This Quarterly Report Form 10-Q contains forward-looking statements. Our actual
results could differ materially from those set forth as a result of general
economic conditions and changes in the assumptions used in making such
forward-looking statements. The following discussion and analysis of our
financial condition and results of operations should be read together with the
unaudited condensed financial statements and accompanying notes and the other
financial information appearing elsewhere in this report. The analysis set forth
below is provided pursuant to applicable Securities and Exchange Commission
regulations and is not intended to serve as a basis for projections of future
events.
The Company intends to build a diversified global financial services company
driven by proprietary Condor trading technologies, complementary regulatory
licenses, and a proven executive team. The Company plans to acquire, integrate,
transform, and scale legacy financial service companies. The Company believes
that its proprietary technology and software development capabilities allow
legacy financial services companies immediate exposure to -forex, stocks, ETFs,
commodities, crypto, social/copy trading, and other high-growth fintech markets.
From December 2021, the Company expects to grow from its acquisition strategy,
specializing in buying and integrating small to mid-size legacy financial
services companies. The Company intends to build a diversified global
software-driven financial services company. The Company plans to acquire,
integrate, transform, and scale legacy financial service companies. The Company
replaces conventional legacy software infrastructure with its regulatory-grade
proprietary Condor trading technologies, intending to improve end-user
experience, increase client retention, and realize cost synergies.
Post-acquisition of ADS, we have two primary business segments, (1) Wealth
Management and (2) Technology and Software Development.
In March 2020, the World Health Organization declared the outbreak of a novel
coronavirus (COVID-19) as a pandemic that continues throughout the United
States. While the outbreak was initially concentrated in China, it spread to
several other countries, including Russia and Cyprus, and reported infections
globally. Many countries worldwide, including the United States, have
significant governmental measures being implemented to control the spread of the
virus, including temporary closure of businesses, severe restrictions on travel
and the movement of people, and other material limitations on our business.
These measures have resulted in work stoppages, absenteeism in the Company's
labor workforce, and other disruptions. The extent to which the coronavirus
impacts our operations will depend on future developments. These developments
are highly uncertain. We cannot predict them with confidence, including the
duration and severity of the outbreak and the actions required to contain the
coronavirus or treat its impact. In particular, the continued spread of the
coronavirus globally could adversely impact our operations and workforce,
including our marketing and sales activities and ability to raise additional
capital, which could harm our business, financial condition, and operation
results.
The geopolitical situation in Eastern Europe intensified on February 24, 2022,
with Russia's invasion of Ukraine. The war between the two countries continues
to evolve as military activity continues. The United States and certain European
countries have imposed additional sanctions on Russia and specific individuals.
The Company maintains a technical support and development office in Russia. As
of the date of this report, there has been no disruption in our operations. Even
though no individual associated with the Company is banned or under Special
Designated Nationals and Blocked Person list, the risk of maintaining a
technical and software development office in Russia is no longer hypothetical.
If the military activities worsen, we may have to relocate our office from
Russia to a neutral zone. If we cannot relocate our Russian operations, it may
impact our software development capabilities and negatively impact the Company's
business plans.
4
Wealth Management
On December 22, 2021, the Company entered into a Share Exchange Agreement (the
"Agreement") with AD Financial Services Pty Ltd ACN 628 331 117 of Level 38/71
Eagle St, Brisbane, Queensland, Australia, 4000 ("ADFP" or "Target"). According
to the Agreement, the Company acquired 51% of ADFP's issued and outstanding
shares of capital stock in exchange for 45,000,000 (the "Consideration") newly
issued "restricted" common shares. The operating and licensed entity of ADFP is
AD Advisory Services Pty Ltd. ADFP owns one hundred percent (100%) equity
interest in AD Advisory Services Pty Ltd ("ADS"). As a result, the Company is
51% owner of ADS. Our wealth management business, AD Advisory Services (ADS), is
subject to enhanced regulatory scrutiny and regulated by multiple regulators in
Australia. The Australian Securities and Investments Commission (ASIC)
administers a licensing regime for financial services providers. ADS holds an
Australian Financial Services License (AFSL) and meets various compliance,
conduct, and disclosure obligations.
AD Advisory Services Pty Ltd. (ADS) is an Australian-regulated wealth management
company with 20 offices, 28 advisors, and $530+ million in funds under advice.
ADS provides licensing solutions for financial advisers & accountants in
Australia. ADS offers different licensing, compliance, and education solutions
to financial planners to meet the specific needs of their practice.
Wealth Management Revenue:
Three months ended Three months ended
June 30, 2022 June 30, 2021
(Unaudited) (Unaudited)
Revenue, $ 1,436,849 -
Cost of sales, $ 1,310,234 -
Gross Profit (loss), $ 126,614 -
Six months ended Six months ended
June 30, 2022 June 30, 2021
(Unaudited) (Unaudited)
Revenue, $ 2,910,471 -
Cost of sales, $ 2,625,190 -
Gross Profit (loss), $ 285,281 -
(1) Consolidated in the Company financial statements.
ADS' revenues, cost of sales, and gross profits for the six months ended June
30, 2022, were $2.91 million, $2.63 million, and $0.29 million, respectively.
Technology and Software Development
Technology & Software Revenue:
Three months ended Three months ended
June 30, 2022 June 30, 2021
(Unaudited) (Unaudited)
Revenue, $ 89,000 82,725
Cost of sales, $ 60,494 68,616
Gross Profit (loss), $ 28,506 14,109
Six months ended Six months ended
June 30, 2022 June 30, 2021
(Unaudited) (Unaudited)
Revenue, $ 156,500 147,078
Cost of sales, $ 120,988 137,231
Gross Profit (loss), $ 35,512 9,847
5
The consolidated revenues, cost of sales, and gross profits for Technology and
Software Development for the six months ended June 30, 2022, were $156,500,
$120,988, and $35,512, respectively.
The Company is developing Condor Investing & Trading App, a simplified trading
platform for traders with varied experiences in trading stocks, ETFs, and other
financial markets from their mobile phones. The Company expects to commercialize
the Condor Investing & Trading App by the end of the second quarter of the
fiscal year ended December 31, 2022. The Condor Investing & Trading App will be
used by a global online broker authorized and regulated by the UK Financial
Conduct Authority. The Company plans to market, distribute, and license the
Condor Investing & Trading App in the US and globally.
The Company had developed NFT Marketplace, a decentralized NFT marketplace, a
multichain platform with a lazy minting option to reduce and limit unnecessary
blockchain usage fees, also known as gas fees. The Company expects to
commercialize the NFT Marketplace by the end of the fourth quarter of the fiscal
year ended December 31, 2022.
The Company and its subsidiary, ADS, are developing a digital wealth management
company, which will initially include a Robo Advice Platform catering to
Australia's wealth management industry. The Company expects to commercialize the
Robo Advice Platform by the fiscal year ended December 31, 2022.
The Company has prepared consolidated financial statements on a going concern
basis, which contemplates the realization of assets and the settlement of
liabilities and commitments in the ordinary business course.
The Company has earned $4,850,743 in revenues from January 21, 2016 (inception)
to June 30, 2022.
As of December 31, 2020, the Company has issued four convertible notes
collectively known as FRH Group Note ("Note for net cash proceeds of $1,000,000.
The Company had extended the maturity date of the FRH Group Note to June 30,
2021. On February 22, 2021, the Company entered into an Assignment of Debt
Agreement (the "Agreement") with FRH and FRH Group Corporation. The Company
eliminated all four FRH Group convertible notes, including interest, of
$1,256,908, in return for the issuance of 12,569,080 of unregistered common
stock of the Company (the "Shares") to FRH. Following the Agreement, FRH
assigned the Shares to FRH Group Corporation, an entity also owned by Mr. Hong.
The Company secures and earns revenues by signing an agreement with its
customers. The Company considers a signed agreement with its customers, a
binding contract with the customer, or other similar documentation reflecting
the terms and conditions under which the Company will provide products or
services as persuasive evidence of an arrangement. Each agreement is specific to
the customer and clearly defines each party's fee schedule, duties and
responsibilities, renewal and termination terms, confidentiality agreement,
dispute resolution, and other clauses necessary for such contract. The material
terms of agreements with customers depend on the nature of services and
solutions. Each agreement is specific to the customer and clearly defines each
party's fee schedule, duties and responsibilities, renewal and termination
terms, confidentiality agreement, dispute resolution, and other clauses
necessary for such contract.
6
Financial Condition At June 30, 2022
On June 30, 2022, the accumulated deficit was $3,979,597. Our cash balance is
$134,888 as of June 30, 2022. At June 30, 2022, the working capital deficit was
$739,675.
On January 27, 2022, the Company signed a promissory note ('AJB Note') with AJB
Capital Investments, LLC ('AJB Capital'), a Delaware limited liability company,
for the principal amount of $550,000 with the maturity date of July 27, 2022,
and a coupon of 10%. The parties extended the AJB Note maturity date by another
six months till January 23, 2023. As part of the AJB Note, the Company entered
into a securities purchase agreement, where AJB Capital will receive equity
equal to US $155,000 of the Company's common stock. The Company issued 2,214,286
common stock valued at $71,521 upon issuance of the Note (the "Shares") and
1,000,000 3-year cash warrants ('Warrants') priced at $0.30. The Warrants and
the Shares, collectively known as the 'Incentive Fee,' are issued upon execution
of the agreement.
The Company executed five "Purchase Notice Right" under an Investment Agreement
with White Lion and received a net of $72,420 after deducting financing costs
associated with the Investment Agreement for the six months ended June 30, 2022.
The Company intends to continue its efforts to enhance its revenue from its
diversified portfolio of technological solutions, become cash flow positive, and
raise funds through private placement offerings and debt financing. As the
Company increases its customer base globally, it intends to acquire long-lived
assets that will provide a future economic benefit beyond fiscal 2022.
Financial Condition at December 31, 2021
At December 31, 2021, the Company eliminated all four FRH Group convertible
notes, including interest, of $1,256,908, in return for the issuance of
12,569,080 of unregistered common stock of the Company (the "Shares") to FRH.
Therefore, there was no current or non-current portion of convertible notes
payable and accrued interest. On December 31, 2021, the accumulated deficit was
$3,230,679. Our cash balance is $93,546 as of December 31, 2021. We do not
believe that our cash balance is sufficient to fund our operations; as a result,
the Company has raised additional capital as disclosed in Subsequent Events from
the Investment Agreement and debt. At December 31, 2021, the working capital
deficit was $199,132.
The Company executed two "Purchase Notice Right" under an Investment Agreement
with White Lion and received a net of $23,551 after deducting financing costs
associated with the Investment Agreement for the fiscal year ended December 31,
2021. The Company also received a net amount of $81,000 from the related parties
to fund its operations. Our cash balance is $93,546 as of December 31, 2021. The
Company did not receive additional funding from U.S. Small Business
Administration (SBA) or Cares Act Paycheck Protection Program during the fiscal
year ending December 31, 2021. We do not believe our cash balance is sufficient
to fund our operations.
The Company intends to continue its efforts to enhance its revenue from its
acquisition strategy and diversified portfolio of technological solutions,
become cash flow positive, and raise funds through private placement offerings
and debt financing. As the Company increases its customer base globally, it
intends to acquire long-lived assets that will provide a future economic benefit
beyond fiscal 2022.
7
RESULTS OF OPERATIONS
Three Months Ended June 30, 2022, compared with Three Months Ended June 30, 2021
The Company had six active customers for the three months ended June 30, 2022,
and 2021. Revenues from the top three (3) customers represented approximately
84.27% and 82.16% of Technology and Software revenue for the three months that
ended June 30, 2022, and 2021.
The consolidated revenues for the three months ended June 30, 2022, and 2021
were $1,525,849 and $82,725, respectively. During the three months ended June
30, 2022, and 2021, the Company incurred a net loss of $381,473 and $265,705.
The total revenue breakdown for the three months ended June 30, 2022, and 2021
is below:
June 30, June 30,
Three Months Ended 2022 2021
Revenue Description % of Total % of Total
Wealth Management 94.49 % -
Technology Solutions 4.12 % 74.61 %
Software Development 1.39 % 25.39 %
Total 100.00 % 100.00 %
During the three months ended June 30, 2022, and 2021, the Company incurred
general and administrative costs ('g and a') of $456,000 and $119,528 (excluding
amortization expenses), respectively. The increase in 'g and a' costs for the
three months ended June 30, 2022, is due to the rise in legal and professional
fees, financing costs, and ADS' 'g and a'. The 'g and a' expenses were 29.88%
and 144.49% of the revenue for the three months ended June 30, 2022, and 2021,
respectively. Amortization expense was $60,494 and $68,616 for the three months
ended June 30, 2022, and 2021 respectively, included in the cost of sales. The
amortization expense for the three months ended June 30, 2022, and 2021 are due
to the cumulative amortization expense of Condor Pro Multi-Asset Trading
Platform (Desktop), Condor Web Trader, and Condor Mobile Trader.
The rental expense was $7,181 and $7,235 for the three months ended June 30,
2022, and 2021, respectively. Effective October 29, 2019, the Company rents its
servers, computers, and data center from an unrelated third party. Under the
rent Agreement, the lessor provides furniture and fixtures and any leasehold
improvements at 200 Spectrum Drive, Suite 300, Irvine, CA 92618, as discussed in
Note 2. Effective February 2019, the Company leases office space at Suite 205,
Building 9, Potamos Germasogeia, 4047, Limassol District, Cyprus, from an
unrelated party for a year. The Company uses the office for sales and marketing
in Europe and Asia. The office's rent payment is $1,750 per month, included in
the General and administrative expenses. From February 2020, the Company
extended the agreement for one year at $1,750 per month. Effective April 2019,
the Company leases office space at Suite 512, 83 Plan, Chelyabinsk, Russia, from
an unrelated party for an eleven-month term. The office's rent payment is $500
per month, included in the General and administrative expenses. From March 2020,
this agreement continues month-to-month until the Company or the lessor chooses
to terminate the agreement's terms by giving thirty days' notice. The Company
uses the office for software development and technical support.
The Company incurred $70,055 and $157,273 in sales, marketing, and advertising
costs ("sales and marketing") for the three months ended June 30, 2022, and
2021. The increase in expense is mainly due to the rise in digital marketing
costs for the three-month ended June 30, 2022. The sales and marketing cost
mainly included travel costs for tradeshows, customer meet and greet, online
marketing on industry websites, press releases, and public relations activities.
The sales, marketing, and advertising expenses represented 4.59% and 190.12% of
the sales for the three months ended June 30, 2022, and 2021.
Six Months Ended June 30, 2022, compared with Six Months Ended June 30, 2021
The Company had six active customers for the six months ended June 30, 2022, and
2021. Revenues from the top three (3) customers represented approximately 86.41%
and 79.09% of Technology and Software revenue for the six months that ended June
30, 2022, and 2021.
8
The consolidated revenues for the six months ended June 30, 2022, and 2021 were
$3,066,971 and $147,078, respectively. During the six months ended June 30,
2022, and 2021, the Company incurred a net loss of $748,918 and $487,542.
The total revenue breakdown for the six months ended June 30, 2022, and 2021 is
below:
June 30, June 30,
Six Months Ended 2022 2021
Revenue Description % of Total % of Total
Wealth Management 95.20 % -
Technology Solutions 3.40 % 85.72 %
Software Development 1.40 % 14.28 %
Total 100.00 % 100.00 %
During the six months ended June 30, 2022, and 2021, the Company incurred
general and administrative costs ('g and a') of $845,053 and $272,281 (excluding
amortization expenses), respectively. The increase in 'g and a' costs for the
six months ended June 30, 2022, is due to the rise in legal and professional
fees, financing costs, and ADS' 'g and a'. The 'g and a' expenses were 27.55%
and 185.13% of the revenue for the six months ended June 30, 2022, and 2021,
respectively. Amortization expense was $120,988 and $137,231 for the six months
ended June 30, 2022, and 2021 respectively, included in the cost of sales. The
amortization expense for the six months ended June 30, 2022, and 2021 are due to
the cumulative amortization expense of Condor Pro Multi-Asset Trading Platform
(Desktop), Condor Web Trader, and Condor Mobile Trader.
The rental expense was $14,602 and $15,058 for the six months ended June 30,
2022, and 2021, respectively. Effective October 29, 2019, the Company rents its
servers, computers, and data center from an unrelated third party. Under the
rent Agreement, the lessor provides furniture and fixtures and any leasehold
improvements at 200 Spectrum Drive, Suite 300, Irvine, CA 92618, as discussed in
Note 2. Effective February 2019, the Company leases office space at Suite 205,
Building 9, Potamos Germasogeia, 4047, Limassol District, Cyprus, from an
unrelated party for a year. The Company uses the office for sales and marketing
in Europe and Asia. The office's rent payment is $1,750 per month, included in
the General and administrative expenses. From February 2020, the Company
extended the agreement for one year at $1,750 per month. Effective April 2019,
the Company leases office space at Suite 512, 83 Plan, Chelyabinsk, Russia, from
an unrelated party for an eleven-month term. The office's rent payment is $500
per month, included in the General and administrative expenses. From March 2020,
this agreement continues month-to-month until the Company or the lessor chooses
to terminate the agreement's terms by giving thirty days' notice. The Company
uses the office for software development and technical support.
The Company incurred $239,448 and $221,993 in sales, marketing, and advertising
costs ("sales and marketing") for the six months ended June 30, 2022, and 2021.
The increase in expense is mainly due to the rise in digital marketing costs for
the six months ended June 30, 2022. The sales and marketing cost mainly included
travel costs for tradeshows, customer meet and greet, online marketing on
industry websites, press releases, and public relations activities. The sales,
marketing, and advertising expenses represented 7.81% and 150.94% of the sales
for the six months ended June 30, 2022, and 2021.
9
LIQUIDITY AND CAPITAL RESOURCES
On June 30, 2022, and December 31, 2021, we had a cash balance of $134,888 and
$93,546, respectively.
In the next twelve (12) months, the Company will continue investing in sales,
marketing, product support, new technology solutions, and existing technology to
serve our customers. We expect capital expenditures to increase to up to
$100,000 in the next twelve (12) months to support the growth, mainly software
development and the purchase of computers and servers. Also, the Company
estimates additional expenditure needed to be $200,000, which provides for
$50,000 and $150,000 for sales and marketing and working capital, respectively.
Should we require additional capital, the Company's operations are insufficient
to fund its capital requirements. The Company may attempt to raise capital by
selling additional capital stock or debt issuance. The Company intends to
continue its efforts in growing its operations and raising funds through private
equity and debt financing.
Between February 22, 2016, and April 24, 2017, the Company borrowed $1,000,000
from FRH Group, a founder and principal shareholder. Effective June 1, 2017, we
raised an aggregate of $98,000 through our common stock's private placement to
our officers, directors, friends, relatives, and business associates.
From January 29, 2019, to February 15, 2019, the Company issued 33,000
registered shares under the Securities Act of 1933 for $4,950. The Company
closed its offering effective February 26, 2019.
On May 01, 2020, the Company received proceeds of Fifty-Thousand Six Hundred and
Thirty-Two ($50,632) from the Promissory Note ("PPP Note") under the Paycheck
Protection Program under the Coronavirus Aid, Relief, and Economic Security Act
(the "CARES Act").
On May 22, 2020, the Company received hundred and forty-four thousand nine
hundred and 00/100 Dollars ($144,900).
On July 15, 2020, the Company engaged Kingswood Capital Markets, a Benchmark
Investments division, Inc., to act as its exclusive general financial advisor
for strategic corporate planning and investment banking services. On August 25,
2020, the Company and Broker-Dealer terminated all obligations other than
maintaining confidentiality, with no fees to the Broker-Dealer. The
Broker-Dealer agreed to return the 2,745,053 shares of the Company's common
stock.
On September 02, 2020, the Company engaged Garden State Securities Inc. (GSS) to
act as its exclusive advisor for the private placement of debt or equity
securities to fulfill the Company's business plan and offer debt securities to
assist in the Company's acquisition strategy. The Company terminated the
engagement as of June 28, 2021.
On February 22, 2021, the Company entered into an Assignment of Debt Agreement
(the "Agreement") with FRH and FRH Group Corporation. The Company eliminated all
four FRH Group convertible notes, including interest, of $1,256,908, in return
for the issuance of 12,569,080 of unregistered common stock of the Company (the
"Shares") to FRH. The debt reduction should enable the Company to raise capital
at favorable terms and conditions.
Between February and September 2021, the Company received $95,000 from the
Officer for working capital purposes and recorded in related party advances.
On October 04, 2021, the Company filed a prospectus that relates to the resale
of up to 22,670,000 shares of our Common Stock issued or issuable to selling
shareholders for up to $2,200,000, including (i) up to 2,000,000 shares issued
to AD Securities America, LLC, (ii) up to 20,000,000 issuable to White Lion
Capital, LLC ("White Lion"), according to a "Purchase Notice Right" under an
Investment Agreement and (iii) 670,000 shares issued to White Lion as a
commitment fee associated with the Investment Agreement. The Company is yet to
receive the funds. If we are unsuccessful in raising funds from the sale of
22,670,000 shares, we do not believe our current cash balance is sufficient to
fund our operations.
From January 4, 2022, to February 10, 2022, the Company issued 2,500,000
registered shares to White Lion for a gross cash amount of $114,185.
On January 27, 2022, the Company signed a promissory note ('AJB Note') with AJB
Capital Investments, LLC ('AJB Capital'). The Company issued 2,214,286 common
stock valued at $71,521 upon issuance of the Note (the "Shares") and 1,000,000
3-year cash warrants ('AJB Warrants') priced at $0.30 as consideration fees for
AJB Note. The AJB Warrants and the Shares, collectively known as the 'Incentive
Fee,' are issued upon execution of the agreement. As of June 30, 2022, all AJB
Warrants are out-of-money and not exercised.
10
GOING CONCERN CONSIDERATION
We have not generated significant revenues from inception to June 30, 2022. As
of June 30, 2022, and December 31, 2021, the Company accumulated a deficit of
$3,979,597 and $3,230,679, respectively. Our independent auditors included an
explanatory paragraph in their report on the audited financial statements for
the fiscal year ended December 31, 2021, and 2020, and the period from January
21, 2016 (inception) to December 31, 2016, regarding concerns about our ability
to continue as a going concern. Our financial statements contain additional note
disclosures describing the circumstances that led to this disclosure by our
independent auditors. Our financial statements do not include any adjustments
related to the recoverability or classification of asset carrying amounts or the
amounts and classifications of liabilities that may result in the company being
unable to continue as a going concern.
Critical Accounting Policies and Significant Judgments and Estimates
We have based our management's discussion and analysis of our financial
condition and results of operations on our financial statements, which we have
prepared following the U.S. generally accepted accounting principles. In
preparing our financial statements, we are required to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting periods. Our actual results could differ from these estimates, and
such differences could be material and uncertain in the current economic
environment due to COVID-19.
In more detail, we have described significant accounting policies in Note 2 of
our annual financial statements included in our 10-K for the fiscal year ended
December 31, 2020, filed with the SEC on April 6, 2020. We evaluate our critical
accounting estimates and judgments required by our policies on an ongoing basis
and update them as appropriate based on changing conditions.
JOBS Act Accounting Election
We are an "emerging growth company," as defined in the JOBS Act. Under the JOBS
Act, emerging growth companies can delay adopting new or revised accounting
standards issued after the enactment of the JOBS Act until those standards apply
to private companies. As an emerging growth company, we have applied for
exemption; as a result, the Company may delay the adoption of certain accounting
standards until the standards would otherwise apply to private companies.
Off-Balance Sheet Arrangements and Contractual Obligations
We have not engaged in any off-balance sheet arrangements as defined in Item
303(c) of the SEC's Regulation S-B. We did not have any relationships with
unconsolidated organizations or financial partnerships, such as structured
finance or special purpose entities that would have been established to
facilitate off-balance sheet arrangements or other contractually narrow or
limited purposes.
Recent Accounting Pronouncements
The amendments in the ASU are effective for fiscal years beginning after
December 15, 2019, including interim periods therein. Early adoption of the
standard is permitted, including adoption in interim or annual periods for which
financial statements have not yet been issued. We have adopted this ASU as of
June 30, 2020 for ASC 606, Revenue Recognition and Amended ASU 2016-02, Leases
(Topic 840). The ASU is currently not expected to have a material impact on our
consolidated financial statements. While we have described significant
accounting policies in more details in Note 2 of our annual financial statements
included in our 10-K for the fiscal year ended December 31, 2020, filed with the
SEC on April 6, 2020, we believe the accounting policies as described in Note 2
to be critical to the judgments and estimates used in the preparation of our
financial statements.
11
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