FDCTECH, INC. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,” “estimate,” “forecast” and similar expressions (or the negative of such expressions). Forward looking statements include, but are not limited to, financial and operational information, the volatility of our stock price, current competitive conditions and the impact of U.S. tariffs, trade barriers and restrictions . 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 is building 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 its proprietary technology and software development capabilities allow legacy financial services companies immediate exposure to forex, stocks, ETFs, commodities, digital assets, social/copy trading, and other high-growth fintech markets. From December 2021 onwards, the Company has been growing through its acquisition strategy, specializing in the purchase and integration of small to mid-sized legacy financial services companies. The Company intends to build a diversified global software-driven financial services company. The Company continues to acquire, integrate, transform, and scale legacy financial service companies. The Company replaces conventional legacy software infrastructure of target companies with its proprietary, regulatory-grade Condor trading technologies, aiming to enhance the end-user experience, increase client retention, and achieve cost synergies. The Company is a financial technology company specializing in developing and delivering innovative software solutions and business services to the over-the-counter (OTC) brokerage and financial services industries. The company provides a range of proprietary and third-party technology solutions, including its flagship Condor Trading Technology , which supports multi-asset trading, risk management, and pricing for forex, equities, commodities, and digital assets. FDCTech follows a strategic growth model centered on acquiring, integrating, and scaling legacy financial services firms. Through its recent acquisitions, the company has expanded its global footprint in wealth management, brokerage, and financial advisory services. Key subsidiaries include: ● AD Advisory Services Pty Ltd. (ADS) – An Australian-regulated wealth management firm managing over $530 million in client assets with a network of 28 financial advisors. ● Alchemy Markets Ltd. (AML) – A Malta-based investment firm regulated by the Malta Financial Services Authority (MFSA), offering trading services across multiple asset classes in various European markets. ● Alchemy Prime Limited (APL) – A UK-based investment firm regulated by the Financial Conduct Authority (FCA), providing investment advisory and brokerage services. ● AlchemyTech Ltd. (ATECH) – A Cyprus-based technology, sales, and marketing service provider supporting the Company’s subsidiaries and affiliated companies. FDCTech continues to drive innovation by developing next-generation trading platforms, such as the Condor Pro Multi-Asset Trading Platform , and expanding its market reach. The company remains committed to leveraging proprietary technology and regulatory expertise to enhance operational efficiencies and client engagement across global financial markets. Currently, we have three primary business segments: (1) Investment and Brokerage, (2) Wealth Management, and (3) Technology and Software Development. 4 Investment and Brokerage (Europe and UK) AML is authorized to deal with its account (market maker) as a Category 3 licensed entity by the Malta Financial Services Authority (MFSA), receive and transmit orders for retail and professional clients, hold and control clients’ money and assets. AML trading platform services in the English, French, German, Italian, and Arabic-speaking markets, whereby customers can trade in currency, commodity, equity, and digital assets-linked derivatives in real time. AML is authorized countries to do business include Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Liechtenstein, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden. In May 2024, Mitchell M. Eaglstein, CEO, was appointed as the CEO and COO of Alchemy Markets Ltd. (AML) to oversee operations in Malta. APL is an investment firm regulated by the Financial Conduct Authority (FCA). It provides investment advice, acts as an agent and principal, and safeguards and administers assets in forex, equity, commodities, spread bets, and other financial assets. It is authorized to do business in several countries, including England, Scotland, Wales, and Northern Ireland. Investment and Brokerage (Trading Revenues) & Gross Margins*: Three months ended March 31, 2025 (Unaudited) Three months ended March 31, 2024 (Unaudited) Revenue $ 7,763,769 4,606,966 Cost of sales $ 3,394,633 2,672,065 Gross Profit (loss) $ 4,369,136 1,934,901 Gross Margins 56.28 % 42.00 % Wealth Management Business 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 Street, 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 a 51% owner of ADS. Our wealth management business, AD Advisory Services (ADS), is subject to enhanced regulatory scrutiny and is regulated by multiple Australian regulators. 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 28 advisors and $530+ million in funds under advice. ADS provides licensing solutions for financial advisers & accountants in Australia. ADS offers financial planners various licensing, compliance, and education solutions to meet the specific needs of their practice. Wealth Management Revenue & Gross Margins: Three months ended March 31, 2025 (Unaudited) Three months ended March 31, 2024 (Unaudited) Revenue $ 1,534,852 1,513,425 Cost of sales $ 1,349,827 1,362,169 Gross profit (loss) $ 185,025 151,256 Gross margins 12.05 % 9.99 % 5 Technology & Software Development Business For the three months ended March 31, 2025, and 2024, the Company had seven and nine licensing agreements, respectively, for its Condor Pro Multi-Asset Trading Platform. The Company continuously negotiates additional licensing agreements with several retail online brokers to use the Condor Pro Multi-Asset Trading Platform. Condor Pro Multi-Asset Trading Platform is available in desktop, web, and mobile versions. The Company is developing the Condor Investing & Trading App, a simplified trading platform designed for traders with varying levels of experience in trading stocks, ETFs, and other financial markets, accessible from their mobile phones. The Company expects to commercialize the Condor Investing & Trading App by the end of the 2025 fiscal year. IT, Sales & Marketing Service Provider (Cyprus) On March 19, 2024, the Company established Alchemytech Ltd. (ATECH), a Cypriot company. ATECH provides the Company’s subsidiaries and affiliate companies with information technology, sales, and marketing services. The Company has mandated ATECH to develop, market, and distribute the Condor Pro Multi-Asset Trading Platform to qualified market participants, including brokers, professional traders, hedge funds, and other financial institutions. Technology & Software Development Revenue & Gross Margins: Three months ended March 31, 2025 (Unaudited) Three months ended March 31, 2024 (Unaudited) Revenue $ 813,747 255,944 Cost of sales $ 184,284 - Gross profit (loss) $ 629,463 255,944 Gross Margins 77.35 % 100.00 % CIM Acquisition Termination On July 31, 2023, the Company sent the notice of termination of the purchase agreement to CIM Securities, as future events may result in a change of ownership in the CMA application. The Company believed that this would cause further delays in the approval process. Our board has mandated that the management team focus on expanding and developing our core non-US foreign exchange business to maximize shareholder value. Bank Acquisition Termination In April 2024, the Company terminated the letter of intent to acquire a community bank in Iowa. As part of the termination, the Company paid the community bank a sum of $100,000 in six equal installments of $15,000, plus one final payment of $10,000, from April 2024 to November 2024. Consolidated Financial Summary The Company has prepared consolidated financial statements on a going concern basis, which assumes the realization of assets and the settlement of liabilities and commitments in the ordinary course of business. For the three months ended March 31, 2025, and 2024, the Company generated $10,112,368 and $6,376,335 in revenues, an increase of over 58.59%. At March 31, 2025, the Company had a cash balance of $26,996,932 and an accumulated deficit of $2,283,928. At December 31, 2024, the Company had a cash balance of $24,781,389 and an accumulated deficit of $2,563,620. Financial Condition as of March 31, 2025 On March 31, 2025, the accumulated deficit, cash balance, and working capital surplus were $2,283,928, $26,996,932, and $10,082,745, respectively. Financial Condition at December 31, 2024 As of December 31, 2024, the accumulated deficit, cash balance, and working capital surplus were $2,563,620, $24,781,389, and $ 9,417,769, respectively. Although we believe our cash balance is sufficient to fund our operations and growth, the Company plans to raise additional capital, as disclosed in Subsequent Events. 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 global customer base, it intends to acquire long-lived assets that will provide future economic benefits beyond fiscal 2025. 6 RESULTS OF OPERATIONS Three Months Ended March 31, 2025, compared with Three Months Ended March 31, 2024 The consolidated revenues for the three months ended March 31, 2025, and 2024 were $10,112,368 and $6,376,335, respectively. During the three months ended March 31, 2025, and 2024, the Company reported net income of $301,002 and $833,445, respectively. The total revenue breakdown for the three months ended March 31, 2025, and 2024 is below: Three Months Ended March 31, 2025 March 31, 2024 Revenue Description % of Total % of Total Technology Solutions 8.05 % 4.01 % Wealth Management 15.18 % 23.74 % Brokerage 76.77 % 72.25 % Total 100.00 % 100.00 % During the three months ended March 31, 2025, and 2024, the Company incurred general and administrative costs (“G&A”) of $4,520,014 and $2,299,134, respectively (excluding amortization expenses). The increase in G&A for the three months ended March 31, 2025, is due to the inclusion of general and administrative costs of all subsidiaries. The G&A costs were 44.70% and 36.06% of the revenue for the three months ended March 31, 2025, and 2024, respectively. The rental expense was $61,150 and $49,162 for the three months ended March 31, 2025, and 2024, respectively. The Company incurred $276,204 and $46,925 in sales, marketing, and advertising costs (“sales and marketing”) for the three months ended March 31, 2025, and 2024. The sales and marketing costs mainly included travel costs for trade shows, customer meetings, online marketing on industry websites, press releases, and public relations activities. The sales, marketing, and advertising expenses represented 2.73% and 0.74% of the sales for the fiscal year ending March 31, 2025, and 2024, respectively. 7 LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2025, and December 31, 2024, we had cash balances of $26,996,932 and $24,781,389, respectively. At March 31, 2025, and December 31, 2024, the working capital surplus was $10,082,745 and $9,097,591, respectively. The increase in working capital surplus was primarily due to the acquisition of AML and APL, resulting in an increase in current assets over current liabilities as of March 31, 2025. We generate a substantial portion of our operating income outside the United States, which is indefinitely reinvested in foreign jurisdictions. Consequently, as outlined under “Cash and Cash Equivalent,” the majority of our cash and short-term investments are held by our foreign subsidiaries. At present, we do not intend to repatriate these funds and do not foresee a need to do so. The company maintains multiple sources of liquidity, including cash flow from operations, potential capital raises, and strategic financing arrangements. FDCTech is actively managing its working capital to support ongoing business expansion, including the development of its Condor Trading Technology , regulatory compliance initiatives, and integration of newly acquired entities. Key liquidity factors include: ● Operating Cash Flow: The company continues to invest in technology infrastructure and operational efficiency to drive sustainable revenue growth. ● Capital Expenditures: Investment in proprietary trading platforms and software development remains a priority. ● Financing Activities: FDCTech has historically relied on equity offerings, debt instruments, and related-party financing to support its expansion. Future capital-raising efforts may be necessary to fund acquisitions and market expansion. Management believes that existing cash reserves , combined with expected revenue growth and potential financing opportunities, will provide sufficient liquidity to meet both operational and strategic needs. However, external market conditions, regulatory changes, and acquisition-related expenditures could impact future liquidity requirements. We anticipate that our existing domestic cash, short-term investments, and cash flows from operations will be sufficient to fund our domestic operating activities and fulfill our cash commitments for investing and financing activities, such as regular quarterly dividends, debt repayments, and capital expenditures, for at least the next 12 months and for the foreseeable future. Should we require additional capital in the United States beyond what our domestic operations generate—for instance, to fund significant discretionary activities such as business acquisitions or share repurchases—we could choose to repatriate future earnings from foreign jurisdictions or raise capital within the United States through debt or equity issuances. These alternatives may result in higher effective tax rates, increased interest expenses, or dilution of our earnings. We have previously borrowed funds domestically and believe that we can continue to do so at reasonable interest rates. Over the next 12 months, the Company will continue investing in sales, marketing, product development, and technology solutions to enhance customer service and expand its market presence. Capital expenditures are anticipated to rise to $1.000,000. This allocation will encompass working capital, software development, sales and marketing initiatives, as well as infrastructure enhancements, including the procurement of computers and servers. The company expects that its existing cash reserves, cash equivalents, operational cash flows, and access to private equity and capital markets will be sufficient to fund operations for at least the next 12 months. These resources will support continued business operations, including debt obligations and significant capital expenditures. However, achieving sustainable revenue growth may require additional funding, and there is no guarantee that financing will be available on favorable terms. If additional capital is required, the company may consider restructuring or refinancing existing debt, securing financing from financial institutions, or raising funds through private equity or debt issuance. FDCTech remains committed to expanding its operations while exploring strategic funding opportunities to support long-term growth. 8 PPP and SBA Funding in 2020 On May 01, 2020, the Company received proceeds of Fifty-Thousand Six Hundred and Thirty-Two ($50,632) from the Promissory Note (“PPP Note”) under the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The outstanding balance of the PPP loan, including accrued interest at 1.00%, is approximately $2,389 as of March 31, 2025. On May 22, 2020, the Company received proceeds of $144,900. The outstanding balance of the SBA loan, including accrued interest, is $112,057 as of March 31, 2025. Related Party Investments and Acquisitions in 2023 On January 25, 2023, the Company issued 5,309,179 restricted common shares to AJB as compensation for consideration shares related to the AJB Note, valued at $60,525. On January 25, 2023, the Company issued 115,000,000 restricted common shares for cash valued at $550,000 to Kundnani, considered a related party. On March 28, 2023, the Company issued 2,000,000 restricted common shares for cash valued at $20,000. On July 31, 2023, the Company sent the notice of termination of the purchase agreement to CIM Securities, as future events may result in a change of ownership in the CMA application. The Company terminated the escrow agreement and released $180,000 to increase cash on hand. On November 30, 2023, Kundnani, a related party, purchased 2,500,000 shares of the Company’s Series A Preferred stock for $2.5 million. The Company has issued the Series A Preferred stock to Kundnani. On November 30, 2023, Kundnani purchased 50,000,000 shares of the Company’s common stock for $5.5 million. The Company has issued the Common stock to Kundnani. The Company expects to receive funds by the end of June 2025. GOING CONCERN CONSIDERATION We generated revenues of $10,112,368 and $6,376,335 for the three months ended March 31, 2025, and 2024, respectively. As of March 31, 2025, and December 31, 2024, the accumulated deficit was $2,283,928 and $2,563,620. Our independent auditors included an explanatory paragraph in their reports on the audited financial statements for the fiscal years ending December 31, 2024, and 2023, regarding concerns about our ability to continue as a going concern. Our financial statements include additional note disclosures that describe the circumstances leading 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. 9 Critical Accounting Policies and Significant Judgments and Estimates We have based our management’s discussion and analysis of our financial condition and results of operations on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles. In preparing our financial statements, we must make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses for the reporting periods. 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, 2023, filed with the SEC on October 15, 2024. We continually evaluate our critical accounting estimates and judgments, as required by our policies, and update them as necessary 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 an exemption; as a result, the Company may delay the adoption of certain accounting standards until the standards 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 had no 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 Company evaluates all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”) for applicability and impact on its consolidated financial statements. We have adopted ASC 606, Revenue from Contracts with Customers, and ASC 842 (formerly ASU 2016-02, Leases) as of March 31, 2020. The amendments in these ASUs are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption was permitted and consistent with SEC guidance; we implemented these standards as required. The adoption of these standards did not have a material impact on our consolidated financial statements. The Company has reviewed recently issued ASUs that are not yet effective and expects no significant impact on its financial statements or disclosures upon adoption. As a smaller reporting company, we have elected to take advantage of the extended transition period for complying with new or revised accounting standards, as permitted by the JOBS Act and SEC rules applicable to emerging growth companies. For a more detailed description of our significant and critical accounting policies, please refer to Note 2 in the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 31, 2025. 10 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS. Not Applicable.