| Summary of Significant Accounting Policies | Note
2 - Summary of Significant Accounting Policies Basis
of Presentation and Principles of Consolidation The
accompanying consolidated financial statements include the accounts of FDCTech, Inc. and its wholly-owned subsidiary. We have
eliminated all intercompany balances and transactions. The Company has prepared the consolidated financial statements in a manner
consistent with the accounting policies adopted by the Company in its financial statements. The Company has measured and presented
the consolidated financial statements of the Company in US Dollars, which is the currency of the primary economic environment
in which the Company operates (also known as its functional currency). Financial
Statement Preparation and Use of Estimates The
Company prepared consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America (“GAAP”). The preparation of consolidated financial statements in conformity with GAAP requires management
to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related
disclosures at the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during
the periods presented. Estimates include revenue recognition, the allowance for doubtful accounts, website and internal-use software
development costs, recoverability of intangible assets with finite lives, and other long-lived assets. Actual results could materially
differ from these estimates. Cash
and Cash Equivalents Cash
and cash equivalents include cash on hand, deposits held with banks, and other short-term highly liquid investments with original
maturities of three months or less. The Company regularly maintains cash more than federally insured limits at financial institutions.
On June 30, 2019, and December 31, 2018, the Company had $95,011 and $210,064 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 30 days after the
date of the invoice. The Company has based the allowance for doubtful accounts on its assessment of the collectability of customer
accounts. The Company regularly reviews the allowance by considering factors such as historical experience, credit quality, the
age of the accounts receivable balances, economic conditions that may affect a customer’s ability to pay and expected default
frequency rates. Trade receivables are written off at the point when they are considered uncollectible. At
June 30, 2019, and December 31, 2018, the Company has determined that allowance for doubtful accounts was $78,087 and $68,675
respectively. Bad debt expense for the six months ended June 30, 2019, and 2018, was $20,000 and $42,275 respectively. Sales,
Marketing and Advertising The
Company recognizes sales, marketing, and advertising expenses when incurred. The
Company incurred $6,325 and $18,451 in sales, marketing and advertising costs (“sales & marketing”) for the three
months ended June 30, 2019, and 2018 respectively. The sales, marketing, and advertising expenses represented 6.86% and 10.11%
of the sales for the three months ended June 30, 2019, and 2018 respectively. The
Company incurred $16,181 and $44,157 in sales, marketing and advertising costs (“sales & marketing”) for the six
months ended June 30, 2019, and 2018 respectively. The sales, marketing, and advertising expenses represented 6.06% and 15.44%
of the sales for the six months ended June 30, 2019, and 2018 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. Office
Lease At
present, the Company leases office space at 1460 Broadway, New York, NY 10036 from an unrelated party. 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 chooses to terminate by the terms of the agreement. 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 year period. The rent payment at the office is $1,750 per month, and we have included it in the
General and administrative expense. From February 2020, this agreement continues on a yearly basis upon written request by the
Company. The Company’s 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 a eleven months
term. The rent payment at the office is $500 per month, and we have included it in the General and administrative expense. From
March 2020, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the terms
of the agreement by giving thirty days notice. The Company’s uses the office for software development and technical support. 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. The
Company adopted ASC 606 using the modified retrospective method applied to all contracts not completed as of January 1, 2019.
The Company presents results for reporting periods beginning after January 1, 2019, under ASC 606 while prior period amounts are
reported following legacy GAAP. In addition to the above guidelines, the Company also considers implementation guidance on warranties,
customer options, licensing, and other topics. The Company takes into account revenue collectability, methods for measuring progress
toward complete satisfaction of a performance obligation, warranties, customer options for additional goods or services, nonrefundable
upfront fees, licensing, customer acceptance, and other relevant categories. The
Company accounts for a contract when the Company and the customer (‘parties’) have approved the contract and are committed
to performing their respective obligations, where each party can identify their rights, obligations, and payment terms, the contract
has commercial substance, and it is probable that the Company will collect substantially all of the consideration. Revenue is
recognized when, or as, performance obligations are satisfied by transferring control of the promised service to a customer. The
Company fixes the transaction price for goods and services at contract inception. The Company’s standard payment terms are
generally net 30 days and in some cases due upon receipt of the invoice. The
Company considers contract modification as a change in the scope or price (or both) of a contract that is approved by the parties.
The parties describe contract modification as a change order, a variation, or an amendment. A contract modification exists when
the parties to the contract approve a modification that either creates new or changes existing enforceable rights and obligations
of the parties to the contract. The Company assumes a contract modification when approved in writing, by oral agreement, or implied
by the customary business practice of the customer. If the parties to the contract have not approved a contract modification,
the Company continues to apply the guidance to the existing contract until the contract modification is approved. The Company
recognizes contract modification in various forms – including but not limited to partial termination, an extension of the
contract term with a corresponding increase in price, adding new goods and/or services to the contract, with or without a corresponding
change in price, and reducing the contract price without a change in goods or services promised. For
all its goods and services, at contract inception, the Company assesses the solutions or services, or bundles of solutions and
services, obligated in the contract with a customer to identify each performance obligation within the contract, and then evaluate
whether the performance obligations are capable of being distinct and distinct within the context of the contract. Solutions and
services that are not both capable of being distinct and distinct within the context of the contract are combined and treated
as a single performance obligation in determining the allocation and recognition of revenue. For multi-element transactions, the
Company allocates the transaction price to each performance obligation on a relative stand-alone selling price basis. The Company
determines that stand-alone selling price for each item at the inception of the transaction involving these multiple elements. Since
January 21, 2016 (‘Inception’), the Company has derived its revenues mainly from three sources – consulting
services, technology solutions, and customized software development. The Company recognizes revenue when it has satisfied a performance
obligation by transferring control over a product or delivering a service to a customer. We measure revenue based upon the consideration
outlined in an arrangement or contract with a customer. The
Company’s typical performance obligations include the following:
Performance
Obligation Types
of Deliverables When
Performance Obligation is Typically Satisfied
Consulting
Services Consulting
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 Licensing
of Condor Risk Management Back Office for MT4 (“Condor Risk Management”), Condor FX Pro Trading Terminal, Condor
Pricing Engine, Crypto Trading Platform (“Crypto Web Trader Platform”), and other cryptocurrency-related solutions. The
Company recognizes ratably over the contractual period that the services are delivered, beginning on the date in which such
service is made available to the customer. Licensing agreements are typically one year in length with an option to cancel
by giving notice; customers have the right to terminate their agreements if the Company materially breaches its obligations
under the agreement. Licensing agreements do not provide customers the right to take possession of the software at any time.
The Company charges the customers a set-up fee for the installation of the platform, and implementation activities are insignificant
and not subject to a separate fee.
Software
Development Design-build
software development projects for customers, where the Company develops the project to meet the design criteria and
performance requirements as specified in the contract. The
Company recognizes the software development revenues when the Customer obtains control of the deliverables, as stated in the
Statement-of-Work in the contract. For
purposes of determining the transaction price, the Company assumes that the goods or services promised in the existing contract
will be transferred to the customer. The Company assumes that the contract will not be canceled, renewed, or modified; therefore,
the transaction price includes only those amounts to which the Company has rights under the present contract. For example, if
the Company enters into a contract with a customer that has an original term of one year and the Company expects the customer
to renew for a second year, the Company would determine the transaction price based on the original one-year term. When determining
the transaction price, the Company first identifies the fixed consideration, which includes any nonrefundable upfront payment
amounts. For
purposes of allocating the transaction price, the Company allocates an amount that best represents consideration that the entity
expects to receive for transferring each promised good or service to the customer. To meet the allocation objective, the Company
allocates the transaction price to each performance obligation identified in the contract on a relative standalone selling price
basis. In determining the standalone selling price, the Company uses the best evidence of the stand-alone selling price that the
Company charges to similar customers in similar circumstances. In some cases, the Company uses the adjusted market assessment
approach to determine the standalone selling price, where it evaluates the market in which it sells the goods or services and
estimates the price that customers in that market would pay for those goods or services when sold separately. The
Company recognizes revenue when or as it transfers the promised goods or services in the contract. The Company considers the “transfers”
the promised goods or services when, or as, the customer obtains control of the goods or services. The Company considers a customer
“obtains control” of an asset when, or as, it can direct the use of, and obtain all the remaining benefits from, an
asset substantially. The Company recognizes deferred revenue related to services which it will deliver within one year as a current
liability. The Company presents deferred revenue related to services that the Company will deliver more than one year into the
future as a non-current liability. For
the period ending June 30, 2019, the Company’s two major revenue streams accounted for under ASC 606 follows: 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 December 31, 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 a full and
final settlement of all past delivered services. The Company received the funds in September 2018. On September 4, 2018, the Company
signed the Second Amendment Agreement (‘Second Amendment’) in continuation of the asset purchase agreement, and the
First Amendment Agreement signed on July 19, 2017, and August 1, 2017, between the Company and the Purchaser. Under the Second
Amendment, the Company received $80,000 as the second part for the was the sale of source code in four equal installments of $20,000
each. All payments were received by May 5, 2019. According
to the Second Amendment, the Company identifies two main ongoing performance obligations in the contract for the following development
services of the Platform: a)
Customized developments, and b)
Software updates. The
Company receives $75 per hour for the first 100 hours/month of approved development services and $45 per hour for all services
over 100 hours per month. The Company invoices the Customer for all development services rendered and any cash received for the
development services is non-refundable. On
February 5, 2018 (‘Effective Date’), the Company signed IT support and maintenance agreement (‘IT Agreement’)
with an FX/OTC broker (‘FX Broker’) regulated by the Malta Financial Services Authority, where the Company earns the
recurring monthly payment from the FX Broker for delivering IT support and maintenance services (‘Services’) to FX
Broker’s legacy technology infrastructure. The term of this Agreement commenced on the Effective Date and shall continue
until terminated by either party either for cause, bankruptcy, and other default clauses. The Company completes and satisfies
its performance obligation upon accomplishment of all support and maintenance activities every month. The Company invoices the
FX Broker at the beginning of the month for services performed, delivered, and accepted for the prior month. At the time of the
invoice, the Company renders all Services, and any cash received for Services is non-refundable. 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 June 30, 2019
and December 31, 2018. Revenues For
the six months ended June 30, 2019 and 2018, the Company had ten (10) and thirteen (13) active customers, respectively. Revenues
generated from the top three (3) customers represented approximately 96.62% and 58.10% of total revenue for the six months ended
June 30, 2019 and 2018 respectively. Accounts
Receivable At
June 30, 2019, and December 31, 2018, Company’s top four (4) customers comprise roughly 66.89% and 88.55% of total A/R,
respectively. The loss of any of the top four customers would have a significant impact on the Company’s operations. Research
and Development (R&D) Cost The
Company acknowledges that future benefits from research and development (R&D) are uncertain, and R&D expenditures cannot
be capitalized. The GAAP accounting standards require us to expense all research and development expenditures as incurred. For
the six months ended June 30, 2019 and 2018, the Company did not incur R&D cost. Legal
Proceedings The
Company discloses a loss contingency if there is at least a reasonable possibility that a material loss has incurred. The Company
records its best estimate of loss related to pending legal proceedings when the loss is considered probable, and the amount can
be reasonably estimated. Where the Company can reasonably estimate a range of loss with no best estimate in the range, the Company
records the minimum estimated liability. As additional information becomes available, the Company assesses the potential liability
related to pending legal proceedings and revises its estimates and updates its disclosures accordingly. The Company’s legal
costs associated with defending itself are recorded to expense as incurred. The Company 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 June 30, 2019, and December 31, 2018, 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 and meet the design specifications of the Condor FX Back Office for MT4 Version, Condor FX Pro Trading Terminal Version,
and Condor Pricing Engine. The Company established the technological feasibility of Crypto Web Trader Platform in 2018. The Company
estimates the useful life of the software to be three (3) years. Amortization
expense was $9,562 and $2,160 for the three months ended June 30, 2019, and 2018, respectively. Amortization expense was $19,843
and $4,320 for the six months ended June 30, 2019, and 2018, respectively. 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 the capitalization of software development costs is material to date. Convertible
Debentures The
cash conversion guidance in ASC 470-20, Debt with Conversion and Other Options, is considered when evaluating the accounting for
convertible debt instruments (this includes certain convertible preferred stock that is classified as a liability) to determine
whether the conversion feature should be recognized as a separate component of equity. The cash conversion guidance applies to
all convertible debt instruments that upon conversion may be settled entirely or partially in cash or other assets where the conversion
option is not bifurcated and separately accounted for pursuant to ASC 815. If
the conversion features of conventional convertible debt provide for a rate of conversion that is below market value, this feature
is characterized as a beneficial conversion feature (“BCF”). The Company records BCF as a debt discount pursuant to
ASC Topic 470-20, Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the
discount related to the BCF, and the Company amortizes the discount to interest expense over the life of the debt using the effective
interest method. As
of June 30, 2019, 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 a beneficial conversion feature (“BCF”)
to the extent of the price difference. Due to the debt extension of FRH Group convertible notes, Management performed an analysis
to determine the fair value of the BCF and noted that the value of the BCF for each note was insignificant. Thus no debt discount
was recorded as of June 30, 2019. Basic
and Diluted Income (loss) per Share The
Company follows ASC 260, Earnings Per Share, to account for earnings per share. Basic earnings per share (“EPS”) calculations
are determined by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted
earnings per share calculations are determined by dividing net income by the weighted average number of common shares and dilutive
common share equivalents outstanding. As of June 30, 2019, and December 31, 2018, the Company had 68,626,332 and 68,533,332 basic
and dilutive shares issued and outstanding respectively. The Company had 20,000,000 million potentially dilutive shares related
to four outstanding FRH Group convertible notes which were excluded from the diluted net loss per share as the effects would have
been anti-dilutive. During the six months ended June 30, 2019 and 2018, common stock equivalents were anti-dilutive due to a net
loss of $21,842 and $84,047, respectively. 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. 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 Summary of Significant Accounting Policies for further discussion on the Company’s accounting policies for
revenue sources within the scope of ASC 606. In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 840), to increase transparency and comparability among organizations
by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.
The amendments to this standard are effective for fiscal years beginning after December 15, 2019. Early adoption of the amendments
in this standard is permitted for all entities, and the Company must recognize and measure leases at the beginning of the earliest
period presented using a modified retrospective approach. 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. |
