| Summary of Significant Accounting Policies | Note 2 - Summary of Significant Accounting
Policies Basis of Presentation and Principles
of Consolidation The accompanying consolidated financial
statements include the accounts of FDCTech, Inc. and its wholly-owned subsidiary. We have eliminated all intercompany balances
and transactions. The Company has prepared the consolidated financial statements in a manner consistent with the accounting policies
adopted by the Company in its financial statements. The Company has measured and presented the consolidated financial statements
of the Company in US Dollars, which is the currency of the primary economic environment in which the Company operates (also known
as its functional currency). In our opinion, the unaudited interim
condensed consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair presentation
of our financial position as of September 30, 2018, our results of operations for the three and nine months ended September 30,
2018 and 2017, and our cash flows for the nine months ended September 30, 2018 and 2017. The results of operations for the three
and nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the year ending December
31, 2018. Financial Statement Preparation
and Use of Estimates The Company prepared consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The
preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments
and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the consolidated
financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Estimates include revenue
recognition, the allowance for doubtful accounts, website and internal-use software development costs, recoverability of intangible
assets with finite lives and other long-lived assets. Actual results could materially differ from these estimates. Cash and Cash Equivalents Cash and cash equivalents include cash
on hand, deposits held with banks, and other short-term highly liquid investments with original maturities of three months or less.
The Company regularly maintains cash more than federally insured limits at financial institutions. On September 30, 2018, and December
31, 2017, the Company had $239,214 and $464,303 cash and cash equivalent held at the financial institution. Accounts Receivable Accounts Receivable primarily represents
the amount due from ten (10) customers. In some cases, Receivables from the customer 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 from 30 days after the date of the invoice.
The Company has based the allowance for doubtful accounts on its assessment of the collectability of customer accounts. The Company
regularly reviews the allowance by considering factors such as historical experience, credit quality, the age of the accounts receivable
balances, economic conditions that may affect a customer’s ability to pay and expected default frequency rates. Trade receivables
are written off at the point when they are considered uncollectible. At September 30, 2018, and December
31, 2017, the Company has determined that allowance for doubtful accounts was $42,350 and $19,000 respectively. Bad debt expense
for the nine months ended September 30, 2018, and 2017 was $42,275 and $0 respectively. Sales, Marketing and Advertising The Company recognizes sales, marketing,
and advertising expenses when incurred. The Company incurred $58,201 and $123,995
in sales, marketing and advertising costs (“sales & marketing”) for the nine months ended September 30, 2018, and
2017 respectively. The sales & marketing cost mainly included travel costs for tradeshows, customer meet and greet, online
marketing on industry websites, press releases, and public relation activities. The sales, marketing, and advertising expenses
represented 13.77% and 29.16% of the sales for the nine months ended September 30, 2018, and 2017 respectively. Office Lease At present, the Company leases office
space at 1460 Broadway, New York, NY 10036. As per the Commitment Term of the lease (“Agreement”), this Agreement shall
continue on a month-to-month basis (any term after the Commitment Term, also known as “Renewal Term”). The Commitment
Term and all subsequent Renewal Terms shall constitute the “Term.” The Company may terminate this Agreement by delivering
to the lessor Form (“Exit Form”) at least one (1) full calendar month before the month in which the Company intends
to terminate this Agreement (“Termination Effective Month”). The rent payment or membership fee at the office is $890
per month, and we have included it in the General and administrative expense. From January 1, 2018, to July 31, 2018, the Company
has received a discount of $890 per month on its rent payment. This agreement continues indefinitely on a month-to-month basis
until the Company choose to terminate in accordance with the terms of the agreement. Revenue Recognition In general, the Company recognizes revenue
when (i) persuasive evidence of an arrangement exists, (ii) consulting services have been rendered and software delivered to the
customer, (iii) the fee is fixed or determinable and (iv) collectability is reasonably assured. In instances where the customer
specifies final acceptance of the product, system, or solution, revenue is deferred until all acceptance criteria have been met.
Software subscription revenue is deferred and recognized ratably over the subscription term upon delivery of the first product
and commencement of the term. Technical support and consulting services revenue are deferred and recognized ratably over the period
during which the services are to be performed, which is typically one (1) year. Transactional advanced services revenue is recognized
upon delivery or completion of performance milestones. The Company considers a signed agreement,
a binding contract with the customer or other similar documentation reflecting the terms and conditions under which products or
services will be provided to be persuasive evidence of an arrangement. Revenue from Consulting Services The Company enters into legally enforceable
rights and obligations consulting service contract with its customers which include turnkey business solutions – Start-Your-Own-Brokerage
(“SYOB”) and Start-Your-Own-Prime Brokerage (“SYOPB”). The Company delivers goods and services at each
stage where Customer can benefit from the good or service either on its own or together with other resources that are readily available
to the customer. The contract contains performance obligations as listed below which are separately identifiable from other promises
in the contract.
● Develops and Implements Corporate Strategy,
● Arranges Liquidity and Counterparty Risk Management,
● Designs and Build B2B Website,
● Trains and Develops B2B Sales and Marketing Division,
● Provides Marketing and Branding Material,
● Integrates Condor Back Office to MT4, FIX Platform with Complete Technical Support, and
● Other services to operate a successful Primer Brokerage business. The Company recognizes the consulting
revenues when the Customer obtains control of the above deliverables. Further, the Company has an enforceable right to payment
for performance completed monthly. According to U.S. GAAP, the Company considers its consulting service contracts as mainly simple
fixed-price contracts for an initial term of one (1) year. As compensation for the consulting services rendered by the Company,
the customer agrees to pay in cash (all quoted in U.S. Dollars) a non-refundable non-recurring set-up fee and a monthly recurring
maintenance fee. In some cases, the Company may earn
variable revenue based on profit sharing from Customer. In such situations, the Company uses the most likely amount method –
the single most likely contract outcome, where it is entitled to earn a minimum maintenance fee. The Company estimates that it receives
fair market value for its services based on the estimation that the price that the customer would pay for similar goods or services
in the forex market. According to the terms and conditions of the contract, the Company invoices the customer at the beginning
of the month for services delivered for the month. The invoice amount is due upon receipt. The Company recognizes the revenue at
the end of each month which is equal to the invoice amount. Revenue from Technology Solutions The Company enters into a legally enforceable
rights and obligations technology solutions contract with its customers which include licensing and volume (usage/metered) fees
for its technology solutions:
● Condor Risk Management Back Office for MT4 Platform (licensing and volume-based fees)
● Condor FX Pro Trading Terminal
● Condor Pricing Engine
● Sale of Source Code After receiving the signed copy of the
contract, the Company transfers all the ownership, and access to the technology mentioned above solutions to the customer along
with login credentials. According to U.S. GAAP, the Company
considers its technology solution contracts as mainly simple fixed-price contracts, independent of many users, and for an initial
term of one (1) year. As compensation for these technology solutions delivered by the Company, the customer agrees to pay in cash
(all quoted in U.S. Dollars) a non-refundable recurring monthly usage fee. The Company does not provide any concessions and extensions
to make the revenues uncollectible. The Company estimates that it receives
fair market value for its services based on the estimation that the price that the customer would pay for similar goods or services
in the forex market. According to the terms and conditions of the contract related to Technology Solutions is considered as software-as-a-service
(“SaaS”), excluding the sale of Source Code, where the Company recognized revenue under a multiple-element arrangement.
The Company invoices the customer at the beginning of the month for services delivered for the month. The invoice amount is due
upon receipt. The Company recognizes the revenue at the end of each month which is equal to the invoice amount. In such situations,
Company’s revenues consist of SaaS offerings, time-based software subscriptions, and perpetual software license sale arrangements
that also, typically, include hardware, maintenance/technical support and professional services elements associated with the agreement.
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable,
and collectability is probable. The Company recognizes software and
software-related elements as per Accounting Standards Codification (“ASC”) 985-605 Software Revenue Recognition. In
May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09
supersedes a majority of existing revenue recognition guidance under US GAAP and requires companies to recognize revenue when it
transfers goods or services to a customer in an amount that reflects the consideration to which a company expects to be entitled
and is the effective date for fiscal years beginning after December 15, 2017. The Company recognizes the Non-software revenue elements
of Technology Solutions as per ASC 605-25. Revenue Recognition Multiple-Element
Arrangements. Since we currently offer our software solutions under either a perpetual license, time-based subscription or SaaS
model, revenue recognition timing varies based on which form of software rights the customer purchases. In June 2017, the Company
completed initial due diligence and advanced negotiation with technology division of a qualified bank for the sale of its source
code (“code”) of FX trading platform (“Platform”) on a non-exclusive basis. The Company entered into a definitive
asset purchase agreement on July 19, 2017, to sell the code, installation, and future development for a value of two hundred and
fifty thousand ($250,000) dollars. The first part was the sale of source code and installation and the second part consisted of
the future development of the Platform, which is not essential to the functionality of the Platform, as third parties or customer(s)
themselves can perform these services. By December 31, 2017, the Company has received the two installments totaling one hundred
and sixty thousand ($160,000) dollars for the source code and successful installation of the Platform. The Company has recognized
the revenue of $160,000 for the fiscal year ended December 31, 2017. On September 30, 2018, the Company wrote-off a software development
revenue equaling $18,675 for the fiscal year ended December 31, 2017, for accounts receivable which were over ninety days. However,
in August 2018, the Company signed the second amendment to the asset purchase agreement, whereby purchaser issued to the Company
seventeen thousand, seven hundred and fifty dollars ($17,750) as full and final settlement of all past delivered services. The
Company received the funds in September 2018. As per the Agreement, the sale of the
source code is a multiple-element arrangement that includes software, installation, maintenance/support, development, and professional
services. In such SaaS arrangement, the Company allocates the value of the SaaS arrangement to each separate unit of accounting
based on vendor-specific objective evidence (“VSOE”) of selling price, when it exists, third-party evidence of selling
price for like services or best estimated selling price. Revenue allocated to the SaaS/software subscription element is recognized
ratably over the non-cancellable term of the SaaS/subscription service. Revenue allocated to software licensing and non-software
elements, and other units of accounting included in the arrangement are recognized as below: Revenue from Sale of Software Under
Multiple-Element Arrangement
● the sale of source code recognized on the date the Company deliver the software to the customer if VSOE of fair value exists for all undelivered elements of the software arrangement,
● If VSOE of fair value does not exist for an undelivered element, we defer the entire software arrangement and recognize it ratably, over the remaining non-cancellable maintenance term, after we have delivered all other undelivered elements,
● VSOE of fair value for our maintenance, training and installation services on the prices charged for these services when sold separately. Revenue from Sale of Professional
Services, Technical Support, and Maintenance Under Multiple-Element Arrangement
● these elements are not essential to the functionality of the software and as such are treated as non-software elements for revenue recognition purposes;
● professional services offerings which typically include data migration, set up, training, additional development, and implementation services are also not essential to the functionality of our products, as third parties or customers themselves can perform these services. Set up and implementation services typically occur at the start of the software arrangement while specific other professional services, depending on the nature of the services and customer requirements, may occur several months later. The Company can reasonably estimate professional services performed for a fixed fee and recognize them on a proportional performance basis. The Company recognizes revenue for professional services engagements billed on a time and materials basis as we deliver the services. The Company recognizes revenues on all other professional services engagements upon the earlier of the completion of the services deliverable or the expiration of the customer’s right to receive the service.
● technical support and maintenance revenues are recognized ratably over the non-cancellable term of the support agreement. Initial maintenance/support terms are typically one to three years and are renewable on an annual basis. The Company does not recognize revenue
for agreements with rights of return, refundable fees, cancellation rights or substantive acceptance clauses until these return,
refund or cancellation rights have expired, or acceptance has occurred. Our arrangements with resellers do not allow for any rights
of return. Deferred revenue includes amounts received
from customers more than the revenue the Company recognizes and includes deferred maintenance, service, and other revenue. The
Company recognizes deferred revenues when the Company completes the service and over the terms of the arrangements, primarily ranging
from one to three years. Revenue from Software Development The Company takes on design-build software
development projects for customers, where the Company develops the project to meet the design criteria and performance requirements
as specified in the Software Development Agreement (“Agreement”). The Agreement is legally enforceable rights and obligations
contract, mainly simple fixed price contracts, and valid for the duration of the project. These projects often include customized
front-end and back-end development for OTC Online brokers. The Company is paid a monthly software development fee for the term
of the Agreement. The Company has included revenues from technical support, and after sale development, it provides as part of
the sale of Source Code under the Software Development. According to the terms and conditions
of the contract, the Company invoices the customer at the beginning of the month for services delivered for the month. The invoice
amount is due upon receipt. The Company recognizes the revenue at the end of each month which is equal to the invoice amount. Concentrations of Credit Risk Cash The Company maintains its cash balances
at a single financial institution. The balances do not exceed FDIC limits as of September 30, 2018. The balances exceeded FDIC
limits as of December 31, 2017. Revenues For the nine months ended September
30, 2018, and 2017, the Company had thirteen (13) and seven (7) active customers respectively. Revenues generated from the top
three (3) customers represented approximately 60.61% and 83.10% of total revenue for the nine months ended September 30, 2018,
and 2017 respectively. Accounts Receivable At September 30, 2018, and December
31, 2017, Company’s top four (4) customers comprise roughly 84.11% and 62.68% of total A/R, respectively. The loss of any
of the top four customers would have a significant impact on the Company’s operations. Legal Proceedings The Company discloses a loss contingency
if there is at least a reasonable possibility that a material loss has incurred. The Company records its best estimate of loss
related to pending legal proceedings when the loss is considered probable, and the amount can be reasonably estimated. Where the
Company can reasonably estimate a range of loss with no best estimate in the range, the Company records the minimum estimated liability.
As additional information becomes available, the Company assesses the potential liability related to pending legal proceedings
and revises its estimates and updates its disclosures accordingly. The Company’s legal costs associated with defending itself
are recorded to expense as incurred. The Company currently is not involved
in any litigation. Impairment of Long-Lived Assets The Company reviews long-lived assets
for impairment in accordance with FASB ASC 360, Property, Plant and Equipment. Under the standard, long-lived assets are tested
for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. An
impairment charge is recognized for the amount if and when the carrying value of the asset exceeds the fair value. On September
30, 2018, and December 31, 2017, there are no impairment charges. Provision for Income Taxes The provision for income taxes is determined
using the asset and liability method. Under this method, deferred tax assets and liabilities are calculated based upon the temporary
differences between the consolidated financial statement and income tax bases of assets and liabilities using the enacted tax rates
that are applicable in each year. The Company utilizes a two-step approach
to recognizing and measuring uncertain tax positions (“tax contingencies”). The first step is to evaluate the tax position
for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will
be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit
as the largest amount which is more than 50% likely to be realized upon ultimate settlement. The Company considers many factors
when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments, and which may not accurately
forecast actual outcomes. The Company includes interest and penalties related to tax contingencies in the provision of income taxes
in the consolidated statements of operations. Management of the Company does not expect the total amount of unrecognized tax benefits
to change in the next 12 months significantly. Software Development Costs By ASC 985-20, Software development
costs, including costs to develop software sold, leased, or otherwise marketed, that are incurred after the establishment of technological
feasibility are capitalized if significant. Capitalized software development costs are amortized using the straight-line amortization
method over the estimated useful life of the application software. By the end of February 2016, the Company completed the activities
(planning, designing, coding, and testing) necessary to establish that it can produce the Condor FX Back Office for MT4 Version,
Condor FX Pro Trading Terminal Version, Condor Pricing Engine, and Crypto Web Trader Platform meet its design specifications. The
Company estimates the useful life of the software to be three (3) years. Amortization expense was $6,480 and
$6,480 for the nine months ended September 30, 2018, and 2017 respectively and the Company classifies such cost as the Cost of
Sales. The Company capitalizes significant
costs incurred during the application development stage for internal-use software. The Company does not believe that capitalization
of software development costs is material to date. Convertible Debentures Accounting for convertible instruments
(ASC 470-20), convertible instruments (primarily convertible debt and convertible preferred stock) should be further analyzed when
the embedded conversion feature is not bifurcated pursuant to ASC 815, including ASC 815-40, because there may be further accounting
for the conversion option. The cash conversion guidance in ASC
470-20, Debt with Conversion and Other Options, is considered when evaluating the accounting for convertible debt instruments (this
includes certain convertible preferred stock that is classified as a liability) to determine whether the conversion feature should
be recognized as a separate component of equity. The cash conversion guidance applies to all convertible debt instruments that
upon conversion may be settled entirely or partially in cash or other assets where the conversion option is not bifurcated and
separately accounted for pursuant to ASC 815. If the conversion features of conventional
convertible debt provide for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion
feature (“BCF”). The Company records BCF as a debt discount pursuant to ASC Topic 470-20, Debt with Conversion and
Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company
amortizes the discount to interest expense over the life of the debt using the effective interest method. As of September 30, 2018, 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. Due to the debt extension of the first three tranches of FRH Group convertible notes, Management performed an analysis
to determine the fair value of the BCF on these tranches, and noted that the value of the BCF for each note was insignificant,
thus no debt discount was recorded as of September 30, 2018. For FRH Group convertible note dated
April 24, 2017, the value of the stock at issuance date was above the floor conversion price; this feature is characterized as
a beneficial conversion feature (“BCF”). The Company records a BCF as a debt discount pursuant to ASC Topic 470-20
“Debt with Conversion and Other Options.” As a result, the convertible debt is recorded net of the discount related
to the BCF, and as of December 31, 2017, the Company has amortized the discount of $97,996 to interest expense at the date of issuance
because the debt is convertible at the date of issuance. The $97,996 amount equaled to the intrinsic
value and the Company allocated it to additional paid-in capital in 2017. Basic and Diluted Loss per Share The Company follows ASC 260, Earnings
Per Share, to account for earnings per share. Basic earnings per share (“EPS”) calculations are determined by dividing
net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share calculations
are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding.
As of September 30, 2018, and December 31, 2017, the Company had 68,533,332 basic and dilutive shares issued and outstanding. The
Company had 20,000,000 million potentially dilutive shares related to four outstanding FRH Group convertible notes which were excluded
from the diluted net loss per share as the effects would have been anti-dilutive. During the period ended September 30, 2018, and
fiscal year ended December 31, 2017, common stock equivalents were anti-dilutive due to a net loss for the period. Hence they are
not considered in the computation. Reclassifications Certain prior period amounts were reclassified
to conform to the current year’s presentation. None of these classifications had an impact on reported operating loss or
net loss for any of the periods presented. Recent Accounting Pronouncements In May 2014, the FASB issued ASU No.
2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Topic 605,
Revenue Recognition, including most industry-specific requirements. ASU 2014-09 establishes a five-step revenue recognition process
in which entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the
consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires enhanced
disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. In August
2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers
the effective date of ASU 2014-09 by one (1) year. ASU 2014-09 will be effective for the Company during the period beginning after
December 15, 2018. Management is currently evaluating the impact the adoption of ASU 2014 - 09 will have on the Company’s
consolidated financial position, results of operations or cash flows. The Company currently anticipates applying the modified retrospective
approach when adopting the standard. In August 2014, the FASB issued ASU
No. 2014-15, Presentation of Financial Statements Going Concern, which requires management to evaluate, at each annual and interim
reporting period, whether there are conditions or events that raise substantial doubt about the entity’s ability to continue
as a going concern within one (1) year after the date the financial statements are issued and provide related disclosures. ASU
2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter. The guidance did not have
a material impact on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU
2016-02, Leases (Topic 840), to increase transparency and comparability among organizations by recognizing lease assets and lease
liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments to this standard are
effective for fiscal years beginning after December 15, 2019. Early adoption of the amendments in this standard is permitted for
all entities, and the Company must recognize and measure leases at the beginning of the earliest period presented using a modified
retrospective approach. The Company is currently in the process of evaluating the effect this guidance will have on its consolidated
financial statements and related disclosures. 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. |
