Fintech Scion Ltd - Quarter Report: 2023 September (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2023

For the transition period from _______ to _______

Commission File Number: 000-55685

FINTECH SCION LIMITED
(Exact name of registrant as specified in its charter)

+44 203 982 5041 

(Registrant’s telephone number, including area code)

Not applicable 

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “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 ☒

As of November 9, 2023, there were 198,742,643 shares of the issuer’s common stock issued and outstanding.

FINTECH SCION LIMITED AND SUBSIDIARIES 

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED September 30, 2023 

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:

All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.

This Quarterly Report on Form 10-Q may include market data and certain industry data and forecasts, which we may obtain from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications, articles and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third-party sources.

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

FINTECH SCION LIMITED AND SUBSIDIARIES 

(Formerly known as HWGC Holdings Limited)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In U.S. dollars)

 The accompanying notes are an integral part of these condensed consolidated financial statements.

FINTECH SCION LIMITED AND SUBSIDIARIES

(Formerly known as HWGC Holdings Limited)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(In U.S. dollars)

The accompanying notes are an integral part of these condensed consolidated financial statements. 

FINTECH SCION LIMITED AND SUBSIDIARIES 

(Formerly known as HWGC Holdings Limited)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In U.S. dollars) 

The accompanying notes are an integral part of these condensed consolidated financial statements.

FINTECH SCION LIMITED AND SUBSIDIARIES 

(Formerly known as HWGC Holdings Limited)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In U.S. dollars)

Fintech Scion Limited (“the Company”) formerly known as HWGC Holdings Limited, incorporated in Nevada.

The Company holds the following equity interests in its subsidiaries: 

The Company was previously engaged in direct selling industry and online shopping platform, primarily through its operating entities in Malaysia. During the financial year ended December 31, 2022, the Company restructured after the consummation of two share exchange agreements and the disposal of VSB and VOM. The Company upon the restructuring, offers digital Banking-as-a-Service (BaaS) by providing the tools, skills, and solutions to facilitate payment services to merchants, offering a variety of secured, online and fully managed transactions and settlements.

Restructuring Transactions

The following restructuring transactions occurred during the year ended December 31, 2022:

Information of the restructuring transactions were disclosed in the notes to the consolidated financial statement for the year ended December 31, 2022, included in the Company’s Form 10-K filed with the Security and Exchange Commission (“SEC”) by the Company on April 17, 2023. 

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information under Article 8 of Regulation S-X. They do not include all information and foot notes required by U.S. GAAP for complete financial statements. Except as disclosed herein, there have been no material changes in the information disclosed in the notes to the consolidated financial statement for the year ended December 31, 2022, included in the Company’s Form 10-K filed with the SEC. The interim unaudited consolidated financial statements should be read in conjunction with those audited consolidated financial statements included in Form 10-K.

In the opinion of management, the Company has made all adjustments necessary to present a fair statement of the financial position as of September 30, 2023, results of operations for the three months ended September 30, 2023 and 2022, and cash flows for the three months ended September 30, 2023 and 2022. All significant intercompany transactions and balances are eliminated on consolidation. The results of operations for the three months ended September 30, 2023 are not necessarily indicative of the results of operations for the entire fiscal year.

Recently issued accounting pronouncements  

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial position or results of operations upon adoption.

Accounts receivable represent balances from: 

(i)       transactions fees receivable generated from financial payment and settlement services. 

(ii)      non-interest-bearing credit tokens issue to authorized agents.

Services billed are generally settled upon financial services have been rendered. Only limited clients are extended with credits.

As of September 30, 2023, accounts receivable balances of $541,219 solely derived from commissions receivables. As of December 31, 2022, accounts receivable balances of $1,792,195 mainly derived from commissions receivables of $597,986 and non-interest-bearing credit tokens issued to authorized agents of $1,194,209.

The company considers accounts receivable to be fully collectible, therefore no impairment is necessary as at September 30, 2023 and December 31, 2022. 

Other receivables, prepayments and other current assets consist of the following:

 Schedule of other receivables and other assets

The table below sets forth the carrying amount of goodwill for September 30, 2023 and December 31, 2022.

Property and equipment, net consist of the following:

 Schedule of property, plant and equipment, net

Depreciation expenses charged to the statements of operations and comprehensive loss for the nine month periods ended September 30, 2023 and 2022 were $9,700   and $7,908 respectively.

Accrued expense and other payables consist of the following:

 Schedule of accruals and other payables

The Company derives its revenue mainly from transaction fees earned through financial payment and settlement services. For these transaction fee revenues, the Company views itself as the agent in these transactions and as a result, records revenue on a net basis. The Company considers its performance obligation satisfied and recognizes revenue at the point in time the transaction is processed.

The disaggregation of revenue of the Company by geographical region for the period ended September 30, 2023 and 2022 is as follows:

Schedule of related party transaction

The related party balances are unsecured, interest-free and repayable on demand.

Mr Lim Chun Hoo is also a director in Ho Wah Genting Group Sdn Bhd (“HWGGSB”), HWG Fintech International Ltd (“HWGFI”) and a previous director of HWG Digital Investment Bank (Malaysia) P.L.C. (“HDIB”). HDIB is previously known as Ho Wah Genting Investment Bank (Labuan) P.L.C.

The amount due from HWGGSB and HWGFI as at September 30, 2023 and December 31, 2022, were advances made by the Company to HWGGSB and HWGFI. Whilst amount due to HDIB were advances made by HDIB to the Company.

Schedule of officers

Capital Commitments

As of September 30, 2023, and December 31, 2022, Company has no capital commitments.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited interim condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2022, as may be amended, supplemented or superseded from time to time by other reports we file with the SEC. All amounts in this report are in U.S. dollars, unless otherwise noted.

Throughout this Quarterly Report on Form 10-Q, references to “we,” “our,” “us,” the “Company,” “Fintech,” or “Fintech Scion” refer to Fintech Scion Limited, individually, or as the context requires, collectively with its subsidiaries. 

Overview

Fintech Scion Limited (“Fintech Scion”, the “Company”, “we”, “our”, or “us”) offers digital Banking-as-a-Service (BaaS) by providing the tools, skills and solutions to facilitate payment services to merchants, offering a variety of secured, online and fully managed transactions and settlements.

We provide a financial layered ecosystem built on a broad technology infrastructure that enables financial institutions to offer a consolidated experience. We support different verticals serving the business-to-business, business-to-consumer and consumer-to-business landscape.

Our payments platform hosts a full suite of integrated payment products and services that can be used across multiple channels (in-store, online, mobile and tablet-based) and industry verticals, including:

We integrate e-money remittance services working in the global marketplace, ranging from open banking and credit card processing, to wire solutions enabling customers to coordinate payments across a multitude of payment methods.

Our solution is delivered as a Software as a Service, or SaaS, to clients, enabling them to focus their time and energies on their operations and sales. We give clients and merchants the ability to streamline their onboarding procedures and increase customer retention, which thereby enables the creation of additional revenue.

We aim to build our market share and become a recognized leader in the payments and banking space on a global scale. Our team is comprised of experienced and knowledgeable personnel in the areas of operations, sales, technology, onboarding, support, legal and compliance.

Our vision is to minimize and automate the process of sending and receiving funds globally, while ensuring security. We aim to provide merchants with a true merchant payment ecosystem or MPE where they can combine all payment needs under one system. Our technology platform uses an innovative Gateway Cashier Technology to provide our services.

Our merchants include small and medium enterprises, or SMEs, and large enterprises across numerous verticals including hospitality, e-gaming, consulting, retail, marketing and eCommerce.

Although we provide a SaaS, we believe that technology should be free and accessible to everyone. We therefore initial provide our platform free of charge and generate our revenue from our extra value-added services. We derive the majority of this revenue from fees paid by our merchants as processing fees charged as a percentage of end-to-end payment volumes. In other cases where merchants subscribe only to our gateway, we generate revenue from transaction fees charged in the form of a fixed fee per transaction and a monthly fee.

Our revenue is continuous, as merchants only pay for the specific amount of service or usage they consume, rather than a flat fee for access to the service (other than in the case of monthly subscription fees). Because of our different layers as described below, merchants sign up for different services which increases revenue for the company. We believe we can maintain long-term relationships with our clients due our customer relationship team as well as the difficulties merchants experience in changing providers, including high switching costs resulting from set-up fees, onboarding costs and integration costs with various other providers. We also benefit from a high degree of operating leverage given the combination of our highly scalable payments platform and strong customer relationship unit.

Components of Results of Operations  

Revenue

Revenue for the nine months ended 30^th September 2023 consists of three components which are client processing commission, client account fixed fees and white labelling. The company will conduct payment solutions for the client using the client funds and the revenue is generated based on pre-agreed client processing commission and fixed monthly client account fees. White labeling income is billed in arrears/advance on a monthly basis for the use of the payment solution software. For the nine months ended 30^th September 2023, we have recognized $1,774,947 generated from client processing commission, $556,474 generated from client account fixed fees and $46,231 generated from white labelling.

Cost of Sales

Cost of sales for the nine months ended 30^th September 2023 mainly consists of an affiliate commission recognized of $103,486. Affiliate commission is based on a pre-agreed rate from existing clients who refer business to the Company. A percentage of the revenue generated from new business is paid to the existing client from the Company.

Gross Profit

Gross profit for the nine months ended 30^th September 2023 consists of $138,794 from FintechAsia and $2,123,867 from Fintech, total for the Company of $2,262,661.

Operating Expenses

Operating expenses for the nine months ended 30^th September 2023 are mainly comprised of salaries and directors’ fees of $597,068, consultancy fees of $532,252, banking and processing fees of $450,916, research and development of $369,726, office rent of $308,876 and legal and professional fees of $369,726.

Results of Operations

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

The following discussion should be read in conjunction with our unaudited consolidated financial statements in Item 1, Financial Statements, for the three months ended September 30, 2023 and 2022 and the related notes thereto.

Revenue

We recognized $946,830 and $nil revenues for the three months ended September 30, 2023 and 2022, respectively. The significant increase in revenue primarily resulted from the restructuring transactions that occurred during financial year ended December 31, 2022. Revenue recognized during the period is mainly from transaction fees earned through financial payment and settlement services provided by Fintech and FintechAsia (formerly known as HWGG Capital P.L.C.). 

Cost of Sales

Cost of sales for the three months ended September 30, 2023 was $72,486 compared to $nil for the three months ended September 30, 2022.

Gross Profit

Gross profit for the three months ended September 30, 2023 was $874,344 compared to $nil for the three months ended September 30, 2022. The increase resulted primarily from the restructuring transactions that led to additional sources of revenue from Fintech and FintechAsia (formerly known as HWGG Capital P.L.C.).

Operating Expenses

For the three months ended September 30, 2023, we incurred total operating expenses in the amount of $1,259,700, composed solely of general and administrative expenses totaling $1,259,700. Whilst, for the three months ended September 30, 2022, we incurred total operating expenses in the amount of $217,953, composed of solely of general and administrative expenses totaling $217,953. The increase of $1,041,747 or 478% for the administrative expenses represents the total increase in operating expenses. The increase as compared to prior year was resulted from the restructuring that has occurred towards prior year end, which were disclosed in the Note 1 of the financial statements.  

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022 

Revenue

We recognized $2,377,652 and $325 revenues for the nine months ended September 30, 2023 and 2022, respectively. The significant increase in revenue primarily resulted from the restructuring transactions that occurred during financial year ended December 31, 2022. Revenue recognized during the period is mainly from transaction fees earned through financial payment and settlement services provided by Fintech and FintechAsia (formerly known as HWGG Capital P.L.C.). 

Cost of Sales

Cost of sales for the nine months ended September 30, 2023 was $114,991 compared to $292 for the nine months ended September 30, 2022.

Gross Profit

Gross profit for the nine months ended September 30, 2023 was $2,262,661 compared to $33 for the period ended September 30, 2022. The increase resulted primarily from the restructuring transactions that led to additional sources of revenue from Fintech and FintechAsia (formerly known as HWGG Capital P.L.C.).

Operating Expenses

For the nine months ended September 30, 2023, we incurred total operating expenses in the amount of $3,043,686, composed solely of general and administrative expenses totaling $3,043,686. Whilst, for the nine months ended September 30, 2022, we incurred total operating expenses in the amount of $533,842, composed solely of general and administrative expenses totaling $533,842. The increase of $2,509,844 or 470% for the administrative expenses represents the total increase in operating expenses. The increase as compared to prior year was resulted from the restructuring that has occurred towards prior year end, which were disclosed in the Note 1 of the financial statements.  

Liquidity and Capital Resources

As of September 30, 2023, we had a cash balance of $3,725,144. During the period ended September 30, 2023, net cash generated from operating activities totaled $776,545. Net cash used in investing activities totaled $10,897. Net cash used in financing activities during the period totaled $845,440. The resulting change in cash for the period was a decrease of $66,234, which was primarily due to cash used from financing activities.

As of September 30, 2023, we had current liabilities of $2,045,811, which was composed of amount due to related parties of $352,602, accounts payable of $25,111, and accruals and other payable of $1,668,098.

We had net assets of $58,443,166 and net liabilities of $4,634,291   as of September 30, 2023 and September 30, 2022, respectively.

We have recognized goodwill of $55,794,524 as a result from the acquisition of Fintech during the year ended December 31, 2022. The management performs goodwill impairment test annually. On November 30, 2022, the reverse acquisition by Fintech/the Company was completed. As the acquisition date and financial period end is of a relatively short period, the management has not identified any indicators that relate to the impairment of goodwill. As such no impairment of goodwill has been made. In the event that after year end if any events occur that may have a negative impact on the carrying amount of goodwill and will have significant effect on the results of the Company, it may raise significant doubts for the Company’s ability to continue as a going concern.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, financing, or other relationships with unconsolidated entities or other persons.

Critical Accounting Policies and Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates. Estimates are used in the following areas, among others: research and development expense recognition, valuation of common shares and stock options, allowances of deferred tax assets, valuation of debt related instruments, and cash flow assumptions regarding going concern considerations. Although management believes the estimates that have been used are reasonable, actual results could vary from the estimates that were used.

Recently Issued Accounting Standards

The recently issued accounting pronouncements are included in Note 2 Unaudited Interim Financial Statements for disclosures on accounting policies related to our business. 

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

Evaluation of Disclosure Controls and Procedures

We maintain controls and procedures that are designed to ensure that information required to be disclosed in the 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 SEC’s rules and forms, and that such information is accumulated and communicated to our management including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures. Based upon their evaluation of those controls and procedures performed as of the end of the period covered by this report, our principal executive and principal financial officers concluded that our disclosure controls and procedures were not effective in ensuring that: (i) information required to be disclosed by us in reports that we file or submit to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for accurate and timely decisions regarding required disclosure.

As required by Rule 13a-15(e), our management has carried out an evaluation, with the participation and under the supervision of Shalom Dodoun, our Chief Executive Officer, and Lim Chun Hoo, our Chief Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures, as of September 30, 2023. Based upon the participation in that evaluation, it has been concluded that the disclosure controls and procedures were effective as of September 30, 2023.

Changes in Internal Controls

During the fiscal quarter ended September 30, 2023, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

PART II - OTHER INFORMATION

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties and an adverse result in these, or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

Risk factors that affect our business and financial results are discussed in Part I, Item 1A “Risk Factors,” in our Annual Report on Form 10-K/A for the year ended December 31, 2022 as filed with the SEC on April 28, 2023 (“Annual Report”), as supplemented by our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 as filed with the SEC on August 21, 2023 (the “Quarterly Report” and together with the Annual Report, the “Periodic Reports”). There have been no material changes in our risk factors from those previously disclosed in our Periodic Reports. You should carefully consider the risks described in our Periodic Reports, which could materially affect our business, financial condition or future results. The risks described in our Periodic Reports are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.

None.

None.

Not applicable.

None.

* Filed herewith 

** Furnished herewith

# Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be furnished to the SEC upon request.

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.