Fdctech, Inc 8-K/A, filed Apr 29, 2022
Fdctech, Inc. (FDCT)
About this 8-K/A
Fdctech, Inc filed this 8-K/A on April 29, 2022, reporting on events of December 22, 2021.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
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FORM
CURRENT REPORT
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Current Report on Form 8-K contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to anticipated future events, future results of operations or future financial performance. These forward-looking statements include, but are not limited to, statements related to our ability to raise sufficient capital to finance our planned operations. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “should,” “intends,” “expects,” “plans,” “goals,” “projects,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology.
These forward-looking statements are only predictions, are uncertain and involve substantial known and unknown risks, uncertainties and other factors which may cause our (or our industry’s) actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. The “Risk Factors” section of this Current Report on Form 8-K sets forth detailed risks, uncertainties and cautionary statements regarding our business and these forward-looking statements.
We cannot guarantee future results, levels of activity or performance. You should not place undue reliance on these forward-looking statements, which speak only as of the date that they were made. These cautionary statements should be considered with any written or oral forward-looking statements that we may issue in the future. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to reflect actual results, later events or circumstances or to reflect the occurrence of unanticipated events.
| ITEM 9.01 | Financial Statements and Exhibits |
(d) Exhibits.
| Exhibit Number | Description | ||
| 99.1 | Audited financial statements of the acquired Company – AD Advisory Services Pty Ltd., for the fiscal year ended June 30, 2021, and 2020. | ||
| 99.2 | Unaudited Proforma condensed combined financial statements as of and for the fiscal year ended December 31, 2020, and nine months ended September 30, 2021 | ||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FDCTECH, INC. | |||
| April 28, 2022 | By: | /s/ Imran Firoz | |
| Date | Imran Firoz | ||
| Chief Financial Officer | |||
| (Principal Executive Officer) | |||
Exhibit 99.1
FINANCIAL STATEMENTS
AD ADVISORY SERVICES PTY LTD
ABN 68 005 830 802
Index to Consolidated Financial Statements
| F-1 |
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of AD Advisory Services Pty Ltd.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of AD Advisory Services Pty Ltd. as of June 31, 2021 and 2020, the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. 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”). We are required to be independent with respect to the Company in accordance with the US 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 audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by Management and evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/S/ BF Borgers CPA PC
We have served as the Company’s auditor since 2021
Lakewood, CO
April 28, 2022
| F-2 |
ABN 68 005 830 802
BALANCE SHEETS
| June 30, | June 30, | |||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 64,876 | $ | 106,430 | ||||
| Loan receivable | 29,222 | - | ||||||
| Prepaid | 1,541 | - | ||||||
| Other current assets | 152,543 | 72,071 | ||||||
| Total Current assets | 248,183 | 178,501 | ||||||
| Plant and equipment, net | 7,954 | - | ||||||
| Total assets | $ | 256,137 | $ | 178,501 | ||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 194,110 | $ | 102,305 | ||||
| Total Current liabilities | 194,110 | 102,305 | ||||||
| Other non-current liabilities | 3,315 | 26,838 | ||||||
| Total liabilities | 197,425 | 129,142 | ||||||
| Stockholders’ Equity: | ||||||||
| Issued capital | 15,041 | 13,731 | ||||||
| Retained earnings | 43,671 | 35,629 | ||||||
| Total equity | 58,712 | 49,359 | ||||||
| Total liabilities and stockholders’ equity | $ | 256,137 | $ | 178,501 | ||||
See accompanying notes to the financial statements.
| F-3 |
ABN 68 005 830 802
STATEMENTS OF OPERATIONS
| June 30, | June 30, | |||||||
| 2021 | 2020 | |||||||
| Revenue: | ||||||||
| Wealth management fees | 5,907,417 | 3,264,106 | ||||||
| Total revenue | $ | 5,907,417 | $ | 3,264,106 | ||||
| Cost of sales | ||||||||
| Commissions paid | 5,427,882 | 2,948,184 | ||||||
| Total cost of sales | $ | 5,427,882 | $ | 2,948,184 | ||||
| Gross profit | $ | 479,535 | $ | 315,922 | ||||
| Operating expenses: | ||||||||
| Operating expenses | 539,692 | 303,620 | ||||||
| Total operating expenses | 539,692 | 303,620 | ||||||
| Operating income (loss) | $ | (60,157 | ) | $ | 12,302 | |||
| Other income (expense): | ||||||||
| Other income | 68,199 | 151,648 | ||||||
| Total other income | 68,199 | 151,648 | ||||||
| Net income | $ | 8,042 | $ | 163,950 | ||||
See accompanying notes to the financial statements.
| F-4 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BUSINESS DESCRIPTION AND NATURE OF OPERATIONS
AD Advisory Services Pty Ltd. (ADS) is an Australian-regulated wealth management company with 20 offices, 28 advisors, and $530+ million in funds under advice. ADS provides licensing solutions for financial advisers & accountants in Australia. ADS offers different licensing, compliance, and education solutions to financial planners to meet the specific needs of their practice.
ADS is subject to enhanced regulatory scrutiny 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.
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 Australia and New Zealand, and reported infections globally. Many countries worldwide, including Australia, have implemented significant governmental measures 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 wealth management 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.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements include the accounts of ADS. The Company has measured and presented the Company’s consolidated financial statements in US Dollars, which is the reporting currency. The AUD is the functional currency of ADS, the primary economic environment in which the Company operates.
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, 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. On June 30, 2021, and 2020, the Company had $64,876 and $106,430 cash and cash equivalent held at the financial institution.
Accounts Receivable
Accounts Receivable primarily represents the amount due from clients of advisors. In most cases, the receivables are automatically deducted from clients’ wealth management accounts every week. The Company base the allowance for doubtful accounts on its assessment of the collectability of advisor 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.
| F-5 |
Foreign Currency Translation and Re-measurement
The Company translates its foreign operations to US dollar following ASC 830, “Foreign Currency Matters.”
The Company translates its records into US dollars as follows:
| ● | Assets and liabilities at the rate of exchange in effect at the balance sheet date | |
| ● | Equities at a historical rate | |
| ● | Revenue and expense items at the average rate of exchange prevailing during the period |
Functional and presentation currency
The Company has presented the financial statements in US dollars.
Transaction and balances
We translate the foreign currency monetary items at the year-end exchange rate. We measure the non-monetary items at historical cost and continue to carry them at the exchange rate at the date of the transaction. We determine non-monetary items measured at fair value are reported at the exchange rate at the date when fair values.
We recognize the exchange differences arising from the translation of monetary items in the statement of profit or loss. We realize the exchange difference arising from the translation of non-monetary items in the profit or loss statement.
Revenue
We recognize revenue when all five of the following revenue recognition criteria have been satisfied:
| ● | contract(s) with customers have been identified; | |
| ● | performance obligations have been identified; | |
| ● | transaction prices have been determined; | |
| ● | transaction prices have been allocated to the performance obligations; and | |
| ● | the performance obligations have been fulfilled by transferring control over the promised services to the customer. |
The determination of when these criteria are satisfied varies by product or service.
The Company’s wealth management revenue primarily consists of advisory revenue, commission revenue from insurance products, fees to prepare the statement of advice, rebalancing portfolio, and other financial planning activities. We recognize revenue upon the transfer of services to customers in an amount that reflects the consideration we expect to receive in exchange for those services. If we accept payments in advance of services, we defer and recognize them as revenue when satisfied with our performance obligation. Advisory income includes fees charged to clients in advisory accounts for which we are the licensed investment advisor. We bill advisory fees weekly.
We determine revenue relating to the services regarding the stage of completion of the transaction at the reporting date and where we can estimate the outcome of the contract reliably. When the transaction is doubtful, we recognize revenue to the extent that related expenditure is recoverable.
We state all revenue as net of the goods and services tax (GST).
| F-6 |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Property, plant, and equipment
We state property, equipment, and software, net at cost less accumulated depreciation. We calculate depreciation using the straight-line method over the following estimated useful lives:
| Estimated Useful Life | ||
| Computer equipment | 3 years | |
| Purchased software | 3 years | |
| Internally developed software | 3 years | |
| Office equipment | 7 years | |
| Office furniture | 7 years | |
| Leasehold improvements | Shorter of a lease term or economic life |
Costs incurred to develop software intended for our internal use, primarily contractor costs and employee salaries and benefits, are capitalized during the application development stage. Capitalization of such costs ceases once the project is substantially complete and ready for its intended use. We also capitalize costs related to specific upgrades and enhancements when it is probable that the expenditure will result in additional functionality.
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment under FASB ASC 360, Property, Plant, and Equipment. Under the standard, we test long-lived assets for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. An impairment charge is recognized for the amount if and when the asset’s carrying value exceeds the fair value. There are no impairment charges on June 30, 2021, and 2020.
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 for 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. |
Depreciation
The depreciable amount of all fixed assets, including building and capitalized leased assets, but excluding freehold land, is depreciated on a diminished value basis over their useful lives to the Company commencing from the time the asset is held ready for use.
Employee benefits
Obligations for contributions to employee-defined contribution superannuation plans are recognized as a personnel expense in profit or loss when they are due.
We measure short-term employee entitlements on an undiscounted basis, and we expense as the related service is provided.
| F-7 |
Leases
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 operating expenses.
Income tax
We account for income taxes under the asset and liability method, under which deferred tax assets, including net operating loss carryforwards, and deferred tax liabilities are determined based on temporary differences between the book and tax basis of assets and liabilities. We periodically evaluate the likelihood of the realization of deferred tax assets and reduce the carrying amount of the deferred tax assets by a valuation allowance to the extent we believe it is more likely than not that a portion will not be realized. We consider many factors when assessing the likelihood of future realization of deferred tax assets, including expectations of future taxable income, recent cumulative earnings experienced by taxing jurisdiction, and other relevant factors. There is a wide range of possible judgments relating to the valuation of our deferred tax assets.
We record liabilities to address uncertain tax positions that have been taken in previously filed tax returns or that are expected to be taken in a future tax return. The determination for required liabilities is based upon an analysis of each individual tax position, taking into consideration whether it is more likely than not that the tax position, based on technical merits, will be sustained upon examination. The tax benefit to be recognized in the financial statements from such a position is measured as the largest amount of benefit with a greater than 50% cumulative likelihood of being realized upon ultimate settlement with the taxing authority. The difference between the amount recognized and the total tax position is recorded as a liability. The ultimate resolution of these tax positions may be greater or less than the liabilities recorded. We recognize interest and penalties related to uncertain tax positions in interest expense and general and administrative expense, respectively.
Goods and services tax
We recognize revenue, expenses, and assets as net of GST, except where the amount of GST incurred is not recoverable from the Tax Office. In these circumstances, we recognize the GST as part of the asset’s acquisition cost or as part of the expense.
We state receivables and payables with the amount of GST included. We include The net amount of GST recoverable from or payable to the Tax Office as a current asset or liability on the statement of financial position.
| F-8 |
NOTE 3 – MANAGEMENT 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.
ADS is an Australian-regulated wealth management company with 20 offices, 28 advisors, and $530+ million funds under advice.
ADS’ audited revenues, cost of sales, and gross profits for the fiscal year ended June 30, 2021, were $5.91 million, $5.43 million, and $0.48 million, respectively. 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.
The Company’s revenue mainly consists of fees received by advisors from their clients. The cost of sales are fees paid out by the Company to advisors. The cost of sales for the fiscal year ended June 30, 2021, and 2020 were 91.88% and 90.32% of respective sales.
The Company’s main costs are compliance, insurance, and wages. For the fiscal year ended June 30, 2021, and 2020, the compliance, insurance, and wages collectively were $388,384 and $223,851, representing 71.96% and 73.73% of the total operating expenses.
The Management intends to continue its efforts to enhance its revenue by developing, marketing, and selling a Robo-advice platform for the Australian market. The Company is currently conducting technical feasibility of the Robo-advice platform with FDCTech, Inc.
NOTE 4. 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 5 – SUBSEQUENT EVENTS
On December 22, 2021, FDCTech, Inc., a US-based financial technology 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 FDCTech, Inc. 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 Company is an operating and licensed wholly-owned entity of ADFP. As a result of the transaction, FDCTech, Inc. is 51% owner of the Company’s issued and outstanding stock.
| F-9 |
AD ADVISORY SERVICES PTY LTD
ABN 68 005 830 802
The Directors have determined that the Company is not a reporting entity and that this special purpose financial report should be prepared in accordance with the accounting policies described in Note 1 to the financial statements.
The Directors of the Company declare that:
| I. | The financial statements and notes attached are in accordance with the Corporations Act 2001: | |
| a. | Comply with Accounting Standards as described in Note 1 to the financial statements, the Corporations Regulations 2001, and other mandatory professional reporting requirements; and | |
| b. | Give a true and fair view of the financial position as of June 30, 2021, and of the performance for the year ended on that date of the Company in accordance with the accounting policies described in Note 1 to the financial statements; and | |
| II. | There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. |
This declaration is made in accordance with a resolution of the Board of Directors.
| Director: | /s/ Jonathan Thomas, CEO |
Dated: November 17, 2021
| F-10 |
EXHIBIT 99.2
FDCTECH, INC
UNAUDITED PROFORMA CONDENSED COMBINED BALANCE SHEET AS OF DECEMBER 31, 2020
(Currency expressed in United States Dollars)
| FDCTech | AD Advisory Services | Total | Pro Forma Adjustments (Note 3) | Pro Forma Combined | ||||||||||||||||
| (USD) | (USD) | (USD) | (USD) | |||||||||||||||||
| Assets | ||||||||||||||||||||
| Current assets: | ||||||||||||||||||||
| Cash | $ | 22,467 | $ | 99,353 | $ | 121,820 | - | $ | 121,820 | |||||||||||
| Accounts receivable, net | 16,541 | - | 16,541 | - | 16,541 | |||||||||||||||
| Other current assets | 27,878 | 45,614 | 73,492 | - | 73,492 | |||||||||||||||
| Total Current assets | 66,886 | 144,967 | 211,853 | 211,853 | ||||||||||||||||
| Capitalized software, net | 632,324 | - | 632,324 | - | 632,324 | |||||||||||||||
| Prepaid and other acquired identifiable intangible assets | 2,918,303 | - | 2,918,303 | (77,510 | ) | 2,840,793 | ||||||||||||||
| Total non-current assets | 3,550,627 | - | 3,550,627 | 3,473,117 | ||||||||||||||||
| Total assets | $ | 3,617,513 | $ | 144,967 | $ | 3,762,480 | $ | 3,684,970 | ||||||||||||
| Liabilities and Stockholders’ Deficit | ||||||||||||||||||||
| Current liabilities: | ||||||||||||||||||||
| Accounts payable & other current liabilities | $ | 116,500 | $ | 67,457 | $ | 183,957 | - | $ | 183,957 | |||||||||||
| Line of credit | 39,071 | - | 39,071 | - | 39,071 | |||||||||||||||
| Payroll tax payable | 125,387 | - | 125,387 | - | 125,387 | |||||||||||||||
| Related-party convertible notes payable - current | 1,000,000 | - | 1,000,000 | - | 1,000,000 | |||||||||||||||
| Related-party accrued interest - current | 256,908 | - | 256,908 | - | 256,908 | |||||||||||||||
| Cares act- paycheck protection program advance | 29,412 | - | 29,412 | - | 29,412 | |||||||||||||||
| Total Current liabilities | 1,567,278 | 67,457 | 1,634,735 | 1,634,735 | ||||||||||||||||
| SBA loan – non-current | 144,900 | - | 144,900 | - | 144,900 | |||||||||||||||
| Cares act- paycheck protection program advance – non-current | 21,220 | - | 21,220 | - | 21,220 | |||||||||||||||
| Accrued interest – non-current | 3,856 | - | 3,856 | - | 3,856 | |||||||||||||||
| Total liabilities | 1,737,254 | 67,457 | 1,804,711 | - | 1,804,711 | |||||||||||||||
| Commitments and Contingencies (Note 9) | - | - | - | |||||||||||||||||
| Stockholders’ Deficit: | ||||||||||||||||||||
| Preferred stock, par value $0.0001 | 400 | - | 400 | - | 400 | |||||||||||||||
| Common stock, par value $0.0001 | 11,387 | - | 11,387 | - | 11,387 | |||||||||||||||
| Additional paid-in capital | 1,972,018 | 15,403 | 1,987,421 | (15,403 | ) | 1,972,018 | ||||||||||||||
| Accumulated deficit | (1,493,984 | ) | 62,107 | (1,431,877 | ) | (62,107 | ) | (1,493,984 | ) | |||||||||||
| Total FDCTech stockholders’ equity | 489,821 | 77,510 | 567,330 | 489,821 | ||||||||||||||||
| Non-controlling interest | 1,390,438 | - | 1,390,438 | 1,390,438 | ||||||||||||||||
| Total liabilities and stockholders’ deficit | $ | 3,617,513 | $ | 144,967 | $ | 3,762,480 | $ | 3,684,970 | ||||||||||||
See accompanying notes to unaudited proforma condensed combined financial statements
FDCTECH INC.
UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2020
(Currency expressed in United States Dollars)
| FDCTech | AD Advisory Services | Total | Proforma Adjustments (Note 3) | Proforma Combined | ||||||||||||||||
| (USD) | (USD) | (USD) | (USD) | |||||||||||||||||
| Revenues | $ | 215,409 | $ | 4,663,632 | 4,879,041 | - | 4,879,041 | |||||||||||||
| Cost of sales | 251,959 | 4,228,417 | 4,480,376 | - | 4,480,376 | |||||||||||||||
| Gross Profit | (36,550 | ) | 435,214 | 398,664 | 398,664 | |||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| General and administrative | 337,634 | 415,836 | 753,470 | - | 753,470 | |||||||||||||||
| Sales and marketing | 24,526 | - | 24,526 | - | 24,526 | |||||||||||||||
| Total operating expenses | 362,160 | 415,836 | 777,996 | 777,996 | ||||||||||||||||
| Operating loss | (398,710 | ) | 19,379 | (379,331 | ) | (379,331 | ) | |||||||||||||
| Other income (expense): | ||||||||||||||||||||
| Related-party interest expense | (60,000 | ) | - | (60,000 | ) | - | (60,000 | ) | ||||||||||||
| Other interest expense | (3,856 | ) | - | (3,856 | ) | - | (3,856 | ) | ||||||||||||
| Other income (expense) | 4,076 | 60,906 | 64,982 | - | 64,982 | |||||||||||||||
| Total other expense | (59,780 | ) | 60,906 | 1,126 | 1,126 | |||||||||||||||
| Loss before provision for income taxes | (458,490 | ) | 80,285 | (378,205 | ) | (378,205 | ) | |||||||||||||
| Provision for income taxes | - | - | - | - | - | |||||||||||||||
| Net loss | $ | (458,490 | ) | $ | 80,285 | (378,205 | ) | (378,205 | ) | |||||||||||
| Net loss per common share, basic and diluted | $ | (0.01 | ) | $ | (0.01 | ) | (0.01 | ) | ||||||||||||
| Weighted average number of common shares outstanding basic and diluted | 69,312,787 | 69,312,787 | 69,312,787 | |||||||||||||||||
See accompanying notes to unaudited proforma condensed combined financial statements
FDCTECH, INC
UNAUDITED PROFORMA CONDENSED COMBINED BALANCE SHEET AS OF SEPTEMBER 30, 2021
(Currency expressed in USD)
| FDCTech | AD Advisory Services | Total | Pro Forma Adjustments (Note 3) | Pro Forma Combined | ||||||||||||||||
| (USD) | (USD) | (USD) | (USD) | |||||||||||||||||
| Assets | ||||||||||||||||||||
| Current assets: | ||||||||||||||||||||
| Cash | $ | 4,251 | $ | 106,618 | $ | 110,869 | - | $ | 110,869 | |||||||||||
| Accounts receivable, net | 49,498 | - | 49,498 | - | 49,498 | |||||||||||||||
| Other current assets | 702,430 | 45,283 | 747,713 | 747,713 | ||||||||||||||||
| Total Current assets | 756,179 | 151,901 | 908,080 | 908,080 | ||||||||||||||||
| Capitalized software, net | 632,177 | - | 632,177 | - | 632,177 | |||||||||||||||
| Prepaid and other acquired identifiable intangible assets | 3,004,621 | - | 3,004,621 | (91,847 | ) | 2,912,774 | ||||||||||||||
| Total non-current assets | 3,636,798 | - | 3,636,798 | 3,544,951 | ||||||||||||||||
| Total assets | $ | 4,392,977 | $ | 151,901 | $ | 4,544,878 | $ | 4,453,030 | ||||||||||||
| Liabilities and Stockholders’ Deficit | ||||||||||||||||||||
| Current liabilities: | ||||||||||||||||||||
| Accounts payable & other current liabilities | $ | 351,015 | $ | 60,053 | $ | 411,068 | - | $ | 411,068 | |||||||||||
| Line of credit | 39,614 | - | 39,614 | - | 39,614 | |||||||||||||||
| Payroll tax payable | 155,203 | - | 155,203 | - | 155,203 | |||||||||||||||
| Related-party advances | 95,000 | - | 95,000 | - | 95,000 | |||||||||||||||
| Cares act- paycheck protection program advance | 46,393 | - | 46,393 | - | 46,393 | |||||||||||||||
| Total Current liabilities | 687,226 | 60,053 | 747,279 | 747,279 | ||||||||||||||||
| SBA loan – non-current | 141,826 | - | 141,826 | - | 141,826 | |||||||||||||||
| Cares act- paycheck protection program advance – non-current | 4,239 | - | 4,239 | - | 4,239 | |||||||||||||||
| Accrued interest – non-current | 7,799 | - | 7,799 | - | 7,799 | |||||||||||||||
| Total liabilities | 841,090 | 60,053 | 901,143 | - | 901,143 | |||||||||||||||
| Commitments and Contingencies (Note 9) | - | - | - | |||||||||||||||||
| Stockholders’ Deficit: | ||||||||||||||||||||
| Preferred stock, par value $0.0001 | 400 | - | 400 | - | 400 | |||||||||||||||
| Common stock, par value $0.0001 | 13,391 | - | 13,391 | - | 13,391 | |||||||||||||||
| Additional paid-in capital | 4,619,575 | 14,465 | 4,634,040 | (14,465 | ) | 4,619,575 | ||||||||||||||
| Accumulated deficit | (2,471,917 | ) | 77,382 | (2,394,535 | ) | (77,382 | ) | (2,471,917 | ) | |||||||||||
| Total FDCTech stockholders’ equity | 2,161,449 | 91,847 | 2,253,296 | (91,847 | ) | 2,161,449 | ||||||||||||||
| Non-controlling interest | 1,390,438 | - | 1,390,438 | 1,390,438 | ||||||||||||||||
| Total liabilities and stockholders’ deficit | $ | 4,392,977 | $ | 151,901 | $ | 4,544,878 | $ | 4,453,030 | ||||||||||||
See accompanying notes to unaudited proforma condensed combined financial statements
FDCTECH INC.
UNAUDITED PROFORMA CONDENSED C3OMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars)
| FDCTech | AD Advisory Services | Total | Proforma Adjustments (Note 3) | Proforma Combined | ||||||||||||||||
| (USD) | (USD) | (USD) | (USD) | |||||||||||||||||
| Revenues | $ | 221,003 | $ | 4,577,866 | 4,798,869 | - | 4,798,869 | |||||||||||||
| Cost of sales | 205,847 | 4,101,305 | 4,307,152 | - | 4,307,152 | |||||||||||||||
| Gross Profit | 15,156 | 476,561 | 491,717 | 491,717 | ||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| General and administrative | 487,320 | 451,630 | 938,950 | - | 938,950 | |||||||||||||||
| Sales and marketing | 499,320 | - | 499,320 | - | 499,320 | |||||||||||||||
| Total operating expenses | 986,640 | 451,630 | 1,438,270 | 1,438,270 | ||||||||||||||||
| Operating loss | (971,484 | ) | 24,931 | (946,553 | ) | (946,553 | ) | |||||||||||||
| Other income (expense): | ||||||||||||||||||||
| Related-party interest expense | (10,399 | ) | - | (10,399 | ) | - | (10,399 | ) | ||||||||||||
| Other interest expense | (2,942 | ) | - | (2,942 | ) | - | (2,942 | ) | ||||||||||||
| Other income (expense) | 6,892 | 2 | 6,894 | - | 6,894 | |||||||||||||||
| Total other expense | (6,449 | ) | 2 | (6,447 | ) | (6,447 | ) | |||||||||||||
| Loss before provision for income taxes | (977,933 | ) | 24,933 | (953,000 | ) | (953,000 | ) | |||||||||||||
| Provision for income taxes | - | - | - | - | - | |||||||||||||||
| Net loss | $ | (977,933 | ) | $ | 24,933 | (953,000 | ) | (953,000 | ) | |||||||||||
| Net loss per common share, basic and diluted | $ | (0.01 | ) | $ | (0.01 | ) | (0.01 | ) | ||||||||||||
| Weighted average number of common shares outstanding basic and diluted | 83,150,225 | 83,150,225 | 83,150,225 | |||||||||||||||||
See accompanying notes to unaudited proforma condensed combined financial statements
FDCTECH, INC
NOTES TO UNAUDITED PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Currency expressed in United States Dollars)
(Unaudited)
We have based the following unaudited proforma condensed combined financial statements on the historical financial statements of FDCTech, Inc. (“FDCTech” or the “Company”) and AD Advisory Services Pty Ltd. (“AD “) after giving effect to our Acquisition of AD (“the Acquisition”) and the assumptions and adjustments described in the accompanying notes to the unaudited proforma condensed combined financial statements.
Note 1. Basis of Proforma Presentation
The unaudited proforma condensed combined financial statements are not intended to represent or indicate the results of operations or financial position of FDCTech that would have been reported had FDCtech completed the Acquisition as of the dates presented. You should not take the proforma as representative of the future results of operations or the Company’s financial position.
The unaudited proforma financial statements, including its notes, do not reflect any potential operating efficiencies and cost savings that FDCTech may achieve concerning the combined companies. The unaudited proforma condensed combined financial statements and corresponding notes should be read in conjunction with the historical financial statements of FDCTech included in the annual report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (the “SEC “) on March 3, 2021, and the subsequent quarterly report on Form 10-Q for the nine months ended September 30, 2021, filed with the SEC on November 05, 2021, and in conjunction with the historical financial statements of AD Advisory Services Pty Ltd. included in this Form 8-K/A.
We present the unaudited proforma condensed combined balance sheet as of December 31, 2020, as if the Acquisition occurred on December 31, 2020. The unaudited proforma condensed combined statement of operations and comprehensive income/(loss) of the FDCTech and AD for the year ended December 31, 2020, has been prepared by combining the FDCTech and ADs historical consolidated results for the year ended December 31, 2020. The Company estimates the preliminary purchase price on the intrinsic value of AD instead of the share price of $0.034 on December 31, 2020. As a result, we estimated the implied value of AD to be $2,995,813 based on the Management discounted cash flow model.
The unaudited proforma combined statement of operations and comprehensive loss for the nine months ended September 30, 2021, has been prepared by combining the FDCTech and ADs historical consolidated results for the nine months ended September 30, 2021.
Note 2. Acquisition of AD Advisory Services Pty Ltd. (AD.)
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. As a result, the Company is 51% owner of AD.
Our wealth management business is subject to enhanced regulatory scrutiny and is regulated by multiple regulators in Australia. The Australian Securities and Investments Commission (ASIC) administers a licensing regime for ‘financial services’ providers where AD holds an Australian Financial Services Licence (AFSL) and meets various compliance, conduct, and disclosure obligations. AD is an Australian-regulated wealth management company with 20 offices, 28 advisors, and $530+ million funds under advice.
The Company completed the acquisitions of AD on December 22, 2021 (“the Acquisition Date”).
Note 3. Proforma Adjustments
Foreign Currency Translation and Re-measurement
The Company translates its foreign operations to US dollar following ASC 830, “Foreign Currency Matters.”
Translation of amounts from the local currency, Australia Dollar (“AUD”) of AD into US$1.00 has been made at the following exchange rates for the respective dates:
Exchange rate at the reporting end date:
| September 30, 2021 | December 31, 2020 | |||||||
| USD: AUD | $ | 1.3831 | $ | 1.2989 | ||||
Average exchange rate for the period:
| January 1, 2021, to September 30, 2021 | January 1, 2020, to December 31, 2020 | |||||||
| USD: AUD | $ | 1.3182 | $ | 1.4480 | ||||
The Company subsidiary’s functional currency is AUD and reporting currency is the US dollar.
The Company translates its records into US dollar as follows:
| ● | Assets and liabilities at the rate of exchange in effect at the balance sheet date | |
| ● | Equities at historical rate | |
| ● | Revenue and expense items at the average rate of exchange prevailing during the period |
The Purchase Price Allocation
The Company estimates the preliminary purchase price to be based on the intrinsic value of AD instead of the Company’s share price of $0.44 on December 31, 2020. As a result, we estimate the implied value of AD to be $2,995,813 based on the Management discounted cash flow model. The Company used Lever 3 Fair Value analysis adjusted for other reasonably available information, including liquidity discount, the Company’s size, historical negative cash flow, and other risks.
The book value of AD on December 31, 2020, was $77,510. Therefore, the implied difference between the implied value and book value of AD was $2,918,303. The Company attributed the implied difference to acquired identifiable intangible assets based on AD’s assets under management and regulatory licenses. The Company did not record impairment for the fiscal year ended December 31, 2020, and nine months ended September 30, 2021.
Adjustments
| I. | We have included the following pro forma adjustments in the unaudited pro forma condensed combined balance sheet and combined statement of operations for the year ended December 31, 2020: |
| A) | To record the following adjustments to shareholders’ equity: |
| i) | Adjustments to FDCTech stockholders’ equity |
| Balance before pro forma adjustments | $ | (567,330 | ) | |
| Elimination of pre-acquisition equity account of AD Advisory Services Pty Ltd. | (77,510 | ) | ||
| Pro Forma Combined as of December 31, 2020 | $ | (489,821 | ) |
| B) | To record the following adjustments to current assets: |
| i) | Adjustments to prepaid and other acquired identifiable intangible assets |
| Balance before pro forma adjustments | $ | 2,918,303 | ||
| Decrease in acquired identifiable intangible assets | (77,510 | ) | ||
| Pro Forma Combined as of December 31, 2020 | $ | 2,840,793 |
There are no intercompany transactions.
| II. | The following pro forma adjustments are included in the unaudited pro forma condensed combined balance sheet and combined statement of operations for the year ended September 30, 2021: |
| C) | To record the following adjustments to shareholders’ equity: |
| i) | Adjustments to stockholders’ equity |
| Balance before pro forma adjustments | $ | 2,253,296 | ||
| Elimination of pre-acquisition equity account of AD Advisory Services Pty Ltd. | (91,847 | ) | ||
| Pro Forma Combined as of September 30, 2021 | $ | 2,161,449 |
| D) | To record the following adjustments to current assets: |
| i) | Adjustments to prepaid and other acquired identifiable intangible assets |
| Balance before pro forma adjustments | $ | 3,004,621 | ||
| Decrease in acquired identifiable intangible assets | (91,847 | ) | ||
| Pro Forma Combined as of September 30, 2021 | $ | 2,912,774 |
There are no intercompany transactions.