favor of terminating Warwick Kerridge from the Board of Directors. Upon termination of Mr. Kerridge, the Company currently has four Board of Directors. Mitchell M. Eaglstein shall be the acting Chairman of the Company.
Subsidiaries of the Company
In April 2016, the Company established its wholly-owned subsidiary – FRH Prime Ltd. (“FRH Prime”), a company incorporated under section 14 of the Companies Act 1981 of Bermuda. In January 2017, FRH Prime established its wholly-owned subsidiary – FXClients Limited (“FXClients”), under the United Kingdom Companies Act 2006 as a private company. The Company established FRH Prime and FXClients to conduct financial technology service activities. At present, both companies have ceased to exist.
For the nineThree and Nine months ending September 30, 2020,2021, and 2019,2020, FRH Prime has generated volume rebates of $1,861$0 and $1,281,$1,861, respectively, from Condor Risk Management Back Office. The Company has included rebates in revenue in the consolidated income statements. There have been no significant operating activities in FXClients.
Board of Directors
TheOn July 6, 2021, the Board of Directors of FDCTech, Inc. (the “Company”) increased from four to five directors and appointed Charles R. Provini, age 74, to the vacancy. Mr. Provini is considered independent under NYSE and NASDAQ listing standards. Mr. Provini has been the Chairman, CEO, and President of Natcore Technology Inc. since May 2009, a research and development company protected by 65 patents granted or pending. From November 1997 to October 2000, he was the President of Ladenburg Thalmann Asset Management and a Director of Ladenburg Thalmann, Inc., one of the oldest members of the New York Stock Exchange. He served as President of Laidlaw Asset Management and Chairman and Chief Investment Officer of Howe & Rusling, Laidlaw’s Portfolio Management Advisory Group, from November 1995 to September 1997. Mr. Provini served as President of Rodman & Renshaw’s Advisory Services from February 1994 to August 1995. He was the President of LaSalle Street Corporation, a wholly-owned subsidiary of Donaldson, Lufkin & Jenrette, from January 1983 to April 1985. Mr. Provini has been a leadership instructor at the U.S. Naval Academy, Chairman of the U.S. Naval Academy’s Honor Board, and is a former Marine Corp. officer. Mr. Provini holds an undergraduate Engineering degree from the U.S. Naval Academy in Annapolis, Maryland, and a post-graduate degree from the University of Oklahoma.
Upon termination of Mr. Kerridge effective August 24, 2021, the Company currently has three directors.four Board of Directors. Mitchell M. Eaglstein shall be the acting Chairman of the Company. Mitchell M. Eaglstein and Imran Firoz are the executive directors of the Company. Jonathan Baumgart and Charles R. Provini are considered independent directors under NYSE and NASDAQ listing standards.
Changes in Registrant’s Certifying Accountant
On July 2, 2021, the Board of Directors of FDCTech, Inc. (the “Company”) approved the dismissal of Farber Hass Hurley LLP (“FHH”) as the Company’s independent registered public accounting firm. The reports of FHH on the Company’s consolidated financial statements for the fiscal years ended December 31, 2020, and 2019 did not contain an adverse opinion or a disclaimer of opinion. It was not qualified or modified as to uncertainty audit scope or accounting principles.
On July 2, 2021, the Company appointed BF Borgers CPA PC (“BFB”) as the Company’s new independent registered public accounting firm, effective immediately, to perform independent audit services for the fiscal year ending December 31, 2021.
Description of Company’s Securities to be Registered
Effective September 03, 2021, the Company incorporated by reference the description of its common stock, par value $ per share, to be registered hereunder contained under the heading “Description of Securities” in the Company’s Registration Statement on Form S-1 (File No. 333- 221726), as initially filed with the Securities and Exchange Commission (the “Commission”) on November 22, 2017, as subsequently amended (the “Registration Statement”). Since the Registration Statement filing, the Company made all required filings pursuant to Section 15(d) and has continued to file all reports voluntarily.
| F-8 |
NoteNOTE 2 - Summary of Significant Accounting PoliciesSUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements include the accounts of FDCTech, Inc. and its wholly-owned subsidiary. We have eliminated all intercompany balances and transactions. The Company has prepared the consolidated financial statements in a manner consistent with the accounting policies adopted by the Company in its financial statements. The Company has measured and presented the company’sits consolidated financial statements in US Dollars, which is the currency of the primary economic environment in which the Company operates (also known as its functional currency).
Financial Statement Preparation and Use of Estimates
The Company prepared consolidated financial statements in conformity withaccording to accounting principles generally accepted in the United States of America (“GAAP”). The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions. This could affect the reported amounts of assets and liabilities and the related disclosures at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the periods presented. Estimates include revenue recognition, the allowance for doubtful accounts, website and internal-use software development costs, recoverability of intangible assets with finite lives, and other long-lived assets. Actual results could materially differ from these estimates. Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties, including uncertainty in the current economic environment due to the coronavirus (“COVID-19”).
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits held with banks, and other short-term highly liquid investments with original maturities of three months or less.less of original maturities. On September 30, 2020,2021, and December 31, 2019,2020, the Company had $59,024$ 4,251 and $27,884$22,467 cash and cash equivalent held at the financial institution.
| F-9 |
Note
NOTE 2 – Summary of Significant Accounting Policies- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Accounts Receivable
Accounts Receivable primarily represents the amount due from six (06)(6) customers. In some cases, Receivables from the customer receivables are due immediately on demand; however, in most cases, the Company offers net 30 terms or n/30, where the payment is due in full 30 days after the invoice’s date. The Company has based the allowance for doubtful accounts on its assessment of the collectability of customer accounts. The Company regularly reviews the allowance by considering historical experience, credit quality, the accounts receivable balances’ age, and economic conditions that may affect a customer’s ability to pay and expected default frequency rates. Trade receivables are written off at the point when they are considered uncollectible.
At September 30, 2020,2021, and December 31, 2019,2020, the Company hasManagement determined that allowance for doubtful accounts was $95,961$95,961 and $78,087,$95,961, respectively. ForThe bad debt expense for the three and nine months ended bad debt expense ended September 30, 2021, and 2020 were $0and 2019, was $17,875 and $20,000,$17,875, respectively.
Sales, Marketing, and Advertising
The Company recognizes sales, marketing, and advertising expenses when incurred.
The Company incurred $3,894$277,327 and $3,636$3,894 in sales, marketing, and advertising costs (“sales and marketing”) for the three months ended September 30, 2020,2021, and 2019, respectively.2020. The sales and marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 9.06%375.15% and 6.30%9.06% of the sales for the three months ended September 30, 2020,2021, and 2019 respectively.2020. The increase in expense is mainly due to the $151,974 digital marketing and travel cost for the three months ended September 30, 2021.
The Company incurred $5,647$499,320 and $19,817$5,647 in sales, marketing, and advertising costs (“sales and marketing”) for the nine months ended September 30, 2020,2021, and 2019, respectively.2020. The sales and marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 3.26%225.93% and 6.11%3.26% of the sales for the nine months ended September 30, 2020,2021, and 2019, respectively.
Office Lease
Effective October 29, 2019, the Company leased office space at 200 Spectrum Center Drive, Suite 300, Irvine, CA 92618. As per the Commitment Term of the lease (“Agreement”), this Agreement shall continue on a month-to-month basis (any term after the Commitment Term, also known as “Renewal Term”).2020. The Commitment Term and all subsequent Renewal Terms shall constitute the “Term.” The Company may terminate this Agreement by deliveringincrease in expense is mainly due to the lessor Form (“Exit Form”) at least one (1) full calendar month before$493,760 digital marketing and travel costs for the month in which the Company intends to terminate this Agreement (“Termination Effective Month”). The Company is entitled to use the office and conference space asnine months ended on need basis. Previously, the Company leased office space at 1460 Broadway, New York, NY 10036, from an unrelated party. The new rent payment or membership fee is $90 per month compared to the previous rent payment or membership fee at the office of $890 per month, including the general and administrative expenses.September 30, 2021.
Effective February 2019, the Company leases office space at Suite 205, Building 9, Potamos Germasogeia, 4047, Limassol District, Cyprus from an unrelated party for one (1) year. The office’s rent payment is $1,750 per month, and we have included it in the General and administrative expenses. From February 2020, this agreement is extended for one year period at $1,750 per month. The Company uses the office for sales and marketing in Europe and Asia.
Effective April 2019, the Company leased office space at Suite 512, 83 Plan, Chelyabinsk, Russia, from an unrelated party for an eleven months term. The office’s rent payment is $500 per month, and we have included it in the general and administrative expenses. From March 2020, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the agreement’s terms by giving thirty (30) days’ notice. The Company uses the office for software development and technical support.
As all leases are either on a month to month basis or less than one (1) year term, the Company is not required to recognize assets and liabilities for our rental leases. The Company has included all rental expenses in the General and Administrative expenses.
Revenue Recognition
On January 1, 2019, the Company adopted ASU 2014-09 Revenue from Contracts with Customers. The majority of the Company’s revenues come from two contracts – IT support and maintenance (‘IT Agreement’) and software development (‘Second Amendment’) that fall within the scope of ASC 606.
The Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to receive in exchange for those goods or services as per the contract with the customer. As a result, the Company accounts for revenue contracts with customers by applying the requirements of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic 606), which includes the following steps:
| ● | Identify the contract or contracts and subsequent amendments with the customer. | |
| ● | Identify all the performance obligations in the contract and subsequent amendments. | |
| ● | Determine the transaction price for completing performance obligations. | |
| ● | Allocate the transaction price to the performance obligations in the contract. | |
| ● | Recognize the revenue when, or as, the Company satisfies a performance obligation. |
| F-10 |
Note
NOTE 2 - Summary of Significant Accounting PoliciesSUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company adopted ASC 606 using the modified retrospective method applied to all contracts not completed as of January 1, 2019. The Company presents results for reporting periods beginning after January 1, 2019, under ASC 606 while prior period amounts are reported following legacy GAAP. In addition to the above guidelines, the Company also considers implementation guidance on warranties, customer options, licensing, and other topics. The Company takes into account revenue collectability, methods for measuring progress toward complete satisfaction of a performance obligation, warranties, customer options for additional goods or services, nonrefundable upfront fees, licensing, customer acceptance, and other relevant categories.
The Company accounts for a contract when the Company and the customer (‘parties’) have approved the contract and are committed to performing their respective obligations, where eachobligations. Each party can identify their rights, obligations, and payment terms,terms; the contract has commercial substance, and it is probable that thesubstance. The Company will probably collect substantially all of the consideration. Revenue is recognized when or as, performance obligations are satisfied by transferring control of the promised service to a customer. The Company fixes the transaction price for goods and services at contract inception. The Company’s standard payment terms are generally net 30 days and, in some cases, due upon receipt of the invoice.
The Company considers contract modification as athe change in the scope or price (or both) of aor both as contract that is approvedmodifications by the parties.Company. The parties describe contract modification as a change order, a variation, or an amendment. A contract modification exists when the parties to the contract approve a modification that either creates new or changes existing enforceable rights and obligations of the parties to the contract.parties. The Company assumes a contract modification when approved in writing, by oral agreement, or implied by the customer’s customary business practice of the customer.practice. If the parties to the contract have not approved a contract modification, the Company continues to apply the guidance to the existing contractcontract’s guidance until the contract modification is approved. The Company recognizes contract modification in various forms – including but not limited to partial–partial termination, an extension of the contract term with a corresponding price increase, in price, adding new goods and/or services to the contract, with or without a corresponding price change, in price, and reducing the contract price without a change in goods or goods/services promised.
For all its goods and services, atAt contract inception, the Company assesses the solutions or services, or bundles of solutions and services, obligated in the contract with a customer to identify each performance obligation within the contract, and then evaluate whether the performance obligations are capable of being distinct and distinct within the context of the contract. Solutions and services that are not both capable of beingcannot be distinct and distinct within the contract context of the contract are combined and treated as a single performance obligation in determining the allocation and recognition of revenue. For multi-element transactions, the Company allocates the transaction price to each performance obligation on a relative stand-alone selling price basis. The Company determines thatthe stand-alone selling price for each item at the inception of the transaction involving these multiple elements.
Since January 21, 2016 (‘Inception’), the Company has derived its revenues mainly from three sources – consulting services, technology solutions, and customized software development. The Company recognizes revenue when it has satisfied a performance obligation by transferring control over a product or delivering a service to a customer. We measure revenue based upon the consideration outlined in an arrangement or contract with a customer.
| F-11 |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company’s typical performance obligations include the following:
| Performance Obligation | Types of Deliverables | When Performance Obligation is Typically Satisfied | ||
| Consulting Services | Services related to Start-Your-Own-Brokerage (“SYOB”), Start-Your-Own-Prime Brokerage (“SYOPB”), Start-Your-Own-Crypto Exchange (“SYOC”), FX/OTC liquidity solutions, and lead generations. | The Company recognizes the consulting revenues when the customer receives services over the length of the contract. If the customer pays the Company in advance for these services, the Company records such payment as deferred revenue until the Company completes the services. | ||
| Technology Services | Software licensing of Condor Risk Management Back Office for | The Company recognizes ratably over the contractual period for services delivered, beginning | ||
| Software Development | Design-build software development projects for customers, where the Company develops the project to meet the design criteria and performance requirements | The Company recognizes the software development revenues when the Customer obtains control of the deliverables, as stated in the |
Note 2 - Summary of Significant Accounting Policies (continued)
For purposes of determiningTo determine the transaction price, the Company assumes that the goods or services promised in the existing contract will be transferred to the customer. The Company assumes that the contract will not be canceled, renewed, or modified; therefore, the transaction price includes only those amounts to which the Company has rights under the present contract. For example, if the Company enters into a contract with a customer with an original term of one year and the Company expects the customer to renew for a second year, the Company would determine the transaction price based on the original one-year term. When determining the transaction price, the Company first identifies the fixed consideration, including non-refundable upfront payment amounts.
To allocateFor purposes of allocating the transaction price, the Company allocates an amount that best represents consideration that the entity expects to receive for transferring each promised good or service to the customer. The Company allocates the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis to meet the allocation objective. In determining the standalone selling price, the Company uses the best evidence of the stand-alone selling price that the Company charges to similar customers in similar circumstances. In some cases, the Company uses the adjusted market assessment approach to determine the standalone selling price. It evaluates the market in which it sells the goods or services and estimates the price that customers in that market would pay for those goods or services when sold separately.
The Company recognizes revenue when or as it transfers the promised goods or services in the contract. The Company considers the “transfers” the promised goods or services when the customer obtains control of the goods or services. The Company considers a customer “obtains control” of an asset when it can direct the use of, and obtain all the remaining benefits from, an asset substantially. The Company recognizes deferred revenue related to services it will deliver within one year as a current liability. The Company presents deferred revenue related to services that the Company will deliver more than one year into the future as a non-current liability.
For the period ending September 30, 2020,2021, the Company’s threetwo primary revenue streams accounted for under ASC 606 follows:
IT Support
On February 5, 2018 (‘Effective Date’), the Company signed an IT support and maintenance agreement (‘IT Agreement’) with an FX/OTC broker (‘FX Broker’) regulated by the Malta Financial Services Authority. The Company earns the recurring monthly payment from the FX Broker for delivering IT support and maintenance services (‘Services’) to FX Broker’s legacy technology infrastructure. The term of this Agreement commenced on the Effective Date and shall continue until terminated by either party either for cause, bankruptcy, and other default clauses. The Company completes and satisfies its performance obligation upon accomplishment of all support and maintenance activities every month. The Company invoices the FX Broker at the beginning of the month for services performed, delivered, and accepted for the prior month. At the time of the invoice, the Company has renderedrenders all Services.
Licensing Fees
The Company receives monthly licensing fees for its Condor Prime Back Office and Condor FX Pro Trading Terminal. Licensing revenues are allocated to software licenses and recognized when the Company transfers the software control to the customer.
Software Development
The Company receives $75 per hour for the first 100 hours/month of approved development services and $45 per hour for all services over 100 hours per month. The Company invoices the Customer for all development services rendered,Services, and any cash received for the development servicesServices is non-refundable.
TheAccording to the contract’s terms and conditions, the Company invoices the customer at the beginning of the month for services delivered for the month.month’s services. The invoice amount is due upon receipt. The Company recognizes the revenue at the end of each month, equal to the invoice amount.
Effective January 2021, the Company signed two licensing agreements for its Condor Pro Multi-Asset Trading Platform, receiving monthly maintenance and volume rebate fees. The initial set-up fee is $5,000, followed by recurring monthly payments of $2,500. The volume fees can range from $2 to $5 per million traded, depending on the volume.
| F-12 |
Note
NOTE 2 - Summary of Significant Accounting PoliciesSUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentrations of Credit Risk
Cash
The Company maintains its cash balances at a single financial institution. The balances do not exceed FDIC limits as of September 30, 20202021, and December 31, 2019.2020.
Revenues
For the nine months ended September 30, 20202021, and 2019,2020, the Company had six (6) and ten (10)six (6) active customers, respectively.customers. Revenues generated from the top three (3) customers represented approximately 82.47%78.15% and 94.29%82.74% of total revenue for the nine months ended September 30, 20202021, and 2019, respectively.2020.
Accounts Receivable
Accounts Receivable primarily represents the amount due from six (6) active customers. In some cases, the customer receivables are due immediately on demand; however, in most cases, the Company offers net 30 terms or n/30, where the payment is due in full 30 days after the invoice’s date. The Company has based the allowance for doubtful accounts on its assessment of the collectability of customer accounts. The Company regularly reviews the allowance by considering historical experience, credit quality, the accounts receivable balances’ age, and economic conditions that may affect a customer’s ability to pay and expected default frequency rates. Trade receivables are written off at the point when they are considered uncollectible.
At September 30, 2020,2021, and December 31, 2019, Company’s top four (4) customers comprise roughly 73.21%2020, the Management determined that allowance for doubtful accounts was $95,961 and 84.43% of total A/R,$95,961, respectively. The loss of any ofbad debt expense for the top four customers would significantly impact the Company’s operations.three and nine months ended September 30, 2021, and 2020 were $0 and $17,875, respectively.
Research and Development (R and D) Cost
The Company acknowledges that future benefits from research and development (R and D) are uncertain, and as a result, we cannot capitalize on R and D expenditures. The GAAP accounting standards require us to expense all research and development expenditures as incurred. For the three and nine months ended September 30, 20202021, and 2019,2020, the Company did not incurincurred R and D cost.costs of $15,600 and $0. The increase in R and D costs was due to evaluating the technological feasibility costs of Condor Stocks and ETF platform.
Legal Proceedings
The Company discloses a loss contingency if there is at least a reasonable possibility that a material loss has been incurred. The Company records its best estimate of loss related to pending legal proceedings when the loss is considered probable, and the amount can be reasonably estimated. Where theThe Company can reasonably estimate a range of loss with no best estimate in the range,estimate; the Company records the minimum estimated liability. As additional information becomes available, the Company assesses the potential liability related to pending legal proceedings, revises its estimates, and updates its disclosures accordingly. The Company’s legal costs associated with defending itself are recorded to expenseexpenses as incurred. The Company is currently not involved in any litigation.
| F-13 |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment in accordance withunder FASB ASC 360, Property, Plant, and Equipment. Under the standard, long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. An impairment charge is recognized for the amount if and when the asset’s carrying value exceeds the fair value. OnAt September 30, 2020,2021, and December 31, 2019,2020, there are no0 impairment charges.
Provision for Income Taxes
The provision for income taxes is determined using the asset and liability method. Under this method, deferred tax assets and liabilities are calculated based upon the temporary differences between the consolidated financial statement and income tax bases of assets and liabilities using the enacted tax rates applicable each year.
The Company utilizes a two-step approach to recognizing and measuring uncertain tax positions (“tax contingencies”). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely to be realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, requiring periodic adjustments, which may not accurately forecast actual outcomes. The Company includes interest and penalties related to tax contingencies in the provision of income taxes in the operations’ consolidated statements. Management of the CompanyThe Company’s management does not expect the total amount of unrecognized tax benefits to change significantly in the next twelve (12) months significantly.months.
Software Development Costs
By ASC 985-20, Software development costs, including costs to develop software sold, leased, or otherwise marketed, that are incurred after the establishment of technological feasibility, are capitalized if significant. CapitalizedThe Company amortizes the capitalized software development costs are amortized using the straight-line amortization method over the application software’s estimated useful life. By the end of February 2016, the Company completed the activities (planning, designing, coding, and testing) necessary to establish that it can produce and meet the design specificationstechnical feasibility of the Condor FX Back Office, Version, Condor FX Pro Multi-Asset Trading TerminalPlatform Version, and Condor Pricing Engine. The Company established the technologicaltechnical feasibility of the Crypto Web Trader Platform in February 2018. The Company completed the technical feasibility of the Condor Stock and ETF platform in January 2021. The Company estimates the useful life of the software to be three (3)(3) years.
Note 2 - Summary of Significant Accounting Policies (continued)
Amortization expense was $68,616$68,616 and $48,127$68,616 for the three months ended September 30, 20202021, and 20192020 respectively, and the Company classifies such cost as the Cost of Sales. Amortization expense was $183,344$205,847 and $67,970$183,344 for the nine months ended September 30, 20202021, and 20192020 respectively, and the Company classifies such cost as the Cost of Sales.
The increase in amortization expense forCompany is developing the three months ending September 30, 2020,Condor Stocks and ETF platform. The Company is duecurrently capitalizing all costs associated with the development. The Company expensed $15,600 as R and D costs to evaluate the cumulative amortization expensetechnical feasibility of Condor Back Office, Condor Crypto Trading Platform,Stocks and Condor FX Trading Platform (Desktop, Web, and Mobile).ETF platform.
The Company capitalizes significant costs incurred during the application development stage for internal-use software. The Company does not believe that the capitalization of software development costs is material to date.
| F-14 |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Convertible Debentures
The cash conversion guidance in ASC 470-20, Debt with Conversion and Other Options, is considered when evaluating the accounting for convertible debt instruments (this includes certain convertible preferred stock that is classified as a liability) to determine whether the conversion feature should be recognized as a separate component of equity. The cash conversion guidance applies to all convertible debt instruments that upon conversion may be settled entirely or partially in cash or other assets where the conversion option is not bifurcated and separately accounted for pursuant to ASC 815.
If the conversion features of conventional convertible debt provide a conversion rate below market value, this feature is characterized as a beneficial conversion feature (“BCF”). The Company records BCF as a debt discount pursuant to ASC Topic 470-20, Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the BCF. The Company amortizes the discount to interest expense over the debt’s life of the debt using the effective interest method.
As of September 30,December 31, 2020, the conversion features of conventional FRH Group convertible notes dated February 22, 2016, May 16, 2016, November 17, 2016, and April 24, 2017 (See Note 8) provide for a rate of conversion where the conversion price is below the market value. As a result, the conversion feature on all FRH Group convertible notes has as a beneficial conversion feature (“BCF”) to the extent of the price difference. The
As the Company and FRH Group extended the duematurity date onof the four (4) tranches of FRH Group convertible notes.notes to June 30, 2021, Management performed an analysis to determine the fair value of the BCF on the four (4) tranches andthese tranches. The Company noted that the value of the BCF for each note was insignificant; thus, the Companyit did not record any debt discountdiscounts as of September 30,December 31, 2020.
For FRH Group convertible note dated April 24, 2017, the stock’s value at issuance date was above the floor conversion price; this feature is characterized as a beneficial conversion feature (“BCF”). The Company records a BCF as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” As a result, the convertible debt is recorded net of the discount related to the BCF. As of December 31, 2017, the Company has amortized the discount of $97,996$97,996 to interest expense at the issuance date because the debt is convertible at the date of issuance.
The $97,996$ amount equaledis equal to the intrinsic value, and the Company allocated it to additional paid-in capital in 2017.
On February 22, 2021, the Company entered into an Assignment of Debt Agreement (the “Agreement”) with FRH and FRH Group Corporation. The Company eliminated all four FRH Group convertible notes, including interest, of $1,256,908, in return for the issuance of of unregistered common stock of the Company (the “Shares”) to FRH. Following the Agreement, FRH assigned the Shares to FRH Group Corporation, an entity also owned by Mr. Hong.
The Company follows ASC 260, Earnings Per Share, to account for earnings per share. Basic earnings per share (“EPS”) calculations are determined by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. As of September 30, 2020,2021, and December 31, 2019,2020, the Company had 68,626,332 and 68,626,332 basic and dilutive shares issued and outstanding, respectively.outstanding. The Company had 20,000,000 million potentially dilutive shares related toconverted the four outstanding FRH Group convertible notes which were excluded from the diluted net loss per share as the effects would have been anti-dilutive.into dilutive shares. During the nine months ended September 30, 20202021, and 2019,2020, common stock equivalents were anti-dilutive due to a net loss of $276,517$ and $86,022,$, respectively, for the period. During the three and nine months ended September 30, 2020,2021, common stock equivalents were anti-dilutive due to a net loss for the period. Hence, the Company has not considered in the computation.
Reclassifications
We have reclassified certain prior period amounts to conform to the current year’s presentation. None of these classifications impacted reported operating loss or net loss for any of the periods presented.
Note
NOTE 2 - Summary of Significant Accounting PoliciesSUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific requirements. ASU 2014-09 establishes a five-step revenue recognition process in which an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows from customers’ contracts. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date of ASU 2014-09 by one (1) year. The Company adopted ASC 606 using the modified retrospective method applied to all contracts not completed as of January 1, 2019. The Company presents results for reporting periods beginning after January 1, 2019, under ASC 606 while prior period amounts are reported following legacy GAAP. Refer to Note 2 Revenue from Major Contracts with Customers for further discussion on the Company’s accounting policies for revenue sources within the scope of ASC 606.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 840), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments to this standard are effective for fiscal years beginning after December 15, 2019. Early adoption of the amendments in this standard is permitted for all entities, and theentities. The Company must recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company adopted this policy as of January 1, 2020, and there is no material effect on its financial reporting.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force) and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.
NOTE 3. GOING CONCERN AND MANAGEMENT’S PLANS
The Company has prepared consolidated financial statements on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the ordinary business course. At September 30, 2020,2021, and December 31, 2019,2020, the accumulated deficit was $1,312,011$2,471,917 and $1,035,494,$1,493,984, respectively. On September 30, 2021, and December 31, 2020, the working capital surplus and deficit were $68,953 and $1,504,678.
During the three months ended September 30, 2020,2021, and 2019,2020, the Company incurred a net loss of $53,351$490,391 and $64,180,$53,351, respectively. During the nine months ended September 30, 2020,2021, and 2019,2020, the Company incurred a net loss of $276,517$977,933 and $86,022, respectively.$276,517.
Since its inception, the Company has sustained recurring losses, and negative cash flows from operations. As of September 30, 2020 and December 31, 2019,2021, the Company had $59,024 and $27,884$4,251 cash on hand, respectively.hand. The CompanyManagement believes that future cash flows may not be sufficient for the Company to meet its debt obligations as they become due in the ordinary course of business course for twelve (12) months. Themonths following September 30, 2021. For the comparable three and nine months year ended September 30, 2021, and 2020, the Company has earned marginally increased revenues and increased operating expenses. As a result, the Company continues to experience negative cash flows from operations and the ongoing requirement for substantial additional capital investment for the development ofto develop its financial technologies. The CompanyManagement expects that it will need to raise substantial additional capital to accomplish its growth plan over the next twelve (12) months. The CompanyManagement expects to seek to obtain additional funding through private equity or public markets. However, there can be no assurance about the availability or terms upon which such financing and capital might be available.
The Company’s ability to continue as a going concern may be dependentdepend on the success of management’sManagement’s plans discussed below. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
To the extent the Company’s operations are not sufficient to fund the Company’s capital requirements, the CompanyManagement may attempt to enter into a revolving loan agreement with financial institutions or attempttry to raise capital through the sale ofby selling additional capital stock or the issuance ofissuing debt.
The CompanyManagement intends to continue its efforts in enhancingto enhance its revenue from its diversified portfolio of technological solutions, and becomingbecome cash flow positive, as well as raisingand raise funds through private placement offering and debt financing. See Note 8 for Notes Payable. In the future, as the Company increases its customer base across the globe, the Company intends to acquire long-lived assets that will provide a future economic benefit beyond fiscal 2020.2021.
NOTE 4. CAPITALIZED SOFTWARE COSTS
During the three months ended September 30, 2020,2021, and 2019,2020, the estimated remaining weighted-average useful life of the Company’s capitalized software was three (3)(3) years. The Company recognizes amortization expense for capitalized software on a straight-line basis.
At September 30, 2020,2021, and December 31, 2019,2020, the gross capitalized software asset was $980,058$1,229,858 and $829,500,$1,024,158, respectively. At the end of September 30, 2020,2021, and December 31, 2019,2020, the accumulated software depreciationamortization expenses were $323,218$597,681 and $139,875,$391,834, respectively. As a result, the unamortized balance of capitalized software atAt September 30, 2020,2021, and December 31, 2019,2020, was $656,840$632,177 and $689,625,$632,324, respectively.
NOTE 5. PROPERTY AND EQUIPMENT
Effective October 29, 2019, the Company rents its servers, computers, and data center from an unrelated third party. The lessor provides furniture and fixtures and any leasehold improvements at 200 Spectrum Drive, Suite 300, Irvine, CA 92618 under the rent Agreement, as discussed in Note 2.
Effective February 2019, the Company leases office space at Suite 205, Building 9, Potamos Germasogeia, 4047, Limassol District, Cyprus from an unrelated party for a year. The office’s rent payment is $1,750 per month, and we have included it in the General and administrative expenses. From February 2020, this agreement is extended for one year period at $1,750 per month. The Company uses the office for sales and marketing in Europe and Asia.
Effective April 2019, the Company leases office space at Suite 512, 83 Plan, Chelyabinsk, Russia, from an unrelated party for an eleven (11) month term. The office’s rent payment is $500 per month, and we have included it in the General and administrative expenses. From March 2020, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the agreement’s terms by giving thirty (30) days’ notice. The Company uses the office for software development and technical support.
NOTE 6. 5. RELATED PARTY TRANSACTIONS
In April 2016, the Company established its wholly-owned subsidiary – FRH Prime Ltd. (“FRH Prime”), a company incorporated under section 14 of the Companies Act 1981 of Bermuda. In January 2017, FRH Prime established its wholly-owned subsidiary – FXClients Limited (“FXClients”) under the United Kingdom Companies Act 2006 as a private company. The Company established FRH Prime and FXClients to conduct financial technology service activities. At present, both companies have ceased to exist.
For the three and nine months ended September 30, 2020,2021, and 2019,2020, FRH Prime has generated volume rebates of $1,861$0 and $1,281,$1,861, respectively, from Condor Risk Management Back Office. There have been no significant operating activities in FXClients.
Between February 22, 2016, and April 24, 2017, the Company borrowed $1,000,000$1,000,000 from FRH Group (“FRH”), a founder and principal shareholder of the Company. shareholder. The Company executed Convertible Promissory Notes due between April 24, 2019, and June 30, 2019. The Notes are convertible into common stock initially at $0.10$0.10 per share but maybe discounted under certain circumstances, but in no event will the conversion price be less than $0.05$0.05 per share. The Notes carry an interest rate of 6%6% per annum, which is due and payable at the maturity date. On February 22, 2021, the Company entered into an Assignment of Debt Agreement (the “Agreement”) with FRH and FRH Group Corporation. The Company eliminated all four FRH Group convertible notes, including interest, of $1,256,908, in return for the issuance of of unregistered common stock of the Company (the “Shares”) to FRH. Following the Agreement, FRH assigned the Shares to FRH Group Corporation, an entity also owned by Mr. Hong.
Between March 15 and 21, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued shares to Susan Eaglstein and shares to Brent Eaglstein for a cash amount of $70,000.$70,000. Ms. Eaglstein and Mr. Eaglstein are the Mother and Brother, respectively, of Mitchell Eaglstein, the CEO and Director of the Company.
Related Party Advance – Officer Loan
On April 1, 2020, the Company received $15,000 from the Officer as a loan. The Company repaid the loan in full as of May 29, 2020. Between February and September 2021, the Company received $95,000 from the Officer for working capital purposes and recorded in related party advances.
NOTE 7. 6. LINE OF CREDIT
From June 24, 2016, the Company obtained an unsecured revolving line of credit of $40,000$40,000 from Bank of America to fund various purchases and travel expenses for the Company.expenses. The line of credit has an average interest rate at the close of business on September 30, 2020,2021, for purchases, and cash is drawn at 12%12% and 25%25%, respectively. As of September 30, 2020,2021, the Company complies with the credit line’s terms and conditions of the credit line. Onconditions. At September 30, 2020,2021, and December 31, 2019,2020, the outstanding balance was $35,723$39,614 and $31,514.$39,071, respectively.
NOTE 8. 7. NOTES PAYABLE
Convertible Notes Payable – Related Party
On February 22, 2016, the Company issued and promised to pay a convertible note to FRH Group Ltd. (“FRH Group,” shareholder) for the principal sum of One Hundred Thousand and 00/100 Dollars ($100,000)100,000) on February 28, 2018 (the “Maturity Date”). The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020.2020. The Company will pay the outstanding principal amount of this Note, together with interest at 6%6% per annum, in cash on the Maturity Date to this Note’s registered holder. On-demand, the Company will pay interest on the amount of any overdue payment of principal or interest for the period following the due date at a rate of ten percent (10%) per annum.
The initial conversion rate will be $0.10$0.10 per share or shares if FRH Group converts the entire Note, subject to adjustments in certain events as set forth below. The conversion price shall be discounted by 30%30% if the Company’s common stock’s fair market value is less than $0.10$0.10 per share. However, in no event will the conversion price be less than $0.05$0.05 per share with a maximum of shares if FRH Group converts the entire Note subject to adjustments in certain events. The Company will not issue fractional share or scrip representing a fractional share upon conversion of the Notes.
NOTE 8.7. NOTES PAYABLE (continued)
Convertible Notes Payable – Related Party
On May 16, 2016, the Company issued and promised to pay a convertible note to FRH Group for the principal sum of Four Hundred Thousand and 00/100 Dollars ($400,000)400,000) on May 31, 2018 (the “Maturity Date”). The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020.2020. The Company will pay the outstanding principal amount of this Note, together with interest at 6%6% per annum, in cash on the Maturity Date to this Note’s registered holder. On-demand, the Company will pay interest on the amount of any overdue payment of principal or interest for the period following the due date at a rate of ten percent (10%) per annum.
The initial conversion rate will be $0.10$0.10 per share or shares if FRH Group converts the entire Note, subject to adjustments in certain events as set forth below. The conversion price shall be discounted by 30%30% if the fair market value of the Company’s common stock is less than $0.10$0.10 per share. However, in no event will the conversion price be less than $0.05$0.05 per share with a maximum of shares if FRH Group converts the entire Note, subject to adjustments in certain events. The Company will not issue fractional share or scrip representing a fractional share upon conversion of the Notes.
On November 17, 2016, the Company issued and promised to pay a convertible note to FRH Group for the principal sum of Two Hundred and Fifty Thousand and 00/100 Dollars ($250,000)250,000) on November 30, 2018, and an additional extension to June 30, 2019. The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020. The Company will pay the outstanding principal amount of this Note, together with interest at 6%6% per annum, in cash on the Maturity Date to this Note’s registered holder. On-demand, the Company will pay interest on the amount of any overdue payment of principal or interest for the period following the due date at a rate of ten percent (10%) per annum.
The initial conversion rate will be $0.10$0.10 per share or shares if FRH Group converts the entire Note, subject to adjustments in certain events as set forth below. The conversion price shall be discounted by 30%30% if the Company’s common stock’s fair market value is less than $0.10$0.10 per share. However, in no event will the conversion price be less than $0.05$0.05 per share with a maximum of shares if FRH Group converts the entire Note, subject to adjustments in certain events. The Company will not issue fractional share or scrip representing a fractional share upon conversion of the Notes.
On April 24, 2017, the Company issued and promised to pay a convertible note to FRH Group for the principal sum of Two Hundred and Fifty Thousand and 00/100 Dollars ($250,000)250,000) on April 24, 2019 (the “Maturity Date”). The Company will pay the outstanding principal amount of this Note, together with interest at 6% per annum, in cash on the Maturity Date to this Note’s registered holder. The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020. The Company will pay the outstanding principal amount of this Note, together with interest at 6% per annum, in cash on the Maturity Date to this Note’s registered holder. The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020. The Company will pay the outstanding principal amount of this Note, together with interest at 6% per annum, in cash on the Maturity Date to this Note’s registered holder. On-demand, the Company will pay interest on the amount of any overdue payment of principal or interest for the period following the due date at a rate of ten percent (10%) per annum.
The initial conversion rate will be $0.10$0.10 per share or shares if FRH Group converts the entire Note, subject to adjustments in certain events as set forth below. The conversion price shall be discounted by 30%30% if the Company’s common stock’s fair market value is less than $0.10$0.10 per share. However, in no event will the conversion price be less than $0.05$0.05 per share with a maximum of shares if FRH Group converts the entire Note, subject to adjustments in certain events. The Company will not issue fractional share or scrip representing a fractional share upon conversion of the Notes.
FRH Group Note Summary
| Date of Note: | 2/22/2016 | 5/16/2016 | 11/17/2016 | 4/24/2017 | ||||||||||||
| Original Amount of Note: | $ | 100,000 | $ | 400,000 | $ | 250,000 | $ | 250,000 | ||||||||
| Outstanding Principal Balance: | $ | 100,000 | $ | 400,000 | $ | 250,000 | $ | 250,000 | ||||||||
| Maturity Date (1): | 12/31/2020 | 12/31/2020 | 12/31/2020 | 12/31/2020 | ||||||||||||
| Interest Rate: | 6 | % | 6 | % | 6 | % | 6 | % | ||||||||
| Date to which interest has been paid: | Accrued | Accrued | Accrued | Accrued | ||||||||||||
| Conversion Rate: | $ | 0.10 | $ | 0.10 | $ | 0.10 | $ | 0.10 | ||||||||
| Floor Conversion Price: | $ | 0.05 | $ | 0.05 | $ | 0.05 | $ | 0.05 | ||||||||
(1) Note Extension – The Convertible Promissory Note with the face value of $100,000 coupon 6%, dated February 22, 2016, was amended to extend the maturity date from June 30, 2019, to September 30, 2020. The Convertible Promissory Note with the face value of $400,000, coupon 6% issue, dated May 16, 2016, was amended to extend the maturity date from June 30, 2019, to December 31, 2020. The Convertible Promissory Note with the face value of $250,000, coupon 6% issue, dated November 17, 2016, was amended to extend the maturity date from June 30, 2019, to December 31, 2020. The Company, by the execution of the note extension agreement, represents and warrants that as of the date hereof, no Event of Default exists or is continuing concerning the Promissory Note.
NOTE 8. NOTES PAYABLE (continued)
Convertible Notes Payable – Related Party
At September 30, 2020, the2021, there was no current portion of convertible notes payable and accrued interest was $1,000,000 and $241,908, respectively. There was no non-current portion of convertible notes payable and accrued interest.
| F-18 |
At December 31, 2019, the current portion of convertible notes payable and accrued interest was $1,000,000 and $196,908, respectively. There was no non-current portion of convertible notes payable and accrued interest.
Related Party Advance – Officer LoanNOTE 7. NOTES PAYABLE (continued)
On April 1, 2020, the Company received $15,000 from the Officer as a loan. The Company repaid the loan in full as of May 29, 2020.FRH Group Note Summary
SCHEDULE OF NOTES PAYABLE
| Date of Note: | 2/22/2016 | 5/16/2016 | 11/17/2016 | 4/24/2017 | ||||||||||||
| Original Amount of Note: | $ | 100,000 | $ | 400,000 | $ | 250,000 | $ | 250,000 | ||||||||
| Outstanding Principal Balance: | $ | - | $ | - | $ | - | $ | - | ||||||||
| Conversion Date (1): | 02/22/2021 | 02/22/2021 | 02/22/2021 | 02/22/2021 | ||||||||||||
| Interest Rate: | 6 | % | 6 | % | 6 | % | 6 | % | ||||||||
| Date to which interest has been paid: | Accrued | Accrued | Accrued | Accrued | ||||||||||||
| Conversion Rate on February 22, 2021: | $ | 0.10 | $ | 0.10 | $ | 0.10 | $ | 0.10 | ||||||||
| Floor Conversion Price: | $ | 0.05 | $ | 0.05 | $ | 0.05 | $ | 0.05 | ||||||||
| Number Shares Converted for Original Note: | 1,000,000 | 4,000,000 | 2,500,000 | 2,500,000 | ||||||||||||
| Number Shares Converted for Interest: | 29,117 | 111,000 | 61,792 | 55,000 | ||||||||||||
| (1) | Note Extension – On February 22, 2021, the Company entered into an Assignment of Debt Agreement (the “Agreement”) with FRH and FRH Group Corporation. The Company eliminated all four FRH Group convertible notes, including interest, of $1,256,908, in return for the issuance of of unregistered common stock of the Company (the “Shares”) to FRH. Following the Agreement, FRH assigned the Shares to FRH Group Corporation, an entity also owned by Mr. Hong. |
Cares Act – Paycheck Protection Program (PPP Note)
On May 01, 2020, the Company received proceeds of Fifty-Thousand Six Hundred and Thirty-Two ($50,632)50,632) from the Promissory Note (“PPP Note”) under the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The funding of the PPP Note is conditioned upon approval of the Company’s application by the Small Business Administration (SBA) and Bank of America (“Bank”), receiving confirmation from the SBA that the Bank may proceed with the PPP Note. Suppose the SBA does not confirm the PPP Note’s forgiveness, or only partly confirms forgiveness of the PPP Note, or the Company fails to apply for PPP Note forgiveness. In that case, the Company will be obligated to repay to the Bank the total outstanding balance remaining due under the PPP Note, including principal and interest (the “PPP Note Balance”). In such case, Bank will establish the terms for repayment of the PPP Note Balance in a separate letter to be provided to the Company, which letter will set forth the PPP Note Balance, the amount of each monthly payment, the interest rate (not above a fixed rate of one percent (1.00%(1.00%) per annum), the term of the PPP Note, and the maturity date of two (2) years from the funding date of the PPP Note. No principal or interest payments will be due before the Deferment Period, which is nineten months from May 01, 2020.the end of the covered period. The Company plans to apply for PPP Note forgiveness.
SBA Loan
On May 22, 2020, the Company received proceeds of one hundred and forty-four thousand nine hundred and 00/100 Dollars ($144,900.00)144,900). The Company received one hundred and forty-four thousand nine hundred and eight hundred 00/100 Dollars ($144,800.00). The installment payments will include the principal and interest of $707$707 monthly willand begin Twelve (12) months from the date of the promissory Note.note date. The balance of principal and interest balance will be payable Thirty (30) years from the date of the promissory Note.Note date. Interest will accrue at the rate of 3.75%3.75% per annum and will accrue only on $144,900$144,900 funds advanced from May 22, 2020, the advance date. The SBA loan outstanding balance is $141,826 as of September 30, 2021.
Economic Injury Disaster Loan (EIDL)
The Small Business Administration offers the Economic Injury Disaster Loan program is offered through the Small Business Administration.program. The CARES Act changed the program to offerprovide an emergency grant up to $10,000$10,000 per business, which is forgivable like the PPP Note. This grantThe Company doesn’t have to be repaid.repay the grant. On May 14, 2020, the Company received $4,000$4,000 in EIDL grants. The Company has recorded it as other income since the EIDL grant is forgivable.
| F-19 |
NOTE 9. 8. COMMITMENTS AND CONTINGENCIES
Office Facility and Other Operating Leases
The rental expense was $23,124$22,765 and $22,909$23,124 for the nine months ended September 30, 2020,2021, and 20192020, respectively. The increasedecrease in rent expense is due to two (2) additional leasesa reduction in rent rate for Irvine Office for the fiscal year ended December 31, 2019. Effective2020.
From October 29, 2019 to the present, the Company rents its servers, computers, and data center from an unrelated third party. TheUnder the rent Agreement, the lessor provides furniture and fixtures and any leasehold improvements at 200 Spectrum Drive, Suite 300, Irvine CA 92618 under the rent Agreement, asOffice, discussed in Note 2. Effective
From February 2019 to the present, the Company leases office space at Suite 205, Building 9, Potamos Germasogeia, 4047,in Limassol District, Cyprus, from an unrelated party for a year. The office’s rent payment is $1,750$1,750 per month, and we have included it in the General and administrative expenses.
From February 2020, this agreement is extended for onecontinues every year period at $1,750 per month.upon written request by the Company. The Company uses the office for sales and marketing in Europe and Asia. Effective From April 2019 to the present, the Company leases office space at Suite 512, 83 Plan,in Chelyabinsk, Russia, from an unrelated party for an eleven (11)(11) month term. The office’s rent payment is $500$500 per month, and we havethe Company has included it in the General and administrative expenses. From March 2019,2020, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the agreement’s terms by giving thirty (30) days’ notice. The Company uses the office for software development and technical support.
Employment Agreement
The Company has not entered into a formalized employment agreement with its Chief Executive Officer (“CEO”gave all salary compensation to key executives as independent contractors, where Eaglstein, Firoz, and Platt commit one hundred percent (100%) andof their time to the Chief Financial Officer (“CFO”), collectively Officers. Effective September 2018, the CEO and the CFO have agreed to receive monthly compensation of $5,000. There are also provisions for performance-based bonuses.Company. The Company has not formalized these agreements.performance bonuses and other incentive plans. Each executive is paid every month at the beginning of the month. From September 2018 to September 30, 2020, the Company is paying a monthly compensation of $5,000 per month to its CEO and CFO; respectively, with increases, each succeeding year should the agreement be approved annually by the Company. Effective October 1, 2020, the Company expenses $12,000 monthly to its CEO and CFO.
Accrued Interest
At September 30, 2020,2021, and December 31, 2019,2020, the cumulative accrued interest at 6%6% per annum on FRH Group Note(s) defined as a related-party accrued interest - current was $241,908,$0, and $196,908$256,908, respectively.
At September 30, 2021, and December 31, 2020, the cumulative accrued interest for SBA and other loans defined as an accrued interest – non-current was $7,799, and $3,856, respectively.
Pending Litigation
The management is unaware of any actions, suits, investigations, or proceedings (public or private) pending against or threatened against or affecting any of the assets or any affiliate of the Company.
Tax Compliance Matters
The Company has estimated payroll tax liabilities based on its officers’ reclassification from independent contractors to employees from the fiscal ended December 31, 2017, to 2019.2020. As of September 30, 2020,2021, the Company has assessed federal and state payroll tax payments in the aggregate amount of $15,427,$155,203, and we have included it in the General and administrative expenses.
NOTE 10. 9. STOCKHOLDERS’ DEFICITEQUITY (DEFICIT)
Authorized Shares
On February 12, 2021, the Company filed the Certificate of Amendment with the Secretary of State of Deleware to change authorized shares. As per the Amendment, the Company shall have authority to issue shares, consisting of shares of Common Stock having a par value of $ per share and shares of Preferred Stock having a par value of $ per share.
As of September 30, 2020,2021, and December 31, 2019,2020, the Company’s authorized capital stock consists of shares of preferred stock, par value $0.0001$ per share, and 100,000,000 shares of common stock, par value $0.0001$ per share. As of September 30, 2020,2021, and December 31, 2019,2020, the Company had 68,626,332 and 68,626,332,, respectively, common shares issued and outstanding and preferred shares issued and outstanding. The preferred stock has fifty votes for each share of preferred shares owned. The preferred shares have no other rights, privileges, and higher claims on the Company’s assets and earnings than common stock.
Preferred Stock
On December 12, 2016, the Board agreed to issue , , and shares of Preferred Stock to Mitchell Eaglstein, Imran Firoz, and FRH Group, respectively, as the founders in consideration of services rendered to the Company. As of September 30, 2020,2021, the Company had preferred shares issued and outstanding.
Common Stock
On January 21, 2016, the Company collectively issued and common shares at par value to Mitchell Eaglstein and Imran Firoz, respectively, as the founders considered the Company’s services.
On December 12, 2016, the Company issued common shares to the remaining two founding members of the Company.
On March 15, 2017, the Company issued restricted common shares for platform development valued at $50,000.$50,000. The Company issued the securities with a restrictive legend.
On March 15, 2017, the Company issued restricted common shares for professional services to three individuals valued at $75,000.$75,000. The Company issued the securities with a restrictive legend.
On March 17, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued shares to Susan Eaglstein for a cash amount of $50,000.$50,000. The Company issued the securities with a restrictive legend.
Note 10 – Stockholders’ Deficit
NOTE 9. STOCKHOLDERS’ EQUITY (DEFICIT) (continued)
On March 21, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued shares to Bret Eaglstein for a cash amount of $20,000.$20,000. The Company issued the securities with a restrictive legend.
Ms. Eaglstein and Mr. Eaglstein are the Mother and Brother, respectively, of Mitchell Eaglstein, the CEO and Director of the Company.
From July 1, 2017, to October 03, 2017, the Company has issued units for a cash amount of $98,000$ under its offering Memorandum, where the unit consists of one share of common stock and one Class A warrant (See Note 11).
On October 31, 2017, the Company issued restricted common shares to a management consultant valued at $10,500.$10,500. The Company issued the securities with a restrictive legend.
On January 15, 2019, the Company issued restricted common shares for professional services to ten (10) consultants valued at $9,000.$9,000.
From January 29, 2019 to February 15, 2019, the Company issued registered shares under the Securities Act of 1933 for a cash amount of $4,950.$4,950. On February 26, 2019, the Company filed the Post-Effective Amendment No. 1 (the “Amendment”) related to the Registration Statement on Form S-1and its amendments thereto, filed with the U.S. Securities and Exchange Commission on November 22, 2017, and declared effective on August 7, 2018 (Registration No. 333-221726) (the “Registration Statement”) of FDCTech, Inc., a Delaware corporation (the “Registrant”), amended the Registration Statement to remove from registration all shares of common stock that were offered for sale by the Registrant but were not sold prior to the termination of the offering made pursuant to the Registration Statement. At the termination of the offering made pursuant to the Registration Statement, shares of common stock which were offered for sale by the Registrant were not sold or issued.
Effective June 03, 2020, the Company issued shares to Benchmark Investments, Inc. (“Broker-Dealer” or “Kingswood Capital Markets”) of common stock at $0.25$ per share for a total value of $686,263.$686,263. The Broker-Dealer is retained to provide general financial advisory to the Company for the next twelve months. The Company has expensed the prepaid-compensationprepaid compensation through the income statement following a regular straight-line amortization schedule over the contract’s life, which is for twelve months—the time during which Kingswood Capital Markets presumably will produce benefits for the Company. On August 25, 2020, the Company and Broker-Dealer terminated all obligations other than maintaining confidentiality, with no fees due by the Company to the Broker-Dealer. The Broker-Dealer agreed to return the shares of the Company’s common stock.
On January 27, 2021, the Company issued restricted common shares to two consultants valued at $621,000. The Company issued the securities with a restrictive legend.
On May 19, 2021, Company issued restricted common shares to a consultant valued at $350,000. The Company issued the securities with a restrictive legend.
On June 02, 2021, Company issued restricted common shares to a consultant valued at $437,500. The Company issued the securities with a restrictive legend.
On June 15, 2021, Company issued restricted common shares to one of the Board of Directors valued at $21,000. The Company issued the securities with a restrictive legend.
On July 06, 2021, Company issued restricted common shares to one of the Board of Directors valued at $22,000. The Company issued the securities with a restrictive legend.
On July 20, 2021, Company issued restricted common shares to a consultant valued at $98,253. The Company issued the securities with a restrictive legend.
Between September 9 -16, 2021, Company issued restricted common shares to AD Securities America LLC according to the subscription agreements valued at $200,000.
On September 10, 2021, Company issued common shares without restriction to White Lion LLC according to the security purchase and registration agreement valued at $80,400.
On August 24, 2021, after the termination of the Genesis Agreement, the Company rescinded the restricted common shares issued on June 02, 2021, to a consultant valued at $437,500. Both parties signed the cancellation agreement on October 5, 2021.
| F-22 |
NOTE 11. 10. WARRANTS
Effective June 1, 2017, the Company planned to raise $600,000$600,000 through a Private Placement Memorandum (the “Memorandum”) of up to Units. Each unit (a “Unit”) consists of one share of Common Stock, par value $.0001$ per share (the “Common Stock) and one redeemable Class A Warrant (the “Class A Warrant(s)”) of the Company. The Company closed the private placement effective December 15, 2017.
Each Class A Warrant entitles the holder to purchase one (1)(1) share of Common Stock for $0.30$ per share at any time until April 30, 2019 (‘Expiration Date’). The Company issued the securities with a restrictive legend.
Information About the Warrants Outstanding During Fiscal 2020 Follows
| Original Number of Warrants Issued | Exercise Price per Common Share | Exercisable at December 31, 2019 | Became Exercisable | Exercised | Terminated / Canceled / Expired | Exercisable at September 30, 2020 | Expiration Date | |||||||||||||||||||||
| 653,332 | $ | 0.30 | - | - | - | 653,332 | - | April 2019 | ||||||||||||||||||||
SCHEDULE OF WARRANTS ACTIVITY
Original Number of Warrants Issued | Exercise Price per Common Share | Exercisable at December 31, 2020 | Became Exercisable | Exercised | Terminated / Canceled / Expired | Exercisable At September 30, 2021 | Expiration Date | |||||||||||||||||||||
| 653,332 | $ | 0.30 | - | - | - | 653,332 | - | April 2019 | ||||||||||||||||||||
The Warrants are redeemable by the Company, upon thirty (30) day notice, at a price of $.05$.05 per Warrant, provided the average of the closing bid price of the Common Stock, as reported by the National Association of Securities Dealers Automated Quotation (“NASDAQ”) System (or the average of the last sale price if the Common Stock is then listed on the NASDAQ National Market System or a securities exchange), shall equal or exceed $1.00$ per share (subject to adjustment) for ten (10)(10) consecutive trading days prior to the date on which the Company gives notice of redemption. The holders of Warrants called for redemption have exercise rights until the business’s close on the date fixed for redemption.
The exercise price and a number of shares of Common Stock or other securities issuable on exercise of the Warrants are subject to adjustment in certain circumstances, including in the event of a stock dividend, recapitalization, reorganization, merger, or consolidation of the Company. However, no Warrant is subject to adjustment for issuances of Common Stock at a price below the exercise price of that Warrant.
As of the date of this report, the holders have not exercised any Class A Warrants. All Class A Warrants have expired.
NOTE 12. 11. OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements, including arrangements that would affect our liquidity, capital resources, market risk support, and credit risk support, or other benefits.
NOTE 13. 12. SUBSEQUENT EVENTS
In March 2020,On October 04, 2021, the World Health Organization declaredCompany filed a prospectus that relates to the outbreakresale of up to shares of our Common Stock issued or issuable to selling shareholders for up to $2,200,000, including (i) up to shares issued to AD Securities America, LLC, (ii) up to issuable to White Lion Capital, LLC (“White Lion”), according to a novel coronavirus (COVID-19)“Purchase Notice Right” under an Investment Agreement and (iii) shares issued to White Lion as a pandemic that continuescommitment fee associated with the Investment Agreement. The Company is yet to spread throughoutreceive the United States. Whilefunds at the outbreak was initially concentrated in China, it has now spread to several other countries, including Russia and Cyprus, and infections have been reported globally. Many countries worldwide, including in the United States, have significant governmental measures being implemented to control the spread of the virus, including temporary closure of businesses, severe restrictions on travel and the movement of people, and other material limitations on the conduct of business. These measures have resulted in work stoppages, absenteeism in the Company’s labor workforce, and other disruptions. The extent to which the coronavirus impacts our operations will depend on future developments. These developments are highly uncertain. We cannot predict them with confidence, including the duration and severity of the outbreak and the actions required to contain the coronavirus or treat its impact. In particular, the continued spread of the coronavirus globally could adversely impact our operations and workforce, including our marketing and sales activities and ability to raise additional capital, which could harm our business, financial condition, and results of operation.filing date.
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
This Quarterly Report Form 10-Q contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with the unaudited condensed financial statements and accompanying notes and the other financial information appearing elsewhere in this report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events.
The Company intends to build a diversified global financial services company driven by proprietary Condor trading technologies, complementary regulatory licenses, and a proven executive team. The Company plans to acquire, integrate, transform, and scale legacy financial service companies. The Company believes that its proprietary technology and software development capabilities allow legacy financial services companies immediate exposure to –forex, stocks, ETFs, commodities, crypto, social/copy trading, and other high-growth fintech markets.
The Company has completed the Condor Pro Multi-Asset Trading Platform, previously known as Condor FX Pro Trading Platform. The Condor Pro Multi-Asset Trading Platform is a commercial trading platform targeted at day traders and retail investors. The industry characterized such platforms by the ease of use and various helpful features, such as the simplified front-end (user interface/user experience), back-end (reporting system), news feeds, and charting system. The Condor Pro Multi-Asset Trading Platform further includes risk management (dealing desk, alert system, margin calls, etc.), pricing engine (best bid/ask), and connectivity to multiple liquidity providers or market makers. We have tailored the Condor Pro Multi-Asset Trading Platform to different markets, such as forex, stocks, commodities, cryptocurrencies, and other financial products.
The Company currently has four (4)six (6) licensing agreements for its Condor FXPro Multi-Asset Trading Platform. The Company is continuously negotiating additional licensing agreements with several retail FXforex brokers forto use the use of Condor FX Pro Multi-Asset Trading Platform. At the time of this report’s release, theThe Company has developed two versions of each of the Condor FXforex Pro Web and Mobile Trading Platform.
The Company has upgraded its Condor Back Office (Risk Management) to meet the regulatory requirements under various jurisdictions. Condor Back Office meets the directives under Markets in Financial Instruments Directive (MiFID II/MiFIR), legislation by European Securities and Market Authority (ESMA) implemented across the European Union on January 3rd,3, 2018. InThe Company released, marketed, and distributed its Condor Pro Multi-Asset Trading Platform, allowing traders to trade on in the second quarter of the fiscal year ending December 31, 2019, the Company released, marketed, and distributed its Condor FX Pro Trading Terminal, allowing traders to trade on Condor FX Pro Trading front-end and other industry trading platform via a single wallet.2019. The Company has developed the Condor Back Office API to integrate any third-party CRM and banking systems to Condor Back Office.
The Company completed the basic version of its Crypto Web Trader in December 2018. The Company is currently evaluating the demand for its Crypto Web Trader and expects to launch its crypto exchange platform by the firstthird quarter of the fiscal year ended December 31, 2021.
The Company has prepared consolidated financial statements on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitmentsis in the ordinary business course.process of developing Condor Stocks and an ETF platform. The Company has earned $1,741,770 in revenues from January 21, 2016 (inception)expects to September 30, 2020. Forcommercialize the three months ended September 30, 2020,Condor Stocks and 2019,ETF platform by the Company earned revenues of $43,000 and $57,760, respectively. For the nine months ended September 30, 2020, and 2019, the Company earned revenues of $173,407 and $324,562, respectively.
As of September 30, 2020, the Company has issued four convertible notes collectively known as FRH Group Note (“Note for net cash proceeds of $1,000,000. The Company has extended the maturity dateend of the FRH Group Note to September 30, 2020. On April 24, 2020,fourth quarter of the Company further extended the FRH Group Note’s maturity date tofiscal year ended December 31, 2020.2021.
The Company secures and earns revenues by signing an agreement with its customers. The Company considers a signed agreement with its customers, a binding contract with the customer, or other similar documentation reflecting the terms and conditions under which the Company will provide products or services as persuasive evidence of an arrangement. Each agreement is specific to the customer and clearly defines each party’s fee schedule, duties and responsibilities, renewal and termination terms, confidentiality agreement, dispute resolution, and other clauses necessary for such agreement.contract. The material terms of contracts with customers depend on the nature of services and solutions. Each contract is specific to the customer and clearly defines each party’s fee schedule, duties and responsibilities, renewal and termination terms, confidentiality agreement, dispute resolution, and other clauses necessary for such contract.
The Company acts as a technology provider and software developer in the cryptocurrency or digital asset space. The Company does not mine any digital assets or trade or act as a counterparty in cryptocurrencies. Consequently, the Company does not intend to register as a custodian with state or federal regulators, including but not limited to obtaining a money service business or money transmitter license with Financial Crimes Enforcement Network (FinCEN) and respective State’s money transmission laws. The Company also does not need to register under the Securities Exchange Act of 1934, as amended, as a national securities exchange, an alternative trading system, or a broker-dealer, since the Company is not a broker-dealer nor does it intend to become a broker-dealer. In some cases, customers compensate us in Bitcoin through our custodian Gemini Trust Company, LLC (“Gemini”). Gemini is a licensed New York trust company that undergoes regular bank exams and is subject to the cybersecurity audits conducted by the New York Department of Financial Services.
The Company has prepared consolidated financial statements on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the ordinary business course. The Company has earned $2,004,775 in revenues from January 21, 2016 (inception) to September 30, 2021. For the three months ended September 30, 2021, and 2020, the Company earned $73,925 and $43,000 in revenues, respectively. For the nine months ended September 30, 2021, and 2020, the Company earned $221,003 and $173,407 in revenues, respectively.
As of December 31, 2020, the Company has issued four convertible notes collectively known as FRH Group Note (“Note for net cash proceeds of $1,000,000. The Company has extended the maturity date of the FRH Group Note to June 30, 2021. On February 22, 2021, the Company entered into an Assignment of Debt Agreement (the “Agreement”) with FRH and FRH Group Corporation. The Company eliminated all four FRH Group convertible notes, including interest, of $1,256,908, in return for the issuance of 12,569,080 of unregistered common stock of the Company (the “Shares”) to FRH. Following the Agreement, FRH assigned the Shares to FRH Group Corporation, an entity also owned by Mr. Hong.
The Company secures and earns revenues by signing an agreement with its customers. The Company considers a signed agreement with its customers, a binding contract with the customer, or other similar documentation reflecting the terms and conditions under which the Company will provide products or services as persuasive evidence of an arrangement. Each agreement is specific to the customer and clearly defines each party’s fee schedule, duties and responsibilities, renewal and termination terms, confidentiality agreement, dispute resolution, and other clauses necessary for such contract. The material terms of agreements with customers depend on the nature of services and solutions. Each agreement is specific to the customer and clearly defines each party’s fee schedule, duties and responsibilities, renewal and termination terms, confidentiality agreement, dispute resolution, and other clauses necessary for such agreement.contract.
| 4 |
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic that continues throughout the United States. While the outbreak was initially concentrated in China, it spread to several other countries, including Russia and Cyprus, and reported infections globally. Many countries worldwide, including in the United States, have significant governmental measures being implemented to control the spread of the virus, including temporary closure of businesses, severe restrictions on travel and the movement of people, and other material limitations on the business. These measures have resulted in work stoppages, absenteeism in the Company’s labor workforce, and other disruptions. The extent to which the coronavirus impacts our operations will depend on future developments. These developments are highly uncertain. We cannot predict them with confidence, including the duration and severity of the outbreak and the actions required to contain the coronavirus or treat its impact. In particular, the continued spread of the coronavirus globally could adversely impact our operations and workforce, including our marketing and sales activities and ability to raise additional capital, which could harm our business, financial condition, and operation results.
Financial Condition at September 30, 2020
At September 30, 2020, the current portion of convertible notes payable and accrued interest was $1,000,000 and $241,908, respectively. There was no non-current portion of convertible notes payable and accrued interest. 2021
On September 30, 2020,2021, the accumulated deficit was $1,312,011. $2,471,917. Our cash balance is $4,251 as of September 30, 2021. On October 04, 2021, the Company filed a prospectus that relates to the resale of up to 22,670,000 shares of our Common Stock issued or issuable to selling shareholders for up to $2,200,000, including (i) up to 2,000,000 shares issued to AD Securities America, LLC, (ii) up to 20,000,000 issuable to White Lion Capital, LLC (“White Lion”), according to a “Purchase Notice Right” under an Investment Agreement and (iii) 670,000 shares issued to White Lion as a commitment fee associated with the Investment Agreement. The Company is yet to receive the funds. If we are unsuccessful in raising funds from the sale of 22,670,000 shares, we do not believe our current cash balance is sufficient to fund our operations.
The Company received $50,632 from Cares Act’s Paycheck Protection Program. No principal or interest payments will be due before the Deferment Period, which is nineten months from May 01, 2020.the end of the covered period. The Company received proceeds for one hundred and forty-four thousand nine hundred and 00/100 Dollars ($144,900.00)144,900) from the U.S. Small Business Administration (SBA). The installment payments will include principal and interest of $707 monthly, will begin Twelvebeginning twelve (12) months from the date of the promissory Note.note date. The balance of principal and interest balance will be payable Thirtythirty (30) years from the date of the promissory Note.note date. Interest will accrue at the rate of 3.75% per annum and will accrue only on $144,900 funds advanced from May 22, 2020, the advance date.
Our cash The SBA loan outstanding balance is $59,024$141,826 as of September 30, 2020. We do not believe that our cash balance is sufficient to fund our operations.2021.
At September 30, 2021, there was no current or non-current portion of convertible notes payable and accrued interest.
Between February and September 2021, the Company received $95,000 from the Officer for working capital purposes and recorded in related party advances.
The Company intends to continue its efforts to enhance its revenue from its diversified portfolio of technological solutions, become cash flow positive, and raise funds through private placement offering and debt financing. In the future, as the Company increases its customer base across the globe, the Company intends to acquire long-lived assets that will provide a future economic benefit beyond fiscal 2020.
Financial Condition at December 31, 20192020
On December 31, 2020, the accumulated deficit was $1,493,984. Our cash balance is $22,467 as of December 31, 2020. We do not believe that our cash balance is sufficient to fund our operations.
The Company received $50,632 from Cares Act’s Paycheck Protection Program. No principal or interest payments will be due ten (10) months after the covered period. The Company received proceeds for one hundred and forty-four thousand nine hundred and 00/100 Dollars ($144,900.00) from U.S. Small Business Administration (SBA). The installment payments will include the principal and interest of $707 monthly and begin Twelve (12) months from the promissory note date. The principal and interest balance will be payable Thirty (30) years from the promissory Note date. Interest will accrue at the rate of 3.75% per annum and will accrue only on $144,900 funds advanced from May 22, 2020, the advance date.
At December 31, 2019,2020, the current portion of convertible notes payable and accrued interest was $1,000,000 and $196,908,$256,908, respectively. There was no non-current portion of convertible notes payable and accrued interest.
On December 31, 2019, the accumulated deficit was $1,035,494.
Our cash balance was $27,884 as of December 31, 2019. We do not believe that our cash balance is sufficient to fund our operations.
The Company intends to continue its efforts to enhance its revenue from its diversified portfolio of technological solutions, become cash flow positive, and raise funds through private placement offering and debt financing. In the future, as the Company increases its customer base across the globe, the Company intends to acquire long-lived assets that will provide a future economic benefit beyond fiscal 2020.
RESULTS OF OPERATIONS
Three monthsMonths Ended September 30, 20202021 and 20192020
For the three months ended September 30, 2020,2021, and 2019,2020, the Company had six active six (6) and ten (10) customers, respectively.customers. Revenues generated from the top three customers represented approximately 90.70%85.71% and 90.66%90.70% of total revenue for the three months ended September 30, 2020,2021, and 2019 respectively.2020. The revenues generated for the three months ended September 30, 2021, and 2020 were $73,925 and 2019 were $43,000, and $57,760, respectively. During the three months ended September 30, 2020,2021, and 2019,2020, the Company earned a net loss of $490,391 and $53,351, and $64,180, respectively.
The total revenue breakdown for the three months ended September 30, 2020,2021, and 20192020 is below:
| Three months Ended | September 30, 2020 | September 30, 2019 | ||||||||||||||
| Three Months Ended | September 30, 2021 | September 30, 2020 | ||||||||||||||
| Revenue Description | % of Total | % of Total | % of Total | % of Total | ||||||||||||
| Technology Solutions | 100.00 | % | 100.00 | % | 69.56 | % | 100.00 | % | ||||||||
| Software Development | 30.44 | % | 0.00 | % | ||||||||||||
| Total | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | ||||||||
During the three months ended September 30, 2020,2021, and 2019,2020, the Company incurred general and administrative costs (“g and a”) of $7,796$215,039 and $55,177$7,796 (excluding amortization expenses), respectively. The decreaseincrease in g and a costs for the three months ended September 30, 20202021, is due to the reverse adjustment of financing cost.rise in legal and professional fees. The g and a expenses were 18.13%290.89% and 95.53%18.13% of the revenue for the three months ended September 30, 2020,2021, and 2019,2020, respectively. Amortization expense was $68,616 and $48,127$68,616 for the three months ended September 30, 2020,2021, and 20192020 respectively, included in the Cost of sales expense.sales. The increase in amortization expense for the three months ended September 30, 2021, and 2020, is due to the cumulative amortization expense of Condor Back Office, Condor Crypto Trading Platform, Condor FXPro Multi-Asset Trading Platform (Desktop), Condor Web Trader, and Condor WebMobile Trader.
The rental expense was $8,220$7,707 and $10,385$8,220 for the three months ended September 30, 2020,2021, and 2019,2020, respectively. Effective October 29, 2019, the Company rents its servers, computers, and data center from an unrelated third party. TheUnder the rent Agreement, the lessor provides furniture and fixtures and any leasehold improvements at 200 Spectrum Drive, Suite 300, Irvine, CA 92618, underas discussed in Note 2. Effective February 2019, the Company leases office space at Suite 205, Building 9, Potamos Germasogeia, 4047, Limassol District, Cyprus, from an unrelated party for a year. The Company uses the office for sales and marketing in Europe and Asia. The office’s rent payment is $1,750 per month, included in the General and administrative expenses. From February 2020, the Company extended the agreement for one year period at $1,750 per month. Effective April 2019, the Company leases office space at Suite 512, 83 Plan, Chelyabinsk, Russia, from an unrelated party for an eleven-month term. The office’s rent payment is $500 per month, included in the General and administrative expenses. From March 2020, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the agreement’s terms by giving thirty days’ notice. The Company uses the office for software development and technical support.
The Company incurred $277,327 and $3,894 in sales, marketing, and advertising costs (“sales and marketing”) for the three months ended September 30, 2021, and 2020. The sales and marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 375.15% and 9.06% of the sales for the three months ended September 30, 2021, and 2020. The increase in expense is mainly due to the $277,188 digital marketing and travel cost for the three months ended September 30, 2021.
| 6 |
Nine months ended September 30, 2021 and 2020
For the nine months ended September 30, 2021, and 2020, the Company had six active customers. Revenues generated from the top three customers represented approximately 78.15% and 82.74% of total revenue for the nine months ended September 30, 2021, and 2020. The revenues for the nine months ended September 30, 2021, and 2020 were $221,003 and $173,407, respectively. During the nine months ended September 30, 2021, and 2020, the Company earned a net loss of $977,933 and $276,517.
The total revenue breakdown for the nine months ended September 30, 2021, and 2020 is below:
| Nine months ended | September 30, 2021 | September 30, 2020 | ||||||
| Revenue Description | % of Total | % of Total | ||||||
| Technology Solutions | 79.87 | % | 98.82 | % | ||||
| Software Development | 17.83 | % | 0.00 | % | ||||
| Consulting | 2.29 | % | 1.18 | % | ||||
| Total | 100.00 | % | 100.00 | % | ||||
During the nine months ended September 30, 2021, and 2020, the Company incurred general and administrative costs (“g and a”) of $487,320 and $216,865 (excluding amortization expenses), respectively. The increase in g and a costs for the nine months ended September 30, 2021, is due to increased legal and professional fees. The g and a expenses were 220.50% and 125.06% of the revenue for the nine months ended September 30, 2021, and 2020, respectively. Amortization expense was $205,847 and $183,344 for the nine months ended September 30, 2021, and 2020 respectively, included in the Cost of sales. The increase in amortization expense for the nine months ended September 30, 2021, is due to the cumulative amortization expense of Condor Back Office, Condor Crypto Trading Platform, Condor Pro Multi-Asset Trading Platform (Desktop), Condor Web Trader, and Condor Mobile Trader.
The rental expense was $22,765.49 and $23,124 for the nine months ended September 30, 2021, and 2020, respectively. Effective October 29, 2019, the Company rents its servers, computers, and data center from an unrelated third party. Under the rent Agreement, the lessor provides furniture and fixtures and any leasehold improvements at 200 Spectrum Drive, Suite 300, Irvine, CA 92618, as discussed in Note 2. Effective February 2019, the Company leases office space at Suite 205, Building 9, Potamos Germasogeia, 4047, Limassol District, Cyprus, from an unrelated party for a year. The office’s rent payment is $1,750 per month, and we have included it in the General and administrative expenses. From February 2020, this agreement is extended for one year period at $1,750 per month. The Company uses the office for sales and marketing in Europe and Asia. Effective April 2019, the Company leases office space at Suite 512, 83 Plan, Chelyabinsk, Russia, from an unrelated party for an eleven monthseleven-month term. The office’s rent payment is $500 per month, and we have included it in the General and administrative expenses. From March 2020, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the agreement’s terms by giving thirty days’ notice. The Company uses the office for software development and technical support.
The Company incurred approximately $3,894$499,320 and $3,636$5,647 in sales, marketing, and advertising costs (“sales and marketing”) for the threenine months ended September 30, 2020,2021, and 2019, respectively.2020. The sales and marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 9.06%225.93% and 6.30%3.26% of the sales for the three months ended September 30, 2020,2021, and 2019 respectively.
In April 2016,2020. The increase in expense is mainly due to the Company established its wholly-owned subsidiary – FRH Prime Ltd. (“FRH Prime”), a company incorporated under section 14 of the Companies Act 1981 of Bermuda. In January 2017, FRH Prime established its wholly-owned subsidiary – FXClients Limited (“FXClients”) under the United Kingdom Companies Act 2006 as a private company. The Company established FRH Prime$493,760 digital marketing and FXClients to conduct financial technology service activities. For the three months ended September 30, 2020 and 2019, FRH Prime has generated volume rebates of $0 and $333 respectively from Condor Risk Management Back Office for MT4 Platform. The Company has included rebates in revenue in the consolidated income statements. There have been no significant operating activities in FXClients.
Nine months Ended September 30, 2020 and 2019
For the nine months ended September 30, 2020, and 2019, the Company had active six (6) and ten (10) customers, respectively. Revenues generated from the top three customers represented approximately 82.47% and 94.29% of total revenuetravel cost for the nine months ended September 30, 2020, and 2019 respectively. The revenues generated for the nine months ended September 30, 2020, and 2019 were $173,407 and $324,562, respectively. During the nine months ended September 30, 2020, and 2019, the Company earned a net loss of $276,517 and $86,022, respectively.2021.
The total revenue breakdown for the nine months ended September 30, 2020, and 2019 is below:
| Nine months Ended | September 30, 2020 | September 30, 2019 | ||||||
| Revenue Description | % of Total | % of Total | ||||||
| Technology Solutions | 98.82 | % | 100.00 | % | ||||
| Consulting | 1.18 | % | 0.00 | % | ||||
| Total | 100.00 | % | 100.00 | % | ||||
During the nine months ended September 30, 2020, and 2019, the Company incurred general and administrative costs (“g and a”) of $216,865 and $277,809 (excluding amortization expenses), respectively. The reduced g and a costs for the nine months ended September 30, 2020 is due to the lower professional & consulting fees. The g and a expenses were 125.06% and 85.60% of the revenue for the nine months ended September 30, 2020, and 2019, respectively. Amortization expense was $183,344 and $67,970 for the nine months ended September 30, 2020, and 2019 respectively, included in the Cost of sales expense. The increase in amortization expense for the nine months ended September 30, 2020, is due to the cumulative amortization expense of Condor Back Office, Condor Crypto Trading Platform, Condor FX Trading Platform (Desktop), and Condor Web Trader.
The rental expense was $23,124 and $22,909 for the nine months ended September 30, 2020, and 2019, respectively. The increase in rent expense is due to two (2) additional leases for the fiscal year ended December 31, 2019. Effective October 29, 2019, the Company rents its servers, computers, and data center from an unrelated third party. The lessor provides furniture and fixtures and any leasehold improvements at 200 Spectrum Drive, Suite 300, Irvine, CA 92618 under the rent Agreement, as discussed in Note 2. Effective February 2019, the Company leases office space at Suite 205, Building 9, Potamos Germasogeia, 4047, Limassol District, Cyprus from an unrelated party for a year. The office’s rent payment is $1,750 per month, and we have included it in the General and administrative expenses. From February 2020, this agreement is extended for one year period at $1,750 per month. The Company uses the office for sales and marketing in Europe and Asia. Effective April 2019, the Company leases office space at Suite 512, 83 Plan, Chelyabinsk, Russia, from an unrelated party for an eleven months term. The office’s rent payment is $500 per month, and we have included it in the General and administrative expenses. From March 2020, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the agreement’s terms by giving thirty days’ notice. The Company uses the office for software development and technical support.
The Company incurred approximately $5,647 and $19,817 in sales, marketing, and advertising costs (“sales and marketing”) for the nine months ended September 30, 2020, and 2019 respectively. The sales and marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 3.26% and 6.11% of the sales for the nine months ended September 30, 2020, and 2019 respectively.
In April 2016, the Company established its wholly-owned subsidiary – FRH Prime Ltd. (“FRH Prime”), a company incorporated under section 14 of the Companies Act 1981 of Bermuda. In January 2017, FRH Prime established its wholly-owned subsidiary – FXClients Limited (“FXClients”) under the United Kingdom Companies Act 2006 as a private company. The Company established FRH Prime and FXClients to conduct financial technology service activities. For the nine months ended September 30, 2020 and 2019, FRH Prime has generated volume rebates of $1,861 and $1,281 respectively from Condor Risk Management Back Office for MT4 Platform. The Company has included rebates in revenue in the consolidated income statements. There have been no significant operating activities in FXClients.
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 20202021 and December 31, 2019,2020, we had a cash balance of $59,024$4,251 and $27,884,$22,467, respectively.
In the next twelve (12) months, the Company will continue to investinvesting in sales, marketing, product support, development of new technology solutions, and enhancement of existing technology to serve our customers. We expect capital expenditures to increase to up to $100,000 in the next twelve (12) months to support the growth, which mainly includes software development and the purchase of computers and servers. Also, the Company estimates additional expenditure needed to be $200,000, which provides for $50,000 and $150,000 for sales and marketing and working capital, respectively.
We expect that the combination of existing cash, cash equivalents, cash flows from operations, and access to private equity and capital markets to be sufficient for at least the next twelve (12) months. The availability of funds will fund our operating activities, meet the need for investing and financing activities, such as debt maturities and material capital expenditures. However, we may need additional funds to achieve a sustainable sales level to fund our ongoing operations out of revenues. There is no assurance that any additional financing will be available or, if available, on terms that will be acceptable to us.
Should we require additional capital, the Company’s operations are not sufficient to fund its capital requirements. The Company may attempt to enter the restructuring of Notes, or refinance existing Notes with financial institutions or attempt to raise capital by selling additional capital stock or debt issuance. The Company intends to continue its efforts in growing its operations and raising funds through private equity and debt financing.
Between February 22, 2016, and April 24, 2017, the Company borrowed $1,000,000 from FRH Group, a founder and principal shareholder of the Company (“FRH”).shareholder. Effective June 1, 2017, we raised an aggregate of $98,000 through our common stock’s private placement to our officers, directors, friends, relatives, and business associates.
From January 29, 2019, to February 15, 2019, the Company issued 33,000 registered shares under the Securities Act of 1933 for a cash amount of $4,950. The Company closed its offering effective February 26, 2019.
On May 01, 2020, the Company received proceeds of Fifty-Thousand Six Hundred and Thirty-Two ($50,632) from the Promissory Note (“PPP Note”) under the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).
On May 22, 2020, the Company received hundred and forty-four thousand nine hundred and 00/100 Dollars ($144,900).
On July 15, 2020, the Company engaged Kingswood Capital Markets, a Benchmark Investments division, Inc., to act as its exclusive general financial advisor for strategic corporate planning and investment banking services. On August 25, 2020, the Company and Broker-Dealer terminated all obligations other than maintaining confidentiality, with no fees due by the Company to the Broker-Dealer. The Broker-Dealer agreed to return the 2,745,053 shares of the Company’s common stock.
On September 02, 2020, the Company engaged Garden State Securities Inc. (GSS) to act as its exclusive advisor for the private placement of debt or equity securities to fulfill the Company’s business plan and an offering ofoffer debt securities to assist in the Company’s acquisition strategy. The Company terminated the engagement as of June 28, 2021.
On February 22, 2021, the Company entered into an Assignment of Debt Agreement (the “Agreement”) with FRH and FRH Group Corporation. The Company eliminated all four FRH Group convertible notes, including interest, of $1,256,908, in return for the issuance of 12,569,080 of unregistered common stock of the Company (the “Shares”) to FRH. The debt reduction should enable the Company to raise capital at favorable terms and conditions.
Between February and September 2021, the Company received $95,000 from the Officer for working capital purposes and recorded in related party advances.
On October 04, 2021, the Company filed a prospectus that relates to the resale of up to 22,670,000 shares of our Common Stock issued or issuable to selling shareholders for up to $2,200,000, including (i) up to 2,000,000 shares issued to AD Securities America, LLC, (ii) up to 20,000,000 issuable to White Lion Capital, LLC (“White Lion”), according to a “Purchase Notice Right” under an Investment Agreement and (iii) 670,000 shares issued to White Lion as a commitment fee associated with the Investment Agreement. The Company is yet to receive the funds. If we are unsuccessful in raising funds from the sale of 22,670,000 shares, we do not believe our current cash balance is sufficient to fund our operations.
GOING CONCERN CONSIDERATION
We have not generated significant revenues sincefrom inception to September 30, 2020.2021. As of September 30, 2020,2021, and December 31, 2019,2020, the Company had anCompany’s accumulated a deficit of $1,312,011$2,471,917 and $1,035,494,$1,493,984, respectively. Our independent auditors included an explanatory paragraph in their report on the audited financial statements for the fiscal year ended December 31, 2019,2020, and 2018,2019, and the period from January 21, 2016 (inception) to December 31, 2016, regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that leadled to this disclosure by our independent auditors. Our financial statements do not include any adjustments related to the recoverability or classification of asset carrying amounts or the amounts and classifications of liabilities that may result shouldin the Company becompany being unable to continue as a going concern.
Critical Accounting Policies and Significant Judgments and Estimates
We have based our management’s discussion, and analysis of our financial condition and results of operations on our financial statements, which we have prepared in accordance withfollowing the U.S. generally accepted accounting principles. In preparing our financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Our actual results could differ from these estimates, and such differences could be material.material and uncertain in the current economic environment due to COVID-19.
In more detail, we have described significant accounting policies in Note 2 of our annual financial statements included in our 10-K for the fiscal year ended December 31, 2019,2020, filed with the SEC on April 6, 2020. We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as appropriate based on changing conditions.
JOBS Act Accounting Election
We are an “emerging growth company,” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued after the enactment of the JOBS Act until those standards apply to private companies. As an emerging growth company, we have applied for exemption; as a result, the Company may delay the adoption of certain accounting standards until the standards would otherwise apply to private companies.
Off-Balance Sheet Arrangements and Contractual Obligations
We have not engaged in any off-balance sheet arrangements as defined in Item 303(c) of the SEC’s Regulation S-B. We did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes.
Recent Accounting Pronouncements
The amendments in the ASU are effective for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. We have adopted this ASU as of March 31, 2020 for ASC 606, Revenue Recognition and Amended ASU 2016-02, Leases (Topic 840). The ASU is currently not expected to have a material impact on our consolidated financial statements. While we have described significant accounting policies in more details in Note 2 of our annual financial statements included in our 10-K for the fiscal year ended December 31, 2019,2020, filed with the SEC on April 6, 2020, we believe the accounting policies as described in Note 2 to be critical to the judgments and estimates used in the preparation of our financial statements.
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS. |
Not Applicable.
| ITEM 4. | CONTROLS AND PROCEDURES. |
Evaluation of Disclosure Controls and Procedures
We evaluated the effectiveness of disclosure controls and procedures as of the end of the period covered by this report under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures as of September 30, 20202021 were not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The term “disclosure controls and procedures,” as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Notwithstanding the identified material weaknesses, management believes the financial statements included in this quarterly report on Form 10-Q fairly represent in all material respects our financial condition, results of operations, and cash flows at and for the periods presented in accordance with U.S. GAAP.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the three months ended September 30, 20202021 and 2019,2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| ITEM 1. | LEGAL PROCEEDINGS. |
There are no legal proceedings against the Company, and the Company is unaware of any proceedings contemplated against it.
| Item 1A. | Risk Factors. |
In accordance with the requirements of Form 10-Q, the Company, as a smaller reporting company, is not required to make the disclosure under this item.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
None
| Item 3. | Defaults Upon Senior Securities. |
None
| Item 4. | Mine Safety Disclosures. |
None
| Item 5. | Other Information. |
None
| Item 6. | Exhibits. |
(a) Exhibits.
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| FDCTECH, INC. | |
| Date: November 05, | /s/ Mitchell Eaglstein |
Mitchell Eaglstein, President and CEO (Principal Executive Officer) |
| Date: November 05, | /s/ Imran Firoz |
Imran Firoz, CFO (Principal Accounting Officer) |