Fdctech, Inc 10-Q for FY2021 Q3
Fdctech, Inc. (FDCT)
About this 10-Q
Fdctech, Inc filed this 10-Q on November 5, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $73.93K
- up 71.9% from $43K a year earlier
- Net loss
- $490.39K
- compared with a net loss of $53.35K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the Quarterly Period Ended
OR
For the transition period from ______________ to ______________
Commission
File No.
(Exact name of the small business issuer as specified in its charter)
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(Address of principal executive offices)
(
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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 |
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
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Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
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| ☐ | 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
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The number of shares of Common Stock, $0.0001 par value, of the registrant outstanding on November 05, 2021, was .
TABLE OF CONTENTS
| 2 |
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Form 10-Q”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies, and objectives of management for future operations; any statements concerning proposed new products or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.
Forward-looking statements may include the words “may,” “could,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “desire,” “goal,” “should,” “objective,” “seek,” “plan,” “strive” or “anticipate,” as well as variations of such words or similar expressions, or the negatives of these words. These forward-looking statements present our estimates and assumptions only as of the date of this Form 10-Q. Except for our ongoing obligation to disclose material information as required by the federal securities laws, we do not intend and undertake no obligation to update any forward-looking statement. We caution readers not to place undue reliance on any such forward-looking statements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes will likely vary materially from those indicated.
| 3 |
PART I.
| Item 1. | Financial Statements. |
FDCTECH, INC.
(Formerly known as Forex Development Corporation)
Index to Consolidated Financial Statements
| F-1 |
FDCTECH, INC.
(Formerly known as Forex Development Corporation)
CONSOLIDATED BALANCE SHEETS
| September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $ | ||||||||
| Other assets – current | ||||||||
| Total Current assets | ||||||||
| Other assets – non-current | - | |||||||
| Capitalized software, net | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Line of credit | ||||||||
| Payroll tax payable | ||||||||
| Related-party convertible notes payable – current | - | |||||||
| Related-party accrued interest – current | - | |||||||
| Related-party advances | - | |||||||
| Cares act- paycheck protection program advance | ||||||||
| 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’ Equity (Deficit): | ||||||||
| Preferred stock, par value $, shares authorized, issued and outstanding, as of September 30, 2021 and December 31, 2020 | ||||||||
| Common stock, par value $, shares authorized; and shares issued and outstanding, as of September 30, 2021 and December 31, 2020 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to the financial statements
| F-2 |
FDCTECH, INC.
(Formerly known as Forex Development Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Revenues | $ | $ | $ | |||||||||||||
| Cost of sales | ||||||||||||||||
| Gross Profit | ( | ) | ( | ) | ||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Related-party interest expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Other interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ( | ) | ||||||||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (loss) before provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision (benefit) for income taxes | ||||||||||||||||
| Net income (loss ) | $ | ( | ) | $ | ( | ) | ( | ) | $ | ( | ) | |||||
| Net income (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-3 |
FDCTECH, INC.
(Formerly known as Forex Development Corporation)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
| Preferred stock | Common stock | Additional Paid-in | Accumulated | Total Stockholders’ Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Three Months Ended September 30, 2020 | ||||||||||||||||||||||||||||
| Balance, June 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Shares cancelled for non-service | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Common shares issued for services valued at $0.22 per share | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.22 per share, shares | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.18 per share | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.18 per share, shares | ||||||||||||||||||||||||||||
| Common shares issued for cash valued at $0.10 per share | ||||||||||||||||||||||||||||
| Common shares issued for cash valued at $0.10 per share, shares | ||||||||||||||||||||||||||||
| Common shares issued for financing cost valued at $0.12 per share | ||||||||||||||||||||||||||||
| Common shares issued for financing cost valued at $0.12 per share, shares | ||||||||||||||||||||||||||||
| Common shares cancelled for services valued at $0.25 per share | ||||||||||||||||||||||||||||
| Common shares cancelled for services valued at $0.25 per share, shares | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.27 | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.27, shares | ||||||||||||||||||||||||||||
| Common shares issued for FRH Group note conversion at $0.10 per share | ||||||||||||||||||||||||||||
| Common shares issued for FRH Group note conversion at $0.10 per share, shares | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.20 | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.20, shares | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.21 | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.21, shares | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.25 | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.25, shares | ||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, September 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Three Months Ended September 30, 2021 | ||||||||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| 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 | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
See accompanying notes to the financial statements
| F-4 |
FDCTECH, INC.
(Formerly known as Forex Development Corporation)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
| Preferred stock | Common stock | Additional Paid-in | Accumulated | Total Stockholders’ Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Nine Months Ended September 30, 2020 | ||||||||||||||||||||||||||||
| Balance, December 31, 2019 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Common shares issued for services valued at $ per share | - | |||||||||||||||||||||||||||
| Common shares issued for services valued at $0.27 | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.27, shares | ||||||||||||||||||||||||||||
| Common shares issued for FRH Group note conversion at $0.10 per share | ||||||||||||||||||||||||||||
| Common shares issued for FRH Group note conversion at $0.10 per share, shares | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.20 | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.20, shares | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.21 | ||||||||||||||||||||||||||||
| Common shares issued for services valued at $0.21, shares | ||||||||||||||||||||||||||||
| Shares cancelled for non-service | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, September 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Nine months ended September 30, 2021 | ||||||||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Common shares issued for services valued at $ | - | |||||||||||||||||||||||||||
| Common shares issued for FRH Group note conversion at $ | - | |||||||||||||||||||||||||||
| Common shares issued for services valued at $ | - | |||||||||||||||||||||||||||
| Common shares issued for services valued at $ | - | |||||||||||||||||||||||||||
| Common shares issued for services valued at $ | - | |||||||||||||||||||||||||||
| 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 | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
See accompanying notes to the financial statements
| F-5 |
FDCTECH, INC.
(Formerly known as Forex Development Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Year Ended | ||||||||
| September 30, 2021 | September 30, 2020 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Software amortization | ||||||||
| Common stock issued for services | ||||||||
| Accounts receivable allowance | ||||||||
| Subscription receivable | ( | ) | ||||||
| Change in assets and liabilities: | ||||||||
| Gross accounts receivable | ( | ) | ( | ) | ||||
| Accounts payable | ||||||||
| Other assets | ( | ) | ( | ) | ||||
| Accrued interest | ||||||||
| Accrued payroll tax expenses | ||||||||
| Net cash provided by (used in) operating activities | $ | ( | ) | $ | ( | ) | ||
| Investing Activities: | ||||||||
| Capitalized software | ( | ) | ( | ) | ||||
| 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 | ( | ) | ||||||
| Related party advances | ||||||||
| Common stock issued for cash | ||||||||
| Net cash provided by (used in) 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 | $ | $ | ||||||
| Non - cash investing and financing activities: | ||||||||
| Common stock issued for note conversion | $ | $ | ||||||
See accompanying notes to the financial statements
| F-6 |
NOTE 1. BUSINESS DESCRIPTION AND NATURE OF OPERATIONS
The Company was incorporated on January 21, 2016, as Forex Development Corporation, under Delaware laws. On February 27, 2018, the Company changed its name to FDCTech, Inc. The name change reflects the Company’s commitment to expanding its products and services in the 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.
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 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 forex brokers to use the Condor Pro Multi-Asset Trading Platform. The Company has developed two versions of each Condor forex Pro Web and Mobile Trading Platform.
The Company has upgraded its Condor Back Office (Risk Management) to meet the 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 3, 2018. The Company released, marketed, and distributed its Condor Pro Multi-Asset Trading Platform in the second quarter of the fiscal year, December 31, 2019. The Company has developed the Condor Back Office API to integrate third-party CRM and banking systems to Condor Back Office.
The Company is in the process of developing Condor Stocks and an ETF platform. The Company expects to commercialize the Condor Stocks and ETF platform by the end of the fourth quarter of the fiscal year ended December 31, 2021.
The Company secures and earns revenues by signing an agreement with its customers. The Company 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.
At present, the Company does not have any patents or trademarks on its proprietary technology solutions.
At present, the Company has three sources of revenue.
| ● | 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 design criteria and performance requirements as specified by the customer.
| F-7 |
NOTE 1. BUSINESS DESCRIPTION AND NATURE OF OPERATIONS (continued)
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 date of termination, 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, upon the consent of the majority of the stockholders of the Corporation representing at least % of the issued and outstanding shares of the Company and per Section 222 of the General Corporation Law of the State of Delaware, voted in favor of terminating Warwick Kerridge from the Board of Directors. Upon termination of Mr. Kerridge, the Company currently has four Board of Directors. Mitchell M. Eaglstein shall be the acting Chairman of the Company.
Subsidiaries of the Company
In April 2016, the Company established its wholly-owned subsidiary – FRH Prime Ltd. (“FRH Prime”), incorporated under section 14 of the Companies Act 1981 of Bermuda. In January 2017, FRH Prime established its wholly-owned subsidiary – FXClients Limited (“FXClients”), under the United Kingdom Companies Act 2006 as a private company. The Company established FRH Prime and FXClients to conduct financial technology service activities. At present, both companies have ceased to exist.
For
the Three and Nine months ending September 30, 2021, and 2020, FRH Prime has generated volume rebates of $
Board of Directors
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 has four Board of Directors. Mitchell M. Eaglstein shall be the acting Chairman of the Company. Mitchell M. Eaglstein and Imran Firoz are the executive directors of the Company. Jonathan Baumgart and Charles R. Provini are considered independent directors under NYSE and NASDAQ listing standards.
Changes in Registrant’s Certifying Accountant
On July 2, 2021, the Board of Directors of FDCTech, Inc. (the “Company”) approved the dismissal of Farber Hass Hurley LLP (“FHH”) as the Company’s independent registered public accounting firm. The reports of FHH on the Company’s consolidated financial statements for the fiscal years ended December 31, 2020, and 2019 did not contain an adverse opinion or a disclaimer of opinion. It was not qualified or modified as to uncertainty audit scope or accounting principles.
On July 2, 2021, the Company appointed BF Borgers CPA PC (“BFB”) as the Company’s new independent registered public accounting firm, effective immediately, to perform independent audit services for the fiscal year ending December 31, 2021.
Description of Company’s Securities to be Registered
Effective September 03, 2021, the Company incorporated by reference the description of its common stock, par value $ per share, to be registered hereunder contained under the heading “Description of Securities” in the Company’s Registration Statement on Form S-1 (File No. 333- 221726), as initially filed with the Securities and Exchange Commission (the “Commission”) on November 22, 2017, as subsequently amended (the “Registration Statement”). Since the Registration Statement filing, the Company made all required filings pursuant to Section 15(d) and has continued to file all reports voluntarily.
| F-8 |
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 accounting policies adopted by the Company in its financial statements. The Company has measured and presented its consolidated financial statements in US Dollars, the currency of the primary economic environment in which the Company operates (also known as its functional currency).
Financial Statement Preparation and Use of Estimates
The Company prepared consolidated financial statements according to accounting principles generally accepted in the United States of America (“GAAP”). The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions. This could affect the reported amounts of assets and liabilities and the related disclosures at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the periods presented. Estimates include revenue recognition, the allowance for doubtful accounts, website and internal-use software development costs, recoverability of intangible assets with finite lives, and other long-lived assets. Actual results could materially differ from these estimates. Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties, including uncertainty in the current economic environment due to the coronavirus (“COVID-19”).
Cash and Cash Equivalents
Cash
and cash equivalents include cash on hand, deposits held with banks, and other short-term highly liquid investments with three months
or less of original maturities. On September 30, 2021, and December 31, 2020, the Company had $
| F-9 |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Accounts Receivable
Accounts Receivable primarily represents the amount due from six (6) customers. In some cases, the customer receivables are due immediately on demand; however, in most cases, the Company offers net 30 terms or n/30, where the payment is due in full 30 days after the invoice’s date. The Company has based the allowance for doubtful accounts on its assessment of the collectability of customer accounts. The Company regularly reviews the allowance by considering historical experience, credit quality, the accounts receivable balances’ age, and economic conditions that may affect a customer’s ability to pay and expected default frequency rates. Trade receivables are written off at the point when they are considered uncollectible.
At
September 30, 2021, and December 31, 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 $
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-10 |
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 takes into account revenue collectability, methods for measuring progress toward complete satisfaction of a performance obligation, warranties, customer options for additional goods or services, nonrefundable upfront fees, licensing, customer acceptance, and other relevant categories.
The Company accounts for a contract when the Company and the customer (‘parties’) have approved the contract and are committed to performing their respective obligations. 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 or price or both as contract modifications by the Company. The parties describe contract modification as a change order, a variation, or an amendment. A contract modification exists when the parties to the contract approve a modification that either creates new or changes existing enforceable rights and obligations of the parties. The Company assumes a contract modification when approved in writing, by oral agreement, or implied by the customer’s customary business practice. 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 cannot be 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 inception of the transaction involving these multiple elements.
Since January 21, 2016 (‘Inception’), the Company has derived its revenues mainly from three sources – consulting services, technology solutions, and customized software development. The Company recognizes revenue when it has satisfied a performance obligation by transferring control over a product or delivering a service to a customer. We measure revenue based upon the consideration outlined in an arrangement or contract with a customer.
| F-11 |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company’s typical performance obligations include the following:
| Performance Obligation | Types of Deliverables | When Performance Obligation is Typically Satisfied | ||
| Consulting Services | Services related to Start-Your-Own-Brokerage (“SYOB”), Start-Your-Own-Prime Brokerage (“SYOPB”), Start-Your-Own-Crypto Exchange (“SYOC”), FX/OTC liquidity solutions, and lead generations. | The Company recognizes the consulting revenues when the customer receives services over the length of the contract. If the customer pays the Company in advance for these services, the Company records such payment as deferred revenue until the Company completes the services. | ||
| Technology Services | Software licensing of Condor Risk Management Back Office for third-party platforms (“Condor Risk Management”), Condor Pro Multi-Asset Trading Platform, Condor Pricing Engine, Crypto Trading Platform (“Crypto Web Trader Platform”), and other cryptocurrency-related solutions.
|
The Company recognizes ratably over the contractual period for services delivered, beginning when such service is available to the customer. Licensing agreements are typically one year in length with an option to cancel by giving notice; customers have the right to terminate their agreements if the Company materially breaches its obligations under the agreement. Licensing agreements do not provide customers the right to take possession of the software at any time. The Company charges the customers a set-up fee for installing the platform, and implementation activities are insignificant and not subject to a separate fee. | ||
| Software Development | Design-build software development projects for customers, where the Company develops the project to meet the design criteria and performance requirements specified in the contract. | The Company recognizes the software development revenues when the Customer obtains control of the deliverables, as stated in the Statement of Work in the contract. |
To determine the transaction price, the Company assumes that the goods or services promised in the existing contract will be transferred to the customer. The Company assumes that the contract will not be canceled, renewed, or modified; therefore, the transaction price includes only those amounts to which the Company has rights under the present contract. For example, if the Company enters into a contract with a customer with an original term of one year and expects the customer to renew for a second year, the Company would determine the transaction price based on the original one-year term. When determining the transaction price, the Company first identifies the fixed consideration, including non-refundable upfront payment amounts.
For purposes of allocating the transaction price, the Company allocates an amount that best represents consideration that the entity expects to receive for transferring each promised good or service to the customer. The Company allocates the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis to meet the allocation objective. In determining the standalone selling price, the Company uses the best evidence of the stand-alone selling price that the Company charges to similar customers in similar circumstances. In some cases, the Company uses the adjusted market assessment approach to determine the standalone selling price. It evaluates the market in which it sells the goods or services and estimates the price that customers in that market would pay for those goods or services when sold separately.
The Company recognizes revenue when or as it transfers the promised goods or services in the contract. The Company considers the “transfers” the promised goods or services when the customer obtains control of the goods or services. The Company considers a customer “obtains control” of an asset when it can direct the use of, and obtain all the remaining benefits from, an asset substantially. The Company recognizes deferred revenue related to services it will deliver within one year as a current liability. The Company presents deferred revenue related to services that the Company will deliver more than one year into the future as a non-current liability.
For the period ending September 30, 2021, the Company’s two primary revenue streams accounted for under ASC 606 follows:
On February 5, 2018 (‘Effective Date’), the Company signed an IT support and maintenance agreement (‘IT Agreement’) with an FX/OTC broker (‘FX Broker’) regulated by the Malta Financial Services Authority. The Company earns the recurring monthly payment from the FX Broker for delivering IT support and maintenance services (‘Services’) to FX Broker’s legacy technology infrastructure. The term of this Agreement commenced on the Effective Date and shall continue until terminated by either party either for cause, bankruptcy, and other default clauses. The Company completes and satisfies its performance obligation upon accomplishment of all support and maintenance activities every month. The Company invoices the FX Broker at the beginning of the month for services performed, delivered, and accepted for the prior month. At the time of the invoice, the Company 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.
Effective
January 2021, the Company signed two licensing agreements for its Condor Pro Multi-Asset Trading Platform, receiving monthly maintenance
and volume rebate fees. The initial set-up fee is $
| F-12 |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentrations of Credit Risk
Cash
The Company maintains its cash balances at a single financial institution. The balances do not exceed FDIC limits as of September 30, 2021, and December 31, 2020.
Revenues
For
the nine months ended September 30, 2021, and 2020, the Company had six (6) and six (6) active customers. Revenues generated from the
top three (3) customers represented approximately
Accounts Receivable
Accounts Receivable primarily represents the amount due from six (6) active customers. In some cases, the customer receivables are due immediately on demand; however, in most cases, the Company offers net 30 terms or n/30, where the payment is due in full 30 days after the invoice’s date. The Company has based the allowance for doubtful accounts on its assessment of the collectability of customer accounts. The Company regularly reviews the allowance by considering historical experience, credit quality, the accounts receivable balances’ age, and economic conditions that may affect a customer’s ability to pay and expected default frequency rates. Trade receivables are written off at the point when they are considered uncollectible.
At
September 30, 2021, and December 31, 2020, the Management determined that allowance for doubtful accounts was $
Research and Development (R and D) Cost
The
Company acknowledges that future benefits from research and development (R and D) are uncertain, and as a result, we cannot capitalize
on R and D expenditures. The GAAP accounting standards require us to expense all research and development expenditures as incurred. For
the three and nine months ended September 30, 2021, and 2020, the Company incurred R and D costs of $
Legal Proceedings
The Company discloses a loss contingency if at least a reasonable possibility that a material loss has been incurred. The Company records its best estimate of loss related to pending legal proceedings when the loss is considered probable, and the amount can be reasonably estimated. The Company can reasonably estimate a range of loss with no best estimate; the Company records the minimum estimated liability. As additional information becomes available, the Company assesses the potential liability related to pending legal proceedings, revises its estimates, and updates its disclosures accordingly. The Company’s legal costs associated with defending itself are recorded to expenses as incurred. The Company is currently not involved in any litigation.
| F-13 |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of Long-Lived Assets
The
Company reviews long-lived assets for impairment under FASB ASC 360, Property, Plant, and Equipment. Under the standard, long-lived assets
are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.
An impairment charge is recognized for the amount if and when the asset’s carrying value exceeds the fair value. At September 30,
2021, and December 31, 2020, 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 calculated based upon the temporary differences between the consolidated financial statement and income tax bases of assets and liabilities using the enacted tax rates applicable each year.
The Company utilizes a two-step approach to recognizing and measuring uncertain tax positions (“tax contingencies”). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely to be realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and 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.
Software Development Costs
By
ASC 985-20, Software development costs, including costs to develop software sold, leased, or otherwise marketed, that are incurred after
the establishment of technological feasibility, are capitalized if significant. The Company amortizes 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 technical feasibility of the Condor FX Back Office, Condor Pro Multi-Asset Trading Platform Version,
and Condor Pricing Engine. The Company established the technical feasibility of the Crypto Web Trader Platform in February 2018. The
Company completed the technical feasibility of the Condor Stock and ETF platform in January 2021. The Company estimates the useful life
of the software to be three (
Amortization
expense was $
The
Company is developing the Condor Stocks and ETF platform. The Company is currently capitalizing all costs associated with the development.
The Company expensed $
The Company capitalizes significant costs incurred during the application development stage for internal-use software.
| F-14 |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Convertible Debentures
The cash conversion guidance in ASC 470-20, Debt with Conversion and Other Options, is considered when evaluating the accounting for convertible debt instruments (this includes certain convertible preferred stock that is classified as a liability) to determine whether the conversion feature should be recognized as a separate component of equity. The cash conversion guidance applies to all convertible debt instruments that 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 performed an analysis to determine 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.
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 follows ASC 260, Earnings Per Share, to account for earnings per share. Basic earnings per share (“EPS”) calculations are determined by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. As of September 30, 2021, and December 31, 2020, the Company had and basic and dilutive shares issued and outstanding. The Company converted the four FRH Group convertible notes into dilutive shares. During the nine months ended September 30, 2021, and 2020, common stock equivalents were anti-dilutive due to a net loss of $ and $, respectively, for the period. During the three and nine months ended September 30, 2021, common stock equivalents were anti-dilutive due to a net loss for the period. Hence, the Company has not considered in the computation.
Reclassifications
We have reclassified certain prior period amounts to conform to the current year’s presentation. None of these classifications impacted reported operating loss or net loss for any of the periods presented.
| F-15 |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements
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 effect on its financial reporting.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force) and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.
NOTE 3. MANAGEMENT’S PLANS
The
Company has prepared consolidated financial statements on a going concern basis, which contemplates the realization of assets and the
settlement of liabilities and commitments in the ordinary business course. At September 30, 2021, and December 31, 2020, the accumulated
deficit was $
During
the three months ended September 30, 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 September 30, 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 try to raise capital by selling additional capital stock or issuing 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. In the future, as the Company increases its customer base across the globe, the Company intends to acquire long-lived assets that will provide a future economic benefit beyond fiscal 2021.
| F-16 |
NOTE 4. CAPITALIZED SOFTWARE COSTS
During
the three months ended September 30, 2021, and 2020, the estimated remaining weighted-average useful life of the Company’s capitalized
software was three (
At
September 30, 2021, and December 31, 2020, the gross capitalized software asset was $
NOTE 5. RELATED PARTY TRANSACTIONS
In April 2016, the Company established its wholly-owned subsidiary – FRH Prime Ltd. (“FRH Prime”), incorporated under section 14 of the Companies Act 1981 of Bermuda. In January 2017, FRH Prime established its wholly-owned subsidiary – FXClients Limited (“FXClients”) under the United Kingdom Companies Act 2006 as a private company. The Company established FRH Prime and FXClients to conduct financial technology service activities. At present, both companies have ceased to exist.
For
the three and nine months ended September 30, 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 for a cash amount of $
Related Party Advance – Officer Loan
On
April 1, 2020, the Company received $
NOTE 6. LINE OF CREDIT
From
June 24, 2016, the Company obtained an unsecured revolving line of credit of $
NOTE 7. NOTES PAYABLE
Convertible Notes Payable – Related Party
On
February 22, 2016, the Company issued and promised to pay a convertible note to FRH Group Ltd. (“FRH Group,” shareholder)
for the principal sum of One Hundred Thousand and 00/100 Dollars ($
The
initial conversion rate will be $
| F-17 |
NOTE 7. NOTES PAYABLE (continued)
Convertible Notes Payable – Related Party
On
May 16, 2016, the Company issued and promised to pay a convertible note to FRH Group for the principal sum of Four Hundred Thousand and
00/100 Dollars ($
The
initial conversion rate will be $
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 ($
The
initial conversion rate will be $
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 ($
The
initial conversion rate will be $
| F-18 |
NOTE 7. NOTES PAYABLE (continued)
FRH Group Note Summary
SCHEDULE OF NOTES PAYABLE
| Date of Note: | 2/22/2016 | 5/16/2016 | 11/17/2016 | 4/24/2017 | ||||||||||||
| Original Amount of Note: | $ | $ | $ | $ | ||||||||||||
| 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-19 |
NOTE 8. 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
September 30, 2021, and December 31, 2020, the cumulative accrued interest at
At
September 30, 2021, and December 31, 2020, the cumulative accrued interest for SBA and other loans defined as an accrued interest –
non-current was $
Pending Litigation
The management is unaware of any actions, suits, investigations, or proceedings (public or private) pending against or threatened against or affecting any of the assets or any affiliate of the Company.
Tax Compliance Matters
The
Company has estimated payroll tax liabilities based on its officers’ reclassification from independent contractors to employees
from fiscal ended December 31, 2017, to 2020. As of September 30, 2021, the Company has assessed federal and state payroll tax payments
in the aggregate amount of $
| F-20 |
NOTE 9. STOCKHOLDERS’ EQUITY (DEFICIT)
Authorized Shares
On February 12, 2021, the Company filed the Certificate of Amendment with the Secretary of State of Deleware to change authorized shares. As per the Amendment, the Company shall have authority to issue shares, consisting of shares of Common Stock having a par value of $ per share and shares of Preferred Stock having a par value of $ per share.
As of September 30, 2021, and December 31, 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 September 30, 2021, and December 31, 2020, the Company had and , respectively, common shares issued and outstanding and preferred shares issued and outstanding. The preferred stock has fifty votes for each share of preferred shares owned. The preferred shares have no other rights, privileges, and higher claims on the Company’s assets and earnings than common stock.
Preferred Stock
On December 12, 2016, the Board agreed to issue , , and shares of Preferred Stock to Mitchell Eaglstein, Imran Firoz, and FRH Group, respectively, as the founders in consideration of services rendered to the Company. As of September 30, 2021, the Company had preferred shares issued and outstanding.
Common Stock
On January 21, 2016, the Company collectively issued and common shares at par value to Mitchell Eaglstein and Imran Firoz, respectively, as the founders considered the Company’s services.
On December 12, 2016, the Company issued common shares to the remaining two founding members of the Company.
On
March 15, 2017, the Company issued restricted common shares for platform development valued at $
On
March 15, 2017, the Company issued restricted common shares for professional services to three 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 $
| F-21 |
NOTE 9. STOCKHOLDERS’ EQUITY (DEFICIT) (continued)
On
March 21, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued shares to Bret Eaglstein
for a cash amount of $
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 share of common stock and one Class A warrant (See Note 11).
On
October 31, 2017, the Company issued restricted common shares to a management consultant valued at $
On
January 15, 2019, the Company issued restricted common shares for professional services to ten (10) 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 $
Effective
June 03, 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 $
On
January 27, 2021, the Company issued restricted common shares to two consultants valued at $
On
May 19, 2021, Company issued restricted common shares to a consultant valued at $
On
June 02, 2021, Company issued restricted common shares to a consultant valued at $
On
June 15, 2021, Company issued restricted common shares to one of the Board of Directors valued at $
On
July 06, 2021, Company issued restricted common shares to one of the Board of Directors valued at $
On
July 20, 2021, Company issued restricted common shares to a consultant valued at $
Between
September 9 -16, 2021, Company issued restricted common shares to AD Securities America LLC according to the subscription agreements
valued at $
On
September 10, 2021, Company issued common shares without restriction to White Lion LLC according to the security purchase and
registration agreement valued at $
On
August 24, 2021, after the termination of the Genesis Agreement, the Company rescinded the restricted common shares issued
on June 02, 2021, to a consultant valued at $
| F-22 |
NOTE 10. WARRANTS
Effective
June 1, 2017, the Company planned to raise $
Each
Class A Warrant entitles the holder to purchase one (
Information About the Warrants Outstanding During Fiscal 2020 Follows
SCHEDULE OF WARRANTS ACTIVITY
Original Number of Warrants Issued |
Exercise Price per Common Share | Exercisable at December 31, 2020 |
Became Exercisable | Exercised | Terminated / Canceled / Expired | Exercisable At September 30, 2021 | Expiration Date | |||||||||||||||||||||
| $ | - | - | - | - | ||||||||||||||||||||||||
The
Warrants are redeemable by the Company, upon thirty (30) day notice, at a price of $
The exercise price and a number of shares of Common Stock or other securities issuable on exercise of the Warrants are subject to adjustment in certain circumstances, including in the event of a stock dividend, recapitalization, reorganization, merger, or consolidation of the Company. However, no Warrant is subject to adjustment for issuances of Common Stock at a price below the exercise price of that Warrant.
As of the date of this report, the holders have not exercised any Class A Warrants. All Class A Warrants have expired.
NOTE 11. 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 12. SUBSEQUENT EVENTS
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 $
| F-23 |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
This Quarterly Report Form 10-Q contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with the unaudited condensed financial statements and accompanying notes and the other financial information appearing elsewhere in this report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events.
The Company intends to build a diversified global financial services company driven by proprietary Condor trading technologies, complementary regulatory licenses, and a proven executive team. The Company plans to acquire, integrate, transform, and scale legacy financial service companies. The Company believes that its proprietary technology and software development capabilities allow legacy financial services companies immediate exposure to –forex, stocks, ETFs, commodities, crypto, social/copy trading, and other high-growth fintech markets.
The Company has completed the Condor Pro Multi-Asset Trading Platform, previously known as Condor FX Trading Platform. The Condor Pro Multi-Asset Trading Platform is a commercial trading platform targeted at day traders and retail investors. The industry characterized such platforms by the ease of use and various helpful features, such as the simplified front-end (user interface/user experience), back-end (reporting system), news feeds, and charting system. The Condor Pro Multi-Asset Trading Platform further includes risk management (dealing desk, alert system, margin calls, etc.), pricing engine (best bid/ask), and connectivity to multiple liquidity providers or market makers. We have tailored the Condor Pro Multi-Asset Trading Platform to different markets, such as forex, stocks, commodities, cryptocurrencies, and other financial products.
The Company currently has six (6) licensing agreements for its Condor Pro Multi-Asset Trading Platform. The Company is continuously negotiating additional licensing agreements with several retail forex brokers to use the Condor Pro Multi-Asset Trading Platform. The Company has developed two versions of each Condor forex Pro Web and Mobile Trading Platform.
The Company has upgraded its Condor Back Office (Risk Management) to meet the 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 3, 2018. The Company released, marketed, and distributed its Condor Pro Multi-Asset Trading Platform, allowing traders to trade on in the second quarter of the fiscal year 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 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 third quarter of the fiscal year ended December 31, 2021. The Company is in the process of developing Condor Stocks and an ETF platform. The Company expects to commercialize the Condor Stocks and ETF platform by the end of the fourth quarter of the fiscal year ended December 31, 2021.
The Company secures and earns revenues by signing an agreement with its customers. The Company 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.
The Company has prepared consolidated financial statements on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the ordinary business course. The Company has earned $2,004,775 in revenues from January 21, 2016 (inception) to September 30, 2021. For the three months ended September 30, 2021, and 2020, the Company earned $73,925 and $43,000 in revenues, respectively. For the nine months ended September 30, 2021, and 2020, the Company earned $221,003 and $173,407 in revenues, respectively.
As of December 31, 2020, the Company has issued four convertible notes collectively known as FRH Group Note (“Note for net cash proceeds of $1,000,000. The Company has extended the maturity date of the FRH Group Note to June 30, 2021. On February 22, 2021, the Company entered into an Assignment of Debt Agreement (the “Agreement”) with FRH and FRH Group Corporation. The Company eliminated all four FRH Group convertible notes, including interest, of $1,256,908, in return for the issuance of 12,569,080 of unregistered common stock of the Company (the “Shares”) to FRH. Following the Agreement, FRH assigned the Shares to FRH Group Corporation, an entity also owned by Mr. Hong.
The Company secures and earns revenues by signing an agreement with its customers. The Company considers a signed agreement with its customers, a binding contract with the customer, or other similar documentation reflecting the terms and conditions under which the Company will provide products or services as persuasive evidence of an arrangement. Each agreement is specific to the customer and clearly defines each party’s fee schedule, duties and responsibilities, renewal and termination terms, confidentiality agreement, dispute resolution, and other clauses necessary for such contract. The material terms of agreements with customers depend on the nature of services and solutions. Each agreement is specific to the customer and clearly defines each party’s fee schedule, duties and responsibilities, renewal and termination terms, confidentiality agreement, dispute resolution, and other clauses necessary for such contract.
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In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic that continues throughout the United States. While the outbreak was initially concentrated in China, it spread to several other countries, including Russia and Cyprus, and reported infections globally. Many countries worldwide, including in the United States, have significant governmental measures being implemented to control the spread of the virus, including temporary closure of businesses, severe restrictions on travel and the movement of people, and other material limitations on the business. These measures have resulted in work stoppages, absenteeism in the Company’s labor workforce, and other disruptions. The extent to which the coronavirus impacts our operations will depend on future developments. These developments are highly uncertain. We cannot predict them with confidence, including the duration and severity of the outbreak and the actions required to contain the coronavirus or treat its impact. In particular, the continued spread of the coronavirus globally could adversely impact our operations and workforce, including our marketing and sales activities and ability to raise additional capital, which could harm our business, financial condition, and operation results.
Financial Condition At September 30, 2021
On September 30, 2021, the accumulated deficit was $2,471,917. Our cash balance is $4,251 as of September 30, 2021. On October 04, 2021, the Company filed a prospectus that relates to the resale of up to 22,670,000 shares of our Common Stock issued or issuable to selling shareholders for up to $2,200,000, including (i) up to 2,000,000 shares issued to AD Securities America, LLC, (ii) up to 20,000,000 issuable to White Lion Capital, LLC (“White Lion”), according to a “Purchase Notice Right” under an Investment Agreement and (iii) 670,000 shares issued to White Lion as a commitment fee associated with the Investment Agreement. The Company is yet to receive the funds. If we are unsuccessful in raising funds from the sale of 22,670,000 shares, we do not believe our current cash balance is sufficient to fund our operations.
The Company received $50,632 from Cares Act’s Paycheck Protection Program. No principal or interest payments will be due before the Deferment Period, ten months from the end of the covered period. The Company received proceeds for one hundred and forty-four thousand and 00/100 Dollars ($144,900) from the U.S. Small Business Administration (SBA). The installment payments will include principal and interest of $707 monthly, beginning twelve (12) months from the promissory note date. The principal and interest balance will be payable thirty (30) years from the promissory note date. Interest will accrue at the rate of 3.75% per annum and will accrue only on $144,900 funds advanced from May 22, 2020, the advance date. The SBA loan outstanding balance is $141,826 as of September 30, 2021.
At September 30, 2021, there was no current or non-current portion of convertible notes payable and accrued interest.
Between February and September 2021, the Company received $95,000 from the Officer for working capital purposes and recorded in related party advances.
The Company intends to continue its efforts to enhance its revenue from its diversified portfolio of technological solutions, become cash flow positive, and raise funds through private placement offering and debt financing. In the future, as the Company increases its customer base across the globe, the Company intends to acquire long-lived assets that will provide a future economic benefit beyond fiscal 2020.
Financial Condition at December 31, 2020
On December 31, 2020, the accumulated deficit was $1,493,984. Our cash balance is $22,467 as of December 31, 2020. We do not believe that our cash balance is sufficient to fund our operations.
The Company received $50,632 from Cares Act’s Paycheck Protection Program. No principal or interest payments will be due ten (10) months after the covered period. The Company received proceeds for one hundred and forty-four thousand nine hundred and 00/100 Dollars ($144,900.00) from U.S. Small Business Administration (SBA). The installment payments will include the principal and interest of $707 monthly and begin Twelve (12) months from the promissory note date. The principal and interest balance will be payable Thirty (30) years from the promissory Note date. Interest will accrue at the rate of 3.75% per annum and will accrue only on $144,900 funds advanced from May 22, 2020, the advance date.
At December 31, 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.
The Company intends to continue its efforts to enhance its revenue from its diversified portfolio of technological solutions, become cash flow positive, and raise funds through private placement offering and debt financing. In the future, as the Company increases its customer base across the globe, the Company intends to acquire long-lived assets that will provide a future economic benefit beyond fiscal 2020.
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RESULTS OF OPERATIONS
Three Months Ended September 30, 2021 and 2020
For the three months ended September 30, 2021, and 2020, the Company had six active customers. Revenues generated from the top three customers represented approximately 85.71% and 90.70% of total revenue for the three months ended September 30, 2021, and 2020. The revenues generated for the three months ended September 30, 2021, and 2020 were $73,925 and $43,000, respectively. During the three months ended September 30, 2021, and 2020, the Company earned a net loss of $490,391 and $53,351, respectively.
The total revenue breakdown for the three months ended September 30, 2021, and 2020 is below:
| Three Months Ended | September 30, 2021 | September 30, 2020 | ||||||
| Revenue Description | % of Total | % of Total | ||||||
| Technology Solutions | 69.56 | % | 100.00 | % | ||||
| Software Development | 30.44 | % | 0.00 | % | ||||
| Total | 100.00 | % | 100.00 | % | ||||
During the three months ended September 30, 2021, and 2020, the Company incurred general and administrative costs (“g and a”) of $215,039 and $7,796 (excluding amortization expenses), respectively. The increase in g and a costs for the three months ended September 30, 2021, is due to the rise in legal and professional fees. The g and a expenses were 290.89% and 18.13% of the revenue for the three months ended September 30, 2021, and 2020, respectively. Amortization expense was $68,616 and $68,616 for the three months ended September 30, 2021, and 2020 respectively, included in the Cost of sales. The amortization expense for the three months ended September 30, 2021, and 2020, is due to the cumulative amortization expense of Condor Back Office, Condor Crypto Trading Platform, Condor Pro Multi-Asset Trading Platform (Desktop), Condor Web Trader, and Condor Mobile Trader.
The rental expense was $7,707 and $8,220 for the three months ended September 30, 2021, and 2020, respectively. Effective October 29, 2019, the Company rents its servers, computers, and data center from an unrelated third party. Under the rent Agreement, the lessor provides furniture and fixtures and any leasehold improvements at 200 Spectrum Drive, Suite 300, Irvine, CA 92618, as discussed in Note 2. Effective February 2019, the Company leases office space at Suite 205, Building 9, Potamos Germasogeia, 4047, Limassol District, Cyprus, from an unrelated party for a year. The Company uses the office for sales and marketing in Europe and Asia. The office’s rent payment is $1,750 per month, included in the General and administrative expenses. From February 2020, the Company extended the agreement for one year period at $1,750 per month. Effective April 2019, the Company leases office space at Suite 512, 83 Plan, Chelyabinsk, Russia, from an unrelated party for an eleven-month term. The office’s rent payment is $500 per month, included in the General and administrative expenses. From March 2020, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the agreement’s terms by giving thirty days’ notice. The Company uses the office for software development and technical support.
The Company incurred $277,327 and $3,894 in sales, marketing, and advertising costs (“sales and marketing”) for the three months ended September 30, 2021, and 2020. The sales and marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 375.15% and 9.06% of the sales for the three months ended September 30, 2021, and 2020. The increase in expense is mainly due to the $277,188 digital marketing and travel cost for the three months ended September 30, 2021.
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Nine months ended September 30, 2021 and 2020
For the nine months ended September 30, 2021, and 2020, the Company had six active customers. Revenues generated from the top three customers represented approximately 78.15% and 82.74% of total revenue for the nine months ended September 30, 2021, and 2020. The revenues for the nine months ended September 30, 2021, and 2020 were $221,003 and $173,407, respectively. During the nine months ended September 30, 2021, and 2020, the Company earned a net loss of $977,933 and $276,517.
The total revenue breakdown for the nine months ended September 30, 2021, and 2020 is below:
| Nine months ended | September 30, 2021 | September 30, 2020 | ||||||
| Revenue Description | % of Total | % of Total | ||||||
| Technology Solutions | 79.87 | % | 98.82 | % | ||||
| Software Development | 17.83 | % | 0.00 | % | ||||
| Consulting | 2.29 | % | 1.18 | % | ||||
| Total | 100.00 | % | 100.00 | % | ||||
During the nine months ended September 30, 2021, and 2020, the Company incurred general and administrative costs (“g and a”) of $487,320 and $216,865 (excluding amortization expenses), respectively. The increase in g and a costs for the nine months ended September 30, 2021, is due to increased legal and professional fees. The g and a expenses were 220.50% and 125.06% of the revenue for the nine months ended September 30, 2021, and 2020, respectively. Amortization expense was $205,847 and $183,344 for the nine months ended September 30, 2021, and 2020 respectively, included in the Cost of sales. The increase in amortization expense for the nine months ended September 30, 2021, is due to the cumulative amortization expense of Condor Back Office, Condor Crypto Trading Platform, Condor Pro Multi-Asset Trading Platform (Desktop), Condor Web Trader, and Condor Mobile Trader.
The rental expense was $22,765.49 and $23,124 for the nine months ended September 30, 2021, and 2020, respectively. Effective October 29, 2019, the Company rents its servers, computers, and data center from an unrelated third party. Under the rent Agreement, the lessor provides furniture and fixtures and any leasehold improvements at 200 Spectrum Drive, Suite 300, Irvine, CA 92618, as discussed in Note 2. Effective February 2019, the Company leases office space at Suite 205, Building 9, Potamos Germasogeia, 4047, Limassol District, Cyprus, from an unrelated party for a year. The office’s rent payment is $1,750 per month, included in the General and administrative expenses. From February 2020, this agreement is extended for one year period at $1,750 per month. The Company uses the office for sales and marketing in Europe and Asia. Effective April 2019, the Company leases office space at Suite 512, 83 Plan, Chelyabinsk, Russia, from an unrelated party for an eleven-month term. The office’s rent payment is $500 per month, included in the General and administrative expenses. From March 2020, this agreement continues on a month-to-month basis until the Company or the lessor chooses to terminate by the agreement’s terms by giving thirty days’ notice. The Company uses the office for software development and technical support.
The Company incurred $499,320 and $5,647 in sales, marketing, and advertising costs (“sales and marketing”) for the nine months ended September 30, 2021, and 2020. The sales and marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 225.93% and 3.26% of the sales for the three months ended September 30, 2021, and 2020. The increase in expense is mainly due to the $493,760 digital marketing and travel cost for the nine months ended September 30, 2021.
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LIQUIDITY AND CAPITAL RESOURCES
On September 30, 2021 and December 31, 2020, we had a cash balance of $4,251 and $22,467, respectively.
In the next twelve (12) months, the Company will continue investing in sales, marketing, product support, new technology solutions, and existing technology to serve our customers. We expect capital expenditures to increase to up to $100,000 in the next twelve (12) months to support the growth, mainly software development and the purchase of computers and servers. Also, the Company estimates additional expenditure needed to be $200,000, which provides for $50,000 and $150,000 for sales and marketing and working capital, respectively.
Should we require additional capital, the Company’s operations are not sufficient to fund its capital requirements. The Company may attempt to raise capital by selling additional capital stock or debt issuance. The Company intends to continue its efforts in growing its operations and raising funds through private equity and debt financing.
Between February 22, 2016, and April 24, 2017, the Company borrowed $1,000,000 from FRH Group, a founder and principal shareholder. Effective June 1, 2017, we raised an aggregate of $98,000 through our common stock’s private placement to our officers, directors, friends, relatives, and business associates.
From January 29, 2019, to February 15, 2019, the Company issued 33,000 registered shares under the Securities Act of 1933 for a cash amount of $4,950. The Company closed its offering effective February 26, 2019.
On May 01, 2020, the Company received proceeds of Fifty-Thousand Six Hundred and Thirty-Two ($50,632) from the Promissory Note (“PPP Note”) under the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).
On May 22, 2020, the Company received hundred and forty-four thousand nine hundred and 00/100 Dollars ($144,900).
On July 15, 2020, the Company engaged Kingswood Capital Markets, a Benchmark Investments division, Inc., to act as its exclusive general financial advisor for strategic corporate planning and investment banking services. On August 25, 2020, the Company and Broker-Dealer terminated all obligations other than maintaining confidentiality, with no fees 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 offer debt securities to assist in the Company’s acquisition strategy. The Company terminated the engagement as of June 28, 2021.
On February 22, 2021, the Company entered into an Assignment of Debt Agreement (the “Agreement”) with FRH and FRH Group Corporation. The Company eliminated all four FRH Group convertible notes, including interest, of $1,256,908, in return for the issuance of 12,569,080 of unregistered common stock of the Company (the “Shares”) to FRH. The debt reduction should enable the Company to raise capital at favorable terms and conditions.
Between February and September 2021, the Company received $95,000 from the Officer for working capital purposes and recorded in related party advances.
On October 04, 2021, the Company filed a prospectus that relates to the resale of up to 22,670,000 shares of our Common Stock issued or issuable to selling shareholders for up to $2,200,000, including (i) up to 2,000,000 shares issued to AD Securities America, LLC, (ii) up to 20,000,000 issuable to White Lion Capital, LLC (“White Lion”), according to a “Purchase Notice Right” under an Investment Agreement and (iii) 670,000 shares issued to White Lion as a commitment fee associated with the Investment Agreement. The Company is yet to receive the funds. If we are unsuccessful in raising funds from the sale of 22,670,000 shares, we do not believe our current cash balance is sufficient to fund our operations.
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GOING CONCERN CONSIDERATION
We have not generated significant revenues from inception to September 30, 2021. As of September 30, 2021, and December 31, 2020, the Company’s accumulated a deficit of $2,471,917 and $1,493,984, respectively. Our independent auditors included an explanatory paragraph in their report on the audited financial statements for the fiscal year ended December 31, 2020, and 2019, and the period from January 21, 2016 (inception) to December 31, 2016, regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that led 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 results of operations 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 and uncertain in the current economic environment due to COVID-19.
In more detail, we have described significant accounting policies in Note 2 of our annual financial statements included in our 10-K for the fiscal year ended December 31, 2020, filed with the SEC on April 6, 2020. We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as appropriate based on changing conditions.
JOBS Act Accounting Election
We are an “emerging growth company,” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued after the enactment of the JOBS Act until those standards apply to private companies. As an emerging growth company, we have applied for exemption; as a result, the Company may delay the adoption of certain accounting standards until the standards would otherwise apply to private companies.
Off-Balance Sheet Arrangements and Contractual Obligations
We have not engaged in any off-balance sheet arrangements as defined in Item 303(c) of the SEC’s Regulation S-B. We did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes.
Recent Accounting Pronouncements
The amendments in the ASU are effective for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. We have adopted this ASU as of March 31, 2020 for ASC 606, Revenue Recognition and Amended ASU 2016-02, Leases (Topic 840). The ASU is currently not expected to have a material impact on our consolidated financial statements. While we have described significant accounting policies in more details in Note 2 of our annual financial statements included in our 10-K for the fiscal year ended December 31, 2020, filed with the SEC on April 6, 2020, we believe the accounting policies as described in Note 2 to be critical to the judgments and estimates used in the preparation of our financial statements.
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| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS. |
Not Applicable.
| ITEM 4. | CONTROLS AND PROCEDURES. |
Evaluation of Disclosure Controls and Procedures
We evaluated the effectiveness of disclosure controls and procedures as of the end of the period covered by this report under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures as of September 30, 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 time periods specified in the Securities and Exchange Commission’s rules and forms. The term “disclosure controls and procedures,” as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Notwithstanding the identified material weaknesses, management believes the financial statements included in this quarterly report on Form 10-Q fairly represent in all material respects our financial condition, results of operations, and cash flows at and for the periods presented in accordance with U.S. GAAP.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the three months ended September 30, 2021 and 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II.
| ITEM 1. | LEGAL PROCEEDINGS. |
There are no legal proceedings against the Company, and the Company is unaware of any proceedings contemplated against it.
| Item 1A. | Risk Factors. |
In accordance with the requirements of Form 10-Q, the Company, as a smaller reporting company, is not required to make the disclosure under this item.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
None
| Item 3. | Defaults Upon Senior Securities. |
None
| Item 4. | Mine Safety Disclosures. |
None
| Item 5. | Other Information. |
None
| Item 6. | Exhibits. |
(a) Exhibits.
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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: November 05, 2021 | /s/ Mitchell Eaglstein |
Mitchell Eaglstein, President and CEO (Principal Executive Officer) |
| Date: November 05, 2021 | /s/ Imran Firoz |
Imran Firoz, CFO (Principal Accounting Officer) |
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EXHIBIT INDEX
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