FDCTECH, INC. - Annual Report: 2018 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2018

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)

(877) 445-6047

(Registrant’s telephone number, including area code)

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

Indicate by check mark if the registrant is a well- known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ] No [X]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 Exchange Act).  Yes [  ] No [X]

The number of shares of Common Stock, $0.0001 par value, of the registrant outstanding at April 15, 2019, was 68,626,332.

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (“Form 10-K”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Although we believe that the expectations reflected in 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-K. Except for our ongoing obligation to disclose material information as required by the federal securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement. We caution readers not to place undue reliance on any such forward-looking statements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes will likely vary materially from those indicated.

PART I

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”).

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.

The Company’s customers are companies in the cryptocurrency and blockchain space, where it 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, 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.

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.

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.

Our Company is a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, and as such, is not required to provide the information required under this Item.

None.

At December 31, 2018, 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.

There is currently no material pending legal or governmental proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of their property is the subject.

Not applicable.

PART II

Market Information

We intend to have our common stock be quoted on the OTC Bulletin Board and/or OTC Link. If our securities are not quoted on the OTC Bulletin Board and/nor OTC Link, a security holder may find it more difficult to dispose of, or to obtain accurate quotations as to the market value of our securities. The OTC Bulletin Board differs from national and regional stock exchanges in that it: (i) is not situated in a single location but operates through communication of bids, offers and confirmations between broker-dealers, and (ii) securities admitted to quotation are offered by one or more Broker-dealers rather than the “specialist” common to stock exchanges.

To qualify for a quotation on the OTC Bulletin Board and/or OTC Link, the Company’s equity security should have one registered broker-dealer, known as the market maker, willing to list bid or sale quotations and to sponsor the company listing. We do not yet have an agreement with a registered broker-dealer, as the market maker, willing to list bid or sale quotations and to sponsor the Company listing. If the Company meets the qualifications for trading securities on the OTC Bulletin Board and/or OTC Link our securities will trade on the OTC Bulletin Board and/or OTC Link until a future time, if at all. We may not now, and it may never qualify for a quotation on the OTC Bulletin Board and/or OTC Link.

Holders

Globex Transfer, LLC, our transfer agent, indicate that as of April 15, 2019, we had 51 record holders of our Common Stock. As of April 15, 2019, we had 68,626,332 shares of our Common Stock and 4,000,000 shares of Series A Preferred Stock issued and outstanding. The Notes are convertible into common stock initially at $0.10 per share but may be discounted under certain circumstances, but in no event, will the conversion price be less than $0.05 per share with a maximum of 20,000,000 shares if the entire Note was converted, subject to adjustments in certain events. Further, holders of Series A Preferred are entitled to 50 non-cumulative votes per share on all matters presented to our stockholders for action. Holders of Series A Preferred have no rights to convert into common stock of the Company.

Dividends

The Company did not declare any cash dividends for the year ended December 31, 2018. Our Board of Directors (which is currently constituted by Mitchell Eaglstein, Imran Firoz, and Naim Abdullah) do not intend to distribute any cash dividends in the near future. The declaration, payment and amount of any future dividends will be made at the discretion of the Board of directors and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the Board of Directors consider relevant. There is no assurance that the Company shall pay any future dividends, and if the Company decides to pay any dividends, there is no assurance concerning the amount of any such dividend.

Securities Authorized for Issuance under Equity Compensation Plans

The Company has no equity compensation plans.

Recent Sales of Unregistered Securities

All of the Company’s recent sales of unregistered securities within the past three years are previously reported as required in Quarterly Reports on Form 10-Q and current reports on Form S1-A filed July 26, 2018.

The Company is a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, and as such, is not required to provide the information required under this Item.

This Annual Report Form 10-K 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. In the second quarter of the fiscal year ending December 31, 2019, the Company expects to release, market and distribute it’s Condor FX Pro Trading Terminal and MT4 Plugins which will allow traders to trade on Condor FX Pro Trading front-end and MT4 trading platform via single wallet.

The Company estimates to complete its first crypto exchange platform – Crypto Web Trader for its customer by the fourth quarter of the fiscal year ended December 31, 2019. The Company has partnered with a financial technology company to a non-exclusive strategic worldwide marketing alliance agreement, where both parties shall engage in promoting – Dealer Desk System and Condor Back Office, collectively known as Dealer Management System. The Company plans to launch the product in 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 $1,153,201 in revenues from January 21, 2016 (inception) to December 31, 2018. For the fiscal year ending December 31, 2018, and 2017, the Company earned revenues of $536,396 and $555,355 respectively.

As of December 31, 2018, the Company has issued four convertible notes collectively known as FRH Group Note for net cash proceeds of $1,000,000.

The Company secures and earns revenues by signing an agreement with its customers. The Company considers a signed agreement with its customers, a binding contract with the customer or other similar documentation reflecting the terms and conditions under which products or services will be provided to be persuasive evidence of an arrangement. Each agreement is specific to the customer, and clearly defines the fee schedule, duties and responsibilities of each party, renewal and termination terms, confidentiality agreement, dispute resolution and other clauses necessary for such agreement. The material terms of agreements with customers depend on the nature of services and solutions. Each agreement is specific to the customer, and clearly defines the fee schedule, duties and responsibilities of each party, renewal and termination terms, confidentiality agreement, dispute resolution and other clauses necessary for such agreement.

Financial Condition at December 31, 2018 and 2017

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. At December 31, 2017, the current portion of convertible notes payable and accrued interest was $750,000 and $52,617 respectively. The non-current portion of convertible notes payable and accrued interest was $250,000 and $24,292 respectively.

On December 31, 2018, and 2017, the accumulated deficit was $ 779,804 and $638,717 respectively.

Our cash balance is $210,064 and $464,303 as of December 31, 2018 and 2017. 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 increase its customer base across the globe, the Company intends to acquire long-lived assets that will provide a future economic benefit beyond fiscal 2018.

RESULTS OF OPERATIONS

For the Fiscal Year Ended December 31, 2018, compared to the Fiscal Year Ended December 31, 2017

For the fiscal year ended December 31, 2018, and 2017, the Company had seventeen (17) and ten (10) active customers respectively. Revenues generated from the top three (3) customers represented approximately 53.53% and 73.06% of total revenue for the fiscal year ended December 31, 2018, and 2017 respectively. The revenues generated for the fiscal year ended December 31, 2018, and 2017 was $536,396 and $555,355 respectively. During the fiscal year ended December 31, 2018, and 2017, the Company incurred a net loss of $141,088 and $394,556 respectively.

The total revenue breakdown for the fiscal year ended December 31, 2018, and 2017 is below:

During the fiscal years ended December 31, 2018, and 2017, the Company incurred general & administrative costs (“G&A”) of $529,692 and $634,326 respectively. The reduced G&A costs for the fiscal year ended December 31, 2018 is due to the lower rental, professional & consulting fees. The G&A expenses were 98.75% and 114.22% of the revenue for the fiscal ended December 31, 2018, and 2017 respectively. Amortization expense was $8,640 and $8,640 for the fiscal year ended December 31, 2018, and 2017 respectively and the Company has included in the Cost of sales expense. The rental expense was $8,253 and $19,974 for the fiscal year ended December 31, 2018, and 2017 respectively. For the fiscal year ending December 31, 2017, the rent payment or membership fee at the office was $950 per month. For the fiscal year 2018, the rent payment or membership fee at the office is $890 per month, included in the General and administrative expense. 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.

The Company incurred $77,009 and $153,325 in sales, marketing and advertising costs (“sales & marketing”) for the year ended December 31, 2018, and 2017 respectively. The sales & marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relation activities. The sales, marketing, and advertising expenses represented 14.36% and 27.61% of the sales for the years ended December 31, 2018, and 2017 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 fiscal year ended December 31, 2018, and 2017, FRH Prime has generated volume rebates of $13,695 and $16,947 respectively from Condor Risk Management Back Office for MT4 Platform. There have been no significant operating activities in FXClients.

LIQUIDITY AND CAPITAL RESOURCES

On December 31, 2018, and December 31, 2017, we had a cash balance of $210,064 and $464,303 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.

GOING CONCERN CONSIDERATION

We have not generated significant revenues since inception to December 31, 2018. As of December 31, 2018, and December 31, 2017, the Company had an accumulated deficit of $ 779,804 and $638,717 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 details in Note 2 of our annual financial statements included in our Amendment No. 7 to Form S-1 Registration Statement filed with the SEC on July 26, 2018. 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. Management is assessing the new standard and plans to adopt the standard using a modified retrospective approach (i.e., apply the standard to the most current period presented in the financial statements). While we have described significant accounting policies in more details in Note 2 of our annual financial statements included in our Amendment No. 7 to Form S-1 Registration Statement filed with the SEC on July 26, 2018, 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.

Not Applicable.

All financial statements required by this Item are presented beginning on Page F-20, and are incorporated herein by this reference.

None.

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 December 31, 2018 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. We expect to be materially dependent on third parties that can provide us with accounting and regulatory compliance consulting services for the foreseeable future. Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP. Notwithstanding the identified material weaknesses, management believes the financial statements included in this annual report on Form 10-K 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 years ended December 31, 2018 and 2017, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

None.

PART III.

Directors serve until the next annual meeting and until their successors are elected and qualified. Officers are appointed to serve for one year until the meeting of the board of directors following the annual meeting of stockholders and until their successors have been elected and qualified.

Mitchell Eaglstein, Co-Founder, President, CEO, and Director

From January 2016 to date, Mr. Eaglstein is the Founder, Chief Executive Officer and Director of Forex Development Corporation. Mr. Eaglstein is responsible for leading the development and execution of the Company’s long-term strategy with the primary focus to enhance shareholder value. Mr. Eaglstein ensures the Company has the necessary organizational and technology infrastructure and is responsible for deploying Capex and approving budgets.

Mr. Eaglstein has extensive executive-level experience in the management of FX brokerage and FinTech software companies. Further, Mr. Eaglstein has participated in several panel discussions as a distinguished industry expert in various forex related conferences and tradeshows.

From June 2014 to February 2016, Mr. Eaglstein worked as the Director of prime brokerage division of Fortress Capital Investments, UAE (“Fortress”), where he led Fortress to a $20 million in trading revenue within one year from start-up date. Under his leadership, Fortress achieved over $70 billion in monthly trading volume within one year and reached the rank of top 20 forex broker by volume. Mr. Eaglstein assembled and led a global team with offices in the Middle East, North America, Russia, and Asia to achieve cash flow positive results within two months of product launch.

From June 2011 to May 2014, Mr. Eaglstein started his career as a Senior Business Intelligence Analyst and was promoted to the position of Managing Director of Boston Technologies, a pioneer in MT4 bridge technology for the retail forex market. He was instrumental in increasing revenue of Boston Technologies from 5 million to 20 million thus making it the 143rd fastest growing company in America by Inc. 500 ranking.

From March 2009 to May 2011, Mr. Eaglstein led FXCM Systems, LLC as its Chief Information Officer where he successfully provided white label and software development solutions to FXCM and on behalf for FXCM, one of the largest forex broker-dealer in the world. From January 2007 to March 2011, he served as the Chief Operating Officer, and Chief Information Officer for Avalon Capital Holdings Corporation developed, marketed and distributed high-performance proprietary trading software for financial companies that engage in online forex trading. From January 2007 to Feb 2009, Mr. Eaglstein was the Co-Founder and Chief Operating Officer of Traders Development COO Traders Development, LLC a financial software company, based in Irvine, California. Early in his career Mr. Eaglstein co-founded Campus Universe an online consignment shop for students to buy and sell textbooks from each other via a fully automated e-commerce website which won the Golden Web Award.

Imran Firoz, Co-Founder, CFO, Director

From January 2016 to date, Mr. Firoz is the Co-Founder, Chief Financial Officer and Director of Forex Development Corporation. Mr. Firoz is responsible for strategic planning & corporate development, M&A, financial restructuring and risk management. He has been responsible for guiding due diligence efforts, implementing financial controls, putting in practice compliance guidelines and planning disaster recovery strategy. Mr. Firoz, the CFO, devotes approximately 90% or more of his time to the Company. Mr. Firoz is Managing Director of Match-Trade Technologies LLC, a private company (“MTT”), where he spends approximately less than 10% of his time. The Company believes that there is no conflict of interest between the work performed by Mr. Firoz with the Company and with MTT.

From December 2011 to May 2015, Mr. Firoz was the CEO, and Director of ABT Holdings, Inc. aka Scoobeez Global, Inc. (“ABT”). From May 2015 to March 2017, Mr. Firoz worked as the CFO and Director of the ABT, where he was instrumental in acquisition, development, and growth of Scoobeez, Inc., an on-demand messenger, delivery, and courier company. During the period Scoobeez increased its revenue from under $500,000 to $27 million. From February 2014 to date, Mr. Firoz is a Managing Director of Match-Trade Technologies L.L.C, a financial technology company. From February 2011 to December 2011, Mr. Firoz worked as an interim CEO/CFO of XnE, Inc. From July 2007 to March 2017, Mr. Firoz was a Managing Partner of Marque 3 LLC, a management consulting company based in Pasadena, California, where he has served as a management consultant/adviser to senior executives of several companies.

Mr. Firoz was the Chief Financial Officer of Master Capital Group Corp. from November 2004 until May 2007 where he provided financial oversight to accounting & finance department of the company and advised the Board of Directors on financial implications of business activities. In January 2002, Mr. Firoz served as Associate, Investment Banking for National Bank Financial, Canada (“NBF”) on numerous transactions including as a key member of M&A advisory team for Franco-Nevada on the $10 billion three-way mega gold merger of Newmont-Normandy-Franco-Nevada. During the same period, he was a member of NBF’s investment banking team that advised Treasurer of Hydro One on the restructuring and sale of Ontario Electricity Financial Corporation debt of $2.9 billion in the Canadian public debt markets.

Mr. Firoz started his career as a Chemical Engineer with Tata Chemicals Limited in December 1994 until September 1997, where he led several cross-functional teams, to manage commissioning activities, plant operations, and other technical projects for Ammonia Plant. From October 1997 to July 1999, Mr. Firoz worked as a Senior Process Engineer with Saudi Methanol Company, a subsidiary of Saudi Basic Industries Corporation (SABIC) where he was responsible for technical services and improving plant safety management. Mr. Firoz received his MBA in April 2001 from Richard Ivey School of Business, University of Western Ontario, Canada and graduated in July 1993 with Bachelor of Engineering (Chemical) from Aligarh University, India. Mr. Firoz is a Certified Financial Risk Manager from Global Association of Risk Professionals (GARP), New Jersey since January 2003.

Peggy S. Reed, COO

Ms. Reed joined Forex Development Corporation in August 2016 as its Chief Operating Officer. As COO, Ms. Reed is leading Company’s operations with the primary focus on scaling customer base, managing customers, and expanding operations globally. Further, Ms. Reed is overseeing sales, marketing, business development and implement Company’s aggressive institutional OTC B2B strategy.

Ms. Reed is an experienced professional in the financial services industry for over eighteen years. Ms. Reed was a successful institutional currency trader for firms such as Barclays, Bank of America. Credit Agricole, and AIG. Ms. Reed managed multimillion of dollars for hedge funds, large corporates and central banks throughout the world. In early 1999, she started the first ECN trading platform with a group FX professional and designed a state-of-the-art and one of the first prime broker systems to accommodating customers to trade across many bank venues through ‘give up’ agreements. In 2006, Knight Securities acquired the ECN company for $89 million, resulting in a very high return on capital for investors of ECN company from an initial investment of $14 million.

In January 2006, Ms. Reed became the head of global sales and trading of Lava Trading, a subsidiary of Citibank. Under her leadership, the revenue of Lava Trading increased from $65 million to $130 million.

From February 2008 to February 2010, Ms. Reed focused her services as an FX consultant for several retail brokers, where she built their foundation in the B2B market to increase their sales and marketing division. Ms. Reed is an expert in Asian FX Market, with special insights in South Korea, where she made InterbankFX as one of the leading online brokers. From February 2010 to February 2013, Ms. Reed was appointed as the Global Head and became the second in command for GFT/Gain Capital. Ms. Reed was responsible for business development of FX and CFDs for Gain Capital resulting in a profit of approximately $80 million. She gained deep expertise and knowledge, and enhanced her network, especially for CFDs business in Japan.

Ms. Reed received a degree in 1983 in Economics from the University of Southern California.

Brian Platt, Chief Technology Officer

Mr. Platt joined Forex Development Corporation in May 2016. Mr. Platt has over ten years of experience in the FX industry managing complex technology and business operations. His expertise includes advanced technical knowledge of databases, programming, and product development lifecycles as well as a clear understanding of business needs. Mr. Platt’s passion is combining this business and technical know-how to assure the best products, client satisfaction, and optimization of human resources.

Prior to joining the Company, Mr. Platt was the head of technology at prime brokerage division of Fortress Capital Investments, UAE (“Fortress”), from June 2014 to January 2016, where he was instrumental in starting a forex broker from the ground up, introducing the trading platform, connecting liquidity; add on services such as money management PAMM systems, and a compliance reporting.

From May 2011 to February 2014, Mr. Platt served as the Director of Risk Management and Operations Research at Boston Technologies. His major accomplishments include developing advanced procedures to eliminate trade risk, streamlining accounting operations, revamping client reporting, integrating new revenue streams, and providing comprehensive analytics.

Before joining Boston Technologies, Mr. Platt managed the Operations Research department at CMS Forex from March 2006 through May 2011. In this role, he coordinated all business intelligence efforts, identified and automated manual operations, and facilitated new business initiatives. Mr. Platt organized the operational elements of the sale of CMS Forex to Gain Capital, and subsequently revamped the company to utilize existing resources as a profitable self-sufficient IB business. Mr. Platt holds a degree in Information Systems from Yeshiva University. He has computer science training from New York University and Oracle DBA training from Farleigh Dickenson University.

Pavel Bronnikov, VP, R&D

Mr. Bronnikov has over ten years of experience in software development and managing software development projects. He has expertise in both backend and front-end development using C#, java, scala, c++, delphi, php, NET, Javascript, angularjs and much more. Mr. Bronnikov’s specific focus has been in the forex industry leading numerous projects including Low Latency, High-Performance trading systems, and Big data analytics tools.

Mr. Bronnikov joined FDC in August 2016 as the team lead and manager of a development team in Chelyabinsk, Russia. He manages software development projects, IT support team and all other IT related issues. Mr. Bronnikov has built and continues to improve Company’s multi-language back office reporting portal site for the Metaquotes MT4 trading platform, trading system synchronization tools between MT4 and other trading platforms, and CRM systems. Under the leadership of Mr. Bronnikov, Company is taking custom to outsource development tasks for various forex and binary options companies.

Before joining FDC, Mr. Bronnikov was head of Chelyabinsk Department of Centre-IT company and managing all software development projects for this department including built developing employee management software for the Russian government offices. From March 2013 to October 2013, Mr. Bronnikov setup and manage remote software development office For Boston Technologies Company. The team worked on improving the company’s global database systems aggregating data from over ten MT4 servers and 100+ liquidity bridges. The team significantly enhanced the overall system backend performance as well as the reporting tools available internally to accounting, sales, and risk management as well as to clients.

In February 2005 Mr. Bronnikov started as a junior developer at Traders Development Company and grew to become head of the software development department until March 2013. He built a full-stack Forex trading system, including the trading terminal, backend Trades Processing, Back Office reporting, and bank liquidity connections.

Naim Abdullah, Director

On November 2, 2017, Mr. Abdullah was appointed to the Board of Directors. Mr. Abdullah has over ten years of experience in the field of equity derivatives markets, portfolio management, financial advisory, and financial planning.

From June 2018 to present, Mr. Abdullah is the Head of Finance of XYO Network, a blockchain company that provides location verification services for various industries. From May 2017 to June 2018, Mr. Abdullah was the Manager, Financial Planning, and Analysis at Cetera Financial Group. From September 2015 to March 2017, Mr. Abdullah was the Director of Trading and Portfolio Manager at Sea Otter Securities Group, LLC. From February 2014 and August 2015 Mr. Abdullah worked as the Associate Portfolio Manager at Reality Shares, Inc. where he developed a product suite of Derivative and Equity based Exchange Traded Funds (ETFs) by managing the creation of portfolio execution strategies in OTC and listed options markets. From September 2012 to December 2013, Mr. Abdullah gained experience as the Portfolio Manager at Marathon Trading where he managed a global portfolio of equity and index products. From June 2011 to October 2011, Mr. Abdullah was a Financial Consultant to the CFO of Major League Baseball, where he conducted financial due diligence on $1.4 billion refinancings of MLB syndicated loan facility. Reviewed investment banking pitch books, analyzed proposals, and presented recommendations to CFO. From July 2004 to May 2009, Mr. Abdullah co-managed $1 billion global portfolios (4 traders) of Equity and Index ETF products at Susquehanna International Group, LLP (SIG).

Mr. Abdullah received his MBA in Finance in June 2011 from the Wharton School of the University of Pennsylvania and graduated in June 2004 with Bachelor of Arts in Economics from Princeton University, New Jersey.

Term of Office

All directors hold office until the next annual meeting of the stockholders of the Company and until their successors have been duly elected and qualified. The Company’s Bylaws provide that the Board of Directors will consist of no less than one member. Officers are elected by and serve at the discretion of the Board of Directors.

Director of Independence

Our board of directors is currently composed of three (3) members, out of which two (2) directors are executive directors and who do not qualify as an independent director in accordance with the published listing requirements of the NASDAQ Global Market (the Company has no plans to list on the NASDAQ Global Market). The third non-executive director is an independent director. The NASDAQ independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director, nor any of his family members have engaged in various types of business dealings with us. Also, our board of directors have not made a subjective determination as to our director that no relationships exist which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, though the NASDAQ rules require such subjective determination. Had our board of directors made these determinations, our board of directors would have reviewed and discussed the information provided by directors and us with regard to our director’s business and personal activities and relationships as they may relate to us and our management.

Audit Committee and Conflicts of Interest

Since we do not have an audit or compensation committee comprised of independent directors, the functions that would have been performed by such committees are performed by our Board of Directors. The Board of Directors has not established an audit committee and does not have an audit committee financial expert, nor has the Board of Directors established a nominating committee. The Board believes that such committees are not necessary since the Company is an early start-up company and has only three directors, and to date, such directors have been performing the functions of such committees. Thus, there is a potential conflict of interest in that our three directors and officers have the authority to determine issues concerning management compensation, nominations, and audit issues that may affect management decisions.

There are no family relationships among our directors or officers. Other than as described above, we are not aware of any other conflicts of interest with any of our executive officers or directors.

Involvement in Certain Legal Proceedings

No director, person nominated to become a director, executive officer, promoter or control person of our company has, during the last ten years: (i) been convicted in or is currently subject to a pending a criminal proceeding (excluding traffic violations and other minor offenses); (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to any federal or state securities or banking or commodities laws including, without limitation, in any way limiting involvement in any business activity, or finding any violation with respect to such law, nor (iii) any bankruptcy petition been filed by or against the business of which such person was an executive officer or a general partner, whether at the time of the bankruptcy or for the two years prior thereto.

Stockholder Communications with the Board Of Directors

We have not implemented a formal policy or procedure by which our stockholders can communicate directly with our board of directors. Nevertheless, every effort will be made to ensure that the views of stockholders are heard by the board of directors, and the appropriate responses are provided to stockholders in a timely manner. During the upcoming year, our board of directors will continue to monitor whether it would be appropriate to adopt such a process.

The following table sets forth all compensation for the last two fiscal years awarded to, earned by or paid our chief executive officer and our only other compensated executive officer serving during the last completed fiscal year (collectively, the “Named Executives”):

⁽¹⁾ Appointed CEO, President and Director January 21, 2016 and the Company issued 30,000,000 common stock on January 21, 2016 and 2,600,000 preferred stock on March 24, 2017 at par value as the founder in consideration of services rendered to the Company.

⁽²⁾ Appointed Chief Financial Officer, Secretary and Director January 21, 2016 and the Company issued 5,310,000 common stock on January 21, 2016 and 400,000 preferred stock on March 24, 2017 at par value as the founder in consideration of services rendered to the Company.

⁽³⁾ March 15, 2016, the Company issued 500,000 restricted common shares equally to Reed and Platt for services rendered valued at $25,000 each.

All salary compensation was given to key executives as independent contractors, where Eaglstein, Reed, and Platt commit one hundred percent (100%) of their time to the Company and Firoz commits ninety percent (90%) of his time to the Company. There are also provisions for performance-based bonuses. These bonuses and other incentive agreements have not been formalized. Each executive is paid every month at the beginning of the month. From September 2018, the Company is paying a monthly compensation of $5,000 and $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.

Currently Messrs: Eaglstein, Firoz and Platt and Ms. Reed are independent contractors performing as the CEO, CFO, CTO and COO respectively. The Company intends to convert all of such officers to employee status during the second quarter of 2019. To date, the Company has not issued any bonuses or option awards to its officers. The Company intends to provide these incentives based on meeting certain sales criteria, which will be reviewed on a quarterly and annual basis.

Stock Option Grants

We had no outstanding equity awards as of the end of the fiscal period ended December 31, 2018, or through the date of filing of this report.

Employment Agreements

The Company is not a party to any employment agreement and has no compensation agreement with any officer or director.

Director Compensation

The non-executive director was paid $2,500 in November 2017 upon his appointment to the Board. No compensation was paid to the non-executive director for the fiscal year ended December 31, 2018.

The following table lists, as of December 31, 2018, the number of shares of common and Series A Preferred Stock of our Company that are beneficially owned by (i) each person or entity known to our Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each officer and director of our Company; and (iii) all sole officer and director as a group. Information relating to beneficial ownership of common stock by our principal shareholders and management is based upon information furnished by each person using “beneficial ownership” concepts under the rules of the Securities and Exchange Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power.

The percentages below are calculated based on 68,533,332 shares of our common stock issued and outstanding for the period ending December 31, 2018.

In the fiscal year ending December 31, 2016, the Company collectively issued 30,000,000 and 5,310,000 common shares at par value to Mitchell Eaglstein, and Imran Firoz respectively as the founders in consideration of services rendered to the Company. Further, the Company agreed to issue 2,600,000, 400,000 and 1,000,000 shares of Preferred Stock to Mitchell Eaglstein, Imran Firoz and FRH Group respectively as the founders in consideration of services rendered to the Company.

⁽¹⁾ Addresses for all officers and directors are 1460 BROADWAY, NYC, NY 10036.

⁽²⁾ In the event, if the entire Notes are converted with a maximum of 20,000,000 shares subject to adjustments in certain events. Mr. Felix Hong is the principal shareholder of FRH Group Ltd. and is considered the beneficial owner of the shares. The percentages for FRH Group Ltd. is calculated based on 88,533,332 shares of our common stock issued and outstanding based on the entire conversion of the note.

⁽³⁾ Series A Preferred stock is entitled to 50 non-cumulative votes per share on all matters presented to stockholders for action. As a result, on a vote per share basis, 4,000,000 Series A Preferred Shares, which represent 69.32% and 68.60% voting percentage Before and After the offering 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 Both FRH Prime and FXClients are established to conduct financial technology service activities. For the fiscal year ended December 31, 2018, and 2017, FRH Prime has generated volume rebates of $13,695 and $16,947 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.

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 between April 24, 2019 and June 30, 2019. The Notes are convertible into common stock initially at $0.10 per share but may be 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. The Company expects to extend the note due on April 24, 2019.

Between March 15 and 21, 2017, subject to the terms and conditions of the Stock Purchase Agreement, the Company issued 1,000,000 shares to Susan Eaglstein and 400,000 shares to Brent Eaglstein at $0.05 per share for a cumulative 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.

Farber Hass Hurley LLP (‘FHH’) is our registered independent public registered accounting firm. There have not been any changes in or disagreements with accountants on accounting and financial disclosure or any other matter.

Audit Fees

For the period ending December 31, 2018 and 2017, the Company paid $39,950 and $17,950 respectively to FHH for the audit of our annual financial statements for 2016, 2017, and 2018 and the reviews of S1 prospectus, and review of Forms 10-Q, or services normally provided by the accountant in connection with statutory and regulatory filings for such fiscal year.

Board of Directors Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

Our Board of Directors’ policy is to pre-approve all services provided by our independent registered public accounting firm. For fiscal 2018, our Board of Directors pre-approved 100% of all services provided by our independent registered public accounting firm. These services include audit services. Our independent registered public accounting firm is required to periodically report to our Board of Directors regarding the extent of services provided by our independent registered public accounting firm by this pre-approval policy. Our Board of Directors may also delegate pre-approval authority to one or more of its members. Such member(s) must report any such pre-approval to our Board of Directors at the next scheduled meeting.

Audit-Related Fees

We incurred neither fees nor expenses for 2018 for professional services rendered by FHH for audit-related fees, other than the fees disclosed above under the caption “Audit Fees”.

Tax Fees

We incurred neither fees nor expenses for 2018 for professional services rendered by FHH for tax compliance, tax advice or tax planning, other than the fees disclosed above under the caption “Audit Fees”.

Other Fees

We incurred no other fees or expenses for 2018 for any other products or professional services rendered by FHH other than as described above.

PART IV

(a) Financial Statements

ITEM 16. EXHIBITS.

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.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

FDCTECH, INC.

(Formerly known as Forex Development Corporation)

Index to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of FDCTech, Inc. (formerly known as Forex Development Corporation)

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of FDCTech, Inc. (formerly known as Forex Development Corporation) and subsidiaries (collectively the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2018, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.

Emphasis of Matter – Going Concern

The accompanying consolidated financial statements have been prepared to assume the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations since inception and has an accumulated deficit of $779,804 which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Farber Hass Hurley LLP

We have served as the Company’s auditor since 2017.

Chatsworth, California

April 15, 2019

FDCTECH, INC.

(Formerly known as Forex Development Corporation)

CONSOLIDATED BALANCE SHEETS

See accompanying notes to the financial statements

FDCTECH, INC.

(Formerly known as Forex Development Corporation)

CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to the financial statements

FDCTECH, INC.

(Formerly known as Forex Development Corporation)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

⁽¹⁾ FRH Group Note IV Dated April 24, 2017 with Face Value $250,000, Maturity Date April 24, 2019, and Coupon 6%

See accompanying notes to the financial statements

FDCTECH, INC.

(Formerly known as Forex Development Corporation)

CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes to the financial statements

FDCTECH, INC. – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 expand 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”).

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.

The Company’s customers are companies in the cryptocurrency and blockchain space, where it 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, 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.

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:

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.

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 carry 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. For the fiscal year ended December 31, 2018, and 2017, FRH Prime has generated volume rebates of $13,695 and $16,947 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.

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. The Company regularly maintains cash more than federally insured limits at financial institutions. On December 31, 2018, and December 31, 2017, the Company had $210,064 and $464,303 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 eight (08) 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 December 31, 2018, and December 31, 2017, the Company has determined that allowance for doubtful accounts was $68,675 and $19,000 respectively. Bad debt expense for the fiscal year ended December 31, 2018, and 2017 was $88,600 and $19,000 respectively.

Sales, Marketing and Advertising

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

The Company incurred $77,009 and $153,325 in sales, marketing and advertising costs (“sales & marketing”) for the fiscal year ended December 31, 2018, and 2017 respectively. The sales & marketing cost mainly included travel costs for tradeshows, customer meet and greet, online marketing on industry websites, press releases, and public relation activities. The sales, marketing, and advertising expenses represented 14.36% and 27.61% of the sales for the fiscal year ended December 31, 2018, and 2017 respectively.

Office Lease

At present, the Company leases office space at 1460 Broadway, New York, NY 10036 from an unrelated party. 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 rent payment or membership fee at the office is $890 per month, and we have included it in the General and administrative expense. 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 choose to terminate in accordance with the terms of the agreement.

Revenue Recognition

In general, the Company recognizes revenue when (i) persuasive evidence of an arrangement exists, (ii) consulting services have been rendered and software delivered to the customer, (iii) the fee is fixed or determinable and (iv) collectability is reasonably assured. In instances where the customer specifies final acceptance of the product, system, or solution, revenue is deferred until all acceptance criteria have been met. Software subscription revenue is deferred and recognized ratably over the subscription term upon delivery of the first product and commencement of the term. Technical support and consulting services revenue are deferred and recognized ratably over the period during which the services are to be performed, which is typically one (1) year. Transactional advanced services revenue is recognized upon delivery or completion of performance milestones.

The Company considers a signed agreement, a binding contract with the customer or other similar documentation reflecting the terms and conditions under which products or services will be provided to be persuasive evidence of an arrangement.

Revenue from Consulting Services

The Company enters into legally enforceable rights and obligations consulting service contract with its customers which include turnkey business solutions – Start-Your-Own-Brokerage (“SYOB”) and Start-Your-Own-Prime Brokerage (“SYOPB”). The Company delivers goods and services at each stage where Customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer. The contract contains performance obligations as listed below which are separately identifiable from other promises in the contract.

Note 2 - Summary of Significant Accounting Policies (continued)

The Company recognizes the consulting revenues when the Customer obtains control of the above deliverables. Further, the Company has an enforceable right to payment for performance completed monthly. According to U.S. GAAP, the Company considers its consulting service contracts as mainly simple fixed-price contracts for an initial term of one (1) year. As compensation for the consulting services rendered by the Company, the customer agrees to pay in cash (all quoted in U.S. Dollars) a non-refundable non-recurring set-up fee and a monthly recurring maintenance fee.

In some cases, the Company may earn variable revenue based on profit sharing from Customer. In such situations, the Company uses the most likely amount method – the single most likely contract outcome, where it is entitled to earn a minimum maintenance fee.

The Company estimates that it receives fair market value for its services based on the estimation that the price that the customer would pay for similar goods or services in the forex market. 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.

Revenue from Technology Solutions

The Company enters into a legally enforceable rights and obligations technology solutions contract with its customers which include licensing and volume (usage/metered) fees for its technology solutions:

After receiving the signed copy of the contract, the Company transfers all the ownership, and access to the technology mentioned above solutions to the customer along with login credentials.

According to U.S. GAAP, the Company considers its technology solution contracts as mainly simple fixed-price contracts, independent of many users, and for an initial term of one (1) year. As compensation for these technology solutions delivered by the Company, the customer agrees to pay in cash (all quoted in U.S. Dollars) a non-refundable recurring monthly usage fee.

The Company estimates that it receives fair market value for its services based on the estimation that the price that the customer would pay for similar goods or services in the forex market. According to the terms and conditions of the contract related to Technology Solutions is considered as software-as-a-service (“SaaS”), excluding the sale of Source Code, where the Company recognized revenue under a multiple-element arrangement. 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. In such situations, Company’s revenues consist of SaaS offerings, time-based software subscriptions, and perpetual software license sale arrangements that also, typically, include hardware, maintenance/technical support and professional services elements associated with the agreement. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable.

The Company recognizes software and software-related elements as per Accounting Standards Codification (“ASC”) 985-605 Software Revenue Recognition. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 supersedes a majority of existing revenue recognition guidance under US GAAP and requires companies to recognize revenue when it transfers goods or services to a customer in an amount that reflects the consideration to which a company expects to be entitled and is the effective date for fiscal years beginning after December 15, 2018. The Company recognizes the Non-software revenue elements of Technology Solutions as per ASC 605-25.

Revenue Recognition Multiple-Element Arrangements. Since we currently offer our software solutions under either a perpetual license, time-based subscription or SaaS model, revenue recognition timing varies based on which form of software rights the customer purchases. In June 2017, the Company completed initial due diligence and advanced negotiation with technology division of a qualified bank for the sale of its source code (“code”) of FX trading platform (“Platform”) on a non-exclusive basis.

Note 2 - Summary of Significant Accounting Policies (continued)

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 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.

As per the Agreement, the sale of the source code is a multiple-element arrangement that includes software, installation, maintenance/support, development, and professional services. In such SaaS arrangement, the Company allocates the value of the SaaS arrangement to each separate unit of accounting based on vendor-specific objective evidence (“VSOE”) of selling price, when it exists, third-party evidence of selling price for like services or best estimated selling price. Revenue allocated to the SaaS/software subscription element is recognized ratably over the non-cancellable term of the SaaS/subscription service. Revenue allocated to software licensing and non-software elements, and other units of accounting included in the arrangement are recognized as below:

Revenue from Sale of Software Under Multiple-Element Arrangement

Revenue from Sale of Professional Services, Technical Support, and Maintenance Under Multiple-Element Arrangement

The Company does not recognize revenue for agreements with rights of return, refundable fees, cancellation rights or substantive acceptance clauses until these return, refund or cancellation rights have expired, or acceptance has occurred. Our arrangements with resellers do not allow for any rights of return.

Deferred revenue includes amounts received from customers more than the revenue the Company recognizes and includes deferred maintenance, service, and other revenue. The Company recognizes deferred revenues when the Company completes the service and over the terms of the arrangements, primarily ranging from one to three years.

Revenue from Software Development

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 Software Development Agreement (“Agreement”). The Agreement is legally enforceable rights and obligations contract, mainly simple fixed price contracts, and valid for the duration of the project.

These projects often include customized front-end and back-end development for OTC Online brokers. The Company is paid a monthly software development fee for the term of the Agreement. The Company has included revenues from technical support, and after sale development, it provides as part of the sale of Source Code under the Software Development.

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 December 31, 2018. However, balances at December 31, 2017 exceeded FDIC limits.

Revenues

For the fiscal year ended December 31, 2018, and 2017, the Company had seventeen (17) and ten (10) active customers respectively. Revenues generated from the top three (3) customers represented approximately 53.53% and 73.06% of total revenue for the fiscal year ended December 31, 2018, and 2017 respectively.

Accounts Receivable

At December 31, 2018, and December 31, 2017, Company’s top four (4) customers comprise roughly 83.55% and 49.92% 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 and R&D expenditures cannot be capitalized. The GAAP accounting standards require us to expense all research and development expenditures as incurred. For the fiscal year ended December 31, 2018 and 2017, the Company incurred R&D cost of $17,752 and $91,131 respectively. The R&D costs are included in General & Administrative expense in the consolidated income statements.

Legal Proceedings

The Company discloses a loss contingency if there is at least a reasonable possibility that a material loss has 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 December 31, 2018, and December 31, 2017, 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.

Note 2 - Summary of Significant Accounting Policies (continued)

Software Development Costs

By ASC 985-20, Software development costs, including costs to develop software sold, leased, or otherwise marketed, 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 Terminal Version, and Condor Pricing Engine. The Company established the technological feasibility of Crypto Web Trader Platform in 2018. The Company estimates the useful life of the software to be three (3) years.

Amortization expense was $8,640 and $8,640 for the fiscal year ended December 31, 2018, and 2017 respectively and the Company classifies such cost 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 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 December 31, 2018, 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 as a beneficial conversion feature (“BCF”) to the extent of the price difference. Due to the debt extension of the first three tranches of FRH Group convertible notes, Management performed an analysis to determine the fair value of the BCF on these tranches and noted that the value of the BCF for each note was insignificant, thus no debt discount was recorded as of December 31, 2018.

For FRH Group convertible note dated April 24, 2017, the value of the stock 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, and as of December 31, 2017, the Company has amortized the discount of $97,996 to interest expense at the date of issuance 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.

Basic and Diluted 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 December 31, 2018, and December 31, 2017, the Company had 68,533,332 basic and dilutive shares issued and outstanding. 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 period ended December 31, 2018, and fiscal year ended December 31, 2017, common stock equivalents were anti-dilutive due to a net loss for the period. Hence they are not considered in the computation.

Note 2 - Summary of Significant Accounting Policies (continued)

Reclassifications

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

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific requirements. ASU 2014-09 establishes a five-step revenue recognition process 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. ASU 2014-09 will be effective for the Company during the period beginning after December 15, 2018. Management is currently evaluating the impact the adoption of ASU 2014 - 09 will have on the Company’s consolidated financial position, results of operations or cash flows. The Company currently anticipates applying the modified retrospective approach when adopting the standard.

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 December 31, 2018, and December 31, 2017, the accumulated deficit was $ 779,804 and $638,717 respectively.

During the fiscal year ended December 31, 2018, and 2017, the Company incurred a net loss of $141,088 and $394,556 respectively.

Since inception, the Company has sustained recurring losses and negative cash flows from operations. As of December 31, 2018, the Company had $210,064 cash on hand. 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 a period of twelve (12) months following April 15, 2019. For the fiscal year ended December 31, 2018 and 2017, the Company has earned steady revenues year-over-year and continues to reduce its operating expenses. However, the Company continues to experience negative cash flows from operations, as well as 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 2018.

NOTE 4. CAPITALIZED SOFTWARE COSTS

During the fiscal year ended December 31, 2018, and 2017, 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 December 31, 2018, and December 31, 2017, the gross capitalized software asset was $561,443 and $320,302 respectively. At the end of December 31, 2018, and December 31, 2017, the accumulated software depreciation and amortization expenses were $22,320 and $13,680 respectively. As a result, the unamortized balance of capitalized software at December 31, 2018, and December 31, 2017, was $539,123 and $306,622 respectively.

The Company has estimated aggregate amortization expense for each of the five succeeding fiscal years based on the estimated software asset’s lifespan of three (3) years.

Estimated Amortization Expense:

NOTE 5. PROPERTY AND EQUIPMENT

On December 31, 2018, the Company rented 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.

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 fiscal year ended December 31, 2018, and 2017, FRH Prime has generated volume rebates of $13,695 and $16,947 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.

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 may be 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.

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 December 31, 2018, for purchases and cash drawn at 12% and 25% respectively. As of December 31, 2018, the Company complies with terms and conditions of the line of credit. At December 31, 2018, and December 31, 2017, the outstanding balance was $17,626 and $17,247, 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 to December 31, 2018 and additional extension to June 30, 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.

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 to December 31, 2018 and additional extension to June 30, 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 and additional extension to December 31, 2018. The note was further extended to June 30, 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 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 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.

NOTE 8. Notes Payable – Related Party (continued)

FRH Group Note Summary

⁽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 December 31, 2018, to June 30, 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 December 31, 2018, to June 30, 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 December 31, 2018, to June 30, 2019. The Company, by 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.

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.

At December 31, 2017, the current portion of convertible notes payable and accrued interest was $750,000 and $52,617 respectively. The non-current portion of convertible notes payable and accrued interest was $250,000 and $24,292 respectively.

NOTE 9. COMMITMENTS AND CONTINGENCIES

Office Facility and Other Operating Leases

Rental expense was $8,253 and $19,974 for the fiscal ended December 31, 2018, and 2017 respectively. The rent payment or membership fee at the office is $890 per month, and we have included it in the General and administrative expense. 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 choose to terminate in accordance with the terms of the agreement.

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 has agreed to receive a monthly compensation of $5,000. There are also provisions for performance-based bonuses. The Company has not formalized these agreements.

Accrued Interest

At December 31, 2018, and December 31, 2017, Company’s exposure to cumulative accrued interest at 6% per annum on FRH Group Note(s) was $136,908 and $52,617 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 December 31, 2018, and December 31, 2017, 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 December 31, 2018, and December 31, 2017, the Company had 68,533,332 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 December 31, 2018, 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.

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 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 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.

NOTE 11. WARRANTS (continued)

Information About the Warrants Outstanding During Fiscal 2018 Follows

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 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.

Note 12. Income Taxes

Income taxes are calculated using the asset and liability method of accounting. Deferred income taxes are computed by multiplying statutory rates applicable to estimated future year differences between the financial statement and tax basis carrying amounts of assets and liabilities.

The income tax provision is summarized as follows: