FDCT FDCTech Inc (PK)

NOTE 1. BUSINESS DESCRIPTION AND NATURE OF OPERATIONS

The Company was incorporated on January 21, 2016, as Forex Development Corporation, under Delaware laws. On February 27, 2018, the Company changed its name to FDCTech, Inc. The name change reflects the Company’s commitment to expanding its products and services in the FX and cryptocurrency markets for OTC brokers. The Company provides innovative and cost-efficient financial technology (‘fintech’) and business solutions to OTC Online Brokerages and cryptocurrency businesses (“customers”).

The Company intends to build a diversified global financial services company driven by proprietary Condor trading infrastructure, complementary regulatory licenses, and a proven executive team. The Company plans to acquire, integrate, transform, and scale legacy financial service companies. The Company believes that its proprietary technology and software development capabilities allow legacy financial services companies immediate exposure to –FX, stocks, ETFs, commodities, crypto, social/copy trading, and other high-growth fintech markets.

As the world continues to respond to the coronavirus (“COVID-19”), we are ensuring the safety of our employees and customers, striving to protect their health and well-being in the space they operate by providing technology and resources to help them do their work while remote.

The Company’s products are designed to provide a complete solution for all operational aspects of the 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, including management consulting and customer’s B2B sales and marketing divisions. The Company offers turnkey business solutions to entrepreneurs and 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 acts as a general technical support provider for customers and other fintech companies.

The Company’s business solutions allow its customers to increase trading revenues and cut operating costs. Our proprietary solutions enable customers to anticipate market challenges using in-house processes, state-of-the-art technologies, risk management tools, customized software development, and turnkey brokerage business solutions.

We are a development company in the financial technology sector with limited operations. The Company has prepared consolidated financial statements on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the ordinary business course.

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

At present, the Company has three sources of revenue.

In the retail foreign exchange trading space, where individuals speculate on the exchange rate between different currencies, our customers are forex brokerages, prime of prime brokers, prime brokers, and banks. The Company generates revenues by licensing its trading technology infrastructure, including but not limited to the trading platform (desktop, web, mobile), back office, and CRM and banking integration technology.

Our customers are companies in the cryptocurrency and blockchain space. The Company is acting as an adviser/strategic consultant and reseller of its proprietary technologies. The Company expects to generate additional revenue from its crypto-related solutions. Such solutions include revenues from the development of a custom crypto exchange platform for customers, the sale of the non-exclusive source code of the crypto exchange platform to third parties, white-label fees of crypto exchange platforms, and the sale of aggregated cryptocurrency data price feed from various crypto exchanges to OTC brokers. The Company initially plans to develop the technology architecture of the crypto exchange platform for its customers. The initial capital required to produce such technologies comes from our customers as the Company takes on design-build software development projects for customers. The Company develops these projects to meet the design criteria and performance requirements as specified by the customer.

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

Acquisition of Genesis Financial, Inc.

In line with the new strategic direction, on June 2, 2021, the Company entered into a Stock Purchase Agreement (the “Agreement”) with the Shareholders of Genesis Financial, Inc., a Wyoming corporation (“GFNL” or “Seller”). According to the Agreement, the Company plans to acquire 100% of the issued and outstanding equity interests of GNFL, including its wholly-owned subsidiaries and other variable interest entities, in consideration for 70,000,000 shares of the Company’s restricted common stock (the” “Securities”) valued at thirty-five Million U.S. Dollars ($35,000,000). The Company has not received certain closing documents as per the Agreement. Therefore, the acquisition is not complete at the time of the report. The Company has made the fact-specific inquiry to assess the probability of completing the Genesis acquisition based on the status of critical closing documents, including receipt of the release of liens and conversion of notes into equity. The Company believes the likelihood of closing the acquisition is doubtful. Therefore, the Company has not issued any stock to the Seller.

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. The Company established FRH Prime and FXClients to conduct financial technology service activities. At present, both companies have ceased to exist.

For the three and six months ending June 30, 2021, and 2020, FRH Prime has generated volume rebates of $0 and $1,861, respectively, from Condor Risk Management Back Office. The Company has included rebates in revenue in the consolidated income statements. There have been no significant operating activities in FXClients.

Board of Directors

On June 9, 2021, the Company appointed Warwick Kerridge as Chairman of the Company’s Board of Directors. Mr. Kerridge is considered independent under NYSE and NASDAQ listing standards. Between March 2020 and June 2021, Mr. Kerridge served as the Chairman of Genesis Financial, Inc. Since 2008, Mr. Kerridge has served as a director of Qlife Capital, a company that he founded. Qlife Capital provides corporate advisory services. Since 2008 Mr. Kerridge. Between 2009 and 2018, Mr. Kerridge was the principal partner of O’Connell Partners, private equity and advisory firm. Between 2005 and 2009, Mr. Kerridge was one of three executive directors at Pitt Capital Partners Ltd., a wholly-owned subsidiary of Washington H. Soul Pattinson & Company is Australia’s oldest listed investment house. Mr. Kerridge completed his B. Leg.S from Macquarie University in 1985.

On June 15, 2021, the Board of Directors of FDCTech, Inc. (the “Company”) increased from three to four directors and appointed Jonathan Baumgart, age 39, to the vacancy. Mr. Baumgart is independent under NYSE and NASDAQ listing standards. Accordingly, the Company will compensate Mr. Baumgart for his services on the Board in cash and stock-based equity. Mr. Baumgart is the founder of Atomiq Consulting and has been its Chief Executive Officer since May 2014. Atomiq specializes in the retail forex industry and the trading of other high-growth financial assets. In February 2015, Mr. Baumgart co-founded Money Matter, a boutique financial investments services firm based in Krakow, Poland. Between September 2010 and March 2014, Mr. Baumgart was the Director of Training at Boston Technologies, a technology, market maker, high-frequency trading, and inter-broker broker-dealer in the retail forex, precious metals, and other over-the-counter financial securities. In 2004, Mr. Baumgart completed his undergraduate degree in International Affairs & Economics from the Whittemore School of Business and Economics, University of New Hampshire, Durham.

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements include the accounts of FDCTech, Inc. and its wholly-owned subsidiary. We have eliminated all intercompany balances and transactions. The Company has prepared the consolidated financial statements consistent with the accounting policies adopted by the Company in its financial statements. The Company has measured and presented its consolidated financial statements in US Dollars, 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. This could affect the reported amounts of assets and liabilities and the related disclosures at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the periods presented. Estimates include revenue recognition, the allowance for doubtful accounts, website and internal-use software development costs, recoverability of intangible assets with finite lives, and other long-lived assets. Actual results could materially differ from these estimates. Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties, including uncertainty in the current economic environment due to the coronavirus (“COVID-19”).

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held with banks, and other short-term highly liquid investments with original maturities of three months or less. On June 30, 2021, and December 31, 2020, the Company had $2,514 and $22,467 cash and cash equivalent held at the financial institution.

Note 2 – Summary of Significant Accounting Policies (continued)

Accounts Receivable

Accounts Receivable primarily represents the amount due from six (6) customers. In some cases, the customer receivables are due immediately on demand; however, in most cases, the Company offers net 30 terms or n/30, where the payment is due in full 30 days after the invoice’s date. The Company has based the allowance for doubtful accounts on its assessment of the collectability of customer accounts. The Company regularly reviews the allowance by considering historical experience, credit quality, the accounts receivable balances’ age, and economic conditions that may affect a customer’s ability to pay and expected default frequency rates. Trade receivables are written off at the point when they are considered uncollectible.

At June 30, 2021, and December 31, 2020, the Management determined that allowance for doubtful accounts was $95,961 and $95,961, respectively. The bad debt expense for the three and six months ended June 30, 2021, and 2020 were $0 and $17,875, respectively.

Sales, Marketing, and Advertising

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

The Company incurred $157,273 and $527 in sales, marketing, and advertising costs (“sales and marketing”) for the three months ended June 30, 2021, and 2020. The sales and marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 190.12% and 1.13% of the sales for the three months ended June 30, 2021, and 2020. The increase in expense is mainly due to the $151,974 digital marketing and travel cost for the three months ended June 30, 2021.

The Company incurred $221,993 and $1,753 in sales, marketing, and advertising costs (“sales and marketing”) for the six months ended June 30, 2021, and 2020. The sales and marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 150.94% and 1.34% of the sales for the six months ended June 30, 2021, and 2020. The increase in expense is mainly due to the $216,572 digital marketing and travel cost for the six months ended June 30, 2021.

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:

Note 2 - Summary of Significant Accounting Policies (continued)

The Company adopted ASC 606 using the modified retrospective method applied to all contracts not completed as of January 1, 2019. The Company presents results for reporting periods beginning after January 1, 2019, under ASC 606 while prior period amounts are reported following legacy GAAP. In addition to the above guidelines, the Company also considers implementation guidance on warranties, customer options, licensing, and other topics. The Company takes into account revenue collectability, methods for measuring progress toward complete satisfaction of a performance obligation, warranties, customer options for additional goods or services, nonrefundable upfront fees, licensing, customer acceptance, and other relevant categories.

The Company accounts for a contract when the Company and the customer (‘parties’) have approved the contract and are committed to performing their respective obligations. Each party can identify their rights, obligations, and payment terms; the contract has commercial substance. The Company will probably collect all of the consideration. Revenue is recognized when performance obligations are satisfied by transferring control of the promised service to a customer. The Company fixes the transaction price for goods and services at contract inception. The Company’s standard payment terms are generally net 30 days and, in some cases, due upon receipt of the invoice.

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

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

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

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

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

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

For the period ending June 30, 2021, the Company’s two primary revenue streams accounted for under ASC 606 follows:

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

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

Effective January 2021, the Company signed two licensing agreements for its Condor Pro Multi-Asset Trading Platform, receiving monthly maintenance and volume rebate fees. The initial set-up fee is $5,000, followed by recurring monthly payments of $2,500. The volume fees can range from $2 to $5 per million traded, depending on the volume.

Note 2 - Summary of Significant Accounting Policies (continued)

Concentrations of Credit Risk

Cash

The Company maintains its cash balances at a single financial institution. The balances do not exceed FDIC limits as of June 30, 2021, and December 31, 2020.

Revenues

For the three months ended June 31, 2021, and 2020, the Company had six (6) and eight (8) active customers. Revenues generated from the top three (3) customers represented approximately 82.16% and 87.10% of total revenue for the three months ended June 30, 2021, and 2020.

For the six months ended June 31, 2021, and 2020, the Company had six (6) and eight (8) active customers. Revenues generated from the top three (3) customers represented approximately 79.09% and 81.94% of total revenue for the six months ended June 30, 2021, and 2020.

Accounts Receivable

Accounts Receivable primarily represents the amount due from six (6) active customers. In some cases, the customer receivables are due immediately on demand; however, in most cases, the Company offers net 30 terms or n/30, where the payment is due in full 30 days after the invoice’s date. The Company has based the allowance for doubtful accounts on its assessment of the collectability of customer accounts. The Company regularly reviews the allowance by considering historical experience, credit quality, the accounts receivable balances’ age, and economic conditions that may affect a customer’s ability to pay and expected default frequency rates. Trade receivables are written off at the point when they are considered uncollectible.

At June 30, 2021, and December 31, 2020, the Management determined that allowance for doubtful accounts was $95,961 and $95,961, respectively. The bad debt expense for the three and six months ended June 30, 2021, and 2020 were $0 and $17,875, respectively.

Research and Development (R and D) Cost

The Company acknowledges that future benefits from research and development (R and D) are uncertain, and as a result, we cannot capitalize on R and D expenditures. The GAAP accounting standards require us to expense all research and development expenditures as incurred. For the three and six months ended June 30, 2021 and 2020, the Company incurred R and D costs of $15,600 and $0. The increase in R and D costs was due to evaluate the technological feasibility costs of Condor Stocks and ETF platform.

Legal Proceedings

The Company discloses a loss contingency if at least a reasonable possibility that a material loss has been incurred. The Company records its best estimate of loss related to pending legal proceedings when the loss is considered probable, and the amount can be reasonably estimated. The Company can reasonably estimate a range of loss with no best estimate in the range; the Company records the minimum estimated liability. As additional information becomes available, the Company assesses the potential liability related to pending legal proceedings, revises its estimates, and updates its disclosures accordingly. The Company’s legal costs associated with defending itself are recorded to expenses as incurred. The Company is currently 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 asset’s carrying value exceeds the fair value. On June 30, 2021, and December 31, 2020, 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 applicable each year.

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

Software Development Costs

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

Amortization expense was $68,616 and $65,144 for the three months ended June 30, 2021, and 2020 respectively, and the Company classifies such cost as the Cost of Sales. Amortization expense was $137,231 and $114,728 for the six months ended June 30, 2021, and 2020 respectively, and the Company classifies such cost as the Cost of Sales.

The Company is developing the Condor Stocks and ETF platform. All costs associated with the development are currently being capitalized. The Company expensed $15,600 as R and D costs to evaluate the technical feasibility of Condor Stocks and ETF platform.

The Company capitalizes significant costs incurred during the application development stage for internal-use software.

Note 2 - Summary of Significant Accounting Policies (continued)

Convertible Debentures

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

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

As of December 31, 2020, the conversion features of conventional FRH Group convertible notes dated February 22, 2016, May 16, 2016, November 17, 2016, and April 24, 2017 (See Note 8) provide for a rate of conversion where the conversion price is below the market value. As a result, the conversion feature on all FRH Group convertible notes has a beneficial conversion feature (“BCF”) to the extent of the price difference.

As the Company and FRH Group extended the maturity date of the four (4) tranches of convertible notes to June 30, 2021, Management performed an analysis to determine the fair value of the BCF on these tranches. The Company noted that the value of the BCF for each note was insignificant; thus, it did not record debt discount as of December 31, 2020.

For FRH Group convertible note dated April 24, 2017, the stock’s value at issuance date was above the floor conversion price; this feature is characterized as a beneficial conversion feature (“BCF”). The Company records a BCF as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” As a result, the convertible debt is recorded net of the discount related to the BCF. As of December 31, 2017, the Company has amortized the discount of $97,996 to interest expense at the issuance date because the debt is convertible at the date of issuance.

The $97,996 amount equaled to the intrinsic value, and the Company allocated it to additional paid-in capital in 2017.

On February 22, 2021, the Company entered into an Assignment of Debt Agreement (the “Agreement”) with FRH and FRH Group Corporation. The Company eliminated all four FRH Group convertible notes, including interest, of $1,256,908, in return for the issuance of 12,569,080 of unregistered common stock of the Company (the “Shares”) to FRH. Following the Agreement, FRH assigned the Shares to FRH Group Corporation, an entity also owned by Mr. Hong.

Basic and Diluted Income (loss) per Share

The Company follows ASC 260, Earnings Per Share, to account for earnings per share. Basic earnings per share (“EPS”) calculations are determined by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. As of June 30, 2021, and December 31, 2020, the Company had 87,345,412 and 68,876,332 basic and dilutive shares issued and outstanding. The Company converted the four FRH Group convertible notes into 12,569,080 dilutive shares. During the three months ended June 30, 2021, and 2020, common stock equivalents were anti-dilutive due to a net loss of $265,705 and $163,581, respectively, for the period. During the three months ended June 30, 2021, common stock equivalents were anti-dilutive due to a net loss for the period. Hence, the Company has not considered in the computation.

Reclassifications

We have reclassified certain prior period amounts to conform to the current year’s presentation. None of these classifications impacted reported operating loss or net loss for any of the periods presented.

Note 2 - Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 840) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments to this standard are effective for fiscal years beginning after December 15, 2019. Early adoption of the amendments in this standard is permitted for all entities, and the Company must recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company adopted this policy as of January 1, 2020, and there is no material effect on its financial reporting.

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

NOTE 3. MANAGEMENT’S PLANS

The Company has prepared consolidated financial statements on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the ordinary business course. At June 30, 2021, and December 31, 2020, the accumulated deficit was $1,981,526 and $1,493,984, respectively. On June 30, 2021 and December 31, 2020, the working capital surplus and deficit were $502,371 and $1,504,678.

During the three months ended June 30, 2021, and 2020, the Company incurred a net loss of $265,705 and $163,581, respectively. During the six months ended June 30, 2021, and 2020, the Company incurred a net loss of $487,542 and $223,166, respectively.

Since its inception, the Company has sustained recurring losses and negative cash flows from operations. As of June 30, 2021, the Company had $2,514 cash on hand. The Management 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 following June 30, 2021. For the comparable three and six months year ended June 30, 2021, and 2020, the Company has earned marginally increased revenues and increased operating expenses. As a result, the Company continues to experience negative cash flows from operations and the ongoing requirement for substantial additional capital investment to develop its financial technologies. The Management expects that it will need to raise substantial additional capital to accomplish its growth plan over the next twelve (12) months. The Management expects to seek to obtain additional funding through private equity or public markets. However, there can be no assurance about the availability or terms such financing and capital might be available.

The Company’s ability to continue as a going concern may depend on the Management’s plans discussed below. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

To the extent the Company’s operations are not sufficient to fund the Company’s capital requirements, the Management may attempt to enter into a revolving loan agreement with financial institutions or try to raise capital by selling additional capital stock or issuing debt.

The Management intends to continue its efforts to enhance its revenue from its diversified portfolio of technological solutions, become cash flow positive, and raise funds through private placement offering and debt financing. See Note 8 for Notes Payable. In the future, as the Company increases its customer base across the globe, the Company intends to acquire long-lived assets that will provide a future economic benefit beyond fiscal 2021.

NOTE 4. CAPITALIZED SOFTWARE COSTS

During the three months ended June 30, 2021, and 2020, 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 June 30, 2021, and December 31, 2020, the gross capitalized software asset was $1,184,558 and $1,024,158, respectively. At the end of June 30, 2021, and 2020, the accumulated software amortization expenses were $529,065 and $391,834, respectively. As a result, the unamortized balance of capitalized software at June 30, 2021, and December 31, 2020, was $655,493 and $632,324, respectively.

NOTE 5. RELATED PARTY TRANSACTIONS

In April 2016, the Company established its wholly-owned subsidiary – FRH Prime Ltd. (“FRH Prime”), incorporated under section 14 of the Companies Act 1981 of Bermuda. In January 2017, FRH Prime established its wholly-owned subsidiary – FXClients Limited (“FXClients”) under the United Kingdom Companies Act 2006 as a private company. The Company established FRH Prime and FXClients to conduct financial technology service activities. At present, both companies have ceased to exist.

For the three and six months ended June 30, 2021, and 2020, FRH Prime has generated volume rebates of $0 and $1,861, respectively, from Condor Risk Management Back Office. 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 (“FRH”), a founder and principal shareholder of the Company. The Company executed Convertible Promissory Notes due between April 24, 2019 and June 30, 2019. The Notes are convertible into common stock initially at $0.10 per share but maybe discounted under certain circumstances, but in no event will the conversion price be less than $0.05 per share. The Notes carry an interest rate of 6% per annum, which is due and payable at the maturity date. On February 22, 2021, the Company entered into an Assignment of Debt Agreement (the “Agreement”) with FRH and FRH Group Corporation. The Company eliminated all four FRH Group convertible notes, including interest, of $1,256,908, in return for the issuance of 12,569,080 of unregistered common stock of the Company (the “Shares”) to FRH. Following the Agreement, FRH assigned the Shares to FRH Group Corporation, an entity also owned by Mr. Hong.

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, the CEO and Director of the Company.

Related Party Advance – Officer Loan

On April 1, 2020, the Company received $15,000 from the Officer as a loan. The Company repaid the loan in full as of May 29, 2020. Between February and June 2021, the Company received $44,000 from the Officer for working capital purposes and recorded in related party advances.

NOTE 6. LINE OF CREDIT

From June 24, 2016, the Company obtained an unsecured revolving line of credit of $40,000 from Bank of America to fund various purchases and travel expenses. The line of credit has an average interest rate at the close of business on June 30, 2021, for purchases, and cash is drawn at 12% and 25%, respectively. As of June 30, 2021, the Company complies with the credit line’s terms and conditions. At June 30, 2021, and December 31, 2020, the outstanding balance was $39,238 and $39,071, respectively.

NOTE 7. NOTES PAYABLE

Convertible Notes Payable – Related Party

On February 22, 2016, the Company issued and promised to pay a convertible note to FRH Group Ltd. (“FRH Group,” shareholder) for the principal sum of One Hundred Thousand and 00/100 Dollars ($100,000) on February 28, 2018 (the “Maturity Date”). The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020. 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 this Note’s registered holder. On-demand, the Company will pay interest on the amount of any overdue payment of principal or interest for the period following the due date 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. The conversion price shall be discounted by 30% if the Company’s common stock’s fair market value is less than $0.10 per share. However, 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. The Company will not issue fractional share or scrip representing a fractional share upon conversion of the Notes.

NOTE 7. Notes Payable (continued)

Convertible Notes Payable – Related Party

On May 16, 2016, the Company issued and promised to pay a convertible note to FRH Group for the principal sum of Four Hundred Thousand and 00/100 Dollars ($400,000) on May 31, 2018 (the “Maturity Date”). The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020. 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 this Note’s registered holder. On-demand, the Company will pay interest on the amount of any overdue payment of principal or interest for the period following the due date 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. The conversion price shall be discounted by 30% if the fair market value of the Company’s common stock is less than $0.10 per share. However, 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. The Company will not issue fractional share or scrip representing a fractional share 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, and an additional extension to June 30, 2019. The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020. 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 this Note’s registered holder. On-demand, the Company will pay interest on the amount of any overdue payment of principal or interest for the period following the due date 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. The conversion price shall be discounted by 30% if the Company’s common stock’s fair market value is less than $0.10 per share. However, 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. The Company will not issue fractional share or scrip representing a fractional share 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 Company will pay the outstanding principal amount of this Note, together with interest at 6% per annum, in cash on the Maturity Date to this Note’s registered holder. The Company extended the Maturity Date of the Note to June 30, 2019, and an additional extension to December 31, 2020. 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 this Note’s registered holder. On-demand, the Company will pay interest on the amount of any overdue payment of principal or interest for the period following the due date 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. The conversion price shall be discounted by 30% if the Company’s common stock’s fair market value is less than $0.10 per share. However, 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. The Company will not issue fractional share or scrip representing a fractional share upon conversion of the Notes. At June 30, 2021, there was no current and non-current portion of convertible notes payable and accrued interest.

Cares Act – Paycheck Protection Program (PPP Note)

On May 01, 2020, the Company received proceeds of Fifty-Thousand Six Hundred and Thirty-Two ($50,632) from the Promissory Note (“PPP Note”) under the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The funding of the PPP Note is conditioned upon approval of the Company’s application by the Small Business Administration (SBA) and Bank of America (“Bank”), receiving confirmation from the SBA that the Bank may proceed with the PPP Note. Suppose the SBA does not confirm the PPP Note’s forgiveness, or only partly confirms forgiveness of the PPP Note or the Company fails to apply for PPP Note forgiveness. In that case, the Company will be obligated to repay to the Bank the total outstanding balance remaining due under the PPP Note, including principal and interest (the “PPP Note Balance”). In such case, Bank will establish the terms for repayment of the PPP Note Balance in a separate letter to be provided to the Company, which letter will set forth the PPP Note Balance, the amount of each monthly payment, the interest rate (not above a fixed rate of one percent (1.00%) per annum), the term of the PPP Note, and the maturity date of two (2) years from the funding date of the PPP Note. No principal or interest payments will be due before the Deferment Period, which is ten months from the end of the covered period. The Company plans to apply for PPP Note forgiveness.

SBA Loan

On May 22, 2020, the Company received hundred and forty-four thousand nine hundred and 00/100 Dollars ($144,900). The installment payments will include the principal and interest of $707 monthly and begin Twelve (12) months from the promissory note date. The principal and interest balance will be payable Thirty (30) years from the promissory Note date. Interest will accrue at the rate of 3.75% per annum and will accrue only on $144,900 funds advanced from May 22, 2020, the advance date. The SBA loan outstanding balance is $144,421 as of June 30, 2021.

Economic Injury Disaster Loan (EIDL)

The Small Business Administration offers the Economic Injury Disaster Loan program. The CARES Act changed the program to provide an emergency grant up to $10,000 per business, forgivable like the PPP Note. The Company doesn’t have to repay the grant. On May 14, 2020, the Company received $4,000 in EIDL grants. The Company has recorded it as other income since the EIDL grant is forgivable.

NOTE 8. COMMITMENTS AND CONTINGENCIES

Office Facility and Other Operating Leases

The rental expense was $7,823 and $8,280 for the three months ended June 30, 2021, and 2020, respectively. The decrease in rent expense is due to reduce rent rate for Irvine Office for the fiscal year ended December 31, 2020. Effective October 29, 2019, the Company rents its servers, computers, and data center from an unrelated third party. The lessor provides furniture and fixtures and any leasehold improvements at Irvine Office under the rent Agreement, discussed in Note 2. Effective February 2019, the Company leases office space in Limassol District, Cyprus, from an unrelated party for a year. The office’s rent payment is $1,750 per month, included in the General and administrative expenses. From February 2020, this agreement 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 in Chelyabinsk, Russia, from an unrelated party for an eleven (11) month term. The office’s rent payment is $500 per month, and is 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 agreement’s terms by giving thirty (30) days’ notice. The Company uses the office for software development and technical support.

Employment Agreement

The Company gave all salary compensation to key executives as independent contractors, where Eaglstein, Firoz, and Platt commit one hundred percent (100%) of their time to the Company. The Company has not formalized performance bonuses and other incentive plans. Each executive is paid every month at the beginning of the month. From September 2018 to September 30, 2020, the Company is paying a monthly compensation of $5,000 each per month to its CEO and CFO; respectively, with increases, each succeeding year should the agreement be approved annually by the Company. Effective October 1, 2020, the Company expenses $12,000 monthly to its CEO and CFO, respectively.

Accrued Interest

At June 30, 2021, and December 31, 2020, the cumulative accrued interest at 6% per annum on FRH Group Note(s) defined as a related-party accrued interest - current was $0, and $3,856, respectively.

At June 30, 2021, and December 31, 2020, the cumulative accrued interest for SBA and other loans defined as an accrued interest – non-current was $5,882, and $256,908, respectively.

Pending Litigation

The management is unaware of any actions, suits, investigations, or proceedings (public or private) pending against or threatened against or affecting any of the assets or any affiliate of the Company.

Tax Compliance Matters

The Company has estimated payroll tax liabilities based on its officers’ reclassification from independent contractors to employees from fiscal ended December 31, 2017, to 2020. As of June 30, 2021, the Company has assessed federal and state payroll tax payments in the aggregate amount of $145,402, and we have included it in the General and administrative expenses.

NOTE 9. STOCKHOLDERS’ EQUITY (DEFICIT)

Authorized Shares

On February 12, 2021, the Company filed the Certificate of Amendment with the Secretary of State of Deleware to change authorized shares. As per the Amendment, the Company shall have authority to issue is 260,000,000 shares, consisting of 250,000,000 shares of Common Stock having a par value of $.0001 per share and 10,000,000 shares of Preferred Stock having a par value of $.0001 per share.

As of June 30, 2021, and December 31, 2020, the Company’s authorized capital stock consists of 10,000,000 shares of preferred stock, par value $0.0001 per share, and 250,000,000 shares of common stock, par value $0.0001 per share. As of June 30, 2021, and December 31, 2020, the Company had 87,345,412 and 68,876,332, 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 June 30, 2021, 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 considered the Company’s services.

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.

Note 9 – Stockholders’ Equity (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, 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 the 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 a management consultant 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 ten (10) 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. On February 26, 2019, the Company filed the Post-Effective Amendment No. 1 (the “Amendment”) related to the Registration Statement on Form S-1and its amendments thereto, filed with the U.S. Securities and Exchange Commission on November 22, 2017, and declared effective on August 7, 2018 (Registration No. 333-221726) (the “Registration Statement”) of FDCTech, Inc., a Delaware corporation (the “Registrant”), amended the Registration Statement to remove from registration all shares of common stock that were offered for sale by the Registrant but were not sold prior to the termination of the offering made pursuant to the Registration Statement. At the termination of the offering made pursuant to the Registration Statement, 2,967,000 shares of common stock which were offered for sale by the Registrant were not sold or issued.

Effective June 03, 2020, the Company issued 2,745,053 shares to Benchmark Investments, Inc. (“Broker-Dealer” or “Kingswood Capital Markets”) of common stock at $0.25 per share for a total value of $686,263. The Broker-Dealer is retained to provide general financial advisory to the Company for the next twelve months. The Company has expensed the prepaid compensation through the income statement following a regular straight-line amortization schedule over the contract’s life, which is for twelve months—the time during which Kingswood Capital Markets presumably will produce benefits for the Company. On August 25, 2020, the Company and Broker-Dealer terminated all obligations other than maintaining confidentiality, with no fees due by the Company to the Broker-Dealer. The Broker-Dealer agreed to return the 2,745,053 shares of the Company’s common stock.

On January 27, 2021, the Company issued 2,300,000 restricted common shares to two consultants valued at $621,000. The Company issued the securities with a restrictive legend.

On May 19, 2021, Company issued 1,750,000 restricted common shares to a consultant valued at $350,000. The Company issued the securities with a restrictive legend.

On June 02, 2021, Company issued 1,750,000 restricted common shares to a consultant valued at $437,500. The Company issued the securities with a restrictive legend.

On June 15, 2021, Company issued 100,000 restricted common shares to one of the Board of Directors valued at $21,000. The Company issued the securities with a restrictive legend.

NOTE 10. WARRANTS

Effective June 1, 2017, the Company planned to raise $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.

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 business’s close 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, the holders have not exercised any Class A Warrants. All Class A Warrants have expired.

NOTE 11. OFF-BALANCE SHEET ARRANGEMENTS

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