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 Software 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 Software 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.

Business Strategy

Our experienced management and in-house software development team have carefully designed various B2B Software 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.

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.

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 Software 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.

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 Multi-Asset Trading Platform (“Platform”) on a non-exclusive basis.

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.

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.

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.

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.

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.

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:

In 2018 and 2017, the Company had pre-tax losses of $141,088 and $394,556, respectively, which are available for carry forward to offset future taxable income. The Company has made determinations to provide full valuation allowances for our net deferred tax assets at the end of 2018, and 2017, including NOL carryforwards generated during the years, based on its evaluation of positive and negative evidence, including our history of operating losses and the uncertainty of generating future taxable income that would enable us to realize our deferred tax assets.

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the “Act”). The Act amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. For businesses, the Act reduces the corporate federal tax rate from a maximum of 35% to a 21% rate. The rate reduction will be taking effect on January 1, 2018. Therefore, we have applied the tax rate of 21% to the ending balance of federal deferred tax assets, but because we provided a full valuation allowance against our net deferred tax assets, no tax impact is recorded due to the tax rate change.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

Based on the available objective evidence, management believes it is more likely than not that the net deferred tax assets at December 31, 2018 will not be fully realizable. Accordingly, management has maintained a full valuation allowance against its net deferred tax assets at December 31, 2018. The net change in the total valuation allowance for the 12 months ended December 31, 2018 was an increase of $29,628. At December 31, 2018 and 2017, we had federal and state net operating loss carry-forwards of approximately $ 779,804 and $638,717, respectively, expiring beginning in 2037 for federal and 2037 for state.

For the years ended December 31, 2018 and December 31, 2017, the Company did an analysis of its ASC 740 position and had not identified any uncertain tax positions as defined under ASC 740. Should such position be identified in the future and should the Company owe interest and penalties because of this, these would be recognized as interest expense and other expense, respectively, in the consolidated financial statements.

The Company has identified the United States Federal tax returns as its “major” tax jurisdiction. The United States Federal return for the year 2017 and 2018 has been submitted and accepted by the United States Internal Revenue Service. The Company is not subject to tax examination by authorities in the United States before the years 2016. The New York State Tax return for the year 2017 and 2018 has been submitted and accepted by New York State Franchise Tax Board and currently the Company does not have any ongoing tax examinations.

The Company does not have any foreign tax expenses and liabilities as of December 31, 2018 and 2017.

NOTE 13. OFF-BALANCE SHEET ARRANGEMENTS

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

NOTE 14. SUBSEQUENT EVENTS

From January 29, 2019 to February 15, 2019, the Company issued 33,000 registered shares under the Securities Act of 1933 for a cash amount of $4,950. On February 26, 2019, the Company filed the Post-Effective Amendment No. 1 (the “Amendment”) related to the Registration Statement on Form S-1and its amendments thereto, filed with the U.S. Securities and Exchange Commission on November 22, 2017 and declared effective on August 7, 2018 (Registration No. 333-221726) (the “Registration Statement”) of FDCTech, Inc., a Delaware corporation (the “Registrant”), amended the Registration Statement to remove from registration all shares of common stock that were offered for sale by the Registrant but were not sold prior to the termination of the offering made pursuant to the Registration Statement. At the termination of the offering made pursuant to the Registration Statement, 2,967,000 shares of common stock which were offered for sale by the Registrant were not sold or issued.

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

The Company has evaluated subsequent events through April 15, 2019, the date these financial statements were available to be issued.

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.

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 Software 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.

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 Multi-Asset Trading Platform (“Platform”) on a non-exclusive basis.

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.

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.

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.

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.

Estimated Amortization Expense:

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.

Information About the Warrants Outstanding During Fiscal 2018 Follows

The income tax provision is summarized as follows: