UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the fiscal year ended
OR
For the transition period from ______________ to ______________
Commission
File No.
(Exact name of the small business issuer as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| OTC Markets |
Securities registered pursuant to Section 12(g) of the Act:
| Title of each class | ||
| Common Stock, par value $0.0001 |
Indicate
by check mark if the registrant is a well- known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
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 twelve (12) months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding twelve (12) months (or for such
shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See the definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☐ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐
The
aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the closing price as
of December 31, 2021, of $0.069 per share, the last business day of the registrant’s most recently completed fourth quarter, was
approximately $
The number of shares of Common Stock, $0.0001 par value, of the registrant outstanding at March 21, 2022, was .
TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (“Form 10-K”) 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 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 and 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-K. 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.
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PART I
| ITEM 1. | BUSINESS |
Overview
Under Delaware laws, the founders incorporated the Company on January 21, 2016, as Forex Development Corporation. 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 online trading technology for OTC online regulated brokers. The Company provides customizable, innovative, and cost-efficient financial technology (‘fintech’) and business solutions to legacy financial services companies in the online regulated brokerages, wealth management, and cryptocurrency businesses (“customers”).
The Company intends to build a diversified global financial services company driven by proprietary Condor trading technologies, complementary regulatory licenses, and a proven executive team. The Company plans to acquire, integrate, transform, and scale legacy financial service companies. The Company believes 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.
From December 2021, the Company expects to grow from its acquisition strategy, specializing in buying and integrating small to mid-size legacy financial services companies. The Company intends to build a diversified global software-driven financial services company. The Company plans to acquire, integrate, transform, and scale legacy financial service companies. The Company replaces conventional legacy software infrastructure with its regulatory-grade proprietary Condor trading technologies, intending to improve end-user experience, increase client retention, and realize cost synergies.
On December 22, 2021, the Company entered into a Share Exchange Agreement (the “Agreement”) with AD Financial Services Pty Ltd ACN 628 331 117 of Level 38/71 Eagle St, Brisbane, Queensland, Australia, 4000 (“ADFP” or “Target”). According to the Agreement, the Company acquired 51% of ADFP’s issued and outstanding shares of capital stock in exchange for 45,000,000 (the “Consideration”) newly issued “restricted” common shares. The operating and licensed entity of ADFP is AD Advisory Services Pty Ltd. ADFP owns one hundred percent (100%) equity interest in AD Advisory Services Pty Ltd (“ADS”). As a result, the Company is 51% owner of ADS.
Post-acquisition of ADS, we have two primary business segments, (1) Wealth Management and (2) Technology and Software Development.
Wealth Management
The Wealth Management business currently consists of ADS, an Australian-regulated wealth management company with 20 offices, 28 advisors, $530+ million funds under advice.
ADS’ audited revenues, cost of sales, and gross profits were $5.91 million, $5.43 million, and $0.48 million for the fiscal year ended June 30, 2021. ADS’ audited revenues, cost of sales, and gross profits for the fiscal year ended June 30, 2020, were $3.26 million, $2.95 million, and $0.32 million, respectively. ADS increased its revenue and gross profit by 78.79% and 51.79% from 2020 to 2021. From July 1, 2021, to December 31, 2021, ADS’ unaudited revenues, sales cost, and gross profits for the six months were $3.03 million, $2.73 million, and $0.29 million, respectively.
Technology Software Development
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 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 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 currently has six (6) licensing agreements for its Condor Pro Multi-Asset Trading Platform. The Company is continuously negotiating additional licensing agreements with several retail online brokers to use the Condor Pro Multi-Asset Trading Platform. Condor Pro Multi-Asset Trading Platform is available as a desktop, web, and mobile version.
The Company’s upgraded Condor Back Office (Risk Management) meets various jurisdictions’ regulatory requirements. 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.
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The Company is developing Condor Investing Trading App, a simplified trading platform for traders of varied experiences in trading stocks, ETFs, and other financial markets from their mobile phone. The Company expects to commercialize the Condor Investing Trading App by the end of the second quarter of the fiscal year ended December 31, 2022.
The Company is developing NFT Marketplace, a decentralized NFT marketplace, a multichain platform with a lazy minting option to reduce and limit unnecessary blockchain usage fees, also known as gas fees. The Company expects to commercialize the NFT Marketplace by the end of the second quarter of the fiscal year ended December 31, 2022.
The Company and its subsidiary, ADS, are developing a digital wealth management company, which will initially include a Robo Advice Platform catering to Australia’s wealth management industry. The Company expects to commercialize the Robo Advice Platform by the fiscal year ended December 31, 2022.
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 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.
We are a development company in the financial technology sector with operations in the US, Australia, Russia, Cyprus, and Israel. 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 does not have any patents or trademarks on its proprietary technology solutions.
The Company has two sources of revenue from its technology and software solutions.
| ● | 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 (“Condor Risk Management”), Condor Pro Multi-Asset Trading Platform (previously known as Condor FX Pro Trading Terminal), Condor Pricing Engine, Crypto Web Trader Platform, and other cryptocurrency-related solutions.
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| ● | Customized Software Development – The Company develops software for Customers with unique requirements outlined in the Software Development Agreement (“Agreement”). |
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.
The Company acts as an adviser/strategic consultant and reseller of its proprietary technologies in the cryptocurrency and blockchain sector. 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 customer’s design criteria and performance requirements.
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Settlement of the FRH Group Note
Between February 22, 2016, and April 24, 2017, the Company borrowed $1,000,000 from FRH Group, a founder and principal shareholder (“FRH”). The Company executed Convertible Promissory Notes, due between February 28, 2018, and April 24, 2019. The Notes were convertible into common stock initially at $0.10 per share but maybe discounted under certain circumstances. In no event will the conversion price be less than $0.05 per share with a maximum of 20,000,000 shares if FRH converts the entire subject to adjustments in certain circumstances. 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.
Termination of Acquisition of Genesis Financial, Inc.
In line with the new strategic direction, on June 2, 2021, the Company entered into a Stock Purchase Agreement (the “Genesis Agreement”) with the Shareholders of Genesis Financial, Inc., a Wyoming corporation (“GFNL” or “Seller”). According to the Agreement, the Company plans to acquire 100% of the issued and outstanding equity interests of GNFL, including its wholly-owned subsidiaries and other variable interest entities, in consideration for 70,000,000 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 termination date, the Company did not issue any Securities to the Seller. The Company could not complete nor qualify the Agreement as Genesis could not comply with several non-exhaustive material provisions, covenants, or conditions.
On June 9, 2021, and in connection with the previous description of the Genesis Agreement, dated June 2, 2021, the Company appointed Warwick Kerridge as Chairman of the Company’s Board of Directors. Effective August 24, 2021, the Company terminated the appointment of Warwick Kerridge as the Board of Directors. The Company approved the termination upon the consent of the majority of the stockholders representing at least 68.73% of the issued and outstanding shares of the Company. The Company authorized the action according to Section 222 of the General Corporation Law of Delaware. 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
On December 22, 2021, the Company entered into a Share Exchange Agreement (the “Agreement”) with AD Financial Services Pty Ltd ACN 628 331 117 of Level 38/71 Eagle St, Brisbane, Queensland, Australia, 4000 (“ADFP” or “Target”). According to the Agreement, the Company acquired 51% of ADFP’s issued and outstanding shares of capital stock in exchange for 45,000,000 (the “Consideration”) newly issued “restricted” common shares. The operating and licensed entity of ADFP is AD Advisory Services Pty Ltd. ADFP owns one hundred percent (100%) equity interest in AD Advisory Services Pty Ltd (“ADS”). As a result, the Company is 51% owner of ADS.
ADS is an Australian regulated wealth management company with 20 offices, 28 advisors, $530+ million funds under advice. ADS consolidated revenues, cost of sales, and gross profits from December 22, 2021, and December 31, 2021, were $156,013, $140,922, and $15,091, respectively.
In April 2016, the Company established its wholly-owned subsidiary – FRH Prime Ltd. (“FRH Prime”), a company incorporated under section 14 of Bermuda’s Companies Act 1981. In January 2017, FRH Prime established its wholly-owned subsidiary – FXClients Limited (“FXClients”), under the United Kingdom Companies Act 2006 as a private company. The Company established FRH Prime and FXClients to conduct financial technology service activities. The Company established FRH Prime and FXClients to conduct financial technology service activities. At present, both companies have ceased to exist.
Governmental Regulation
FDCTech is a publicly-traded company subject to SEC and FINRA’s rules and regulations regarding public disclosure, financial reporting, internal controls, and corporate governance.
Our wealth management business, AD Advisory Services (ADS), is subject to enhanced regulatory scrutiny and regulated by multiple regulators in Australia. The Australian Securities and Investments Commission (ASIC) administers a licensing regime for ‘financial services’ providers where ADS holds an Australian Financial Services License (AFSL) and meets various compliance, conduct, and disclosure obligations.
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Board of Directors
Effective January 1, 2021, Naim Abdullah resigned as the Director of the Company.
On July 6, 2021, the Board of Directors of FDCTech, Inc. (the “Company”) increased from four to five directors and appointed Charles R. Provini, age 74, to the vacancy. Mr. Provini is considered independent under NYSE and NASDAQ listing standards. Mr. Provini has been the Chairman, CEO, and President of Natcore Technology Inc. since May 2009, a research and development company protected by 65 patents granted or pending. From November 1997 to October 2000, he was the President of Ladenburg Thalmann Asset Management and a Director of Ladenburg Thalmann, Inc., one of the oldest 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 had 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.
On November 30, 2021, Charles R. Provini, a member of the Board of Directors of FDCTech, Inc. (the “Company”), notified the Company of his intention to voluntarily resign from the Company’s Board of Directors effective November 30, 2021. Mr. Provini did not advise the Company of any disagreement with the Company on any matter relating to its operations, policies, or practices. Upon the resignation of Mr. Provini, the Company currently has three Board of Directors.
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, 2021, and 2020 did not contain an adverse opinion or a disclaimer of opinion. It was not qualified or modified for uncertainty audit scope or accounting principles.
On July 2, 2021, the Company appointed BF Borgers CPA PC (“BFB”) as the Company’s new independent registered public accounting firm, effective immediately, to perform independent audit services for the fiscal year ending December 31, 2021.
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 $0.0001 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.
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Covid-19
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic throughout the United States. While the initial outbreak concentrated in China, it spread to several other countries, including Russia and Cyprus, and reported infections globally. Many countries worldwide, including 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.
| ITEM 1A. | RISK FACTORS |
Our Company is a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this Item.
| ITEM 1B. | UNRESOLVED STAFF COMMENTS |
None.
| ITEM 2. | OPERATING LEASES |
Effective October 29, 2019, the Company leased office space at 200 Spectrum Center Drive, Suite 300, Irvine, CA 92618. As per the Commitment Term of the lease (“Agreement”), this Agreement shall continue on a month-to-month basis (any term after the Commitment Term, also known as “Renewal Term”). The Commitment Term and all subsequent Renewal Terms shall constitute the “Term.” The Company may terminate this Agreement by delivering to the lessor Form (“Exit Form”) at least one (1) whole calendar month before the month in which the Company intends to terminate this Agreement (“Termination Effective Month”). The Company is entitled to use the office and conference space on a need basis. Previously, the Company leased office space at 1460 Broadway, New York, NY 10036, from an unrelated party. The new rent payment or membership fee for Irvine Office is $90 per month compared to the previous rent payment or membership fee for the New York Office of $890 per month as the General and administrative expenses.
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 as 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 as 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 costs.
| ITEM 3. | LEGAL PROCEEDINGS |
There is currently no material pending legal or governmental proceedings other than ordinary routine litigation incidental to the business. The Company or any of its subsidiaries is a party, or any of their property is the subject.
| ITEM 4. | MINE SAFETY DISCLOSURES. |
Not applicable.
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PART II
| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES |
Market Information
Effective October 24, 2019, Financial Industry Regulatory Authority, Inc. (FINRA) pursuant to FINRA Rule 6432 and Rule 15c2-11 under the Securities Exchange Act of 1934 determined that Glendale Securities, Inc. (“Glendale”) demonstrated compliance with FINRA Rule 6432 and Glendale might initiate a priced quotation of the Company’s stock at $0.1500 Bid, $0.1600 Ask on OTC Link ATS for the Company under the trading symbol - FDCT. OTC Bulletin Board and OTC Link quote our stock under OTCQ: FDCT. The OTC Bulletin Board differs from national and regional stock exchanges in that it: (i) is not situated in a single location but operates through the communication of bids, offers, and confirmations between broker-dealers and (ii) securities admitted to the quotation are offered by one or more broker-dealers rather than the “specialist” common to stock exchanges.
Holders
Globex Transfer, LLC, our transfer agent, indicates that as of March 21, 2022, we had 82 record holders of our Common Stock. The Company expects to distribute 45,000,000 shares issued to ADFS’ 60 shareholders based on their equity ownership in ADFS.
As of March 21, 2022, we had 148,025,550 shares of our Common Stock and 4,000,000 shares of Series A Preferred Stock issued and outstanding. Holders of Series A Preferred are entitled to fifty (50) non-cumulative votes per share on all matters presented to our stockholders for action. Holders of Series A Preferred have no right to convert into the Company’s common stock.
Dividends
The Company did not declare any cash dividends for the fiscal year ended December 31, 2021. Our Board of Directors (currently constituted by Mitchell Eaglstein, Imran Firoz, and Jonathan Baumgart) does not intend to distribute any cash dividends in the near term. The Board of Directors decides the declaration, payment, timing, and amount of any future dividends. The dividends will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the Board of Directors consider relevant. There is no assurance that the Company shall pay any future dividends. If the Company decides to pay any dividends, there is no assurance concerning any dividend.
Securities Authorized for Issuance under Equity Compensation Plans
As of December 31, 2021, the Company has no equity compensation plans.
On February 17, 2022, the Company filed the Information Statement pursuant to Section 14C of the Securities Exchange Act of 1934 and informed all holders of record on February 10, 2022 (the “Record Date”) of the common stock, $0.0001 par value per share (the “Common Stock”), of the Company, in connection with the approval of the following actions taken by the Board of Directors of the Company (the “Board”) and by written consent of the holders of a majority of the voting power of Company’s issued and outstanding capital stock (the “Approving Stockholders”):
1. To amend our certificate of incorporation, as amended (the “Certificate”), to increase the number of authorized shares of common stock from 250,000,000 to 500,000,000 (the “Authorized Share Increase” and together with the 2022 Equity Plan, the “Corporate Action”), and
2. To approve the Company’s 2022 Equity Plan (the “2022 Equity Plan”)
On February 10, 2022, our Board unanimously approved the Corporate Actions. To eliminate the costs and management time for a special meeting and to effect the actions, the Company chose to obtain the written consent of a majority of the Company’s voting power to approve the actions described in the Information Statement following Sections 228 and 242 of the Delaware General Corporation Law (the “DGCL”) and per our bylaws. On February 10, 2022, the Approving Stockholders approved the Corporate Actions by written consent. The Approving Stockholders (common stock only) own 96,778,105 shares, representing 64.62% of the Company’s total issued and outstanding voting power.
Recent Sales of Unregistered Securities
All of the Company’s recent sales of unregistered securities within the past three years reported previously reported as required in Quarterly Reports on Form 10-Q and current reports on Form S1-A filed July 26, 2018.
| ITEM 6. | SELECTED FINANCIAL DATA |
The Company is a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act and as such, is not required to provide the information required under this Item.
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| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
This Annual Report Form 10-K contains forward-looking statements. Our actual results could differ materially from those set forth due to 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 audited 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.
From December 2021, the Company expects to grow from its acquisition strategy, specializing in buying and integrating small to mid-size legacy financial services companies. The Company intends to build a diversified global software-driven financial services company. The Company plans to acquire, integrate, transform, and scale legacy financial service companies. The Company replaces conventional legacy software infrastructure with its regulatory-grade proprietary Condor trading technologies, intending to improve end-user experience, increase client retention, and realize cost synergies.
Post-acquisition of ADS, we have two primary business segments, (1) Wealth Management and (2) Technology and Software Development.
Wealth Management
On December 22, 2021, the Company entered into a Share Exchange Agreement (the “Agreement”) with AD Financial Services Pty Ltd ACN 628 331 117 of Level 38/71 Eagle St, Brisbane, Queensland, Australia, 4000 (“ADFP” or “Target”). According to the Agreement, the Company acquired 51% of ADFP’s issued and outstanding shares of capital stock in exchange for 45,000,000 (the “Consideration”) newly issued “restricted” common shares. The operating and licensed entity of ADFP is AD Advisory Services Pty Ltd. ADFP owns one hundred percent (100%) equity interest in AD Advisory Services Pty Ltd (“ADS”). As a result, the Company is 51% owner of ADS. Our wealth management business, AD Advisory Services (ADS), is subject to enhanced regulatory scrutiny and regulated by multiple regulators in Australia. The Australian Securities and Investments Commission (ASIC) administers a licensing regime for ‘financial services’ providers where ADS holds an Australian Financial Services Licence (AFSL) and meets various compliance, conduct, and disclosure obligations. ADS is an Australian regulated wealth management company with 20 offices, 28 advisors, $530+ million funds under advice.
ADS consolidated revenues, cost of sales, and gross profits from December 22, 2021, and December 31, 2021, were $156,013, $140,922, and $15,091, respectively. The Company expects the full impact on its financial statements from the fiscal year 2022 and beyond.
ADS’ audited revenues, cost of sales, and gross profits were $5.91 million, $5.43 million, and $0.48 million for the fiscal year ended June 30, 2021. ADS’ audited revenues, cost of sales, and gross profits for the fiscal year ended June 30, 2020, were $3.26 million, $2.95 million, and $0.32 million, respectively. ADS increased its revenue and gross profit by 78.79% and 51.79% from 2020 to 2021. From July 1, 2021, to December 31, 2021, ADS’ unaudited revenues, sales cost, and gross profits for the six months were $3.03 million, $2.73 million, and $0.29 million, respectively. As the Company acquired ADS on December 22, 2021, it has consolidated financial statements from December 22, 2021, to December 31, 2021.
Technology and Software Development
The consolidated revenues, cost of sales, and gross profits for Technology and Software Development for the fiscal year ended December 31, 2021, were $301,648, $274,462, and $27,186, respectively.
The Company is developing Condor Investing Trading App, a simplified trading platform for traders of varied experiences in trading stocks, ETFs, and other financial markets from their mobile phone. The Company expects to commercialize the Condor Investing Trading App by the end of the second quarter of the fiscal year ended December 31, 2022. The Condor Investing Trading App will be used by a global online broker authorized and regulated by the UK Financial Conduct Authority. The Company plans to market, distribute, and license the Condor Investing Trading App in the US and globally.
The Company is developing NFT Marketplace, a decentralized NFT marketplace, a multichain platform with a lazy minting option to reduce and limit unnecessary blockchain usage fees, also known as gas fees. The Company expects to commercialize the NFT Marketplace by the end of the second quarter of the fiscal year ended December 31, 2022. The Company expects the beta version of the NFT Marketplace to be available by the end of the first quarter of the fiscal year ending December 31, 2022.
The Company and its subsidiary, ADS, are developing a digital wealth management company, which will initially include a Robo Advice Platform catering to Australia’s wealth management industry. The Company expects to complete the techno-feasibility of the Robo Advice Platform by March 31, 2022. The Company expects to commercialize the NFT Marketplace by the fiscal year ended December 31, 2022.
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The Company released, marketed, and distributed its Condor Pro Multi-Asset Trading Platform in the fiscal year ended 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 currently has four (4) licensing agreements for its Condor Pro Multi-Asset Trading Platform and Condor Back Office. The Company is continuously negotiating additional licensing agreements with several retail online brokers to use the Condor Pro Multi-Asset Trading Platform. Condor Pro Multi-Asset Trading Platform is available as a desktop, web, and mobile version. The Company currently has four (4) licensing agreements for its Condor FX Trading Platform. The Company is continuously negotiating additional licensing agreements with several retail FX brokers to use Condor FX Pro 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, 2018. 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 platforms via a single wallet. 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 first quarter of the fiscal year ended December 31, 2022.
Consolidated Financial Summary
The Company has prepared consolidated financial statements on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the ordinary business course. The Company generated $2,241,433 in revenues from January 21, 2016 (inception) to December 31, 2021. For the fiscal year ended December 31, 2021, and 2020, the Company generated $457,661 and $215,409 in revenues,
For the fiscal year ended December 31, 2021, and 2020, FRH Prime has generated volume rebates of $0 and $1,861 from the Condor Risk Management Back Office. The Company has included rebates in revenue in the consolidated income statements.
Financial Condition at December 31, 2021
At December 31, 2021, the Company had 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. Therefore, there was no current or non-current portion of convertible notes payable and accrued interest. On December 31, 2021, the accumulated deficit was $3,230,679. Our cash balance is $93,546 as of December 31, 2021. We do not believe that our cash balance is sufficient to fund our operations; as a result, the Company has raised additional capital as disclosed in Subsequent Events from the Investment Agreement and debt.
The Company executed two “Purchase Notice Right” under an Investment Agreement with White Lion and received a net $23,551 after deducting financing costs associated with the Investment Agreement for the fiscal year ended December 31, 2021. The Company also received a net amount equal to $81,000 from the related parties to fund its operations. Our cash balance is $93,546 as of December 31, 2021. The Company did not receive any additional funding from U.S. Small Business Administration (SBA) or Cares Act Paycheck Protection Program during the fiscal year ended December 31, 2021. 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 acquisition strategy and diversified portfolio of technological solutions, become cash flow positive, and raise funds through private placement offering and debt financing. As the Company increases its customer base across the globe, it intends to acquire long-lived assets that will provide a future economic benefit beyond fiscal 2021.
Financial Condition at December 31, 2020
At December 31, 2020, the current portion of convertible notes payable and accrued interest was $1,000,000 and $256,908, respectively. There was no non-current portion of convertible notes payable and accrued interest. On December 31, 2020, the accumulated deficit was $1,493,984. The Company received $50,632 from Cares Act 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 only on $144,900 funds advanced from May 22, 2020, the advance date.
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.
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RESULTS OF OPERATIONS
For the Fiscal Year Ended December 31, 2021, compared to the Fiscal Year Ended December 31, 2020
For the fiscal year ended December 31, 2021, and 2020, the Company had eight (8) and eight (8) active customers. Revenues generated from the top three (3) customers represented approximately 52.98% and 83.30% of total revenue for the fiscal year ended December 31, 2021, and 2020, respectively. The revenues generated for the fiscal year ended December 31, 2021, and 2020 were $457,661 and $215,409, respectively. During the fiscal year ended December 31, 2021, and 2020, the Company incurred a net loss of $1,736,695 and $458,490.
The total revenue breakdown for the fiscal year ended December 31, 2021, and 2020 is below:
| Fiscal Ended | December 31, 2021 | December 31, 2020 | ||||||
| % of Total | % of Total | |||||||
| Revenue Description | ||||||||
| Technology Solutions | 50.95 | % | 97.65 | % | ||||
| Consulting | 0.00 | % | 1.40 | % | ||||
| Software Development | 14.58 | % | 0.95 | % | ||||
| Wealth Management | 34.47 | % | 0.00 | % | ||||
| Total | 100.00 | % | 100.00 | % | ||||
During the fiscal years ended December 31, 2021, and 2020, the Company incurred General and administrative costs (“G and A”) of $1,127,503 and $337,634, respectively. The increase in G and A costs for the fiscal year ended December 31, 2021, was mainly due to higher professional consulting fees related to common stock issued for services. The G and A expenses were 246.36% and 156.74% of the fiscal revenue for the fiscal year ended December 31, 2021, and 2020. Amortization expense was $274,462 and $251,959 for the fiscal year ended December 31, 2021, and 2020 respectively, and the Company has included in the Cost of sales expense. The increase in amortization expense for the fiscal year ended December 2021 is due to the cumulative amortization expense of Condor Back Office, Condor Crypto Trading Platform, Condor FX Trading Platform (Desktop) Condor Web Trader.
The rental expense was $29,705 and $30,893 for the fiscal year ended December 31, 2021, and 2020. 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 as 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 as 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 $648,833 and $24,526 in sales, marketing, and advertising costs (“sales and marketing”) for the fiscal year ended December 31, 2021, and 2020, respectively. The increase in the sales and marketing cost is due to an increase in stock-based compensation to certain marketing and branding consultants. The sales and marketing costs mainly included stock-based payment to marketing and branding consultants, 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 141.77% and 11.39% of the sales for the fiscal year ended December 31, 2021, and 2020, respectively.
For the fiscal year ended December 31, 2021, and 2020, FRH Prime has generated volume rebates of $0 and $1,861 from the Condor Risk Management Back Office Platform.
In April 2016, the Company established its wholly-owned subsidiary – FRH Prime Ltd. (“FRH Prime”), a company incorporated under section 14 of Bermuda’s Companies Act 1981. In January 2017, FRH Prime established its wholly-owned subsidiary – FXClients Limited (“FXClients”), under the United Kingdom Companies Act 2006 as a private company. The Company established FRH Prime and FXClients to conduct financial technology service activities. The Company established FRH Prime and FXClients to conduct financial technology service activities. At present, both companies have ceased to exist.
On December 22, 2021, the Company entered into a Share Exchange Agreement (the “Agreement”) with AD Financial Services Pty Ltd ACN 628 331 117 of Level 38/71 Eagle St, Brisbane, Queensland, Australia, 4000 (“ADFP” or “Target”). According to the Agreement, the Company acquired 51% of ADFP’s issued and outstanding shares of capital stock in exchange for 45,000,000 (the “Consideration”) newly issued “restricted” common shares. The operating and licensed entity of ADFP is AD Advisory Services Pty Ltd. ADFP owns one hundred percent (100%) equity interest in AD Advisory Services Pty Ltd (“ADS”). As a result, the Company is 51% owner of ADS.
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LIQUIDITY AND CAPITAL RESOURCES
On December 31, 2021, and 2020, we had a cash balance of $93,546 and $22,467, respectively. At December 31, 2021, and 2020, the working capital deficit was $199,132 and $1,504,678, respectively. The decrease in the working capital deficit was mainly due to the acquisition of ADS, resulting in the increase of current assets and settlement of FRH Group Note for shares of the Company, resulting in the decrease of current liabilities for the period ending December 31, 2021.
In the next twelve (12) months, the Company will continue investing in sales, marketing, product development, new technology solutions, and support of existing technology to serve our customers. We expect capital expenditures to increase to $250,000 in the next twelve (12) months to support the growth, including software development and purchasing computers and servers. Also, the Company estimates additional expenditure needed to be $250,000, which provides for $100,000 and $150,000 for sales and marketing and working capital, respectively.
We expect the combination of existing cash, cash equivalents, cash flows from operations, and access to private equity and capital markets to be sufficient for at least the next twelve (12) months. The availability of funds will fund our operating activities to meet the need for investing and financing, such as debt maturities and material capital expenditures. However, we may need additional funds to achieve a sustainable sales level to fund our ongoing operations out of revenues. There is no assurance that any additional financing will be available or, if available, on terms that will be acceptable to us.
Should we require additional capital, the Company’s operations are insufficient to fund its capital requirements. The Company may attempt to restructure Notes, refinance existing Notes with financial institutions, or raise capital by selling additional capital stock or debt issuance. The Company intends to continue 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. 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. Between February 22, 2016, and April 24, 2017, the Company borrowed $1,000,000 from FRH Group, a founder and principal shareholder (“FRH”). The Company executed Convertible Promissory Notes, due between February 28, 2018, and April 24, 2019. The Notes were convertible into common stock initially at $0.10 per share but maybe discounted under certain circumstances. In no event will the conversion price be less than $0.05 per share with a maximum of 20,000,000 shares if FRH converts the entire subject to adjustments in certain circumstances.
From January 29, 2019, to February 15, 2019, the Company issued 33,000 registered shares under the Securities Act of 1933 for a cash amount of $4,950. The Company closed its offering effective February 26, 2019.
On February 22, 2021, the Company entered into an Assignment of Debt Agreement (the “Agreement”) with FRH and FRH Group Corporation. The Company eliminated all four FRH Group convertible notes, including interest, of $1,256,908, in return for the issuance of 12,569,080 of unregistered common stock of the Company (the “Shares”) to FRH. Following the Agreement, FRH assigned the Shares to FRH Group Corporation, an entity also owned by Mr. Hong.
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 proceeds of one hundred and forty-four thousand nine hundred and 00/100 Dollars ($144,900.00).
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 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 of debt securities to assist in the Company’s acquisition strategy. On October 05, 2021, the Company and GSS terminated all obligations other than maintaining confidentiality, with no fees to the GSS. The Broker-Dealer agreed to return the 1,750,000 shares of the Company’s common stock.
On September 27, 2021, the Company engaged EF Hutton, a division of Benchmark Investments, LLC (“EF Hutton”). EF Hutton will act as lead underwriter, deal manager, and investment banker for the proposed firm commitment public offering and uplisting (“Offering”) by the Company, in connection with the offering of the Company’s equity, debt, or equity derivative instruments (the “Securities”).
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.
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The Company executed two “Purchase Notice Right” under an Investment Agreement with White Lion and received a net $23,551 after deducting financing costs associated with the Investment Agreement for the fiscal year ended December 31, 2021. The Company also received a net amount equal to $81,000 from the related parties to fund its operations. Our cash balance is $93,546 as of December 31, 2021. The Company did not receive any additional funding from U.S. Small Business Administration (SBA) or Cares Act Paycheck Protection Program during the fiscal year ended December 31, 2021.
GOING CONCERN CONSIDERATION
We have not generated significant revenues from inception to December 31, 2021. As of December 31, 2021, and 2020, the Company had an accumulated deficit of $3,230,679 and $1,493,984. Our independent auditors included an explanatory paragraph in their report on the audited financial statements for the fiscal year ended December 31, 2021, and 2020, 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 lead 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 in the Company 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 operations results on our financial statements, which we have prepared following 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.
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, 2020, filed with the SEC on March 3, 2021. 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 after enacting the JOBS Act until those standards apply to private companies. We have applied for exemption as an emerging growth company; thus, the Company may delay adopting 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 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 ASU amendments 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 ASC 606 - Revenue Recognition from January 1, 2019, and Amended ASU 2016-02, Leases (Topic 840) from January 1, 2020. The ASU is currently not expected to have a material impact on our consolidated financial statements. We believe the accounting policies described in Note 2 are critical to the judgments and estimates used to prepare our financial statements. As a result, we have described significant accounting policies in more detail in Note 2 of our annual financial statements included in our 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 3, 2021.
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| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS. |
Not Applicable.
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
All financial statements required by this Item are presented beginning on Page F-20, and are incorporated herein by this reference.
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. |
None.
| ITEM 9A. | 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 December 31, 2021, 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 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 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. 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 following 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 December 31, 2021 and 2020, that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.
| ITEM 9B. | OTHER INFORMATION. |
None.
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PART III.
| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE. |
| Name | Age | Position | ||
| Mitch Eaglstein | 39 | President/CEO/Director | ||
| Imran Firoz | 49 | CFO/Secretary/Director | ||
| Brian Platt | 43 | CTO | ||
| Jonathan Baumgart | 39 | Director |
Directors serve until the next annual meeting, and their successors are elected and qualified. Officers are appointed to serve for one year until the board of directors’ meeting following stockholders’ annual meeting. Further, until Directors’ successors have been elected and qualified.
Mitchell Eaglstein, Co-Founder, President, CEO, and Director
From January 2016 to date, Mr. Eaglstein has been the Founder, Chief Executive Officer, and Director of the Company. Mr. Eaglstein is responsible for leading the development and execution of the Company’s long-term strategy with the primary focus to enhance shareholder value. Mr. Eaglstein ensures the Company has the necessary organizational and technology infrastructure and is responsible for deploying Capex and approving budgets.
Mr. Eaglstein has extensive executive-level experience in the management of FX brokerage and FinTech software companies. Further, Mr. Eaglstein has participated in several panel discussions as a distinguished industry expert in various forex-related conferences and tradeshows.
From June 2014 to February 2016, Mr. Eaglstein, as a managing member of MMI Advisors LLC, worked as the Director, Business Development, Fortress Capital Investments, UAE (“Fortress”). He led Fortress to $20 million in trading revenue within one year from the start-up date. Under his leadership, Fortress achieved over $70 billion in monthly trading volume within one (1) year and reached the top twenty (20) forex brokers by volume. Mr. Eaglstein assembled and led a global team with offices in the Middle East, North America, Russia, and Asia to achieve positive cash flow results within two (2) months of product launch.
From June 2011 to May 2014, Mr. Eaglstein started his career as a Senior Business Intelligence Analyst at Boston Technologies (“BT”). BT promoted him to Managing Director, a pioneer in MT4 bridge technology for the retail forex market. He was instrumental in increasing Boston Technologies’ revenue from five (5) million to twenty (20) million, making it the 143rd fastest-growing company in America by Inc. 500 ranking.
From March 2009 to May 2011, Mr. Eaglstein led FXCM Systems, LLC, as its Chief Information Officer. He successfully provided white label and software development solutions to FXCM and on behalf of FXCM, one of the largest forex broker-dealers in the world. From January 2007 to March 2011, he served as the Chief Operating Officer and Chief Information Officer for Avalon Capital Holdings Corporation. He developed, marketed, and distributed high-performance proprietary trading software for financial companies engaged in online forex trading. From January 2007 to Feb 2009, Mr. Eaglstein was the Co-Founder and Chief Operating Officer of Traders Development COO Traders Development, LLC, a financial software company based in Irvine, California. Early in his career, Mr. Eaglstein co-founded Campus Universe, an online consignment shop for students to buy and sell textbooks from each other via a fully automated e-commerce website that won the Golden Web Award.
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Imran Firoz, Co-Founder, CFO, Director
From January 2016 to date, Mr. Firoz has been the Co-Founder, Chief Financial Officer, and Director of the Company. Mr. Firoz is responsible for strategic planning and corporate development, Mergers and Acquisitions (MA), financial restructuring, and risk management. He has been responsible for guiding due diligence efforts, implementing financial controls, practicing compliance guidelines, and planning disaster recovery strategies. From December 2011 to May 2015, Mr. Firoz was the CEO and Director of Scoobeez Global, Inc. (“ABT”). From May 2015 to March 2017, Mr. Firoz worked as the CFO and Director of the ABT. He was instrumental in the acquisition, development, and growth of Scoobeez, Inc., an on-demand messenger, delivery, and courier company. Scoobeez increased its revenue from under $500,000 to $27 million during the period.
From February 2014 to December 2019, Mr. Firoz worked as the Managing Director of Match-Trade Technologies LLC, a financial technology company. From July 2007 to March 2017, Mr. Firoz was a Managing Partner of Marque 3 LLC, a management consulting company based in Pasadena, California. He has served as a management consultant/adviser to senior executives of several companies.
Mr. Firoz was the Chief Financial Officer of Master Capital Group Corp. from November 2004 until May 2007. He provided financial oversight to the accounting and finance department and advised the Board of Directors on the financial implications of business activities. In January 2002, Mr. Firoz served as Associate, Investment Banking for National Bank Financial, Canada (“NBF”) on numerous transactions, including a key member of the MA advisory team Franco-Nevada on the $10 billion three-way mega gold merger of Newmont-Normandy-Franco-Nevada. During the same period, he was a member of NBF’s investment banking team that advised the Treasurer of Hydro One on the restructuring and sale of Ontario Electricity Financial Corporation debt of $2.9 billion in the Canadian public debt markets.
Mr. Firoz started his career as a Chemical Engineer with Tata Chemicals Limited in December 1994 until September 1997. He led several cross-functional teams to manage commissioning activities, plant operations, and other technical projects for Ammonia Plant. From October 1997 to July 1999, Mr. Firoz worked as a Senior Process Engineer with Saudi Methanol Company, a Saudi Basic Industries Corporation (SABIC) subsidiary. He was responsible for technical services and improving plant safety management. Mr. Firoz received his MBA in April 2001 from Richard Ivey School of Business, University of Western Ontario, Canada. Mr. Firoz graduated in July 1993 with a Bachelor of Engineering (Chemical) from Aligarh University, India. Mr. Firoz has been a Certified Financial Risk Manager from the Global Association of Risk Professionals (GARP), New Jersey, since January 2003.
Brian Platt, Chief Technology Officer
Mr. Platt joined the Company in May 2016. Mr. Platt has over ten (10) years of experience in the forex industry, managing complex technology, and business operations. His expertise includes advanced technical knowledge of databases, programming, product development lifecycles, and a clear understanding of business needs. Mr. Platt’s passion is combining this business and technological know-how to assure the best products, client satisfaction, and optimization of human resources.
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Mr. Platt was the head of technology at the prime brokerage division of Fortress Capital Investments, UAE (“Fortress”), from June 2014 to January 2016. He was instrumental in starting a forex broker from the ground up, introducing the trading platform, connecting liquidity, add-on services such as money management PAMM systems, and compliance reporting.
From May 2011 to February 2014, Mr. Platt served as the Director of Risk Management and Operations Research at Boston Technologies. His accomplishments include developing advanced procedures to eliminate trade risk, streamlining accounting operations, revamping client reporting, integrating new revenue streams, and providing comprehensive analytics.
Before joining Boston Technologies, Mr. Platt managed the Operations Research department at CMS Forex from March 2006 through May 2011. He coordinated all business intelligence efforts, identified and automated manual operations, and facilitated new business initiatives in this role. Mr. Platt organized the operational elements of CMS Forex’s sale to Gain Capital and subsequently revamped it to utilize existing resources as a profitable self-sufficient IB business. Mr. Platt holds a degree in Information Systems from Yeshiva University. He has computer science training from New York University and Oracle DBA training from Farleigh Dickenson University.
Jonathan Baumgart, Director
Mr. Baumgart has been a non-executive director of the Company since June 2021. Mr. Baumgart is considered independent under NYSE and NASDAQ listing standards. The Company compensates Mr. Baumgart for his services on the Board in cash and stock-based equity. He is the founder of Atomiq Consulting (“Atomiq”) and has been its Chief Executive Officer since May 2014. Atomiq specializes in the retail forex industry and the trading of other high-growth financial assets. In February 2015, Mr. Baumgart co-founded Money Matter, a boutique financial investments services firm based in Krakow, Poland. Between September 2010 and March 2014, Mr. Baumgart was the Director of Training at Boston Technologies, a technology, market maker, high-frequency trading, and inter-broker broker-dealer in the retail forex, precious metals, and other over-the-counter financial securities. In 2004, Mr. Baumgart completed his undergraduate degree in International Affairs Economics from the Whittemore School of Business and Economics, University of New Hampshire, Durham.
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Term of Office
All directors serve until the next annual meeting, and their successors are elected and qualified. Officers are appointed to serve for one year until the board of directors’ meeting following stockholders’ annual meeting. Further, until Directors’ successors have been elected and qualified.
Director of Independence
Our board of directors is currently composed of three (3) members, out of which two (2) directors are executive directors and who do not qualify as independent directors by the published listing requirements of the NASDAQ Global Market (the Company has no plans to list on the NASDAQ Global Market). The third non-executive director is an independent director. The NASDAQ independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three (3) years, one of our employees and that neither the director nor any of his family members have engaged in various types of business dealings with us. Also, our board of directors has not made a subjective determination as to our director that no relationships exist, which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. However, the NASDAQ rules require such subjective determination. Had our board of directors made these determinations, our board of directors would have reviewed and discussed the information provided by directors and us concerning our director’s business and personal activities and relationships as they may relate to us and our management.
Audit Committee and Conflicts of Interest
Since we do not have an audit or compensation committee comprised of independent directors, the functions that such committees would have performed are performed by our Board of Directors. The Board of Directors has not established an audit committee and does not have an audit committee financial expert, nor has the Board of Directors established a nominating committee. The Board believes that such committees are not necessary since the Company is an early start-up company and has only three (3) directors. To date, such directors have been performing the functions of such committees. Thus, there is a potential conflict of interest in that our three (3) directors and officers have the authority to determine issues concerning management compensation, nominations, and audit issues that may affect management decisions.
There are no family relationships among our directors or officers other than as described above. We are not aware of any other conflicts of interest with our executive officers or directors.
Involvement in Certain Legal Proceedings
No director, person nominated to become a director, executive officer, promoter, or control person of our Company has, during the last ten (10) years: (i) been convicted in or is currently subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to any federal or state securities or banking or commodities laws including, without limitation, in any way limiting involvement in any business activity, or finding any violation to such law, nor (iii) any bankruptcy petition been filed by or against the business of which such person was an executive officer or a general partner, whether at the time of the bankruptcy or for the two (2) years prior thereto.
Stockholder Communications with the Board Of Directors
We have not implemented a formal policy or procedure by which our stockholders can communicate directly with our board of directors. Nevertheless, every effort will be made to ensure that the board hears the views of stockholders of directors and the appropriate responses are provided to stockholders in a timely manner. Our board of directors will continue to monitor whether it would be appropriate to adopt such a process during the upcoming year.
| 19 |
| ITEM 11. | EXECUTIVE COMPENSATION |
The following table sets forth all compensation for the last two fiscal years awarded to, earned by, or paid our chief executive officer and our only other compensated executive officer serving in the previous completed fiscal year (collectively, the “Named Executives”):
| Non-Equity | ||||||||||||||||||||||||||||||||||||
| Incentive | Nonqualified | |||||||||||||||||||||||||||||||||||
| Salary | Stock | Option | Plan | Deferred | All Other | |||||||||||||||||||||||||||||||
| Name and | (3) | Bonus | Awards | Awards | Compensation | Compensation | Compensation | Total | ||||||||||||||||||||||||||||
| Principal Position | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||||||||
| Mitch Eaglstein, CEO (1) | 2021 | 144,000 | -0- | -0- | -0- | -0- | -0- | -0- | 144,000 | |||||||||||||||||||||||||||
| 2020 | 81,000 | -0- | -0- | -0- | -0- | -0- | -0- | 81,000 | ||||||||||||||||||||||||||||
| Imran Firoz, CFO (2) | 2021 | 144,000 | -0- | -0- | -0- | -0- | -0- | -0- | 144,000 | |||||||||||||||||||||||||||
| 2020 | 81,000 | -0- | -0- | -0- | -0- | -0- | -0- | 81,000 | ||||||||||||||||||||||||||||
| Brian Platt, CTO (3) | 2021 | 60,000 | -0- | -0- | -0- | -0- | -0- | -0- | 60,000 | |||||||||||||||||||||||||||
| 2020 | 60,000 | -0- | -0- | -0- | -0- | -0- | -0- | 60,000 | ||||||||||||||||||||||||||||
(1) Appointed CEO, President, and Director January 21, 2016. The Company issued 30,000,000 common stock on January 21, 2016, and 2,600,000 preferred stock on March 24, 2017, at par value as the founder in consideration of services rendered to the Company.
(2) Appointed Chief Financial Officer, Secretary, and Director January 21, 2016. The Company issued 5,310,000 common stock on January 21, 2016, and 400,000 preferred stock on March 24, 2017, at par value as the founder in consideration of services rendered to the Company.
(3) March 15, 2016, the Company issued 500,000 restricted common shares to Platt for services rendered valued at $25,000.
The Company gave all salary compensation to key executives as independent contractors, where Eaglstein, Firoz, and Platt commit one hundred percent (100%) of their time to the Company. The Company has not formalized 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. Effective October 1, 2020, the Company pays $12,000 monthly to its CEO and CFO.
Currently, Messrs: Eaglstein, Firoz, and Platt are independent contractors performing as the CEO, CFO, CTO, and COO, respectively. The Company intends to convert all such officers to employee status during the second quarter of 2021. The Company has not issued any bonuses or option awards to its officers to date. The Company intends to provide these incentives to meet specific sales criteria, to be reviewed quarterly and annually.
Stock Option Grants
We had no outstanding equity awards as of the end of the fiscal period ended December 31, 2021, or through the date of filing this report.
Employment Agreements
The Company is not a party to any employment agreement and has no compensation agreement with any officer or director.
Director Compensation
The Company issued Jonathan Baumgart, non-executive director, 100,000 common stock valued at $21,000 in June 2021 upon his appointment to the Board.
| 20 |
| ITEM 12: | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
The following table lists, as of December 31, 2021, the number of shares of common and Series A Preferred Stock of our Company that is beneficially owned by (i) each person or entity is known to our Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each officer and director of our Company; and (iii) all sole officer and director as a group. Information relating to beneficial ownership of the common stock by our principal shareholders and management is based upon each person’s information using “beneficial ownership” concepts under the Securities and Exchange Commission rules. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which consists of the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within sixty (60) days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which they may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power.
The percentages below are calculated based on 141,811,264 shares of our common stock issued and outstanding for the fiscal year December 31, 2021.
| Name and Address(1) | Title of Class | Number of Shares Beneficially Owned | Percent of Class | |||||||
| Mitch Eaglstein | Common | 20,768,105 | 14.64 | % | ||||||
| Imran Firoz | Common | 14,310,000 | 10.09 | % | ||||||
| Brian Platt | Common | 500,000 | 0.35 | % | ||||||
| Jonathan Baumgart | Common | 100,000 | 0.07 | % | ||||||
| FRH Group Corporation (2) | Common | 33,600,000 | 23.69 | % | ||||||
| Officers and Directors as a group (4 persons) | Common | 35,678,105 | 25.16 | % | ||||||
| Name and Address(1) | Title of Class | Number of Shares Beneficially Owned | Percent of Class | |||||||
| Mitch Eaglstein | Series A Preferred | 2,600,000 | 65.00 | % | ||||||
| Imran Firoz | Series A Preferred | 400,000 | 10.00 | % | ||||||
| Felix R. Hong (2) | Series A Preferred | 1,000,000 | 25.00 | % | ||||||
| Officers and Directors as a group (2 persons) | Series A Preferred | 3,000,000 | 75.00 | % | ||||||
In the fiscal year ending December 31, 2016, the Company collectively issued 30,000,000 and 5,310,000 common shares at par value to Mitchell Eaglstein and Imran Firoz, respectively, as the founders in consideration of services rendered the Company. Further, the Company agreed to issue 2,600,000, 400,000, and 1,000,000 shares of Preferred Stock to Mitchell Eaglstein, Imran Firoz, and FRH Group, respectively, as the founders in consideration of services rendered the Company.
(1) Addresses for all officers and directors are 200 Spectrum Drive, Suite 300, Irvine, CA 92618.
(2) 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.
(3) Series A Preferred stock is entitled to fifty (50) non-cumulative votes per share on all matters presented to stockholders for action. As a result, 4,000,000 Series A Preferred Shares represent 58.51% voting percentage on a fully diluted vote per share basis.
| 21 |
| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
In April 2016, the Company established its wholly-owned subsidiary – FRH Prime Ltd. (“FRH Prime”), a company incorporated under section 14 of Bermuda’s Companies Act 1981. In January 2017, FRH Prime established its wholly-owned subsidiary – FXClients Limited (“FXClients”), under the United Kingdom Companies Act. The Company established FRH Prime and FXClients to conduct financial technology service activities. The Company established FRH Prime and FXClients to conduct financial technology service activities. At present, both companies have ceased to exist.
For the fiscal year ended December 31, 2021, and 2020, FRH Prime has generated volume rebates of $0 and $1,861 from the Condor Risk Management Back Office Platform. The Company has included rebates in revenue in the consolidated income statements.
Between February 22, 2016, and April 24, 2017, the Company borrowed $1,000,000 from FRH Group, a founder and principal shareholder (“FRH Group”). 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 per share but maybe discounted under certain circumstances, but in no event will the conversion price be less than $0.05 per share. The Notes carry an interest rate of 6% per annum, which is due and payable at the maturity date.
Between March 15 and 21, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued 1,000,000 shares to Susan Eaglstein and 400,000 shares to Brent Eaglstein at $0.05 per share, a cumulative cash amount of $70,000. Ms. Eaglstein and Mr. Eaglstein are the Mother and Brother, respectively, of Mitchell Eaglstein, the Company’s CEO and Director.
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 also received a net amount equal to $81,000 from the related parties to fund its operations.
| ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Farber Hass Hurley LLP (‘FHH’) was our registered independent public registered accounting firm until July 2021. There have not been any changes in or disagreements with accountants on accounting and financial disclosure or any other matter. In July 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.
Audit Fees
For the fiscal year ended December 31, 2021, and 2020, the Company paid $34,250 and $37,500, respectively, to FHH.
For the fiscal year ended December 31, 2021, and 2020, the Company paid $10,800 and $0 respectively to BFB. As of December 31, 2021, the Company owed BFB $35,000 for auditing financial statements of ADS for the period ending June 30, 2021, and 2020. The Company included the amount owed to BFB in accounts payable.
The fees include the audit of our annual financial statements for 2021 and 2020 and review of Forms 10-Q, or services generally provided by the accountant in connection with statutory and regulatory filings for such fiscal year.
Board of Directors Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
Our Board of Directors’ policy is to pre-approve all our independent registered public accounting firm’s services. For fiscal 2021, our Board of Directors pre-approved 100% of our independent registered public accounting firm’s services. These services include audit services. Our independent registered public accounting firm is required to periodically report to our Board of Directors regarding the extent of services offered by our independent registered public accounting firm by this pre-approval policy. Our Board of Directors may also delegate pre-approval authority to one or more members. Such member(s) must report any such pre-approval to our Board of Directors at the next scheduled meeting.
Audit-Related Fees
We incurred neither fees nor expenses for 2021 for professional services rendered by FHH and BFB for audit-related fees, other than the fees disclosed above under the caption “Audit Fees.”
Tax Fees
We incurred neither fees nor expenses for 2021 for professional services rendered by FHH and BFB for tax compliance, tax advice, or tax planning, other than the fees disclosed above under the caption “Audit Fees.”
Other Fees
We incurred no other fees or expenses for 2021 for any other products or professional services rendered by FHH and BFB other than as described above.
| 22 |
PART IV
| ITEM 15. | FINANCIAL STATEMENT SCHEDULES. |
(a) Financial Statements
| ITEM 16. | EXHIBITS. |
| Exhibit | Item | |
| 23.1 | Consent of Independent PCOAB public accounting firm. | |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 | |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 | |
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS* | Inline XBRL Instance Document | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| 23 |
SIGNATURES
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: March 28, 2022 | /s/ Mitchell Eaglstein |
Mitchell Eaglstein, President and CEO (Principal Executive Officer) |
| Date: March 28, 2022 | /s/ Imran Firoz |
Imran Firoz, CFO (Principal Accounting Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| SIGNATURE | TITLE | DATE | ||
| /s/ Mitchell Eaglstein | President, Chief Executive Officer (Principal | March 28, 2022 | ||
| Mitchell Eaglstein | Executive Officer) | |||
| /s/ Imran Firoz | Chief Financial Officer (Principal Financial and | March 28, 2022 | ||
| Imran Firoz | Accounting Officer) |
| 24 |
FDCTECH, INC.
Index to Consolidated Financial Statements
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of FDCTech, Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of FDCTech, Inc. (the “Company”) as of December 31, 2021, and the related consolidated statement of operations, shareholders’ equity (deficit), and cash flows for the period ended December 31, 2021, and the related notes and schedules (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Matter
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.
Critical Audit Matter
Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/S BF Borgers CPA PC
We have served as the Company’s auditor since 2021
March 28, 2022
| F-2 |
FDCTECH, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2021 | December 31, 2020 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net
of allowance for doubtful accounts of $ | ||||||||
| Other current assets | ||||||||
| Total Current assets | ||||||||
| Capitalized software, net | ||||||||
| Acquired tangible assets | - | |||||||
| Acquired intangible assets | - | |||||||
| Other assets – non-current | - | |||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Line of credit | ||||||||
| Payroll tax payable | ||||||||
| Related-party advances | - | |||||||
| Related-party convertible notes payable – current | - | |||||||
| Related-party accrued interest – current | - | |||||||
| Cares act- paycheck protection program advance | ||||||||
| Other current liabilities | ||||||||
| Total Current liabilities | ||||||||
| SBA loan – non-current | ||||||||
| Cares act- paycheck protection program advance – non-current | ||||||||
| Accrued interest – non-current | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 9) | - | - | ||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, par value $, shares authorized, issued and outstanding, as of December 31, 2021 and December 31, 2020 | ||||||||
| Common stock, par value $, shares authorized; and shares issued and outstanding, as of December 31, 2021 and December 31, 2020 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total FDCTech, Inc. stockholders’ equity (deficit) | ( | ) | ||||||
| Noncontrolling interest | - | |||||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
See accompanying notes to the financial statements.
| F-3 |
FDCTECH, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| Year Ended | ||||||||
December 31, 2021 | December 31, 2020 | |||||||
| Revenues | ||||||||
| Technology software | ||||||||
| Wealth management | - | |||||||
| Total revenue | $ | $ | ||||||
| Cost of sales | ||||||||
| Technology software | ||||||||
| Wealth management | - | |||||||
| Total cost of sales | ||||||||
| Gross Profit | $ | ( | ) | |||||
| Operating expenses: | ||||||||
| General and administrative | ||||||||
| Sales and marketing | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Related-party interest expense | - | ( | ) | |||||
| Other interest expense | ( | ) | ( | |||||
| Other income (expense) | ||||||||
| Total other expense | ( | ) | ( | ) | ||||
| Loss before provision for income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | - | - | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Less: Net income attributable to noncontrolling interest | - | |||||||
| Net income attributable to FDCTech’s shareholders | ( | ) | ( | ) | ||||
| Net loss per common share, basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of common shares outstanding basic and diluted | ||||||||
See accompanying notes to the financial statements.
| F-4 |
FDCTECH, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
| Preferred stock | Common stock | Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| December 31, 2019 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $ per share | - | - | - | |||||||||||||||||||||||||
| Shares cancelled for non-service | - | - | ( | ) | ( | ) | ( | ) | - | ( | ) | |||||||||||||||||
| Common shares issued for services valued at $ per share | - | - | - | |||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| December 31, 2021 | - | |||||||||||||||||||||||||||
| Common shares issued for services valued at $ per share | - | - | - | |||||||||||||||||||||||||
| Common shares issued for FRH Group note conversion
at $ | - | - | - | |||||||||||||||||||||||||
| Common shares issued for services valued at $ per share | - | - | - | |||||||||||||||||||||||||
| Common shares issued for services valued at $ per share | - | - | - | |||||||||||||||||||||||||
| Common shares issued for services valued at $ per share | - | - | - | |||||||||||||||||||||||||
| Common shares issued for services valued at $ per share | - | - | - | |||||||||||||||||||||||||
| Common shares issued for services valued at $ per share | - | - | - | |||||||||||||||||||||||||
| Common shares issued for cash valued at $ per share | - | - | - | |||||||||||||||||||||||||
| Common shares issued for financing cost valued at $ per share | - | - | - | |||||||||||||||||||||||||
| Common shares cancelled for services valued at $ per share | - | - | ( | ) | ( | ) | ( | ) | - | ( | ) | |||||||||||||||||
| Common shares issued for services valued at $ per share | - | - | - | |||||||||||||||||||||||||
| Common shares issued for cash valued at $ per share | - | - | - | |||||||||||||||||||||||||
| Common shares issued for cash valued at $ per share | - | - | - | |||||||||||||||||||||||||
| Common shares issued for acquisition valued at $ per share | - | - | - | |||||||||||||||||||||||||
| Common shares issued for services valued at $ per share | - | - | - | |||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
See accompanying notes to the financial statements
| F-5 |
FDCTECH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended | ||||||||
December 31, 2021 | December 31, 2020 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Software depreciation and amortization | ||||||||
| Common stock issued for services | ||||||||
| Accounts receivable allowance | ||||||||
| Subscription receivable | ( | ) | - | |||||
| Acquired tangible assets | ( | ) | - | |||||
| Acquired intangible assets | ( | ) | - | |||||
| Change in assets and liabilities: | ||||||||
| Gross accounts receivable | ( | ) | ( | ) | ||||
| Accounts payable | ||||||||
| Other current liabilities | ||||||||
| Other current assets | ( | ) | ( | ) | ||||
| Accrued interest | ||||||||
| Increase in accrued payroll tax | ||||||||
| Net cash used in operating activities | $ | ( | ) | $ | ( | ) | ||
| Investing Activities: | ||||||||
| Capitalized software | ( | ) | ( | ) | ||||
| Stock issued for acquisition | - | |||||||
| Net cash used in investing activities | $ | ( | ) | $ | ( | ) | ||
| Financing Activities: | ||||||||
| Borrowing from (payments to) line of credit | ||||||||
| Net proceeds from cares act - paycheck protection program | - | |||||||
| Net proceeds from SBA loan | ( | ) | ||||||
| Net proceeds from common stock | - | |||||||
| Related party advances | - | |||||||
| Noncontrolling interest | - | |||||||
| Net cash provided by financing activities | $ | $ | ||||||
| Net decrease in cash | ( | ) | ||||||
| Cash at beginning of the period | ||||||||
| Cash at end of the period | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
See accompanying notes to the financial statements.
| F-6 |
FDCTECH, INC. – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BUSINESS DESCRIPTION AND NATURE OF OPERATIONS
Under Delaware laws, the founders incorporated the Company on January 21, 2016, as Forex Development Corporation. On February 27, 2018, the Company changed its name to FDCTech, Inc. The name change reflects the Company’s commitment to expanding its products and services in the FX and cryptocurrency markets for OTC brokers. The Company provides innovative and cost-efficient financial technology (‘fintech’) and business solutions to OTC Online Brokerages and cryptocurrency businesses (“customers”).
The Company intends to build a diversified global financial services company driven by proprietary Condor trading technologies, complementary regulatory licenses, and a proven executive team. The Company plans to acquire, integrate, transform, and scale legacy financial service companies. The Company believes 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.
From December 2021, the Company expects to grow from its acquisition strategy, specializing in buying and integrating small to mid-size legacy financial services companies. The Company intends to build a diversified global software-driven financial services company. The Company plans to acquire, integrate, transform, and scale legacy financial service companies. The Company replaces conventional legacy software infrastructure with its regulatory-grade proprietary Condor trading technologies, intending to improve end-user experience, increase client retention, and realize cost synergies.
On December 22, 2021, the Company entered into a Share Exchange Agreement (the “Agreement”) with AD Financial Services Pty Ltd ACN 628 331 117 of Level 38/71 Eagle St, Brisbane, Queensland, Australia, 4000 (“ADFP” or “Target”). According to the Agreement, the Company acquired % of ADFP’s issued and outstanding shares of capital stock in exchange for (the “Consideration”) newly issued “restricted” common shares. The operating and licensed entity of ADFP is AD Advisory Services Pty Ltd. ADFP owns one hundred percent (%) equity interest in AD Advisory Services Pty Ltd (“ADS”). As a result, the Company is % owner of ADS.
Post-acquisition of ADS, we have two primary business segments, (1) Wealth Management and (2) Technology and Software Development.
Wealth Management
The Wealth Management business currently consists of ADS, an Australian-regulated wealth management company with 20 offices, 28 advisors, $530+ million funds under advice.
From 12/22/21 to 12/31/21* (Unaudited) | From 07/01/21 to 12/31/21 (Unaudited) | Fiscal year ended June 30, 2021 (Audited) | Fiscal year ended June 30, 2020 (Audited) | |||||||||||||
| Revenue, $ | ||||||||||||||||
| Cost of sales, $ | ||||||||||||||||
| Gross Profit, $ | ||||||||||||||||
| * |
ADS’
audited revenues, cost of sales, and gross profits for the fiscal year ended June 30, 2021, were $
| F-7 |
Technology Software Development
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 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.
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.
The Company does not have any patents or trademarks on its proprietary technology solutions.
The Company has three sources of revenue.
| ● | Consulting Services – The Company’s turnkey business solutions - Start-Your-Own-Brokerage (“SYOB”), Start-Your-Own-Prime Brokerage (“SYOPB”), Start-Your-Own-Crypto Exchange (“SYOC”), FX/OTC liquidity solutions, and lead generations. | |
| ● | 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 (“Condor Risk Management”), Condor Pro Multi-Asset Trading Platform (previously known as Condor FX Pro Trading Terminal), Condor Pricing Engine, Crypto Web Trader Platform, and other cryptocurrency-related solutions. | |
| ● | Customized Software Development – The Company develops software for Customers with unique requirements outlined in the Software Development Agreement (“Agreement”). |
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.
The Company acts 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 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 customer’s design criteria and performance requirements.
Fiscal year ended December 31, 2021 (Audited) | Fiscal year ended December 31, 2020 (Audited) | |||||||
| Revenue, $ | ||||||||
| Cost of sales, $ | ||||||||
| Gross Profit (loss), $ | ( | ) | ||||||
| F-8 |
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 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 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 currently has six (6) licensing agreements for its Condor Pro Multi-Asset Trading Platform. The Company is continuously negotiating additional licensing agreements with several retail online brokers to use the Condor Pro Multi-Asset Trading Platform. Condor Pro Multi-Asset Trading Platform is available as a desktop, web, and mobile version.
The Company’s upgraded Condor Back Office (Risk Management) meets various jurisdictions’ regulatory requirements. 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 is developing Condor Investing Trading App, a simplified trading platform for traders of varied experiences in trading stocks, ETFs, and other financial markets from their mobile phone. The Company expects to commercialize the Condor Investing Trading App by the end of the second quarter of the fiscal year ended December 31, 2022.
The Company is developing NFT Marketplace, a decentralized NFT marketplace, a multichain platform with a lazy minting option to reduce and limit unnecessary blockchain usage fees, also known as gas fees. The Company expects to commercialize the NFT Marketplace by the end of the second quarter of the fiscal year ended December 31, 2022.
The Company and its subsidiary, ADS, are developing a digital wealth management company, which will initially include a Robo Advice Platform catering to Australia’s wealth management industry. The Company expects to commercialize the Robo Advice Platform by the fiscal year ended December 31, 2022.
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 Bermuda’s Companies Act 1981. 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. The Company established FRH Prime and FXClients to conduct financial technology service activities. At present, both companies have ceased to exist.
ADS
is an Australian regulated wealth management company with 20 offices, 28 advisors, $530+ million funds under advice. ADS consolidated
revenues, cost of sales, and gross profits from December 22, 2021, and December 31, 2021, were $
Settlement of the FRH Group Note
Between
February 22, 2016, and April 24, 2017, the Company borrowed $
| F-9 |
Termination of Acquisition of Genesis Financial, Inc.
In
line with the new strategic direction, on June 2, 2021, the Company entered into a Stock Purchase Agreement (the “Genesis Agreement”)
with the Shareholders of Genesis Financial, Inc., a Wyoming corporation (“GFNL” or “Seller”). According to the
Agreement, the Company plans to acquire
On August 24, 2021, FDCTech, Inc., a Delaware corporation (“FDCT” or the “Company” or “Buyer”), terminated the Stock Purchase Agreement (the “Agreement”), dated June 2, 2021, with the Shareholders of Genesis Financial, Inc., a Wyoming corporation (“Genesis” or “Seller”). As of the termination date, the Company did not issue any Securities to the Seller. The Company could not complete nor qualify the Agreement as Genesis could not comply with several non-exhaustive material provisions, covenants, or conditions.
On June 9, 2021, and in connection with the previous description of the Genesis Agreement, dated June 2, 2021, the Company appointed Warwick Kerridge as Chairman of the Company’s Board of Directors. Effective August 24, 2021, the Company terminated the appointment of Warwick Kerridge as the Board of Directors. The Company approved the termination upon the consent of the majority of the stockholders representing at least % of the issued and outstanding shares of the Company. The Company authorized the action according to Section 222 of the General Corporation Law of Delaware. Upon termination of Mr. Kerridge, the Company currently has four Board of Directors. Mitchell M. Eaglstein shall be the acting Chairman of the Company.
Equity Line of Credit
On
October 04, 2021, the Company filed a prospectus that relates to the resale of up to shares of our Common Stock issued or
issuable to selling shareholders for up to $
Governmental Regulation
FDCTech is a publicly-traded company subject to SEC and FINRA’s rules and regulations regarding public disclosure, financial reporting, internal controls, and corporate governance.
Our wealth management business, AD Advisory Services (ADS), is subject to enhanced regulatory scrutiny and regulated by multiple regulators in Australia. The Australian Securities and Investments Commission (ASIC) administers a licensing regime for ‘financial services’ providers where ADS holds an Australian Financial Services Licence (AFSL) and meets various compliance, conduct, and disclosure obligations.
Board of Directors
Effective January 1, 2021, Naim Abdullah resigned as the Director of the Company.
On July 6, 2021, the Board of Directors of FDCTech, Inc. (the “Company”) increased from four to five directors and appointed Charles R. Provini, age 74, to the vacancy. Mr. Provini is considered independent under NYSE and NASDAQ listing standards. Mr. Provini has been the Chairman, CEO, and President of Natcore Technology Inc. since May 2009, a research and development company protected by 65 patents granted or pending. From November 1997 to October 2000, he was the President of Ladenburg Thalmann Asset Management and a Director of Ladenburg Thalmann, Inc., one of the oldest 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.
| F-10 |
Upon termination of Mr. Kerridge effective August 24, 2021, the Company currently had 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.
On November 30, 2021, Charles R. Provini, a member of the Board of Directors of FDCTech, Inc. (the “Company”), notified the Company of his intention to voluntarily resign from the Company’s Board of Directors effective November 30, 2021. Mr. Provini did not advise the Company of any disagreement with the Company on any matter relating to its operations, policies, or practices. Upon the resignation of Mr. Provini, the Company currently has three Board of Directors.
Changes in Registrant’s Certifying Accountant
On July 2, 2021, the Board of Directors of FDCTech, Inc. (the “Company”) approved the dismissal of Farber Hass Hurley LLP (“FHH”) as the Company’s independent registered public accounting firm. The reports of FHH on the Company’s consolidated financial statements for the fiscal years ended December 31, 2020, and 2019 did not contain an adverse opinion or a disclaimer of opinion. It was not qualified or modified for uncertainty audit scope or accounting principles.
On July 2, 2021, the Company appointed BF Borgers CPA PC (“BFB”) as the Company’s new independent registered public accounting firm, effective immediately, to perform independent audit services for the fiscal year ending December 31, 2021.
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.
Covid-19
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic throughout the United States. While the initial outbreak concentrated in China, it spread to several other countries, including Russia and Cyprus, and reported infections globally. Many countries worldwide, including 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.
| F-11 |
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 consistent with the Company’s accounting policies in its financial statements. The Company has measured and presented the Company’s 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).
Consolidated Financial Statement Preparation and Use of Estimates
The Company prepared the consolidated financial statements according to accounting principles generally accepted in the United States of America (“GAAP”). The preparation of the 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 three months or less of original maturities. The Company maintains
its cash balances at a single financial institution. The balances do not exceed Federal Deposit Insurance Corporation (FDIC) limits as
of December 31, 2021. On December 31, 2021, and 2020, the Company had $
| F-12 |
Note 2 – Summary of Significant Accounting Policies (continued)
Accounts Receivable
Accounts Receivable primarily represents the amount due from eight (8) 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
December 31, 2021, and 2020, the Management determined that allowance for doubtful accounts was $
Sales, Marketing and Advertising
The Company recognizes sales, marketing, and advertising expenses when incurred.
The
Company incurred $
Revenue Recognition
On January 1, 2019, the Company adopted ASU 2014-09 Revenue from Contracts with Customers. The majority of the Company’s revenues come from two contracts – IT support and maintenance (‘IT Agreement’) and software development (‘Second Amendment’) that fall within the scope of ASC 606.
The Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services as per the contract with the customer. As a result, the Company accounts for revenue contracts with customers by applying the requirements of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic 606), which includes the following steps:
| ● | Identify the contract or contracts, and subsequent amendments with the customer. | |
| ● | Identify all the performance obligations in the contract and subsequent amendments. | |
| ● | Determine the transaction price for completing performance obligations. | |
| ● | Allocate the transaction price to the performance obligations in the contract. | |
| ● | Recognize the revenue when, or as, the Company satisfies a performance obligation. |
| F-13 |
Note 2 - Summary of Significant Accounting Policies (continued)
The Company adopted ASC 606 using the modified retrospective method applied to all contracts not completed as of January 1, 2019. The Company presents results for reporting periods beginning after January 1, 2019, under ASC 606, while prior period amounts are reported following legacy GAAP. In addition to the above guidelines, the Company also considers implementation guidance on warranties, customer options, licensing, and other topics. The Company considers revenue collectability, methods for measuring progress toward complete satisfaction of a performance obligation, warranties, customer options for additional goods or services, nonrefundable upfront fees, licensing, customer acceptance, and other relevant categories.
The Company accounts for a contract when the Company and the customer (‘parties’) have approved the contract and are committed to performing their respective obligations. Each party can identify their rights, obligations, and payment terms; the contract has commercial substance. The Company will probably collect all of the consideration. Revenue is recognized when performance obligations are satisfied by transferring control of the promised service to a customer. The Company fixes the transaction price for goods and services at contract inception. The Company’s standard payment terms are generally net 30 days and, in some cases, due upon receipt of the invoice.
The Company considers the change in scope, price, or both as contract modifications. The parties describe contract modification as a change order, a variation, or an amendment. A contract modification exists when the parties to the contract approve a modification that either creates new or changes existing enforceable rights and obligations. The Company assumes a contract modification by oral agreement or implied by the customer’s customary business practice when agreed in writing. If the parties to the contract have not approved a contract modification, the Company continues to apply the existing contract’s guidance until the contract modification is approved. The Company recognizes contract modification in various forms –partial termination, an extension of the contract term with a corresponding price increase, adding new goods or services to the contract, with or without a corresponding price change, and reducing the contract price without a change in goods/services promised.
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 capable of being distinct and distinct within the contract context are combined and treated as a single performance obligation in determining the allocation and recognition of revenue. For multi-element transactions, the Company allocates the transaction price to each performance obligation on a relative stand-alone selling price basis. The Company determines the stand-alone selling price for each item at the transaction’s inception involving these multiple elements.
| F-14 |
Note 2 - Summary of Significant Accounting Policies (continued)
Since January 21, 2016 (‘Inception’), the Company has derived its revenues mainly from consulting services, technology solutions, and customized software development. The Company recognizes revenue when it has satisfied a performance obligation by transferring control over a product or delivering a service to a customer. We measure revenue based 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 contract length. If the customer pays the Company in advance for these services, the Company records such payment as deferred revenue until the Company completes the services. | ||
| Technology Services | Licensing of Condor Risk Management Back Office (“Condor Risk Management”), Condor FX Pro Trading Terminal, Condor Pricing Engine, Crypto Trading Platform (“Crypto Web Trader Platform”), and other cryptocurrency-related solutions. | The Company recognizes ratably over the contractual period that the services are delivered, beginning on the date such service is made available to the customer. Licensing agreements are typically one year in length with an option to cancel by giving notice; customers have the right to terminate their agreements if the Company materially breaches its obligations under the agreement. Licensing agreements do not provide customers the right to take possession of the software. The Company charges the customers a set-up fee for installing the platform, and implementation activities are insignificant and not subject to a separate fee. | ||
| Software Development | Design and build development software projects for customers, where the Company develops the project to meet the design criteria and performance requirements as specified in the contract. | The Company recognizes the software development revenues when the Customer obtains control of the deliverables as stated in the Statement-of-Work contract. |
The Company assumes that the goods or services promised in the existing contract will be transferred to the customer to determine the transaction price. The Company believes that the contract will not be canceled, renewed, or modified; therefore, the transaction price includes only those amounts to which the Company has rights under the present contract. For example, if the Company enters into a contract with a customer with an original term of one year and expects the customer to renew for a second year, the Company would determine the transaction price based on the initial one-year period. When choosing the transaction price, the company first identifies the fixed consideration, including non-refundable upfront payment amounts.
To allocate the transaction price, the Company gives an amount that best represents 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.
| F-15 |
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 December 31, 2019, the Company’s two primary 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
two hundred and fifty thousand ($
According to the Second Amendment, the Company identifies two primary ongoing performance obligations in the contract for the following development services of the Platform:
a) Customized developments, and
b) Software updates.
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 accomplishing 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 contract’s terms and conditions, the Company invoices the customer at the beginning of the month for the month’s services. The invoice amount is due upon receipt. The Company recognizes the revenue at the end of each month, equal to the invoice amount.
| F-16 |
Note 2 - Summary of Significant Accounting Policies (continued)
Concentrations of Credit Risk
Cash
Cash
and cash equivalents include cash on hand, deposits held with banks, and other short-term highly liquid investments with three months
or less of original maturities. The Company maintains its cash balances at a single financial institution. The balances do not exceed
Federal Deposit Insurance Corporation (FDIC) limits as of December 31, 2021. On December 31, 2021, and 2020, the Company
had $
Revenues
For
the fiscal year ended December 31, 2021, and 2020, the Company had eight (8) and eight (8) active customers. Revenues generated from
the top three (3) customers represented approximately
Accounts Receivable
At
December 31, 2021, and 2020, the company’s top four (4) customers comprise roughly
Research and Development (R and D) Cost
The Company acknowledges that future benefits from research and development (R and D) are uncertain, and it cannot capitalize the R and D expenditures. The GAAP accounting standards require us to expense all research and development expenditures as incurred. For the fiscal year ended December 31, 2021, and 2020, the Company incurred no R and D costs. We have included the R and D costs in the General and Administrative expenses in the consolidated income statements.
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 probable, and the amount can be reasonably estimated. 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, revises its estimates, and updates its disclosures accordingly. The Company’s legal costs associated with defending itself are recorded as expenses when incurred. The Company is currently not involved in any litigation.
Impairment of Long-Lived Assets
The
Company reviews long-lived assets for impairment following FASB ASC 360, Property, Plant, and Equipment. We test long-lived assets for
recoverability whenever events or changes in circumstances indicate that the 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. There are
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 based on the temporary differences between the consolidated financial statement and income tax bases of assets and liabilities using the enacted tax rates applicable each year.
The Company utilizes a two-step approach to recognizing and measuring uncertain tax positions (“tax contingencies”). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount, 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 benefits, requiring periodic adjustments, which may not accurately forecast actual outcomes. The Company includes interest and penalties related to tax contingencies in the provision of income taxes in the operations’ consolidated statements. The Company’s management does not expect the total amount of unrecognized tax benefits to change significantly in the next twelve (12) months.
| F-17 |
Note 2 - Summary of Significant Accounting Policies (continued)
Software Development Costs
By ASC 985-20, Software development costs, including costs to develop software sold, leased, or otherwise marketed, are capitalized after establishing technical feasibility, if significant. We amortize the capitalized software development costs using the straight-line amortization method over the application software’s estimated useful life. By the end of February 2016, the Company completed the activities (planning, designing, coding, and testing) necessary to establish that it can produce and meet the Condor FX Back Office Version’s design specifications, Condor FX Pro Trading Terminal Version, and Condor Pricing Engine. The Company established the technical feasibility of the Crypto Web Trader Platform in 2018. The Company established the technical feasibility of the Condor Investing Trading App in 2021.
The
Company estimates the useful life of the software to be three (
Amortization
expense was $
The Company capitalizes the significant costs incurred during the application development stage for internal-use software.
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 life of the debt using the effective interest method.
As of 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 a beneficial conversion feature (“BCF”) to the extent of the price difference.
As the Company and FRH Group extended the maturity date of the four (4) tranches of convertible notes to June 30, 2021, Management analyzed the fair value of the BCF on these tranches. The Company noted that the value of the BCF for each note was insignificant; thus, it did not record debt discounts as of 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 $
The $ amount is equal to the intrinsic value, and the Company allocated it to additional paid-in capital in 2017.
Fair Value
The Company uses current market values to recognize certain assets and liabilities at a fair value. The fair value is the estimated price at which the Company can sell the asset or settle a liability in an orderly transaction to a third party under current market conditions. The Company uses the following methods and valuation techniques for deriving fair values:
Market Approach – The market approach uses the prices associated with actual market transactions for similar or identical assets and liabilities to derive a fair value.
Income Approach – The income approach uses estimated future cash flows or earnings, adjusted by a discount rate representing the time value of money and the risk of cash flows not being achieved to derive a discounted present value.
Cost Approach – The cost approach uses the estimated cost to replace an asset adjusted for the obsolescence of the existing asset.
The Company ranks the fair value hierarchy of information sources from Level 1 (best) to Level 3 (worst). The Company uses these three levels to select inputs to valuation techniques:
| Level I | Level 2 | Level 3 | ||
| Level 1 is a quoted price for an identical item in an active market on the measurement date. Level 1 is the most reliable evidence of fair value and is used whenever this information is available. | Level 2 is directly or indirectly observable inputs other than quoted prices. An example of a Level 2 input is a valuation multiple for a business unit based on comparable companies’ sales, EBITDA, or net income. | Level 3 is an unobservable input. It may include the company’s data, adjusted for other reasonably available information. Examples of a Level 3 input are an internally-generated financial forecast. |
The Company follows ASC 260, Earnings Per Share, to account for earnings per share. Basic earnings per share (“EPS”) calculations are determined by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share calculations are determined by dividing net loss by the weighted average number of common shares and dilutive common share equivalents outstanding. As of December 31, 2021, and 2020, the Company had and basic and dilutive shares issued and outstanding, respectively. On December 31, 2020, the Company had million potentially dilutive shares related to four (4) 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 December 31, 2021, and 2020, common stock equivalents were anti-dilutive due to a net loss. Hence they are not considered in the computation.
| F-18 |
Note 2 - Summary of Significant Accounting Policies (continued)
Reclassifications
Certain prior period amounts were reclassified to conform to the current year’s presentation. None of these classifications impacted reported operating loss or net loss for any period 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; 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. 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 affect on its financial reporting.
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” The amendments modify the disclosure requirements in Topic 820 to add disclosures regarding changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty. The amendments removed and modified certain disclosure requirements in Topic 820. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Certain amendments are to be applied prospectively, while others are to be applied retrospectively. Early adoption is permitted.
The
Company adopted the ASU 2018-13 as of January 1, 2020. The Company used the Level 1 Fair Market Measurement to record, at cost, ADS’
intangible assets’ valued at $
ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, issued in August 2020 simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to present certain conversion features in equity separately. In addition, the amendments also simplify the guidance in ASC Subtopic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity, by removing certain criteria that must be satisfied to classify a contract as equity, which is expected to decrease the number of freestanding instruments and embedded derivatives accounted for as assets or liabilities. Finally, the amendments revise the guidance on calculating earnings per share, requiring the use of the if-converted method for all convertible instruments and rescinding an entity’s ability to rebut the presumption of share settlement for instruments that may be settled in cash or other assets. The amendments are effective for public companies for fiscal years beginning after December 15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The guidance must be adopted as of the beginning of the fiscal year of adoption. The Company does not expect this ASU 2020-06 to impact its condensed consolidated financial statements.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force) and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.
| F-19 |
NOTE 3. MANAGEMENT’S PLANS
The
Company has prepared consolidated financial statements on a going concern basis, which contemplates the realization of assets and the
settlement of liabilities and commitments in the ordinary business course. At December 31, 2021, and 2020, the accumulated deficit was
$
During
the fiscal year ended December 31, 2021, and 2020, the Company incurred a net loss of $
Since
its inception, the Company has sustained recurring losses, and negative cash flows from operations. As of December 31, 2021,
the Company had $
The Company’s ability to continue as a going concern may depend on the Management’s plans discussed below. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company 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 Management may attempt to enter into a revolving loan agreement with financial institutions or raise capital through the sale of additional capital stock or issuance of debt.
The Management intends to continue its efforts to enhance its revenue from its diversified portfolio of technological solutions, become cash flow positive, and raise funds through private placement offering and debt financing. See Note 8 for Notes Payable. 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.
| F-20 |
NOTE 4. CAPITALIZED SOFTWARE COSTS
During
the fiscal year ended December 31, 2021, and 2020, the estimated remaining weighted-average useful life of the Company’s capitalized
software was three (
At
December 31, 2021, and 2020, the gross capitalized software asset was $
The Company has estimated aggregate amortization expense for each of the five (5) succeeding fiscal years based on the estimated software asset’s lifespan of three (3) years.
Estimated Amortization Expense:
| Fiscal year ended December 31, 2022 | $ | |||
| Fiscal year ended December 31, 2023 | $ | |||
| Fiscal year ended December 31, 2024 | $ | |||
| Fiscal year ended December 31, 2025 | $ |
NOTE 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 Bermuda’s Companies Act 1981. In January 2017, FRH Prime established its wholly-owned subsidiary – FXClients Limited (“FXClients”), under the United Kingdom Companies Act. The Company established FRH Prime and FXClients to conduct financial technology service activities. The Company established FRH Prime and FXClients to conduct financial technology service activities. At present, both companies have ceased to exist.
For
the fiscal year ended December 31, 2021, and 2020, FRH Prime has generated volume rebates of $
Between
February 22, 2016, and April 24, 2017, the Company borrowed $
Between
March 15 and 21, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued shares to Susan
Eaglstein and shares to Brent Eaglstein at $
On
February 22, 2021, the Company entered into an Assignment of Debt Agreement (the “Agreement”) with FRH and FRH Group Corporation.
The Company eliminated all four FRH Group convertible notes, including interest, of $
The
Company also received a net amount equal to $
NOTE 6. LINE OF CREDIT
From
June 24, 2016, the Company obtained an unsecured revolving line of credit of $
| F-21 |
NOTE 7. NOTES PAYABLE – RELATED PARTY
Convertible Notes Payable
Between
February 22, 2016, and April 24, 2017, the Company borrowed $
At
December 31, 2020, the current portion of convertible notes payable and accrued interest was $
At
December 31, 2019, the current portion of convertible notes payable and accrued interest was $
At December 31, 2020, there was no non-current portion of the Notes payable and accrued interest.
The
Company will pay the Notes’ outstanding principal amount, together with interest at
On
February 22, 2016, the Company issued and promised to pay a convertible note to FRH Group for the principal sum of One Hundred Thousand
and 00/100 Dollars ($
On
May 16, 2016, the Company issued and promised to pay a convertible note to FRH Group for the principal sum of Four Hundred Thousand and
00/100 Dollars ($
On
November 17, 2016, the Company issued and promised to pay a convertible note to FRH Group for the principal sum of Two Hundred and Fifty
Thousand and 00/100 Dollars ($
On
April 24, 2017, the Company issued and promised to pay a convertible note to FRH Group for the principal sum of Two Hundred and Fifty
Thousand and 00/100 Dollars ($
| F-22 |
NOTE 7. Notes Payable – Related Party (continued)
Convertible Notes Payable (continued)
FRH Group Note Summary
| Date of Note: | 2/22/2016 | 5/16/2016 | 11/17/2016 | 4/24/2017 | ||||||||||||
| Original Amount of Note: | $ | $ | $ | $ | ||||||||||||
| Outstanding Principal Balance: | $ | $ | $ | $ | ||||||||||||
| Conversion Date (1): | ||||||||||||||||
| Interest Rate: | % | % | % | % | ||||||||||||
| Date to which interest has been paid: | ||||||||||||||||
| Conversion Rate on February 22, 2021: | $ | $ | $ | $ | ||||||||||||
| Floor Conversion Price: | $ | $ | $ | $ | ||||||||||||
| Number Shares Converted for Original Note: | ||||||||||||||||
| Number Shares Converted for Interest: | ||||||||||||||||
| (1) |
Cares Act – Paycheck Protection Program (PPP Note)
On
May 01, 2020, the Company received proceeds of Fifty-Thousand Six Hundred and Thirty-Two ($
SBA Loan
On
May 22, 2020, the Company received hundred and forty-four thousand nine hundred and 00/100 Dollars ($
Economic Injury Disaster Loan (EIDL)
The
Small Business Administration offers the Economic Injury Disaster Loan program. The CARES Act changed the program to provide an emergency
grant up to $
| F-23 |
NOTE 9. COMMITMENTS AND CONTINGENCIES
Office Facility and Other Operating Leases
The
rental expense was $
From October 2019 to the present, 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 Irvine Office, discussed in Note 2.
From
February 2019 to the present, the Company leases office space in Limassol District, Cyprus, from an unrelated party for a year. The office’s
rent payment is $
Employment Agreement
Accrued Interest
At
December 31, 2021, and 2020, the Company’s exposure to cumulative accrued interest at
Pending Litigation
Management is unaware of any actions, suits, investigations, or proceedings (public or private) pending 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 fiscal ended December 31, 2017, to 2020. As of December 31, 2021, the Company has assessed federal and state payroll tax payments
in the aggregate amount of $
| F-24 |
NOTE 10. STOCKHOLDERS’ DEFICIT
Authorized Shares
As of December 31, 2021, and 2020, the Company’s authorized capital stock consists of shares of preferred stock, par value $per share, and shares of common stock, par value $per share. As of December 31, 2021, and 2020, the Company had and respectively common shares issued and outstanding and preferred shares issued and outstanding. The preferred stock has fifty (50) votes for each share of preferred shares owned. The preferred shares have no other rights, privileges, and higher claims on the Company’s assets and earnings than common stock.
Preferred Stock
On December 12, 2016, the Board agreed to issue , , and shares of Preferred Stock to Mitchell Eaglstein, Imran Firoz, and Felix R. Hong, respectively, as the founders in consideration of services rendered to the Company. As of December 31, 2019, 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 in consideration of services rendered to the Company.
On December 12, 2016, the Company issued common shares to the remaining two (2) founding members of the Company.
On
March 15, 2017, the Company issued restricted common shares for platform development valued at $
On
March 15, 2017, the Company issued restricted common shares for professional services to three (3) individuals valued at $
On
March 17, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued shares to Susan Eaglstein
for a cash amount of $
On
March 21, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued shares to Bret Eaglstein
for a cash amount of $
Ms. Eaglstein and Mr. Eaglstein are the Mother and Brother, respectively, of Mitchell Eaglstein, the CEO and Director of the Company.
From July 1, 2017, to October 03, 2017, the Company has issued units for a cash amount of $ under its offering Memorandum, where the unit consists of one (1) share of common stock and one Class A warrant (See Note 11).
On
October 31, 2017, the Company issued restricted common shares to management consultants valued at $
On
January 15, 2019, the Company issued restricted common shares for professional services to eight (8) consultants valued at $
From
January 29, 2019 to February 15, 2019, the Company issued registered shares under the Securities Act of 1933 for a cash amount
of $
| F-25 |
Effective June 3, 2020, the Company issued shares to Benchmark Investments, Inc. (“Broker-Dealer” or “Kingswood Capital Markets”) of common stock at $ per share for a total value of $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 compensation through the income statement following a regular straight-line amortization schedule over the contract’s life, which is for twelve months—when 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 returned the shares of the Company’s common stock as of December 31, 2020.
On
October 1, 2020, the Company issued restricted common shares to a digital marketing consultant valued at $
On
January 31, 2021, the Company issued restricted common shares for professional services to two (2) consultants valued at $
On
February 22, 2021, the Company entered into an Assignment of Debt Agreement (the “Agreement”) with FRH and FRH Group Corporation.
The Company eliminated all four FRH Group convertible notes, including interest, of $
On
May 19, 2021, the Company issued restricted common shares for professional services to a consultant valued at $
On
June 02, 2021, the Company issued restricted common shares for Genesis Agreement to a consultant valued at $
On
June 15, 2021, the Company issued restricted common shares to a board member for services to a consultant valued at $
On
July 06, 2021, the Company issued restricted common shares to a board member for services to a consultant valued at $
On
July 20, 2021, the Company issued restricted common shares for professional services to a consultant valued at $
On
October 04, 2021, the Company filed a prospectus related to the resale of shares to White Lion and AD Securities America, LLC. The Company
issued shares to AD Securities America, LLC for $
On
October 5, 2021, the Company issued restricted common shares for professional services to a consultant valued at $
In
November 2021, the Company issued registered shares to White Lion for a gross cash amount of $
On
December 22, 2021, the Company issued restricted common shares to ADFP to acquire
In
December 2021, the Company issued restricted common shares to two board members, a consultant, and two officers, for services
and software development valued at $
NOTE 11. WARRANTS
Effective
June 1, 2017, the Company is raising $
Each
Class A Warrant entitles the holder to purchase one (
| F-26 |
NOTE 11. WARRANTS (continued)
Information About the Warrants Outstanding During Fiscal 2019 Follows
| Original Number of Warrants Issued | Exercise Price per Common Share | Exercisable at December 31, 2017 | Became Exercisable | Exercised | Terminated / Canceled / Expired | Exercisable
at December 31, 2019 | Expiration Date | |||||||||||||||||||||
| $ | ||||||||||||||||||||||||||||
The
Warrants are redeemable by the Company, upon thirty (30) day notice, at a price of $
The exercise price and the number of shares of Common Stock or other securities issuable on exercise of the Warrants are subject to adjustment in certain circumstances, including stock dividend, recapitalization, reorganization, merger, or consolidation of the Company. However, no Warrant is subject to adjustment for issuances of Common Stock at a price below the exercise price of that Warrant.
As of this report’s date, no Class A Warrants were exercised, and all Class A Warrants have expired.
Note 12. Income Taxes
The Company calculates income taxes using the asset and liability method of accounting. We compute Deferred income taxes by multiplying statutory rates applicable to estimated future year differences between the consolidated financial statement and tax basis carrying amounts of assets and liabilities.
The income tax provision is summarized as follows:
| 2021 | 2020 | |||||||
| Current: | ||||||||
| Federal | $ | $ | ||||||
| State | - | - | ||||||
| Deferred: | ||||||||
| Federal | ||||||||
| State | - | - | ||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Total tax expense | $ | $ | ||||||
| 2021 | 2020 | |||||||
| Net loss carryforward | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Total deferred tax assets | $ | $ | ||||||
In
2021 and 2020, the Company had pre-tax losses of $
On
December 22, 2017, the United States President signed the Tax Cuts and Jobs Act (the “Act”). The Act amends the Internal
Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses.
| F-27 |
Note 12. Income Taxes (continued)
In
assessing the realization of deferred tax assets, management considers whether it is more likely that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of the deferred tax assets depends on generating future taxable income during
the periods when those temporary differences become deductible. The Company believes it is unlikely to realize the benefits of NOL carryforward.
We have provided a valuation allowance of $
Based
on the available objective evidence, management believes it is likely that the net deferred tax assets will not be fully realizable on
December 31, 2021. Accordingly, management maintained a full valuation allowance against its net deferred tax assets on December 31,
2021. The net change in the total valuation allowance for the twelve (12) months ended December 31, 2021, increased $
For the years ended December 31, 2021, and 2020, the Company analyzed its ASC 740 position and had not identified any uncertain tax positions defined under ASC 740. Should such position be identified in the future, and if the Company owes interest and penalties, these would be recognized as interest expense and other expense, respectively, in the consolidated financial statements.
The Company has identified the United States Federal tax returns as its “major” tax jurisdiction. The Company has submitted and received acceptance of the United States Federal return for 2020 and 2019. The Company is not subject to tax examination by authorities in the United States before 2016. The State Franchise Tax return for 2021 and 2020 has been submitted and accepted by Delaware State Franchise Tax Board. Currently, the Company does not have any ongoing tax examinations.
As
of December 31, 2021, the Company has assessed federal and state payroll tax payments in the aggregate amount of $
NOTE 13. OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements, including arrangements that would affect our liquidity, capital resources, market risk support, credit risk support, or other benefits.
NOTE 14. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through March 31, 2022, the date these financial statements were available to be issued.
From
January 4, 2022, to February 10, 2022, the Company executed six Purchase Notices under the Investment Agreement with White Lion for $
On
January 27, 2022, the Company signed a promissory note (‘AJB Note’) with AJB Capital Investments, LLC (‘AJB Capital’),
a Delaware limited liability company, for the principal amount of $
On February 17, 2022, the Company filed the Information Statement pursuant to Section 14C of the Securities Exchange Act of 1934 and informed all holders of record on February 10, 2022 (the “Record Date”) of the common stock, $ par value per share (the “Common Stock”), of the Company, in connection with the approval of the following actions taken by the Board of Directors of the Company (the “Board”) and by written consent of the holders of a majority of the voting power of Company’s issued and outstanding capital stock (the “Approving Stockholders”):
| 1. | To amend our certificate of incorporation, as amended (the “Certificate”), to increase the number of authorized shares of common stock from to (the “Authorized Share Increase” and together with the 2022 Equity Plan, the “Corporate Action”), and |
| 2. | To approve the Company’s 2022 Equity Plan (the “2022 Equity Plan”) |
On
February 10, 2022, our Board unanimously approved the Corporate Actions. To eliminate the costs and management time for a special meeting
and to effect the actions, the Company chose to obtain the written consent of a majority of the Company’s voting power to approve
the actions described in the Information Statement following Sections 228 and 242 of the Delaware General Corporation Law (the “DGCL”)
and per our bylaws. On February 10, 2022, the Approving Stockholders approved the Corporate Actions by written consent. The Approving
Stockholders (common stock only) own shares, representing
| F-28 |
EXHIBIT INDEX
| Exhibit | Item | |
| 23.1 | Consent of Independent PCOAB public accounting firm. | |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 | |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 | |
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS* | Inline XBRL Instance Document | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| F-29 |