Company Quick10K Filing
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FDCTech
10-Q 2019-09-30 Quarter: 2019-09-30
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
APTI Apptio 1,641
EWLU Merion 57
INVU Investview 54
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FDCT 2019-09-30
Part I.
Item 1. Financial Statements.
Note 1. Business Description and Nature of Operations
Note 2 - Summary of Significant Accounting Policies
Note 3. Management's Plans
Note 4. Capitalized Software Costs
Note 5. Property and Equipment
Note 6. Related Party Transactions
Note 7. Line of Credit
Note 8. Notes Payable - Related Party
Note 9. Commitments and Contingencies
Note 10. Stockholders' Deficit
Note 11. Warrants
Note 12. Income Taxes
Note 13. Off-Balance Sheet Arrangements
Note 14. Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risks.
Item 4. Controls and Procedures.
Part II.
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 ex31-1.htm
EX-31.2 ex31-2.htm
EX-32.1 ex32-1.htm

FDCTech Earnings 2019-09-30

FDCT 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended September 30, 2019

 

OR

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________ to ______________

 

Commission File No. 333-221726

 

FDCTECH, INC.

(Exact name of the small business issuer as specified in its charter)

 

DELAWARE   81-1265459

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

200 Spectrum Center Drive, Suite 300

Irvine, CA 92618

(Address of principal executive offices)

 

(877) 445-6047

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered

Common Stock, par value $0.0001

  FDCT   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 Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] Smaller reporting company [X]
Emerging growth company [X]    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [  ] No [X]

 

The number of shares of Common Stock, $0.0001 par value, of the registrant outstanding at November 12, 2019, was 68,626,332.

 

 

 

   
 

 

TABLE OF CONTENTS

 

    Page No.
PART I.  
     
Item 1. Financial Statements. F-1
     
  Consolidated Balance Sheets as of September 30, 2019 (Unaudited), and December 31, 2018 F-2
     
  Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited) F-3
     
  Consolidated Statements of Stockholders’ Deficit for the Nine Months Ended September 30, 2019 and 2018 (Unaudited) F-4
     
  Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018 (Unaudited) F-5
     
  Notes to Consolidated Financial Statements F-6
     
  Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 4
     
  Item 3. Quantitative and Qualitative Disclosures About Market Risks. 8
     
  Item 4. Controls and Procedures 8
     
PART II.  
     
  Item 1. Legal Proceedings. 9
     
  Item 1A. Risk Factors. 9
     
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 9
     
  Item 3. Defaults Upon Senior Securities. 9
     
  Item 4. Mine Safety Disclosures. 9
     
  Item 5. Other Information. 9
     
  Item 6. Exhibits. 9
     
SIGNATURES 10
     
EXHIBIT INDEX 11

 

 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

 

  Pages
   
Consolidated Balance Sheets as of September 30, 2019 (Unaudited) and December 31, 2018 F-2
   
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited) F-3
   
Consolidated Statements of Stockholders’ Deficit for the Nine Months Ended September 30, 2019 and 2018 (Unaudited) F-4
   
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018 (Unaudited) F-5
   
Notes to the Consolidated Financial Statements F-6

 

F-1
 

 

FDCTECH, INC.

 

(Formerly known as Forex Development Corporation)

 

CONSOLIDATED BALANCE SHEETS

 

   September 30, 2019   December 31, 2018 
   (Unaudited)     
Assets          
Current assets:          
Cash  $65,553   $210,064 
Accounts receivable, net of allowance for doubtful accounts of $78,087 and $68,675, respectively   15,878    37,155 
Other current assets   7,753    2,375 
Total Current assets   89,184    249,594 
Capitalized software, net   675,940    539,123 
Total assets  $765,124   $788,717 
Liabilities and Stockholders’ Deficit          
Current liabilities:          
Accounts payable  $-   $5,500 
Line of credit   23,605    17,626 
Related-party convertible notes payable   1,000,000    1,000,000 
Related-party accrued interest   181,908    136,908 
Deferred revenue   3,000    - 
Total Current liabilities   1,208,513    1,160,034 
Total liabilities   1,208,513    1,160,034 
Commitments and Contingencies (Note 9)   -    - 
Stockholders’ Deficit:          
Preferred stock, par value $0.0001, 10,000,000 shares authorized, 4,000,000 issued and outstanding, as of September 30, 2019 and December 31, 2018   400    400 
Common stock, par value $0.0001, 100,000,000 shares authorized; 68,626,332 and 68,533,332 shares issued and outstanding, as of September 30, 2019 and December 31, 2018   6,862    6,853 
Additional paid-in capital   415,175    401,234 
Accumulated deficit   (865,826)   (779,804)
Total stockholders’ deficit   (443,389)   (371,317)
Total liabilities and stockholders’ deficit  $765,124   $788,717 

 

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, 2019   September 30, 2018   September 30, 2019   September 30, 2018 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
Revenues  $57,760   $136,812    324,562   $422,817 
Cost of sales   48,127    2,160    67,970    6,480 
Gross Profit   9,633    134,652    256,592    416,337 
Operating expenses:                    
General and administrative   55,177    107,602    277,809    397,001 
Sales and marketing   3,636    14,044    19,817    58,201 
Total operating expenses   58,813    121,646    297,626    455,202 
Operating income (loss)   (49,180)   13,006    (41,034)   (38,865)
Other income (expense):                    
Related-party interest expense   (15,000)   (15,000)   (45,000)   (45,335)
Other income (expense)   -    18    12    (1,821)
Total other expense   (15,000)   (14,982)   (44,988)   (47,156)
Income (loss) before provision for income taxes   (64,180)   (1,976)   (86,022)   (86,021)
Provision (benefit) for income taxes   -    -    -    - 
Net income (loss )  $(64,180)  $(1,976)   (86,022)  $(86,021)
Net income (loss) per common share, basic and diluted  $(0.00)  $0.00    (0.00)  $(0.00)
Weighted average number of common shares outstanding basic and diluted   68,626,332    68,533,332    68,618,343    68,533,332 

 

See accompanying notes to the financial statements

 

F-3
 

 

FDCTECH, INC.

 

(Formerly known as Forex Development Corporation)

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (UNAUDITED)

 

Three Months Ended September 30, 2019

 

   Preferred stock   Common stock   Additional Paid-in   Accumulated   Total Stockholders’ 
   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit 
                             

Three Months Ended September 30, 2018

                                   
                                   
Balance, June 30, 2018   4,000,000   $400    68,533,332   $6,853   $401,234   $(722,762)  $(314,275)
Net Loss   -    -    -    -    -    (1,976)   (1,976)
Balance, September 30, 2018   4,000,000   $400    68,533,332   $6,853   $401,234   $(724,738)  $(316,251)
                                    
Three Months Ended September 30, 2019                                   
                                    
Balance, June 30, 2019   4,000,000   $400    68,626,332   $6,862   $415,175   $(801,647)  $(379,210)
Net loss   -    -    -    -    -    (64,180)   (64,180)
Balance, September 30, 2019   4,000,000   $400    68,626,332   $6,862   $415,175   $(865,826)  $(443,389)

 

Nine Months Ended September 30, 2019

 

   Preferred stock   Common stock   Additional Paid-in   Accumulated   Total Stockholders’ 
   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit 
                             
Nine Months Ended September 30, 2018                                   
                                    
Balance, December 31, 2017   4,000,000   $400    68,533,332   $6,853   $401,234   $(638,717)  $(230,230)
Net Loss   -    -    -    -    -    (86,021)   (86,021)
Balance, September 30, 2018   4,000,000   $400    68,533,332   $6,853   $401,234   $(724,738)  $(316,251)
                                    
Nine Months Ended September 30, 2019                                   
                                    
Balance, December 31, 2018   4,000,000   $400    68,533,332   $6,853   $401,234   $(779,804)  $(371,317)
Common shares issued for cash at $0.15 per share   -    -    33,000    3    4,947    -    4,950 
Common shares issued for services valued at $0.15 per share   -    -    60,000    6    8,994    -    9,000 
Net loss   -    -    -    -    -    (86,022)   (86,022)
Balance, September 30, 2019   4,000,000   $400    68,626,332   $6,862   $415,175   $(865,826)  $(443,389)

 

See accompanying notes to the financial statements

 

F-4
 

 

FDCTECH, INC.

 

(Formerly known as Forex Development Corporation)

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   Nine Months Ended 
   September 30, 2019   September 30, 2018 
   (Unaudited)   (Unaudited) 
Net loss  $(86,022)  $(86,021)
Adjustments to reconcile net loss to net cash used in operating activities:          
Software depreciation and amortization   67,970    6,480 
Common stock issued for services   9,000    - 
Accounts receivable allowance   9,412    23,350 
Change in assets and liabilities:          
Gross accounts receivable   11,865    (32,846)
Accounts payable   (5,500)   6,233 
Prepaid expenses   (5,378)   - 
Accrued interest   45,000    45,000 
Deferred revenue   3,000    - 
Net cash provided by (used in) operating activities  $49,347   $(37,804)
Investing Activities:          
Capitalized software   (204,787)   (183,050)
Net cash used in investing activities  $(204,787)  $(183,050)
Financing Activities:          
Line of credit   5,979    (4,235)
Net proceeds from common stock and paid-in-capital   4,950    - 
Net cash provided by (used in) financing activities  $10,929   $(4,235)
Net decrease in cash   (144,511)   (225,089)
Cash at beginning of the period   210,064    464,303 
Cash at end of the period  $65,553   $239,214 
Cash paid for income taxes  $-   $- 
Cash paid for interest  $-   $- 

 

See accompanying notes to the financial statements

 

F-5
 

 

NOTE 1. BUSINESS DESCRIPTION AND NATURE OF OPERATIONS

 

The Company was incorporated on January 21, 2016, as Forex Development Corporation, under the laws of the State of Delaware. 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 solution to OTC Online Brokerages and cryptocurrency businesses (“customers”).

 

The Company’s products are designed to provide a complete solution for all operating aspects of customer’s business, including but not limited to trading terminal, back office, customer relationship management, and risk management systems. The Company provides business and management consulting, which include management consulting and the development of customers’ B2B sales and marketing divisions. The Company provides turnkey business solutions to entrepreneurs and other non-broker entities seeking to enter FX, cryptocurrency, and other OTC markets. The Company takes on customized software development projects specific to meet the needs of its customers. The Company also act as a general technical support provider for customers and other fintech companies.

 

The Company’s business solutions allow its customers to run their overall business better, increase trading revenues, cut operating costs, and enable them to anticipate market challenges using our proprietary based processes, state-of-the-art technologies, risk management tools, customized software development, and turnkey prime-of-prime business solution.

 

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 normal course of business.

 

At present, the Company does not have any patents or trademarks on its proprietary technology solutions.

 

At present, the Company has three sources of revenues.

 

  Consulting Services, which includes 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, where the Company license its proprietary and, in some cases, act as a reseller of third-party technologies to customers. Our proprietary technology includes but not limited to Condor Risk Management Back Office for MT4 (“Condor Risk Management”), Condor FX Pro Trading Terminal, Condor Pricing Engine, Crypto Trading Platform (“Crypto Web Trader Platform”), and other cryptocurrency-related solutions.
     
  Customized Software Development, where the Company takes on design-build software development projects for customers, where the Company develops the project to meet the design criteria and performance requirements as specified in the contract.

 

The Company’s customers are companies in the cryptocurrency and blockchain space, where it is acting as an advisor/strategic consultant and reseller of its proprietary technologies. The Company expects to generate additional revenue from its crypto-related solutions, which include revenues from development of custom crypto exchange platform for customers, the sale of the non-exclusive source code of 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 technology architecture of 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, where the Company develops these projects to meet the design criteria and performance requirements as specified by the customer.

 

There are several steps required to set-up a functional crypto exchange platform. Our customers are expected to seek necessary licensing approval and meet registration requirements in their respective jurisdictions. Customers are also responsible for establishing a relationship with the payment processing partner such as a bank. Subsequently, the Company intends to provide and maintain a payment gateway API, which will give users the power of adding and withdrawing funds. Liquidity is an essential aspect of the success of a cryptocurrency exchange marketplace. The trades at an exchange drive its liquidity, and robust crypto exchange platform requires seamless trading activity. To manage this liquidity at the customer’s crypto exchange business, the Company will integrate its customer crypto exchange’s liquidity position to other existing exchanges. The Company will provide a modern and robust API interface that connects liquidity and trade volume data between various crypto exchanges.

 

F-6
 

 

Note 1 – Business Description and Nature of Operations (continued)

 

The Company is responsible for arranging, developing, and maintaining the technology architecture of the crypto exchange platform. This architecture includes but not limited to the trading engine, front-end user interface, functional website, cryptocurrency wallet, and administration console. The trading engine serves as the core of exchange and is essential to smart order transaction execution, calculate balances, access, and aggregation of the order book and match all the buy/sell transactions on an exchange. The front-end user interface is a user-friendly and intuitive interface with a minimalistic approach to offer an exceptional trading experience. The front-end user includes but not limited to user registration, funds deposit/withdrawal, view order book, transactions, balance, statistics, charts, buy/sell orders, and support features. The Company can customize the features of a console according to the specific business requirement of our customers, such as the option to edit trading fee, managing cryptocurrency listing, adding new currencies, crediting/debiting funds to wallets and addressing support issues. The Company’s involvement is limited to creating an interface between the crypto exchange platform and the digital asset owner and is not responsible for holding and maintaining the digital assets in the wallet.

 

The Company is only involved as a technology provider and software developer in the crypto space and does not mine, trade (acquire or sell cryptocurrencies), speculate or act as a trading 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.

 

Third-Party Industry Accreditation

 

In July 2016, Financial Commission, a leading financial services industry external dispute resolution (EDR) organization, with a diverse membership of online brokerages and independent services providers (ISPs) provided the technology certification for the Company. Financial Commission conducted its rigorous review of Company’s platforms, including its Condor Risk Management Back Office for MT4, to ensure it met the technical information requirements of the Commission’s technology certification evaluation process. The Financial Commission established a comprehensive list of requirements to verify system security, capacity, business disaster recovery, and continuity plan, as well as reporting and record-keeping, among other fields deemed necessary for the technical certification of the Company. In October 2018, Financial Commission added the Company as an approved service provider to its Partner section website. Financial Commission has created its Partners section for service providers approved to offer their solutions to our members.

 

Business Strategy

 

Our experienced management and in-house software development team have carefully designed various B2B business solutions to meet the needs of OTC Online Brokers. Our solution targets OTC Online brokers of all sizes and stages - whether our potential customer is a start-up company or an established OTC Online broker, it is easier, less risky, and more cost-efficient for customers to enter Prime of Prime or OTC Online broker space using our turnkey solution. Our advisory services and proprietary technologies enable customers to adapt to regulatory changes and market shifts quickly while enhancing the end-user/trader experience.

 

We intend to grow our core business, increase market share, and improve profitability principally by deploying the following growth strategies:

 

  Continue to enhance and promote our core proprietary technologies and business solutions including but not limited to Condor Risk Management Back Office, SYOPB, SYOB and introduce other innovative trading tools for B2B and futures markets;
  Future growth will depend on the timely development and successful distribution of Condor FX Pro Trading Platform and Condor Pricing Engine;
  Increase our software development capabilities to develop disruptive and next-generation technologies to grow software license revenues;
  Strategically expand our operations in Asia and Europe, and grow customer base through accretive acquisitions, opportunistic investments, and beneficial partnerships; and
  Recognize and enter high-growth markets to expand our services to meet the demand for other financial products to cater to retail or non-professional customers.

 

Marketing and Sales

 

The Company aims to be flexible and responsive to its sales and marketing strategies to provide an omnichannel customer experience. Therefore, our primary focus is on different customer acquisition channels to expand our customer base. The Company is actively being integrating both digital (online marketing, website, blogs, and social media) and traditional channels (conferences, trade shows, phones, direct meeting) effectively as we are aware that one-size-fits-most customers do no longer work.

 

F-7
 

 

Note 1 – Business Description and Nature of Operations (continued)

 

We implement an effective marketing funnel where we map out our customer’s journey from when a customer is a lead and then put specific strategies in place that will encourage them to move through this funnel. We create awareness of our solutions through direct marketing strategy, where we use a combination of approaches. The omnichannel strategy includes but not limited to online banner advertising, SEO marketing, email outreach, event promotion, including educational seminars, conferences, and public and media relations, all of which are designed at driving prospective customers to fdctech.com or encourage them to contact one of our specialists. We also encourage customers to participate in the demo or webinar or consultation call where our expert shows them why they need our solutions and exactly how it will benefit them.

 

We also utilize many indirect channels where a network of industry professionals, introducing and referring brokers (collectively “RB/IB”) as third parties promote our services in exchange for performance-based compensation. In most cases, RB/IB carries out the lead generation function while our staff provides the customer and technical service.

 

Most of the marketing and branding initiatives are taken in-house by our team where we effectively leverage social media, content marketing, and integrated models to keep the continuity of our message and maintain critical customer relationships on a one on one basis.

 

Subsidiaries of the Company

 

In April 2016, the Company established its wholly-owned subsidiary – FRH Prime Ltd. (“FRH Prime”), a company, incorporated under section 14 of 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. Both FRH Prime and FXClients are established to conduct financial technology service activities.

 

Board of Directors

 

The Company currently has three directors.

 

Note 2 - Summary of Significant Accounting Policies

 

Basis of Presentation and Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of FDCTech, Inc. and its wholly-owned subsidiary. We have eliminated all intercompany balances and transactions. The Company has prepared the consolidated financial statements in a manner consistent with the accounting policies adopted by the Company in its financial statements. The Company has measured and presented the consolidated financial statements of the Company in US Dollars, which is the currency of the primary economic environment in which the Company operates (also known as its functional currency).

 

Financial Statement Preparation and Use of Estimates

 

The Company prepared consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Estimates include revenue recognition, the allowance for doubtful accounts, website and internal-use software development costs, recoverability of intangible assets with finite lives, and other long-lived assets. Actual results could materially differ from these estimates.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand, deposits held with banks, and other short-term highly liquid investments with original maturities of three months or less. On September 30, 2019, and December 31, 2018, the Company had $65,553 and $210,064 cash and cash equivalent held at the financial institution.

 

F-8
 

 

Note 2 – Summary of Significant Accounting Policies (continued)

 

Accounts Receivable

 

Accounts Receivable primarily represents the amount due from eight (8) customers. In some cases, Receivables from the customer are due immediately on demand, however, in most cases, the Company offers net 30 terms or n/30, where the payment is due in full 30 days after the date of the invoice. The Company has based the allowance for doubtful accounts on its assessment of the collectability of customer accounts. The Company regularly reviews the allowance by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, economic conditions that may affect a customer’s ability to pay and expected default frequency rates. Trade receivables are written off at the point when they are considered uncollectible.

 

At September 30, 2019, and December 31, 2018, the Company has determined that allowance for doubtful accounts was $78,087 and $68,675 respectively. Bad debt expense for the nine months ended September 30, 2019, and 2018, was $20,000 and $42,275 respectively.

 

Sales, Marketing and Advertising

 

The Company recognizes sales, marketing, and advertising expenses when incurred.

 

The Company incurred $3,636 and $14,044 in sales, marketing and advertising costs (“sales & marketing”) for the three months ended September 30, 2019, and 2018 respectively. The sales, marketing, and advertising expenses represented 6.30% and 10.27% of the sales for the three months ended September 30, 2019, and 2018 respectively.

 

The Company incurred $19,817 and $58,201 in sales, marketing, and advertising costs (“sales & marketing”) for the nine months ended September 30, 2019, and 2018 respectively. The sales, marketing, and advertising expenses represented 6.11% and 13.77% of the sales for the nine months ended September 30, 2019, and 2018 respectively.

 

The sales & marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relations activities.

 

Office Lease

 

Effective October 29, 2019, the Company leased office space at 200 Spectrum Center Drive, Suite 300, Irvine, CA 92618. As per the Commitment Term of the lease (“Agreement”), this Agreement shall continue on a month-to-month basis (any term after the Commitment Term, also known as “Renewal Term”). The Commitment Term and all subsequent Renewal Terms shall constitute the “Term.” The Company may terminate this Agreement by delivering to the lessor Form (“Exit Form”) at least one (1) full calendar month before the month in which the Company intends to terminate this Agreement (“Termination Effective Month”). The Company is entitled to use the office and conference space as on need basis. Previously, the Company leased office space at 1460 Broadway, New York, NY 10036, from an unrelated party. The new rent payment or membership fee is $90 per month compared to the previous rent payment or membership fee at the office of $890 per month, which is included it in the General and administrative expenses. From January 1, 2018, to July 31, 2018, the Company has received a discount of $890 per month on its rent payment. This agreement continues indefinitely on a month-to-month basis until the Company chooses to terminate by the terms of the agreement.

 

Effective February 2019, the Company leases office space at Suite 205, Building 9, Potamos Germasogeia, 4047, Limassol District, Cyprus from an unrelated party for a year. The rent payment at the office is $1,750 per month, and we have included it in the General and administrative expenses. From February 2020, this agreement continues every year upon written request by the Company. The Company uses the office for sales and marketing in Europe and Asia.

 

Effective April 2019, the Company leases office space at Suite 512, 83 Plan, Chelyabinsk, Russia, from an unrelated party for an eleven months term. The rent payment at the office is $500 per month, and we have included it 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 terms of the agreement by giving thirty days’ notice. The Company uses the office for software development and technical support.

 

As all leases are either on a month to month basis or less than a year term, the Company is not required to recognize assets and liabilities for our rental leases. The Company has included all rental expenses in the General & Administrative expenses.

 

Revenue Recognition

 

On January 1, 2019, the Company adopted ASU 2014-09 Revenue from Contracts with Customers. The majority of the Company’s revenues come from two contracts – IT support and maintenance (‘IT Agreement’) and software development (‘Second Amendment’) that fall within the scope of ASC 606.

 

The Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to receive in exchange for those goods or services as per the contract with the customer. As a result, the Company accounts for revenue contracts with customers by applying the requirements of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic 606), which includes the following steps:

 

  Identify the contract or contracts, and subsequent amendments with the customer.
  Identify all the performance obligations in the contract and subsequent amendments.
  Determine the transaction price for completing performance obligations.
  Allocate the transaction price to the performance obligations in the contract.
  Recognize the revenue when, or as, the Company satisfies a performance obligation.

 

F-9
 

 

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, where each party can identify their rights, obligations, and payment terms, the contract has commercial substance, and it is probable that the Company will collect substantially all of the consideration. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of the promised service to a customer. The Company fixes the transaction price for goods and services at contract inception. The Company’s standard payment terms are generally net 30 days and in some cases due upon receipt of the invoice.

 

The Company considers contract modification as a change in the scope or price (or both) of a contract that is approved by the parties. The parties describe contract modification as a change order, a variation, or an amendment. A contract modification exists when the parties to the contract approve a modification that either creates new or changes existing enforceable rights and obligations of the parties to the contract. The Company assumes a contract modification when approved in writing, by oral agreement, or implied by the customary business practice of the customer. If the parties to the contract have not approved a contract modification, the Company continues to apply the guidance to the existing contract until the contract modification is approved. The Company recognizes contract modification in various forms – including but not limited to partial termination, an extension of the contract term with a corresponding increase in price, adding new goods and/or services to the contract, with or without a corresponding change in price, and reducing the contract price without a change in goods or services promised.

 

For all its goods and services, at contract inception, the Company assesses the solutions or services, or bundles of solutions and services, obligated in the contract with a customer to identify each performance obligation within the contract, and then evaluate whether the performance obligations are capable of being distinct and distinct within the context of the contract. Solutions and services that are not both capable of being distinct and distinct within the context of the contract are combined and treated as a single performance obligation in determining the allocation and recognition of revenue. For multi-element transactions, the Company allocates the transaction price to each performance obligation on a relative stand-alone selling price basis. The Company determines that stand-alone selling price for each item at the inception of the transaction involving these multiple elements.

 

F-10
 

 

Note 2 - Summary of Significant Accounting Policies (continued)

 

Since January 21, 2016 (‘Inception’), the Company has derived its revenues mainly from three sources – consulting services, technology solutions, and customized software development. The Company recognizes revenue when it has satisfied a performance obligation by transferring control over a product or delivering a service to a customer. We measure revenue based upon the consideration outlined in an arrangement or contract with a customer.

 

The Company’s typical performance obligations include the following:

 

Performance Obligation   Types of Deliverables   When Performance Obligation is Typically Satisfied
Consulting Services   Consulting related to Start-Your-Own-Brokerage (“SYOB”), Start-Your-Own-Prime Brokerage (“SYOPB”), Start-Your-Own-Crypto Exchange (“SYOC”), FX/OTC liquidity solutions and lead generations.   The Company recognizes the consulting revenues when the customer receives services over the length of the contract. If the customer pays the Company in advance for these services, the Company records such payment as deferred revenue until the Company completes the services.
         
Technology Services   Licensing of Condor Risk Management Back Office for MT4 (“Condor Risk Management”), Condor FX Pro Trading Terminal, Condor Pricing Engine, Crypto Trading Platform (“Crypto Web Trader Platform”), and other cryptocurrency-related solutions.   The Company recognizes ratably over the contractual period that the services are delivered, beginning on the date in which such service is made available to the customer. Licensing agreements are typically one year in length with an option to cancel by giving notice; customers have the right to terminate their agreements if the Company materially breaches its obligations under the agreement. Licensing agreements do not provide customers the right to take possession of the software at any time. The Company charges the customers a set-up fee for the installation of the platform, and implementation activities are insignificant and not subject to a separate fee.
         
Software Development   Design-build software development projects for customers, where the Company develops the project to meet the design criteria and performance requirements as specified in the contract.   The Company recognizes the software development revenues when the Customer obtains control of the deliverables, as stated in the Statement-of-Work in the contract.

 

For purposes of determining the transaction price, the Company assumes that the goods or services promised in the existing contract will be transferred to the customer. The Company believes that the contract will not be canceled, renewed, or modified; therefore, the transaction price includes only those amounts to which the Company has rights under the present contract. For example, if the Company enters into a contract with a customer that has an original term of one year and the Company expects the customer to renew for a second year, the Company would determine the transaction price based on the original one-year term. When determining the transaction price, the Company first identifies the fixed consideration, which includes any nonrefundable upfront payment amounts.

 

For purposes of allocating the transaction price, the Company allocates an amount that best represents consideration that the entity expects to receive for transferring each promised good or service to the customer. To meet the allocation objective, the Company allocates the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis. In determining the standalone selling price, the Company uses the best evidence of the stand-alone selling price that the Company charges to similar customers in similar circumstances. In some cases, the Company uses the adjusted market assessment approach to determine the standalone selling price, where it evaluates the market in which it sells the goods or services and estimates the price that customers in that market would pay for those goods or services when sold separately.

 

The Company recognizes revenue when or as it transfers the promised goods or services in the contract. The Company considers the “transfers” of promised goods or services when, or as, the customer obtains control of the goods or services. The Company believes a customer “obtains control” of an asset when, or as, it can direct the use of, and obtain all the remaining benefits from, an asset substantially. The Company recognizes deferred revenue related to services which it will deliver within one year as a current liability. The Company presents deferred revenue related to services that the Company will provide more than one year into the future as a non-current liability.

 

For the period ending September 30, 2019, the Company’s two primary revenue streams accounted for under ASC 606 follows:

 

The Company entered into a definitive asset purchase agreement on July 19, 2017, to sell the code, installation, and future development for a value of two hundred and fifty thousand ($250,000) dollars. The first part was the sale of source code and installation, and the second part consisted of the future development of the Platform, which is not essential to the functionality of the Platform, as third parties or customer(s) themselves can perform these services. By December 31, 2017, the Company has received the two installments totaling one hundred and sixty thousand ($160,000) dollars for the source code and successful installation of the Platform. The Company has recognized the revenue of $160,000 for the fiscal year ended December 31, 2017. On December 31, 2018, the Company wrote-off a software development revenue equaling $18,675 for the fiscal year ended December 31, 2017, for accounts receivable, which were over ninety days. However, in August 2018, the Company signed the second amendment to the asset purchase agreement, whereby the purchaser issued to the Company seventeen thousand, seven hundred and fifty dollars ($17,750) as a full and final settlement of all past delivered services. The Company received the funds in September 2018. On September 4, 2018, the Company signed the Second Amendment Agreement (‘Second Amendment’) in continuation of the asset purchase agreement, and the First Amendment Agreement signed on July 19, 2017, and August 1, 2017, between the Company and the Purchaser. Under the Second Amendment, the Company received $80,000 as the second part for the was the sale of source code in four equal installments of $20,000 each. All payments were received by May 5, 2019.

 

According to the Second Amendment, the Company identifies two main ongoing performance obligations in the contract for the following development services of the Platform:

 

a) Customized developments, and

b) Software updates.

 

The Company receives $75 per hour for the first 100 hours/month of approved development services and $45 per hour for all services over 100 hours per month. The Company invoices the Customer for all development services rendered and any cash received for the development services is non-refundable.

 

On February 5, 2018 (‘Effective Date’), the Company signed IT support and maintenance agreement (‘IT Agreement’) with an FX/OTC broker (‘FX Broker’) regulated by the Malta Financial Services Authority, where the Company earns the recurring monthly payment from the FX Broker for delivering IT support and maintenance services (‘Services’) to FX Broker’s legacy technology infrastructure. The term of this Agreement commenced on the Effective Date and shall continue until terminated by either party either for cause, bankruptcy, and other default clauses. The Company completes and satisfies its performance obligation upon accomplishment of all support and maintenance activities every month. The Company invoices the FX Broker at the beginning of the month for services performed, delivered, and accepted for the prior month. At the time of the invoice, the Company renders all Services, and any cash received for Services is non-refundable.

 

F-11
 

 

Note 2 - Summary of Significant Accounting Policies (continued)

 

According to the terms and conditions of the contract, the Company invoices the customer at the beginning of the month for services delivered for the month. The invoice amount is due upon receipt. The Company recognizes the revenue at the end of each month, which is equal to the invoice amount.

 

Concentrations of Credit Risk

 

Cash

 

The Company maintains its cash balances at a single financial institution. The balances do not exceed FDIC limits as of September 30, 2019 and December 31, 2018.

 

Revenues

 

For the nine months ended September 30, 2019 and 2018, the Company had ten (10) and thirteen (13) active customers, respectively. Revenues generated from the top three (3) customers represented approximately 94.94% and 60.61% of total revenue for the nine months ended September 30, 2019 and 2018 respectively.

 

Accounts Receivable

 

At September 30, 2019, and December 31, 2018, Company’s top four (4) customers comprise roughly 82.98% and 88.55% of total A/R, respectively. The loss of any of the top four customers would have a significant impact on the Company’s operations.

 

Research and Development (R&D) Cost

 

The Company acknowledges that future benefits from research and development (R&D) are uncertain; as a result, the Company has not capitalized R&D expenditures. The GAAP accounting standards require us to expense all research and development expenditures as incurred. For the nine months ended September 30, 2019 and 2018, the Company did not incur R&D cost.

 

Legal Proceedings

 

The Company discloses a loss contingency if there is at least a reasonable possibility that a material loss has incurred. The Company records its best estimate of loss related to pending legal proceedings when the loss is considered probable, and the amount can be reasonably estimated. Where the Company can reasonably estimate a range of loss with no best estimate in the range, the Company records the minimum estimated liability. As additional information becomes available, the Company assesses the potential liability related to pending legal proceedings and revises its estimates and updates its disclosures accordingly. The Company’s legal costs associated with defending itself are recorded to expense as incurred. The Company currently is not involved in any litigation.

 

Impairment of Long-Lived Assets

 

The Company reviews long-lived assets for impairment in accordance with FASB ASC 360, Property, Plant, and Equipment. Under the standard, long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. An impairment charge is recognized for the amount if and when the carrying value of the asset exceeds the fair value. On September 30, 2019, and December 31, 2018, there are no impairment charges.

 

Provision for Income Taxes

 

The provision for income taxes is determined using the asset and liability method. Under this method, deferred tax assets and liabilities are calculated based upon the temporary differences between the consolidated financial statement and income tax bases of assets and liabilities using the enacted tax rates that are applicable in each year.

 

The Company utilizes a two-step approach to recognizing and measuring uncertain tax positions (“tax contingencies”). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely to be realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments, and which may not accurately forecast actual outcomes. The Company includes interest and penalties related to tax contingencies in the provision of income taxes in the consolidated statements of operations. Management of the Company does not expect the total amount of unrecognized tax benefits to change in the next 12 months significantly.

 

At September 30, 2019 and 2018, the Company had not taken any significant uncertain tax positions on its tax returns for periods ended December 30, 2018 and prior years or in computing its tax provision for 2019. Management has considered its tax positions and believes that all of the positions taken by the Company in its Federal and State tax returns are more likely than not to be sustained upon examination. The Company is subject to review by U.S. Federal and State tax authorities for the period ended December 31, 2016 to the present, generally, for three years after the Company has filed the taxes.

 

Software Development Costs

 

By ASC 985-20, Software development costs, including costs to develop software sold, leased, or otherwise marketed, that are incurred after the establishment of technological feasibility, are capitalized if significant. Capitalized software development costs are amortized using the straight-line amortization method over the estimated useful life of the application software. By the end of February 2016, the Company completed the activities (planning, designing, coding, and testing) necessary to establish that it can produce and meet the design specifications of the Condor FX Back Office for MT4 Version, Condor FX Pro Trading Desktop and Web Trader Terminal Desktop, and Condor Pricing Engine. The Company established the technological feasibility of the Crypto WebTrader Platform in 2018. The Company estimates the useful life of the software to be three (3) years. The Company is in the process of developing the Condor WebTrader platform. The Company estimates the useful life of the Condor FX WebTrader platform to be three (3) years.

 

F-12
 

 

Note 2 - Summary of Significant Accounting Policies (continued)

 

Amortization expense was $48,127 and $2,160 for the three months ended September 30, 2019, and 2018, respectively. Amortization expense was $67,970 and $6,480 for the nine months ended September 30, 2019, and 2018, respectively. The Company classifies such costs as the Cost of Sales.

 

The Company capitalizes significant costs incurred during the application development stage for internal-use software. The Company does not believe that the capitalization of software development costs is material to date.

 

Convertible Debentures

 

The cash conversion guidance in ASC 470-20, Debt with Conversion and Other Options, is considered when evaluating the accounting for convertible debt instruments (this includes certain convertible preferred stock that is classified as a liability) to determine whether the conversion feature should be recognized as a separate component of equity. The cash conversion guidance applies to all convertible debt instruments that upon conversion may be settled entirely or partially in cash or other assets where the conversion option is not bifurcated and separately accounted for pursuant to ASC 815.

 

If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). The Company records BCF as a debt discount pursuant to ASC Topic 470-20, Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.

 

As of September 30, 2019, the conversion features of conventional FRH Group convertible notes dated February 22, 2016, May 16, 2016, November 17, 2016 and April 24, 2017 (See Note 8) provide for a rate of conversion where the conversion price is below the market value. As a result, the conversion feature on all FRH Group convertible notes has a beneficial conversion feature (“BCF”) to the extent of the price difference. Due to the debt extension of FRH Group convertible notes, Management performed an analysis to determine the fair value of the BCF and noted that the value of the BCF for each note was insignificant. Thus no debt discount was recorded as of September 30, 2019.

 

Basic and Diluted Income (loss) per Share

 

The Company follows ASC 260, Earnings Per Share, to account for earnings per share. Basic earnings per share (“EPS”) calculations are determined by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. As of September 30, 2019, and December 31, 2018, the Company had 68,626,332 and 68,533,332 basic and dilutive shares issued and outstanding respectively. The Company had 20,000,000 million potentially dilutive shares related to four outstanding FRH Group convertible notes which were excluded from the diluted net loss per share as the effects would have been anti-dilutive. During the Nine months ended September 30, 2019 and 2018, common stock equivalents were anti-dilutive due to a net loss of $86,022 and $86,021, respectively. Hence, they are not considered in the computation.

 

Reclassifications

 

Certain prior period amounts were reclassified to conform to the current year’s presentation. None of these classifications had an impact on reported operating loss or net loss for any of the periods presented.

 

F-13
 

 

Note 2 - Summary of Significant Accounting Policies (continued)

 

Recent Accounting Pronouncements

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific requirements. ASU 2014-09 establishes a five-step revenue recognition process in which entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows from contracts with customers. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date of ASU 2014-09 by one (1) year. The Company adopted ASC 606 using the modified retrospective method applied to all contracts not completed as of January 1, 2019. The Company presents results for reporting periods beginning after January 1, 2019, under ASC 606 while prior period amounts are reported following legacy GAAP. Refer to Note 2 Summary of Significant Accounting Policies for further discussion on the Company’s accounting policies for revenue sources within the scope of ASC 606.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 840), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments to this standard are effective for fiscal years beginning after December 15, 2019. Early adoption of the amendments in this standard is permitted for all entities, and the Company must recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently in the process of evaluating the effect this guidance will have on its consolidated financial statements and related disclosures.

 

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force) and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

 

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 normal course of business. At September 30, 2019, and December 31, 2018, the accumulated deficit was $865,826 and $779,804 respectively.

 

During the three months ended September 30, 2019, and 2018, the Company incurred a net loss of $64,180 and $1,976 respectively. During the Nine months ended September 30, 2019, and 2018, the Company incurred a net loss of $86,022 and $86,021respectively.

 

Since inception, the Company has sustained recurring losses, and negative cash flows from operations. As of December 31, 2019, and December 31, 2018, the Company had $65,553 and $210,064 cash on hand, respectively. The Company believes that future cash flows may not be sufficient for the Company to meet its debt obligations as they become due in the ordinary course of business for twelve (12) months. For the nine months ended September 30, 2019, and 2018, the Company has earned steady revenues year-over-year and continues to reduce its operating expenses. For the nine months ended on September 30, 2019, the Company experienced positive cash flows from operations. However, the cash flow is not significant to meet the ongoing requirement for substantial additional capital investment for the development of its financial technologies. The Company expects that it will need to raise substantial additional capital to accomplish its growth plan over the next twelve months. The Company expects to seek to obtain additional funding through private equity or public markets. However, there can be no assurance as to the availability or terms upon which such financing and capital might be available.

 

The Company’s ability to continue as a going concern may be dependent on the success of 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 Company may attempt to enter into a revolving loan agreement with financial institutions or attempt to raise capital through the sale of additional capital stock or the issuance of debt.

 

The Company intends to continue its efforts in enhancing its revenue from its diversified portfolio of technological solutions and becoming cash flow positive, as well as raising 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 2019.

 

F-14
 

 

NOTE 4. CAPITALIZED SOFTWARE COSTS

 

During the nine months ended September 30, 2019, and 2018, the estimated remaining weighted-average useful life of the Company’s capitalized software was three (3) years. The Company recognizes amortization expense for capitalized software on a straight-line basis.

 

At September 30, 2019, and December 31, 2018, the gross capitalized software asset was $766,230 and $561,443 respectively. At the end of September 30, 2019, and December 31, 2018, the accumulated software depreciation and amortization expenses were $90,290 and $22,320, respectively. As a result, the unamortized balance of capitalized software on September 30, 2019, and December 31, 2018, was $675,940 and $539,123 respectively.

 

NOTE 5. PROPERTY AND EQUIPMENT

 

On September 30, 2019, the Company rents its servers, computers, and data center from an unrelated third party. Furniture and fixtures and any leasehold improvements are provided by the lessor at 1460 Broadway, New York, NY 10036 under the rent Agreement as discussed in Note 2. Effective October 29, 2019, the Company changed its headquarters to 200 Spectrum Center Drive, Suite 300, Irvine, CA 92618.

 

NOTE 6. RELATED PARTY TRANSACTIONS

 

In April 2016, the Company established its wholly-owned subsidiary – FRH Prime Ltd. (“FRH Prime”), a company, incorporated under section 14 of 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. Both FRH Prime and FXClients are established to conduct financial technology service activities. For the nine months ended September 30, 2019, and 2018, FRH Prime has generated volume rebates of $1,281 and $12,735, respectively, from Condor Risk Management Back Office for MT4 Platform. The Company has included rebates in revenue in the consolidated income statements. There have been no significant operating activities in FXClients.

 

Between February 22, 2016, and April 24, 2017, the Company borrowed $1,000,000 from FRH Group, a founder and principal shareholder of the Company (“FRH”). The Company executed Convertible Promissory Notes due on December 31, 2019. The Notes are convertible into common stock initially at $0.10 per share but maybe discounted under certain circumstances, but in no event will the conversion price be less than $0.05 per share. The Notes carry an interest rate of 6% per annum, which is due and payable at the maturity date.

 

Between March 15 and 21, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued 1,000,000 shares to Susan Eaglstein and 400,000 shares to Brent Eaglstein for a cash amount of $70,000. Ms. Eaglstein and Mr. Eaglstein are the Mother and Brother, respectively, of Mitchell Eaglstein, who is the CEO and Director of the Company.

 

F-15
 

 

NOTE 7. LINE OF CREDIT

 

From June 24, 2016, the Company obtained an unsecured revolving line of credit of $35,000 from Bank of America to fund various purchases and travel expenses for the Company. The line of credit has an average interest rate at the close of business on September 30, 2019, for purchases and cash drawn at 12% and 25%, respectively. As of September 30, 2019, the Company complies with terms and conditions of the line of credit. At September 30, 2019, and December 31, 2018, the outstanding balance was $23,605 and $17,626, respectively.

 

NOTE 8. NOTES PAYABLE – RELATED PARTY

 

Convertible Notes Payable

 

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 ($100,000) on February 28, 2018 (the “Maturity Date”). The Maturity Date of the Note was extended from September 30, 2019 to December 31, 2019. The Company will pay the outstanding principal amount of this Note, together with interest at 6% per annum, in cash on the Maturity Date to the registered holder of this Note. In the event the Company does not make, when due, any payment of principal or interest required to be made the Company will pay, on-demand, interest on the amount of any overdue payment of principal or interest for the period following the due date of such payment, at a rate of ten percent (10%) per annum.

 

The initial conversion rate will be $0.10 per share or 1,000,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events as set forth below. If the fair market value of the Company’s common stock is less than $0.10 per share, the conversion price shall be discounted by 30%, but in no event, will the conversion price be less than $0.05 per share with a maximum of 2,000,000 shares if FRH Group converts the entire Note subject to adjustments in certain events. No fractional Share or scrip representing a fractional Share will be issued upon conversion of the Notes.

 

F-16
 

 

NOTE 8. Notes Payable – Related Party (continued)

 

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 ($400,000) on May 31, 2018 (the “Maturity Date”). The Maturity Date of the Note was extended from September 30, 2019 to December 31, 2019. The Company will pay the outstanding principal amount of this Note, together with interest at 6% per annum, in cash on the Maturity Date to the registered holder of this Note. In the event the Company does not make, when due, any payment of principal or interest required to be made the Company will pay, on-demand, interest on the amount of any overdue payment of principal or interest for the period following the due date of such payment, at a rate of ten percent (10%) per annum.

 

The initial conversion rate will be $0.10 per share or 4,000,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events as set forth below. If the fair market value of the Company’s common stock is less than $0.10 per share, the conversion price shall be discounted by 30%, but in no event, will the conversion price be less than $0.05 per share with a maximum of 8,000,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events. No fractional Share or scrip representing a fractional Share will be issued upon conversion of the Notes.

 

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 ($250,000) on November 30, 2018. The Maturity Date of the Note was extended from September 30, 2019 to December 31, 2019. The Company will pay the outstanding principal amount of this Note, together with interest at 6% per annum, in cash on the Maturity Date to the registered holder of this Note. In the event the Company does not make, when due, any payment of principal or interest required to be made the Company will pay, on demand, interest on the amount of any overdue payment of principal or interest for the period following the due date of such payment, at a rate of ten percent (10%) per annum.

 

The initial conversion rate would be $0.10 per share or 2,500,000 shares if the entire Note were converted, subject to adjustments in certain events as set forth below. If the fair market value of the Company’s common stock is less than $0.10 per share, the conversion price shall be discounted by 30%, but in no event, will the conversion price be less than $0.05 per share with a maximum of 5,000,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events. No fractional Share or scrip representing a fractional Share will be issued upon conversion of the Notes.

 

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 ($250,000) on April 24, 2019 (the “Maturity Date”). The Maturity Date of the Note was extended to December 31, 2019. The Company will pay the outstanding principal amount of this Note, together with interest at 6% per annum, in cash on the Maturity Date to the registered holder of this Note. In the event the Company does not make, when due, any payment of principal or interest required to be made the Company will pay, on demand, interest on the amount of any overdue payment of principal or interest for the period following the due date of such payment, at a rate of ten percent (10%) per annum.

 

The initial conversion rate will be $0.10 per share or 2,500,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events as set forth below. If the fair market value of the Company’s common stock is less than $0.10 per share, the conversion price shall be discounted by 30%, but in no event, will the conversion price be less than $0.05 per share with a maximum of 5,000,000 shares if the entire Note was converted, subject to adjustments in certain events. No fractional Share or scrip representing a fractional Share will be issued upon conversion of the Notes.

 

FRH Group Note Summary

 

Date of Note:  2/22/2016   5/16/2016   11/17/2016   4/24/2017 
Original Amount of Note:  $100,000   $400,000   $250,000   $250,000 
Outstanding Principal Balance:  $100,000   $400,000   $250,000   $250,000 
Maturity Date (1):   12/31/2019    12/31/2019    12/31/2019    12/31/2019 
Interest Rate:   6%   6%   6%   6%
Date to which interest has been paid:   Accrued    Accrued    Accrued    Accrued 
Conversion Rate:  $0.10   $0.10   $0.10   $0.10 
Floor Conversion Price:  $0.05   $0.05   $0.05   $0.05 

 

(1) Note Extension – The Convertible Promissory Note with the face value $100,000, coupon 6%, dated February 22, 2016, was amended to extend the maturity date from March 31, 2019, to September 30, 2019, and to December 31, 2019. The Convertible Promissory Note with the face value $400,000, coupon 6% issue, dated May 16, 2016, was amended to extend the maturity date from March 31, 2019, to September 30, 2019, and to December 31, 2019. The Convertible Promissory Note with the face value $250,000, coupon 6% issue, dated November 17, 2016, was amended to extend the maturity date from November 17, 2018, to December 31, 2018, to September 30, 2019, and to December 31, 2019. The Convertible Promissory Note with the face value $250,000, coupon 6% issue, dated April 24, 2017, was amended to extend the maturity date from April 24, 2019, to December 31, 2019. The Company, by the execution of the note extension agreement, represents and warrants that as of the date hereof, no Event of Default exists or is continuing concerning the Promissory Note.

 

F-17
 

 

Note 8 – Notes Payable Related Party (continued)

 

At September 30, 2019, the current portion of convertible notes payable and accrued interest was $1,000,000 and $181,908 respectively. There was no non-current portion of convertible notes payable and accrued interest.

 

At December 31, 2018, the current portion of convertible notes payable and accrued interest was $1,000,000 and $136,908 respectively. There was no non-current portion of convertible notes payable and accrued interest.

 

NOTE 9. COMMITMENTS AND CONTINGENCIES

 

Office Facility and Other Operating Leases

 

The rental expense was $22,909 and $3,896 for the nine months ended September 30, 2019, and 2018 respectively. The rent payment or membership fee at the office is $890 per month, and we have included it in the General and administrative expenses. From January 1, 2018, to July 31, 2018, the Company has received a discount of $890 per month on its rent payment. This agreement continues indefinitely on a month-to-month basis until the Company chooses to terminate by the terms of the agreement. Effective October 29, 2019, the Company changed its head office to 200 Spectrum Center Drive Suite 300, Irvine, CA 92618.

 

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 rent payment at the office is $1,750 per month, and we have included it in the General and administrative expenses. From February 2020, this agreement continues yearly upon written request by the Company. The Company uses the office for sales and marketing in Europe and Asia.

 

Effective April 2019, the Company leases office space at Suite 512, 83 Plan, Chelyabinsk, Russia, from an unrelated party for an eleven months term. The rent payment at the office is $500 per month, and we have included it 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 terms of the agreement by giving thirty days’ notice. The Company uses the office for software development and technical support.

 

As all leases are either on a month to month basis or less than a year term, the Company is not required to recognize assets and liabilities for our rental leases. The Company has included all rental expenses in the General & Administrative expenses.

 

Employment Agreement

 

The Company has not entered into a formalized employment agreement with its Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), collectively Officers. From July 2016, the Company is paying a monthly compensation of $8,000 and $6,250 each per month to its CEO and CFO, respectively, with increases each succeeding year should the agreement be approved annually by the Company. Effective September 2018, the CEO and the CFO have agreed to receive monthly compensation of $5,000. There are also provisions for performance-based bonuses. The Company has not formalized these agreements.

 

Accrued Interest

 

On September 30, 2019, and December 31, 2018, Company’s exposure to cumulative accrued interest at 6% per annum on FRH Group Note(s) was $181,908 and $136,908 respectively.

 

Pending Litigation

 

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.

 

NOTE 10. STOCKHOLDERS’ DEFICIT

 

Authorized Shares

 

As of September 30, 2019, and December 31, 2018, the authorized capital stock of the Company consists of 10,000,000 shares of preferred stock, par value $0.0001 per share, and 100,000,000 shares of common stock, par value $0.0001 per share. As of September 30, 2019, and December 31, 2018, the Company had 68,626,332 and 68,533,332, respectively, common shares issued and outstanding and 4,000,000 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 2,600,000, 400,000 and 1,000,000 shares of Preferred Stock to Mitchell Eaglstein, Imran Firoz and FRH Group respectively as the founders in consideration of services rendered to the Company. As of September 30, 2019, the Company had 4,000,000 preferred shares issued and outstanding.

 

Common Stock

 

On January 21, 2016, the Company collectively issued 30,000,000 and 5,310,000 common shares at par value to Mitchell Eaglstein and Imran Firoz, respectively, as the founders in consideration of services rendered to the Company.

 

On December 12, 2016, the Company issued 28,600,000 common shares to the remaining two founding members of the Company.

 

On March 15, 2017, the Company issued 1,000,000 restricted common shares for platform development valued at $50,000. The Company issued the securities with a restrictive legend.

 

On March 15, 2017, the Company issued 1,500,000 restricted common shares for professional services to three individuals valued at $75,000. The Company issued the securities with a restrictive legend.

 

On March 17, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued 1,000,000 shares to Susan Eaglstein for a cash amount of $50,000. The Company issued the securities with a restrictive legend.

 

F-18
 

 

Note 10 – Stockholders’ Deficit (continued)

 

On March 21, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued 400,000 shares to Bret Eaglstein for a cash amount of $20,000. The Company issued the securities with a restrictive legend.

 

Ms. Eaglstein and Mr. Eaglstein are the Mother and Brother, respectively, of Mitchell Eaglstein, who is the CEO and Director of the Company.

 

From July 1, 2017, to October 03, 2017, the Company has issued 653,332 units for a cash amount of $98,000 under its offering Memorandum, where unit consists of one share of common stock and one Class A warrant (See Note 11).

 

On October 31, 2017, the Company issued 70,000 restricted common shares to management consultants valued at $10,500. The Company issued the securities with a restrictive legend.

 

On January 15, 2019, the Company issued 60,000 restricted common shares for professional services to eight consultants valued at $9,000.

 

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.

 

NOTE 11. WARRANTS

 

Effective June 1, 2017, the Company is raising $600,000 through a Private Placement Memorandum (the “Memorandum”) of up to 4,000,000 Units. Each unit (a “Unit”) consists of one share of Common Stock, par value $.0001 per share (the “Common Stock) and one redeemable Class A Warrant (the “Class A Warrant(s)”) of the Company. The Company closed the private placement effective December 15, 2017.

 

Each Class A Warrant entitles the holder to purchase one (1) share of Common Stock for $0.30 per share at any time until April 30, 2019 (‘Expiration Date.’). The Company issued the securities with a restrictive legend.

 

Information About the Warrants Outstanding During Fiscal 2019 Follows

 

Original Number of Warrants Issued 

Exercise

Price per Common Share

   Exercisable at December 31, 2018   Became Exercisable   Exercised   Terminated / Canceled / Expired   Exercisable at September 30, 2019   Expiration Date 
653,332  $0.30    653,332            -           -    653,332            -    April 2019 

 

The Warrants are redeemable by the Company, upon thirty (30) day notice, at a price of $.05 per Warrant, provided the average of the closing bid price of the Common Stock, as reported by the National Association of Securities Dealers Automated Quotation (“NASDAQ”) System (or the average of the last sale price if the Common Stock is then listed on the NASDAQ National Market System or a securities exchange), shall equal or exceed $1.00 per share (subject to adjustment) for ten (10) consecutive trading days prior to the date on which the Company gives notice of redemption. The holders of Warrants called for redemption have exercise rights until the close of business on the date fixed for redemption.

 

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, no Class A Warrants were exercised, and all Class A Warrants have expired.

 

NOTE 12. INCOME TAXES

 

Based on the available information and other factors, management believes it is more likely than not that the net deferred tax assets at September 30, 2019 and December 31, 2018, will not be fully realizable. Accordingly, management has recorded a full valuation allowance against its net deferred tax assets at September 30, 2019 and December 31, 2018. At September 30, 2019 and December 31, 2018, the Company had federal net operating loss carryforwards of approximately $182,000 and $163,759, respectively, expiring beginning in 2037.

 

Deferred tax assets consist of the following components:

 

   September 30, 2019   December 31, 2018 
Tax at statutory rate (21%)   182,000    163,759 
State tax benefit, net of federal tax effect   -    - 
Change in valuation allowance   (182,000)   (163,759)
Total   -    - 

 

NOTE 13. OFF-BALANCE SHEET ARRANGEMENTS

 

We have no off-balance sheet arrangements, including arrangements that would affect our liquidity, capital resources, market risk support, and credit risk support or other benefits.

 

NOTE 14. SUBSEQUENT EVENTS

 

Effective October 29, 2019, the Company changed its headquarters to 200 Spectrum Center Drive, Suite 300, Irvine, CA 92618.

 

F-19
 

 

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 continually upgrade its Condor Risk Management to meet the regulatory requirements under various jurisdictions including but not limited to directives under Markets in Financial Instruments Directive (MiFID II/MiFIR), a legislation by European Securities and Market Authority (ESMA) that has been implemented across the European Union on January 3rd, 2018.

 

The Company has completed the Condor FX Pro Trading Platform. The Company is negotiating licensing agreements with several retail FX brokers for the use of Condor FX Pro Trading Platform. In the third quarter of the fiscal year ending December 31, 2019, the Company released, marketed, and distributed the Condor FX Pro Trading Terminal and MT4 Plugins, which allows traders to trade on Condor FX Pro Trading front-end and MT4 trading platform via single wallet.

 

The Company completed the basic version of its Crypto Web Trader in December 2018. The Company is currently evaluating the demand of its Crypto Web Trader and expects to launch its crypto exchange platform by the fourth quarter of the fiscal year ended December 31, 2019.

 

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 normal course of business. The Company has earned $1,480,507 in revenues from January 21, 2016 (inception) to September 30, 2019. For the three months ending September 30, 2019, and 2018, the Company earned revenues of $57,760 and $136,812, respectively. The variance was mainly due to significant management consulting income earned for the three months ended September 30, 2018. For the nine months ending September 30, 2019, and 2018, the Company earned revenues of $324,562 and $422,817 respectively.

 

As of September 30, 2019, the Company has issued four convertible notes collectively known as FRH Group Note for net cash proceeds of $1,000,000.

 

Financial Condition at September 30, 2019

 

At September 30, 2019, the current portion of convertible notes payable and accrued interest was $1,000,000 and $181,908 respectively. There was no non-current portion of convertible notes payable and accrued interest. On September 30, 2019, the accumulated deficit was $865,826.

 

Our cash balance is $65,553 as of September 30, 2019. We do not believe that our cash balance is sufficient to fund our operations.

 

The Company intends to continue its efforts in enhancing its revenue from its diversified portfolio of technological solutions and becoming cash flow positive, as well as raising 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 2019.

 

Financial Condition at December 31, 2018

 

At December 31, 2018, the current portion of convertible notes payable and accrued interest was $1,000,000 and $136,908, respectively. There was no non-current portion of convertible notes payable and accrued interest. On December 31, 2018, the accumulated deficit was $779,804.

 

Our cash balance was $210,064 as of December 31, 2018. We do not believe that our cash balance is sufficient to fund our operations.

 

 4 
 

 

RESULTS OF OPERATIONS

 

Three Months Ended September 30, 2019, and 2018

 

For the three months ended September 30, 2019, and 2018, the Company had ten (10) and thirteen (13) active customers, respectively. Revenues generated from the top three customers represented approximately 90.66% and 76.33% of total revenue for the three months ended September 30, 2019, and 2018 respectively. The revenues generated for the three months ended September 30, 2019, and 2018 was $57,760 and $136,812, respectively. During the three months ended September 30, 2019, and 2018, the Company incurred a net loss of $64,180 and $1,976, respectively.

 

The total revenue breakdown for the three months ended September 30, 2019, and 2018 is below:

 

Three Months Ended  September 30, 2019   September 30, 2018 
Revenue Description   % of Total    % of Total 
Consulting Services   0.00%   41.66%
Technology Solutions   100.00%   58.34%
Total   100.00%   100.00%

 

During the three months ended September 30, 2019, and 2018, the Company incurred general & administrative costs (“G&A”) of $55,321 and $107,602 (excluding amortization expenses), respectively. The G&A expenses were 95.89% and 78.65% of the revenue for the three months ended September 30, 2019, and 2018 respectively. Amortization expense was $48,127 and $2,160 for the three months ended September 30, 2019, and 2018 respectively, included in the Cost of sales expense. The total rental expense was $10,385 and $2,596 for the three months ended September 30, 2019, and 2018 respectively.

 

The Company incurred approximately $3,636 and $14,044 in sales, marketing, and advertising costs (“sales & marketing”) for the three months ended September 30, 2019, and 2018 respectively. The sales & marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 6.30% and 10.27% of the sales for the three months ended September 30, 2019, and 2018 respectively.

 

In April 2016, the Company established its wholly-owned subsidiary – FRH Prime Ltd. (“FRH Prime”), a company 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. Both FRH Prime and FXClients are established to conduct financial technology service activities. For the three months ended September 30, 2019, and 2018, FRH Prime has generated volume rebates of $0 and $2,947 respectively from Condor Risk Management Back Office for MT4 Platform. The Company has included rebates in revenue in the consolidated income statements. There have been no significant operating activities in FXClients.

 

Nine Months Ended September 30, 2019, and 2018

 

For the nine months ended September 30, 2019, and 2018, the Company had ten (10) and thirteen (13) active customers, respectively. Revenues generated from the top three customers represented approximately 94.94% and 60.61% of total revenue for the nine months ended September 30, 2019, and 2018 respectively. The revenues generated for the nine months ended September 30, 2019, and 2018 were $324,562 and $422,817, respectively. During the nine months ended September 30, 2019, and 2018, the Company incurred a net loss of $86,022 and $86,021respectively.

 

The total revenue breakdown for the nine months ended September 30, 2019, and 2018 is below:

 

Nine Months Ended  September 30, 2019   September 30, 2018 
Revenue Description   % of Total    % of Total 
Consulting Services   0.00%   44.79%
Technology Solutions   100.00%   55.21%
Total   100.00%   100.00%

 

During the nine months ended September 30, 2019, and 2018, the Company incurred general & administrative costs (“G&A”) of $277,809 and $397,001 (excluding amortization expenses) respectively. The G&A expenses were 85.60%, and 93.89% of the revenue for the nine months ended September 30, 2019, and 2018 respectively. Amortization expense was $67,970 and $6,480 for the nine months ended September 30, 2019, and 2018 respectively, included in the Cost of sales expense. The rental expense was $22,909 and $3,896 for the nine months ended September 30, 2019, and 2018 respectively.

 

The Company incurred approximately $19,817 and $58,201 in sales, marketing, and advertising costs (“sales & marketing”) for the nine months ended September 30, 2019, and 2018 respectively. The sales & marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 6.11% and 13.77% of the sales for the nine months ended September 30, 2019, and 2018 respectively.

 

For the nine months ended September 30, 2019, and 2018, FRH Prime has generated volume rebates of $1,281 and $12,735, respectively, from Condor Risk Management Back Office for MT4 Platform. The Company has included rebates in revenue in the consolidated income statements. There have been no significant operating activities in FXClients.

 

For the nine months ended September 30, 2019, the rent payment or membership fee at the office was $890 per month. For the fiscal year 2019, the rent payment or membership fee at the office shall be $890 per month, and it will be included in the General and administrative expenses. From January 1, 2018, to July 31, 2018, the Company has received a discount of $890 per month on its rent payment. This agreement continues indefinitely on a month-to-month basis until the Company chooses to terminate by the terms of the agreement.

 

Effective February 2019, the Company leases office space at Suite 205, Building 9, Potamos Germasogeia, 4047, Limassol District, Cyprus from an unrelated party for one-year period. The rent payment at the office is $1,750 per month, and we have included it in the General and administrative expenses.

 

Effective April 2019, the Company leases office space at Suite 512, 83 Plan, Chelyabinsk, Russia from an unrelated party for an eleven months term. The rent payment at the office is $500 per month, and we have included it in the General and administrative expenses.

 

 5 
 

 

LIQUIDITY AND CAPITAL RESOURCES

 

On September 30, 2019, and December 31, 2018, we had a cash balance of $65,553 and $210,064 respectively.

 

In the next twelve months, the Company will continue to invest in sales, marketing, product support, development of new technology solutions, and enhancement of existing technology to serve our customers. We expect capital expenditures to increase to up to $100,000 in the next twelve months to support the growth, which mainly includes software development and 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 & marketing and working capital, respectively.

 

We expect existing cash, cash equivalents, cash flows from operations, and access to private equity and capital markets to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities, such as debt maturities, and material capital expenditures, for at least the next 12 months. However, we may need additional funds to achieve a sustainable sales level where we can fund our ongoing operations out of revenues. There is no assurance that any additional financing will be available or if available, on terms that will be acceptable to us.

 

Should we require additional capital to the extent the Company’s operations are not sufficient to fund its capital requirements, the Company may attempt to enter the restructuring of Notes, or refinance existing Notes with financial institutions or attempt to raise capital through the sale of additional capital stock or the issuance of debt. The Company intends to continue its efforts in growing its operations, as well as 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 of the Company (“FRH”). Effective June 1, 2017, to date, we have raised an aggregate of $98,000 through a private placement of our common stock to our officers, directors and their friends and 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.

 

 6 
 

 

GOING CONCERN CONSIDERATION

 

We have not generated significant revenues since inception to September 30, 2019. As of September 30, 2019, and December 31, 2018, the Company had an accumulated deficit of $865,826 and $779,804, respectively. Our independent auditors included an explanatory paragraph in their report on the audited financial statements for the fiscal year ended December 31, 2018, and 2017, and the period from January 21, 2016 (inception) to December 31, 2016, regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors. Our financial statements do not include any adjustments related to the recoverability or classification of asset carrying amounts or the amounts and classifications of liabilities that may result should the Company be 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 in accordance with the U.S. generally accepted accounting principles. In preparing our financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Our actual results could differ from these estimates, and such differences could be material.

 

We have described significant accounting policies in more detail in Note 2 of our annual financial statements included in our Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on April 16, 2019. 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

 

We have not implemented all new accounting pronouncements that are in effect, and that may impact our financial statements, and any other new accounting pronouncements may have a material impact on our financial position or results of operations. While we have described significant accounting policies in more details in Note 2 of our quarterly financial statements included in our Form 10-Q, we have described significant accounting policies in more details in Note 2 of our annual financial statements included in our Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on April 16, 2019, 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.

 

 7 
 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.

 

Not Applicable.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

We carried out an evaluation of 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, 2019 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, 2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 8 
 

 

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.

 

Exhibit   Item
     
31.1   Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
31.2   Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
32.1   Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

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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 12, 2019 /s/ Mitchell Eaglstein
 

Mitchell Eaglstein, President and CEO

(Principal Executive Officer)

 

Date: November 12, 2019 /s/ Imran Firoz
 

Imran Firoz, CFO

(Principal Accounting Officer)

 

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EXHIBIT INDEX

 

Exhibit   Item
     
31.1   Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
31.2   Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
32.1   Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

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