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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K/A
(Amendment
No. 5)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the fiscal year ended December 31, 2023
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For
the transition period from ___________________________ to ___________________________
Commission
file number 000-55685
FINTECH SCION LIMITED |
(Exact
name of registrant as specified in its charter) |
Nevada |
|
30-0803939 |
(State or other jurisdiction
of incorporation or organization) |
|
(I.R.S. Employer
Identification No.) |
M Floor & 1st Floor
No. 33 Jalan Maharajalela
50150,
Kuala Lumpur, Malaysia |
|
N/A |
(Address of principal
executive offices) |
|
(Zip Code) |
+603
9226 0908
(Registrant’s
telephone number, including area code)
Portman
House, 2 Portman Street
London,
W1H 6DU
United
Kingdom
(Former
name, former address and former fiscal year, if changed since last report) |
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class |
|
Trading
Symbol(s) |
|
Name
of each exchange
on
which registered |
None |
|
N/A |
|
N/A |
Securities
registered pursuant to Section 12(g) of the Act:
Common
Stock, $0.001 par value
(Title
of class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
☒
Yes ☐ No
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
☒
Yes ☐ No
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer |
☐ |
Accelerated
filer |
☐ |
|
|
|
|
Non-accelerated filer |
☒ |
Smaller reporting
company |
☒ |
|
|
|
|
|
|
Emerging growth
company |
☐ |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No
The
aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at
which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of
the Registrant’s most recently completed fiscal year was $2,628,493 (computed using the closing sales price of $2.25 per
share of common stock on such date).
198,742,643 shares of common stock were issued and outstanding as of September 30, 2024.
Documents
Incorporated by Reference: None.
Explanatory
Note
This Amendment No. 5 to Form 10-K (this
“Amendment No. 5”) amends the Annual Report to Form 10-K of Fintech Scion Limited, a Nevada corporation (“Fintech,”
the “Company,” “we,” or “us”) for the fiscal year ended December 31, 2023,
as filed with the Securities and Exchange Commission (the “SEC”) on April 5, 2024 (the “Original Filing”).
This Amendment is being filed for the purpose of making clarifications to our disclosure in response to the comment letter received
from the staff of the SEC dated October 15, 2024 in connection with the staff’s review of the Original Filing and to restate
our financial statements as of and for the year ended December 31, 2023 and 2022, and to update related.
Except
as otherwise indicated herein, this Form 10-K/A does not reflect events occurring after the date of the Original Filing or modify
or update those disclosures, including the exhibits to the Form 10-K affected by subsequent events. Information not affected by
the restatement is unchanged and reflects the disclosures made at the time of the Original Filing. Accordingly, this Form 10-K/A
should be read in conjunction with our filings made with the Securities and Exchange Commission subsequent to the Original Filing.
For the convenience of the reader, this Form 10-K/A presents the Original Report in its entirety, subject to the changes described
below. The following items have been amended and restated as a result of the restatement:
|
● |
Part I - Item 1
- Business |
|
● |
Part I - Item 1A
- Risk Factors |
|
● |
Part II - Item 7
- Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
● |
Part II - Item 8
- Consolidated Financial Statements and Supplementary Data |
|
● |
Part II - Item 9A
- Controls and Procedures |
|
● |
Part IV - Item 15(b)
- Exhibits |
In
addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934 as amended (the “Exchange Act”) we
are also filing new certifications by the Company’s Principal Executive Officer and Principal Financial and Accounting Officer
are filed herewith as Exhibit 31.1, 31.2 and 32.1, respectively, pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act.
Description
of Restatement
On October 15,
2024, the staff of the SEC issued a comment letter to our Form 10-K for the fiscal years ended December 31, 2023 and 2022 (the
“SEC Staff Statement”). The SEC Staff Statement addresses certain accounting and reporting considerations related
to the statements of income (loss) and comprehensive income (loss), stockholders’ equity, and cash flows for the period
from January 1, 2022 to November 30, 2022. In the light of this SEC Staff Statement, the Board of Directors, after discussion
with management, has determined that the financial statements previously filed with the SEC should be restated to reflect the
recognition of the results of operation for the acquisition of Fintech.
In
connection with the restatement, management has re-evaluated the effectiveness of our disclosure controls and procedures and internal
control over financial reporting as of December 31, 2023 and 2022. As a result of that assessment, management has concluded that
our disclosure controls and procedures and internal controls over financial reporting were not effective as of December 31, 2023
and 2022, due to a material weakness in our internal control over financial reporting. See Part II, Item 9A, “Controls and
Procedures.”
TABLE
OF CONTENTS
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This
Annual Report on Form 10-K/A contains forward-looking statements which are made pursuant to the safe harbor provisions of Section
27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as
“may,” “should,” “expects,” “intends,” “plans,” “anticipates,”
“believes,” “estimates,” “predicts,” “potential,” “continue” or the
negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations,
assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial
risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements.
Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking
statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including
the risks and uncertainties inherent in our statements regarding:
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our projected financial position and estimated
cash burn rate; |
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our estimates regarding expenses, future revenues
and capital requirements; |
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our ability to continue as a going concern; |
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our need to raise substantial additional capital
to fund our operation; |
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our dependence on third parties in the conduct
of our operations; |
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our ability to obtain the necessary regulatory
approvals to market and commercialize our products; |
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the impact of a health epidemic, on our business,
our operations or the global economy as a whole; |
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the results of market research conducted by
us or others; |
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our ability to obtain and maintain intellectual
property protection for our current and future products; |
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our ability to protect our intellectual property
rights and the potential for us to incur substantial costs from lawsuits to enforce or protect our intellectual property rights; |
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the possibility that a third party may claim
we or our third-party licensors have infringed, misappropriated or otherwise violated their intellectual property rights and
that we may incur substantial costs and be required to devote substantial time defending against claims against us; |
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our reliance on third-party suppliers and manufacturers; |
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the success of competing payment platforms and
products that are or become available; |
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our ability to expand our organization to accommodate
potential growth and our ability to retain and attract key personnel; |
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the potential for us to incur substantial costs
resulting from product liability lawsuits against us and the potential for these product liability lawsuits to cause us to
limit our commercialization of our products; and |
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the successful development of our commercialization
capabilities, including sales and marketing capabilities. |
All
of our forward-looking statements are as of the date of this Annual Report on Form 10-K/A only. In each case, actual results may
differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements
will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties
referred to in this Annual Report on Form 10-K/A or included in our other public disclosures or our other periodic reports or other
documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”) could materially
and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do
not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions,
estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Annual
Report on Form 10-K/A, even if such results, changes or circumstances make it clear that any forward-looking information will not
be realized. Any public statements or disclosures by us following this Annual Report on Form 10-K/A that modify or impact any of
the forward-looking statements contained in this Annual Report on Form 10-K/A will be deemed to modify or supersede such statements
in this Annual Report on Form 10-K/A.
This
Annual Report on Form 10-K/A may include market data and certain industry data and forecasts, which we may obtain from internal
company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry
publications, articles and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the
information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such
information is not guaranteed. While we believe that such studies and publications are reliable, we have not independently verified
market and industry data from third-party sources.
PART
I.
ITEM
1. Business
Overview
Fintech
Scion Limited (“Fintech Scion”, the “Company”, “we”, “our”, or “us”)
is a fintech enterprise poised to revolutionize the financial landscape through our digital Banking-as-a-Service (BaaS) platform.
Our mission is to empower merchants by furnishing them with an integrated suite of tools, skills, and solutions that streamline
payment services, unlocking a realm of secure, online, and fully managed transactions and settlements. We currently operate through
our wholly-owned subsidiaries based in Malaysia and the United Kingdom.
At
the core of our enterprise lies a sophisticated financial ecosystem, underpinned by a robust technological infrastructure. This
infrastructure has been developed with the mission of empowering financial institutions to offer seamless, consolidated experiences
across diverse verticals encompassing business-to-business, business-to-consumer, and consumer-to-business domains.
In
an era where merchants are leveraging an array of software solutions and digital tools to bolster their competitive edge, our
role has emerged as a pivotal enabler. The intricate challenge of managing disparate software systems sourced from various providers
has become an impediment for merchants of all sizes to seamlessly embrace payments.
Our
current clientele encompasses an array of enterprises and organizations, spanning varied sectors, including, but not limited to
the management consultancy services, development of software and programming activities, e-commerce, tours and entertainment operations,
information technology and investment banking all with a common objective: to minimize the intricacies and costs associated with
fund transfers. We extend our services to online businesses, providing comprehensive solutions encompassing payment collection,
cross-border transactions, FX services, and corporate bank accounts.
Our
cutting-edge payments platform boasts a comprehensive suite of integrated payment products and services tailored to various channels–be
it in-store, online, or through mobile and tablet interfaces. This suite encompasses end-to-end payment processing for an array
of payment types, merchant acquiring and issuing, diverse methods of mobile and contactless payments, and QR code-based solutions.
Complementary software integrations, virtual international bank account numbers (IBAN), integrated mobile point-of-sale (POS)
solutions, risk management tools, and robust reporting and analytics capabilities augment our platform’s offerings.
Our
payment services seamlessly integrating e-money remittance solutions within the global marketplace, spanning open banking and
credit card processing to wire transfers. Our unique Software-as-a-Service (SaaS) model empowers clients to focus on their core
operations and sales while we handle the intricate aspects of payment processing. This streamlined approach facilitates efficient
onboarding, elevates customer retention, and cultivates new revenue streams.
Our
vision transcends boundaries as we aspire to cement our position as a global leader in the payments and banking sphere. Our team,
comprising seasoned experts across operations, technology, sales, legal, compliance, and more, forms the backbone of our enterprise.
The
crux of our vision lies in simplifying and automating global fund transfers while upholding the highest standards of security.
We endeavor to furnish merchants with an all-encompassing Merchant Payment Ecosystem (MPE), a unified platform catering to their
diverse payment needs. Our technology leverages the Gateway Cashier Technology to deliver unparalleled services.
Our
diverse merchant base ranges from small to medium-sized enterprises, or SMEs, to large enterprises, spanning sectors such as hospitality,
e-gaming, consulting, retail, marketing, and e-commerce. While we are rooted in the SaaS framework, our belief in democratizing
technology has led us to offer an initial free platform, generating revenue through value-added services.
Our
revenue streams encompass processing fees based on payment volumes, a hybrid model featuring fixed transaction fees and
monthly charges, and diverse layers that allow us to cross-sell services and nurture lasting client relationships. Currently,
we derive all our revenues from our operating subsidiaries based in Malaysia and the United Kingdom. For the fiscal year
ended December 31, 2023, we recorded revenue of $2,420,184, with 81.9% of such revenue being derived from our operating
subsidiaries in the United Kingdom and the remaining 18.1% from our Malaysian subsidiaries. We also recognized a net loss of
$40,662,716 during the fiscal year ended December 31, 2023, primarily resulting from an impairment loss of $39,136,871 (see
Note 5 to the consolidated financial statements for a discussion of the Company’s Goodwill).
In
the competitive landscape, our distinct layers constitute the heart of our approach, underpinned by a commitment to exemplary
customer service. We understand the nuanced needs of various merchants and have meticulously curated layers tailored to their
requirements, including cutting-edge technology, diverse payment processing and integrated banking. These layers collectively
form the bedrock of our operations, fostering seamless merchant experiences and propelling us to the forefront of the industry.
As
we chart our course, we stand poised to not only cater to our diverse clientele but to exceed their expectations. Our pursuit
of excellence remains unwavering as we continue to innovate, expand our offerings, and forge new partnerships to reshape the payments
and banking landscape.
Corporate
History and Structure
We
were incorporated in the state of Nevada on November 19, 2013 as “Albero, Corp.” On January 8, 2016, we changed our
name to “Vitaxel Group Limited.” On March 2, 2022, we changed our name to “HWGC Holdings Limited.” On
May 16, 2023, we changed our name to “Fintech Scion Limited.”
On
July 21, 2022, we entered into a share exchange agreement with FintechCashier Asia P.L.C. (formerly known as HWGG Capital P.L.C.),
a Labuan company (“FintechAsia”), and all of the shareholders of FintechAsia pursuant to which all shareholders of
FintechAsia irrevocably agreed to transfer and assign to the Company all FintechAsia’s shares held by the shareholders in
exchange for newly issued shares of the Company’s common stock, par value $0.001 per share. Following the closing of the
share exchange on November 15, 2022, FintechAsia became a wholly-owned subsidiary of the Company.
On
August 9, 2022, we entered into another share exchange agreement with Fintech Scion Limited (“Fintech”), a private
limited company incorporated in the United Kingdom, and all of the shareholders of Fintech pursuant to which All shareholders
of Fintech irrevocably agreed to transfer and assign to the Company all of Fintech’s shares held by such shareholders in
exchange for an aggregate of 101,666,666 newly issued shares of the Company’s common stock, par value $0.001 per share.
Following the closing of the share exchange on November 30, 2022, Fintech became a wholly-owned subsidiary of the Company.
On
December 30, 2022, we entered into a stock purchase agreement with Mr. Leong Yee Ming, the previous Chief Executive Officer of
the Company (the “Purchaser”), pursuant to which the Company sold to the Purchaser all issued and outstanding shares
of Aelora Sdn Bhd (“ASB” and formerly known as Vitaxel Sdn Bhd) and Vitaxel Online Mall Sdn Bhd (“Vionmall”,
and together with ASB, the “Former Subsidiaries”). The Company sold the Former Subsidiaries for an aggregate purchase
price of RM4,500,002 (the “Purchase Price”), with RM4,500,000 allocated for the purchase price of ASB and RM2 for
the purchase of Vionmall. The Purchase Price was paid by the Purchaser’s assumption of a certain amount of intercompany
debt owed by the Company to ASB. Pursuant to the terms of the agreement, the Company and ASB assigned, and the Purchaser’s
assumed, that portion of intercompany debt equal to the Purchase Price and in full satisfaction of the Purchase Price. Following
the completion of the disposal of the Former Subsidiaries to the Purchaser on the same day, ASB and Vionmall ceased to be the
subsidiaries of the Company as of December 30, 2022.
On
October 11, 2023, we entered into an Asset Conveyance Agreement (the “Purchase Agreement”) with CICO Digital Solutions
Limited, a British Columbia company (“CICO” and a related party company that has a common control by a major shareholder
of the Company). The Purchase Agreement provided for the acquisition by the Company of substantially all of the assets of CICO
(the “Assets”) related to CICO’s business of providing a service platform and software application for payment
services from CICO. As consideration for the transfer and sale of the Assets, the Company issued CICO 100,000,000 restricted shares
of common stock of the Company, par value $0.001 per share (the “Shares”).
On
December 27, 2023, the Company and CICO mutually and voluntarily agreed to unwind the transaction contemplated by the Purchase
Agreement. Upon termination, each of the parties to the Purchase Agreement were relieved of their respective rights, liabilities,
expenses and other obligations under the Purchase Agreement. In connection therewith, CICO transferred the Shares back to the
Company for cancellation upon receipt. The Shares were cancelled and removed from the Company’s issued and outstanding shares
of common stock on January 30, 2024.
The
diagram below illustrates our corporate structure:
*HWGC
KZ Limited and HWG Cash Singapore Ptd Ltd. are dormant.
Range
of Services
Our
comprehensive suite of services is carefully tailored across six strategic business areas, each designed to cater to the distinct
needs of our diverse clientele. These business areas represent the core of our operations, enabling us to offer a seamless and
integrated payment ecosystem to merchants worldwide.
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Payment Services
Provider (PSP): Operating under the brand name FintechCashier, we excel as a PSP, facilitating international payment solutions
for merchants by collaborating with card acquiring banks and alternative payment solution providers. Our expertise in this
domain empowers merchants to effortlessly navigate the complexities of cross-border transactions. |
Our
PSP service provides an intermediary payment platform to facilitate efficient payment transactions between merchants. Users of
our PSP platform have the ability to initiate payment to a supplier, or collect payment from a customer. These payments are processed
through our banks with all fund movement reflected in the user’s individualized e-wallet. Our PSP service offers both merchant
and supplier users the flexibility to choose their preferred currency when initiating and collecting payment, respectively. We
collect a fee from a user’s e-wallet for each completed transaction. Therefore, users must have sufficient funds to complete
each payment transaction and pay our fee prior to being able to complete the transaction.
Users
have the option of utilizing our PSP services through an already established API operating system, e-mail and mobile messaging
services, or in tandem with our Business Accounts service as more fully described below.
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Business Accounts:
Our specialized business account services extend across diverse industries and currencies, offering tailored solutions
to corporate entities. We assist our clients in establishing and managing corporate accounts, ensuring they can seamlessly
operate on a global scale, irrespective of their sector. |
Our
Business Account services establish the operating system needed to utilize our PSP service platform, including use of our e-wallet
feature allowing users to monitor funds, track payment transactions in real time and review transaction history. Users of our
Business Accounts services experience our full payment service ecosystem to seamlessly integrate our PSP service platform and
operating system to maximize the potential customer experience. We charge an annual fee for our Business Accounts services.
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SEPA & SWIFT
Payments: Our proficient settlement services encompass SEPA and SWIFT payments, enabling swift and secure fund transfers
for merchants and business clients across international banks. Our streamlined process involves efficient inter-account fund
transfers, culminating in the issuance of SWIFT or SEPA payments. |
Our
PSP service platform utilizes SEPA and SWIFT payments through our partner banks to carry out all payment transactions. We do not
currently have direct access to SEPA or SWIFT payments and rely on our bank partners to utilize these services to ensure our customers
experience smooth and secure transfers of funds.
We
do not charge an additional fee for incoming or outgoing SEPA or SWIFT payment services as the fee is included in our PSP service
fees. We absorb all fees charged by our partner bank for use of SEPA or SWIFT payments.
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Foreign Exchange
(FX) Conversion: Through strategic partnerships, we provide foreign exchange payment solutions, facilitating seamless
currency conversion for clients. Whether it’s settling invoices, processing payrolls, or making payments for goods and
services, our FX conversion services ensure seamless and efficient transactions. |
Our
FX conversion services provide foreign currency conversion services for our customers. Through third party brokers, users of our
PSP services or Business Accounts services are able to exchange currency, provided they have the sufficient balance in their e-wallet
of in our designated bank account to fund the conversion transaction.
We
require users of our FX conversion services to inform us of the currency they intend to convert, at which point we determine the
fees associated with such conversion, including the exchange rate fee, our fee and other transaction-related fees such as bank
charges. Upon the user’s agreement to the total fee amount, we instruct our brokers to carry out the exchange. These transactions
typically take 1-2 days, but may take as long as one week depending on the customer requests or a disagreement on the exchange
rate.
Our
customers are not required to register with our brokers to utilize our FX conversion services, as the brokers work with us directly.
Our fees are fixed and do not include mark-up fees on the exchange rate. Any mark-up fees on the exchange rate would be added
by our brokers and passed on to the customers.
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Acquirer Services:
As a global player, we specialize in offering debit and credit card acquiring services to online merchants across the
globe. Our network extends through PSPs and Independent Sales Organizations, ensuring a robust and secure payment acceptance
framework. |
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Whitelabelling:
Our whitelabelling service presents a fully customizable merchant back office platform, complete with comprehensive access
to an array of banking payment methods. This tailored solution empowers merchants to seamlessly integrate their operations
within a unified framework. |
Within
these strategic business areas, we have structured three distinct service layers, all seamlessly integrated within a single platform.
This holistic approach empowers merchants to expand their operational horizons, fueling their growth within a unified payment
ecosystem.
Fintech
Digital Solution Limited is a software technology provider combining hundreds of payment providers and payment methods under one
platform. In response to updated regulatory compliance mandates from the United Kingdom, potentially impacting our operations
as of December 2023, our management has opted to discontinue the EMD agency service. However, our management team remains committed
to collaborating with various firms across multiple jurisdictions where regulatory licenses or registrations are essential for
our operations. We are actively engaging with licensed and regulated entities on a referral basis to ensure seamless continuity
of our services including Business Accounts, SEPA & SWIFT Payments and Foreign Exchange (FX) Conversion services and maintaining
our commitment to delivering reliable payment solutions without any interruption.
Integrated
Solutions and Advanced Capabilities
Our
Merchant Payment Ecosystem (MPE) is grounded in rigorous Know-Your-Customer (KYC) protocols and fortified by robust fraud and
risk management tools. Certified compliance with the European Union’s General Data Protection Regulation (GDPR) and the
Payment Card Industry Data Security Standard (PCI DSS) Level 1 underscores our commitment to safeguarding sensitive data. Operating
at the nexus of multiple currencies and nations, we seamlessly facilitate payment services, encompassing transactions, payouts,
and settlements.
Our
ethos is rooted in agility and innovation, with a steadfast dedication to swift and precise operations. Our service portfolio
extends across the entire end-to-end payment continuum, spanning clients, merchants, PSP providers, affiliates/partners, and harmonious
integration with acquiring banks and solution providers. This inclusive approach ensures seamless interactions across the global
payments landscape.
Powered
by our cutting-edge technology and advanced payment solutions, businesses can manifest their service visions without being constrained
by the intricacies of payment plan budgeting. Our meticulously designed layers cater to diverse merchant needs, ensuring a tailored
fit for every scenario. The FintechCashier onboarding engine serves as a discerning guide, meticulously analyzing applications
and seamlessly aligning merchants with the most pertinent service layer or offering.
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Technology Layer:
At the vanguard of our architecture is the Technology Layer, meticulously engineered to target key verticals within the
market. Anchored by a PCI DSS Level 1 certified payment gateway, recognized by industry titans VISA and MasterCard, this layer
seamlessly integrates a plethora of service providers. From credit card acquirers to issuers, corporate accounts to open banking,
transaction monitoring to Know-Your-Customer and Know Your Business compliance, our technology layer converges diverse functionalities
into a cohesive whole. |
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Payments Layer:
Central to our prowess is the Payments Layer, facilitated through subsidiaries under the FintechCashier umbrella. Endowed
with an array of financial and regulatory licenses, we operate as a Merchant of Record (MOR), vested with the authority and
accountability to oversee a gamut of processing accounts. This dynamic allows us to seamlessly onboard small merchants, expertly
managing their comprehensive payment requisites. Notably, our MOR status holds us responsible for maintaining merchant accounts,
processing payments, managing credit card processing fees, and orchestrating seamless compliance with PCI DSS. Our proactive
stance extends further as we embrace the role of a Payment Initiation Service Provider (PISP) under PSD2. This enables us
to extend direct banking services through an open banking infrastructure, a feat made possible through strategic partnerships
and technological integrations. By deftly incorporating open banking functionality within our payment gateway, we have etched
our place as a leader within the payment stack, a multifaceted assortment of technologies that coalesce to offer a comprehensive
payment solution. |
Our
payment ecosystem comprises essential components that collaborate seamlessly to facilitate secure and efficient electronic transactions.
These integral elements collectively underpin businesses’ ability to accept and process electronic payments from customers.
Whether provided by a Payment Services Provider (PSP) as an integrated solution or crafted in-house by merchants, these components
are essential building blocks within the payment landscape:
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Payment Gateway:
Serving as a crucial bridge, the payment gateway connects a merchant’s website or mobile app to the payment processor.
This pivotal link ensures that customers can make secure transactions using their credit or debit cards, thus enabling seamless
and safe payment experiences. |
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Payment Processor:
The heartbeat of the payment process, the payment processor assumes the pivotal role of orchestrating the actual payment
transactions. It encompasses the full spectrum of tasks, from authorizing the transaction to settling it with the customer’s
bank or financial institution, culminating in the successful completion of the payment. |
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Fraud Detection
and Prevention: These vigilant components stand guard against fraudulent activities, functioning as a protective shield
for both merchants and customers. By meticulously scrutinizing transactions and adhering to industry regulations, these components
ensure the integrity and security of each payment. |
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Risk Management:
A robust risk management framework is integral to navigating the complexities of electronic payments. These components
proactively manage and mitigate risks associated with electronic transactions, including challenges such as chargebacks and
potential fraud. By fostering a secure environment, risk management safeguards the payment ecosystem’s stability. |
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Payment Methods:
Diverse and adaptable, payment methods encompass a spectrum of options that customers can leverage to initiate transactions.
Ranging from credit and debit cards to e-wallets and bank transfers, this versatility empowers customers with convenient choices
for conducting transactions. |
Collectively,
these interwoven elements coalesce to form the foundation of an efficient and secure payment stack. This stack can be seamlessly
delivered as a comprehensive solution by a PSP or meticulously assembled in-house by merchants, utilizing an assortment of specialized
tools. Embracing these core components empowers businesses to confidently engage in electronic payment processing, enhancing their
capacity to provide exceptional service while maintaining robust security measures.
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Banking Layer:
FintechCashier’s technology extends to our Banking Layer, where we seamlessly integrate virtual bank accounts into our
payment offerings. This strategic augmentation encompasses both “pay-in” and “pay-out” solutions,
catering to diverse corporate needs. For “pay-in” scenarios, our system facilitates effortless fund collection
from both individuals and corporate entities, accommodating various payment methods such as traditional bank transfers, credit
or debit card payments, and popular online platforms like PayPal. Conversely, our “pay-out” capabilities empower
businesses to efficiently disburse funds to their clients, whether they are individuals or corporations. Our automated onboarding
process ensures merchants can swiftly access bank accounts and payment processing, streamlining operations and enhancing efficiency. |
These
pivotal layers form the cornerstone of FintechCashier’s holistic approach, aimed at harnessing the full potential of the
market. By offering a comprehensive spectrum of efficient payment services, we empower our customers with a range of benefits,
including:
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Currency Support
and Optimized FX Conversion: Seamlessly supporting multiple currencies and optimizing foreign exchange conversion, we
enable businesses to transcend geographic boundaries and operate on a global scale. |
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Multilingual
Support: Our platform’s multilingual capabilities create avenues to explore new markets, fostering expansion opportunities
for our clients. |
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Always-On Management
Portal: Anchored by high availability, cloud-based architecture, and real-time performance, our user-friendly management
portal ensures uninterrupted service continuity, cultivating customer loyalty. |
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Comprehensive
Reporting and Analysis: Clients gain access to robust reporting tools, enabling them to monitor service performance, support
cash flow analysis for various transaction types, and manage chargeback and retrieval disputes. |
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Experienced Team
Support: Our seasoned team provides unparalleled support, guiding clients through the intricacies of the payment landscape. |
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Efficient Onboarding
and Integration: Through a unified platform, we expedite onboarding and integration processes, enabling swift deployment
of new services without hindrances or budgetary constraints. |
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Secured Accessibility:
Clients enjoy secure access to our services through a built-in portal, ensuring the confidentiality and integrity of sensitive
information. |
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Hosted Payment
Page (HPP): Our platform’s integration of a hosted payment page streamlines the checkout process, facilitating “one-click-checkout”
simplicity. |
Our
competitive edge as a comprehensive payment hub eliminates the need for customers to seek disparate service providers. We cater
to every facet of merchants’ payment solution requirements, providing an encompassing gateway to manage operations and relationships.
Services like KYC and AML compliance, customer relationship management (CRM), transaction monitoring, and comprehensive reporting
stand testament to our commitment to ensuring seamless, secure, and efficient payment solutions for merchants across diverse industries.
Diverse
Customer Base
We
cater to a wide array of customers, embracing:
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Enterprises and Organizations: Our services
resonate with entities across all categories, seeking to optimize fund transfer costs while ensuring swift and secure transactions. |
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Online Businesses: For online enterprises,
we present an effective end-to-end solution for the intricate realm of online selling. This encompasses seamless payment collection
and streamlined cross-border transactions, enabling businesses to flourish on a global scale. |
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Specialized Online Businesses: A distinctive
facet of our customer spectrum encompasses specialized online businesses facing challenges in establishing and maintaining
physical bank accounts across the diverse territories they operate in. This category is particularly relevant for Small and
Medium-sized Enterprises (SMEs) and online businesses. |
In
stark contrast to relying on a handful of major customers for our revenue stream, our approach emphasizes a diverse customer portfolio.
This strategic stance fortifies our stability and resilience in the market, safeguarding against over-dependence on any single
client.
Operational
Excellence and Support Services
Our
operational infrastructure is meticulously crafted to deliver unparalleled customer experiences across the entire payment ecosystem.
Our suite of operations and support services encompasses:
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Merchant Underwriting: Our adept merchant
underwriting team meticulously evaluates applications and assesses risks for new merchants. By focusing on markets with high
card-present volume and minimal fraud and chargeback losses, our underwriting strategy offers low-risk profile merchants an
expedited activation, augmenting their customer journey. |
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Merchant Onboarding and Activation: Through
our user-friendly web-based portal, business proprietors can swiftly sign up for a merchant account. For enterprises, our
dedicated merchant onboarding and activation team collaborates closely with partners to facilitate a seamless transition from
sales to implementation and activation. Our streamlined process and automated approvals enable rapid and frictionless onboarding,
empowering us and our partners with accelerated speed-to-market. In fact, even the most intricate and sizable merchants can
be onboarded within a mere 48 hours of application submission. |
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Merchant Training: We furnish merchants
with comprehensive training materials through a dedicated department and content delivery platform, ensuring their adept utilization
of our offerings. |
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Merchant Risk Management: Our vigilant
risk management operations entail ongoing monitoring of merchant accounts. Supported by dedicated security and regulatory
assistance (including compliance support, vulnerability scanning, system monitoring, and breach aid), our systems are configured
to automatically surveil activities warranting heightened scrutiny. This proactive approach mitigates losses attributed to
fraud and defaults. |
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Merchant Support: Operating round the
clock, seven days a week, 365 days a year, our merchant support team is unwavering in its dedication to addressing merchant
inquiries. Whether pertaining to systems integration or technical solutions, our team delivers expert customer support. Additionally,
our cadre of merchant account specialists guides merchants through the entire payment acceptance journey, from onboarding
to settlements and reporting. With a resolute focus on swift issue resolution, we provide unparalleled payment expertise and
support, reducing repeat calls and enhancing operational efficiency. |
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Software Integrations and Compliance Management:
A dedicated team of engineers and technical support staff oversees software integrations and ensures full compliance with
security and regulatory requisites. This encompasses support for PCI and Payment Application Data Security Standard compliance,
along with system integration and configuration guidance. |
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Partner Support: Our committed support
teams collaborate closely with software providers to address inquiries or issues pertaining to the integration of our products
and solutions into their software suites. We strive for comprehensive issue resolution by harmonizing relevant departments,
optimizing partner support. We also extend assistance in resolving matters encompassing our partners’ entire merchant
portfolio or incidents affecting individual merchants. |
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Partner Services: Through our partner-centric
customer relationship management system, partners can track the real-time activation progress of new merchant accounts. This
comprehensive system empowers partners to monitor their merchant portfolio, encompassing commissions, residual payments, and
even support interactions, all in a precise and real-time manner. Automation has been seamlessly woven into these processes
to ensure an impeccable experience and heightened financial efficiency. |
Business
Strategy and Revenue Generation
Over
the forthcoming five years, Fintech Scion and its subsidiaries are resolutely committed to expanding market presence and becoming
a preeminent force in the Banking-as-a-Service realm and a global in payment solutions. This entails broadening our current array
of services and licenses to establish an even more extensive and comprehensive payment ecosystem.
A
pivotal facet of this strategy involves strategic acquisitions and investments within the payment landscape. This approach, as
envisioned by our directors, will foster rapid revenue growth while maintaining prudent control over operating costs.
Our
overarching strategy encompasses the following elements:
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Robust Software
Model: We are dedicated to crafting a robust software model that aligns seamlessly with the diverse requirements of businesses
of varying scales. |
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Flexibility in
Product Offerings: Flexibility remains at the core of our product offerings, allowing us to tailor custom solutions that
precisely cater to our clients’ unique needs. |
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Market Leadership
and Innovation: As a market leader, we are deeply attuned to the evolving marketplace. Continuous research and development
will be an integral part of our approach, allowing us to integrate cutting-edge products into our business portfolio and remain
ahead of industry trends. |
|
● |
FintechCashier’s
Vision: Our vision for FintechCashier is centered on empowering merchants worldwide to expand their businesses. This will
be achieved through state-of-the-art payment technology coupled with financial services that are transparent and free of hidden
costs. Our motto is encapsulated in the mantra “One Application, One Integration, Pay as You GO.” |
Our
business cases are compelling, with clear value propositions for various segments:
|
● |
SMEs: Simplifying
global payment acceptance through a single integration, streamlining operations and enhancing their growth prospects. |
|
● |
Fintechs: Amplifying
the capabilities of fintech companies, enabling them to construct more robust and scalable products. |
|
● |
PSPs/Card Acquirers:
Elevating these entities into more accessible providers, offering a comprehensive platform with over 280 API integrations
and simplified onboarding processes. |
Value
Addition to Customers
We
augment the value for our customers in the following ways:
|
● |
SMEs: Simplifying
global payment acceptance through a single integration, reducing operational complexity. |
|
● |
Fintechs: Enabling
the expansion of their offerings, leading to the creation of more advanced and scalable products. |
|
● |
PSPs/Card Acquirers:
Transforming these entities into easily accessible providers with a comprehensive platform, streamlined onboarding, and
extensive API integrations. |
Marketing
Approach
Our
marketing initiatives encompass a diverse range of channels, ensuring broad and effective outreach:
|
● |
Direct Sales:
Our direct sales team employs a multifaceted approach, encompassing techniques like cold calling, networking, and in-person
presentations. They are driven to generate leads and secure sales, while also nurturing customer relationships and collecting
feedback to inform product development. |
|
● |
Social Media:
Our marketing team fosters brand awareness on prominent social media platforms, including Facebook, Twitter, and LinkedIn,
enabling us to reach a vast audience. |
|
● |
Website and Mobile
Optimization: A meticulously optimized website and mobile interface are designed to enhance user experience, foster easy
navigation, and improve search engine visibility. |
|
● |
Adwords and Online
Advertising: We leverage pay-per-click (PPC) advertising, cost-per-thousand advertising, and site-targeted advertising
to effectively promote our offerings through text, banner, and rich-media ads. |
|
● |
Partnerships:
Collaborations with established banks and financial institutions serve as a conduit to reach a broad spectrum of businesses
annually. |
|
● |
Affiliate Program:
An affiliate program with a commission-based structure is designed to attract new customers through affiliates, expanding
our customer base. |
Industry
Opportunity
We
believe the fintech industry is attractive for a number of reasons:
|
● |
Large Total Addressable Market: The
financial services industry represents a significant part of the economy. According to a research report by The Business Research
Company, a global market research and consulting firm, the financial services market has experienced significant growth in
recent years. The firm anticipates that the market will continue to expand, projecting a growth from $31.1 trillion in 2023
to $33.5 trillion in 2024, with a compound annual growth rate (“CAGR”) of 7.7%. Furthermore, it is forecasted
to reach $44.9 trillion by 2028, with a CAGR of 7.6%. |
|
(1) |
https://www.thebusinessresearchcompany.com/report/financial-services-global-market-report |
Broad
Universe of Potential Targets: The total global fintech market attained a value of more than $140 billion in 2023, and
expected to grow at a CAGR of 12% to reach over $270 billion by 2027(2).
|
(2) |
https://beinsure.com/ranking/biggest-fintech-unicorn-startups-in-world/ |
|
● |
Pace of Growth
and Innovation Across Subsectors: In fintech, we believe the pace of innovation in the private and public sectors is accelerating.
There has been significant disruption and change in the delivery of financial services across many subsectors in recent years,
including, among others: |
|
○ |
APIs, including
open banking and account connectivity; |
|
○ |
Big data, analytics
and information technology; |
|
○ |
Digital assets and
blockchain technology; |
|
○ |
Exchanges and trading
platforms, including capital markets technology; |
|
○ |
Insurance technology
and services (“insurtech”); |
|
○ |
Lending and underwriting
technology; |
|
○ |
Real estate, mortgage
and prop tech services (“proptech”); |
|
○ |
Regulatory technology
for financial services (“regtech”); |
|
○ |
Risk technology,
including fraud and identity protection and cyber and data security; and |
|
○ |
Wealth management
technology (“wealthtech”). |
|
● |
Accelerated Adoption
Rate for Innovation in Financial Services: Over the last decade, fintech has steadily increased its share of the global
economy, and the financial services industry has become one of the largest consumers of technology worldwide, spending over
$500 billion on technology annually. These adoption levels continue to benefit from robust secular tailwinds including the
growth in digital commerce, the proliferation of mobile technology, the ubiquitous acceptance of digital payments and continuous
technological advancement, positioning the sector for long-term growth. |
|
● |
Attractive for
Public Markets: Over the past few years, the public market’s demand for high-growth fintech prospects has increased,
as public market investors continue to seek access to private fintech companies that offer disruptive technologies and solutions. |
Market
Opportunity
In
general, FinTech-as-a-Service (FaaS) is gaining attention, leveraging modern technology to aid multiple segments, including Lending,
Credit, and Payments, in resolving long-standing challenges. Businesses are increasingly turning to FaaS to optimize their processes
and increase efficiency. Customer satisfaction and customer retention are two compelling reasons why numerous companies are now
adopting FaaS. Legal compliance and optimal security mechanisms are additional benefits. Using FaaS, financial and non-financial
companies can automate their financial processes and offer customers hassle-free access to credit and services.
FaaS
automates financial processes and makes them efficient, eliminates cumbersome paperwork, and reduces human intervention. Robotic
automation frees up working hours for more valuable tasks. The result—streamlined workflows, thorough document analyses,
and quick results. By integrating FaaS, companies can significantly reduce the turnaround time for the entire financial process
and improve customer experience.
We
believe FaaS has tremendous growth potential with its ability to bridge the gap between traditional legacy structures and next-generation
technology. We predict both financial and non-financial companies will continue to adopt FaaS in effort to improve financial processes,
reduce human intervention and increase personalization.
In
a recently published Financial Services Global Market Report 2024 published by The Business Research Company, it is predicted
that the global financial services market will grow from $31.14 trillion in 2023 to $44.93 trillion in 2028 (CAGR
7.6%).
FinTech-as-a-Service
(FaaS) exhibits immense growth potential and is gaining considerable traction. By harmonizing traditional and modern elements
and bridging the divide between legacy systems and cutting-edge technology, FaaS provides insights into the evolution of the hybrid
future. Furthermore, as businesses strive to enhance financial operations, minimize manual intervention, and enhance personalization,
FaaS is poised for rapid and enduring adoption across financial and non-financial sectors in the foreseeable future.
We
believe our three layer diversified approach in the payment space minimizes our reliance on any one market to to best position
our growth opportunities.
|
● |
Technology Layer
– Payment Gateway Market – according to an April 2024 report published by MarketandMarkets Research Pvt. Ltd,
there was a market size of$23.3 billion in 2023 and is expected to grow to $28.8 billion by 2029, with a CAGR of 12.9%. |
|
● |
Banking Layer –
Digital Payment Market – According to an October 2023 report published by MarketandMarkets Research Pvt. Ltd, there
was a market size of $111.2 billion in 2023 and is expected to grow to 193.7 billion by 2028, with a CAGR of 11.8%. |
|
● |
Payment Layer –
Payment Processing Market – According to an July 2023 report published by MarketandMarkets Research Pvt. Ltd, there
was a market size of $103.2 billion in 2023 and is expected to grow to $160.0 billion by 2028, with a CAGR of 9.2%. |
The
below table summarizes these market opportunities:
|
2023 |
2028 |
2029 |
CAGR |
Payment
Gateway Market |
$23.3
billion |
— |
$48.4
billion |
12.96% |
Digital
Payment Market |
$111.2
billion |
$193.7
billion |
— |
11.80% |
Payment
Processing Solutions Market |
$103.2
billion |
$160.0
billion |
— |
9.2% |
We
believe we will be able to maintain and even increase our market share revenues over the next two to three years based on the
expected growth of the overall market.
Acquisition
Strategy
We
intend to acquire one or more high-quality businesses that can generate attractive, risk-adjusted returns for shareholders. To
that end, our acquisition and value creation strategy is to identify, acquire and, after our initial business combination, enhance
the growth of a company in the fintech industry that complements our experience and expertise.
We
believe that the following value propositions will allow us to source businesses which will not only bring value to us but also
bring transformative change and exponential growth to them :
|
● |
Best-in-Class
Sourcing Capabilities: our global network of relationships with financial services and technology company CEOs, founders,
boards of directors and private equity sponsors provides us with a proprietary avenue for sourcing target businesses. |
|
● |
Deep Insights
Across the Fintech Industry: We believe that our management team’s extensive knowledge of the fintech industry,
understanding of economic and regulatory nuances globally and expertise in technology go-to-market strategies and business
models provide us with a differentiated ability to evaluate promising target businesses. |
|
● |
Proven Experience
in Consummating Transactions: We believe that our management team’s extensive mergers and acquisitions experience,
with a distinct reputation for navigating transaction complexities, is a significant advantage. Our management team have demonstrated
ability to negotiate and structure transactions, evaluate corporate strategies, access growth capital and develop appropriate
capital structures. |
|
● |
Significant Financial
Services and Technology Investment Experience: our management team has extensive experience in analyzing attractive financial
services and technology investments in individual equity opportunities. We believe that our proficiency in this area can help
us evaluate compelling business combination opportunities. |
Fintech
Scion will actively pursue mergers and acquisitions to elevate the performance of our portfolio businesses. Our primary aim is
to drive their growth by expanding their size, capabilities, and market presence in their respective industries. These strategic
initiatives are designed to unlock synergies and enhance overall performance. Furthermore, we will allocate resources to develop
scalable platforms that empower our portfolio businesses, enabling them to achieve accelerated growth.
Competitive
Strengths
FintechCashier
competes with a range of providers, each of whom may provide a component of our offering, but do not provide an integrated offering
capable of solving complex business challenges for software partners and merchants. For certain services and solutions, including
end-to-end payments, we compete with third-party payment processors and integrated payment providers.
The
competitive landscape across the three layers are shown in the table:
Layer |
Market
Sector |
Competitors |
Technical |
Payment
Gateway Market |
Crassula,
Contis, Mambu, Sblock |
Payments |
Payment
Processing Market |
Nuvei,
Worldpay, Checkout, Ayden |
Banking |
Digital
Payment Market |
Solaris
Bank, Tide Mollie, Revolut, Marqueta |
We
believe our market opportunity is demonstrated by a number of recent transactions completed by our competitors throughout the
three layers outlined above. With respect to the technical layer, in a December 2021 Series E funding round, Mambu raised $265.7
million, for a company valuation of $5.4 billion post-money. With respect to the banking layer, our competitor Revolut, cites
a $33 billion market cap while another competitor, Marqueta is valued today at nearly $3.7 billion.
Unlike
many players in the market FintechCashier is not exclusively focused on payments. By targeting different layers, it can provide
full solutions for customers covering all their payment needs.
Combining
all layers under one platform, FintechCashier solution creates a greater market opportunity and potential for increasing market
penetration.
The
following direct competitors have been identified:
|
a) |
Simplex –
Fully regulated as a financial institution, Simplex processes credit card payments with a 100% fraud protection guarantee
– in case of a fraud chargeback, the merchant gets paid by Simplex. Utilizing its cutting-edge fraud prevention solution
and AI technology, Simplex blocks fraudulent users and allows legitimate users to complete payments, thereby, increasing conversion
rates and enabling merchants to focus on their business growth. In today’s banking echo-system Crypto-related businesses
are underserved. Simplex enables personal individuals and businesses to get an EU IBAN account for their banking activity
having all the necessary payment account functions. |
|
b) |
SafeCharge –
mission is to unleash the transformational capabilities of modern payments technology for merchants; putting them in control
and empowering them to achieve more. SafeCharge has developed the industry’s first Native+ Payments Engine. Native,
because it has been built from the ground-up as a platform to cover the full payment value chain, providing merchants with
all the benefits of an end-to-end secure payment processing solution. It enables a connection to other payment and risk management
partners. |
|
c) |
Rapyd –
claims to offer the fastest way to power local payments anywhere in the world, enabling companies across the globe to
access markets quicker than ever before. By utilizing Rapyd’s payments network and FinTech-as-a-Service platform, businesses
and consumers engage in local and cross-border transactions in any market. The Rapyd platform is unifying fragmented payment
systems worldwide by bringing together 900-plus payment methods in over 100 countries. |
FintechCashier
believes it can compete with these and other providers in the industry by virtue of:
|
a) |
Offering a faster
solution – the onboarding offered by FintechCashier is much quicker than other systems. It is optimized to allow clients
to deploy in a minimum of time, with less hassle, enabling them to focus on their business rather than back office activities. |
|
b) |
High level of service
– FintechCashier is more flexible and more client centric, with the ability to respond quickly and personally, and to
have the ability to make changes and create new applications to meet client needs. |
|
c) |
FintechCashier understands
that small businesses will often grow into large enterprises and it has a strong interest in nurturing clients as their businesses
grow. Our user-friendly and professional team is always on hand to answer questions and provide professional and responsive
support, before, during and after sign up. |
|
d) |
Competitive pricing
– FintechCashier’s priority is to be highly competitive in pricing, as it understands that its’ clients
are price sensitive. |
|
e) |
FintechCashier
has the capability to incorporate additional features to cater to the evolving requirements of its clients. Recognizing that
businesses undergo changes, FintechCashier actively listens to customer needs and adapts by either providing tailored solutions
or integrating a comprehensive range of services into its offerings. This flexibility empowers clients to incorporate or switch
features as their businesses evolve. |
Employees
As
of the date of this Annual Report on Form 10-K/A, we have approximately 23 full-time employees who work primarily in onboarding,
compliance and operation. We have employment contracts with all of our full-time employees. We are not a party to any collective
bargaining agreements, and we believe that we maintain good relations with our employees.
Intellectual
Property
We
rely on a combination of trademark, domain names, and trade secret laws, as well as employee and third-party nondisclosure, confidentiality,
and other types of contractual arrangements to establish, maintain and enforce our intellectual property rights, including with
respect to our proprietary rights related to our products and services. In addition, we use service platform technology, have
an exclusive distribution technology license and license technology from third parties.
As
of the date of this Annual Report on Form 10-K/A, we own rights to domains (fintechcashier.com, fintechcashier.co.uk, hwgc.tech,
hwgcash.kz, hwggcapital.com and hwgcash.com) and trade names (FintechCashier) and their respective logos. In
addition, we own a portfolio of trademarks in multiple jurisdictions around the world and have registered our primary trademark,
FintechCashier.
Properties
Our
corporate headquarters, which include the majority of our product development, sales, marketing, and business operations, is located
at M Floor & 1st Floor, No. 33, Jalan Maharajalela, 50150, Kuala Lumpur, Malaysia, supported by our United Kingdom
branch located at 2 Portman Street, W1H 6DU, London, United Kingdom and Asian branch located at Lot 2-15, Labuan Time Square,
Jalan Merdeka, 87007, Federal Territory of Labuan, Malaysia. Both properties are leased on a rolling contract basis. We believe
this to be sufficient to meet our needs for the foreseeable future and that any additional space we may require will be available
on commercially reasonable terms.
Legal
Proceedings
We
are not a party to existing or pending material legal proceedings against us, and we have no knowledge of any threatened litigation,
nor are we involved as a plaintiff in any proceeding or pending litigation. There are no proceedings in which any of our directors,
officers or any of their respective affiliates, or any beneficial shareholder, is an adverse party or has a material interest
adverse to our interest.
Government
Regulations
Various
aspects of our business and service areas are subject to U.S. federal, state, and local regulation, as well as regulation outside
the U.S., as more fully described below. As we continue to expand our business globally, we will become subject to more government
regulation in new markets.
The
Dodd-Frank Act
In
July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“the Dodd-Frank Act”) was signed
into law in the U.S. The Dodd-Frank Act has resulted in significant structural and other changes to the regulation of the financial
services industry. Among other things, Title X of the Dodd-Frank Act established the Consumer Financial Protection Bureau (“CFPB”)
to regulate consumer financial products and services (including some offered by our partners). The CFPB may also have authority
over us as a provider of services to regulated financial institutions in connection with consumer financial products.
Separately,
the Dodd-Frank Act directed the Federal Reserve to regulate debit interchange transaction fees that a card issuer or payment
network receives or charges for an electronic debit transaction. Pursuant to the Dodd-Frank Act, debit interchange transaction
fees must be “reasonable and proportional” to the cost incurred by the card issuer in authorizing, clearing, and settling
the transaction. Pursuant to the regulations promulgated by the Federal Reserve implementing this “reasonable and proportional”
requirement, debit interchange rates for card issuers operating in the U.S. with assets of $10 billion or more are capped
at the sum of $0.21 per transaction and an ad valorem component of 5 basis points (multiplied by the value of the transaction)
to reflect a portion of the issuer’s fraud losses plus, for qualifying issuers, an additional $0.01 per transaction in debit
interchange for fraud prevention costs. In addition, the regulations contain non-exclusivity provisions that ban debit card networks
from prohibiting an issuer from contracting with any other card network that may process an electronic debit transaction involving
an issuer’s debit cards and prohibit card issuers and card networks from inhibiting the ability of merchants to direct the
routing of debit card transactions over any network that can process the transaction.
On
November 14, 2023, the Federal Reserve issued a notice of proposed rulemaking, pursuant to which the Federal Reserve proposes
to update certain interchange rates for card issuers operating in the U.S. with assets of $10 billion or more. Under the proposed
rule, the base component would decrease from $0.21 per transaction to $0.144 per transaction, the ad valorem component would decrease
from 5 basis points (multiplied by the value of the transaction) to 4.0 basis points (multiplied by the value of the transaction),
and the additional fraud-prevention cost would increase from $0.01 per transaction to $.013 per transaction. Modifications to
the interchange fees permitted could adversely affect our business, financial condition or results of operations. In addition,
members of Congress have periodically introduced legislation to reduce credit card interchange, such as The Credit Card Competition
Act of 2023. If any such legislation is passed, our business, financial condition or results of operations may be adversely affected.
Further,
the ability of payment networks to impose certain restrictions are limited because the Dodd-Frank Act allows merchants to set
minimum dollar amounts for the acceptance of a credit card (while federal governmental entities and institutions of higher education
may set maximum amounts for the acceptance of credit cards). Depending on the card network rules, merchants are now also allowed
to provide discounts or other incentives to entice consumers to pay with an alternative payment method, such as cash, checks,
or debit cards.
The
Dodd-Frank Act granted each the CFPB and the Financial Stability Oversight Council authority to determine whether any non-bank
financial company, such as us, should be supervised by the CFPB or Board of Governors of the Federal Reserve System, respectively.
Any new rules or regulations, implemented by the CFPB or the Financial Stability Oversight Council or in connection with the Dodd-Frank
Act that are applicable to us, or any changes that are adverse to us resulting from litigation brought by third parties challenging
such rules and regulations, could increase our cost of doing business or limit permissible activities.
Privacy
and information security regulations
We,
our partners and certain of our merchants provide services that may be subject to various state, federal, and foreign privacy
laws and regulations, including, among others, the Financial Services Modernization Act of 1999, which we refer to as the Gramm-Leach-Bliley
Act (“GLBA”), the EU General Data Protection Regulation 2016/679 (“EU GDPR”), the California Consumer
Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (the “CPRA”), the United Kingdom General
Data Protection Regulation and Data Protection Act 2018 (collectively, the “UK GDPR”), the Personal Information Protection
and Electronic Documents Act in Canada and Israeli privacy laws, in particular in relation to Finaro. These laws and their implementing
regulations restrict certain collection, processing, storage, use, and disclosure of personal information, require notice to individuals
of privacy practices, and provide individuals with certain rights to prevent use and disclosure of protected information. These
laws also impose requirements for the safeguarding and proper destruction of personal information through the issuance of data
security standards or guidelines. Certain federal, state and foreign laws and regulations impose similar privacy obligations and,
in certain circumstances, obligations to notify affected individuals, state officers or other governmental authorities, the media,
and consumer reporting agencies, as well as businesses and governmental agencies, of security breaches affecting personal information.
In addition, there are state and foreign laws restricting the ability to collect and utilize certain types of information such
as Social Security and driver’s license numbers.
As
a processor of personal data of EU and UK data subjects, we are also subject to regulation and oversight in the applicable EU
Member States and United Kingdom with regard to data protection legislation. The EU GDPR and UK GDPR (collectively referred to
as the “GDPR”) contains additional obligations on data controllers and data processors that have an establishment
in the EU or UK or are offering goods or services to, or monitoring the behavior of, consumers within the EU or UK. The GDPR includes
significant enhancements with regard to the rights of data subjects (which include the right to be forgotten and the right of
data portability), stricter regulation on obtaining consent to processing of personal data and sensitive personal data, stricter
obligations with regard to the information to be included in privacy notices and significant enhanced requirements with regard
to compliance, including a regime of “accountability” for processors and controllers and a requirement to embed compliance
with GDPR into the fabric of an organization by developing appropriate policies and practices, to achieve a standard of data protection
by “design and default.” The GDPR includes enhanced data security obligations, requiring data processors and controllers
to take appropriate technical and organizational measures to protect the data they process and their systems. Organizations that
process significant amounts of data may be required to appoint a Data Protection Officer responsible for reporting to highest
level of management within the business. There are greatly enhanced sanctions under GDPR for failing to comply, and penalties
for certain breaches are up to the greater of EUR 20 million/ GBP 17.5 million or 4% of our global annual turnover.
We are also subject to evolving EU and UK privacy laws on cookies, tracking technologies and e-marketing.
Personal
Data Protection Act 2010 and Personal Data Protection Regulations 2013
The
Personal Data Protection Act 2010 (PDPA) pertains to the legislation and rules governing data privacy and the safeguarding of
personal data. Under the PDPA, it is generally mandated that an individual’s consent is required for the processing and
disclosure of their personal data, unless specified otherwise in the provisions of the PDPA. The term “processing”
has a broad definition, encompassing activities such as collecting, recording, retaining, or storing personal data, as well as
carrying out any operation or series of operations involving personal data, including the following:
|
(a) |
the organization,
adaptation or alteration of personal data; |
|
(b) |
the retrieval, consultation
or utilization of personal data; |
|
(c) |
the disclosure of
personal data by transmission, transfer, dissemination or otherwise making available; or |
|
(d) |
the alignment, combination,
correction, erasure, or destruction of personal data. |
The
Personal Data Protection Regulations of 2013 stipulate that consent must be obtained for the processing of personal data, regardless
of the form in which it can be accurately recorded and maintained by the data user.
Data
users have an obligation to provide written notice regarding the processing of personal data. This notice should include various
details such as a description of the personal data being processed, the purpose for which it is being processed, the source of
the data, the recipients to whom it may be disclosed, whether providing the personal data is mandatory or voluntary, the individual’s
rights to access and correct their personal data, and the options available to limit the processing of the data. The notice must
be provided in both English and the national language of Bahasa Malaysia.
Unfair
trade practice regulations
We,
our partners and certain of our merchants are subject to various federal, state, and international laws prohibiting unfair or
deceptive trade practices, such as Section 5 of the Federal Trade Commission Act and the prohibition against unfair, deceptive,
or abusive acts or practices (“UDAAPs”) under the Dodd-Frank Act, and prohibiting misrepresentations and other activities
related to telemarketing, such as the Telemarketing Sales Act. Various regulatory agencies, including the Federal Trade Commission
(“FTC”) and state attorneys general, have authority to take action against parties that engage in unfair or deceptive
trade practices or violate other laws, rules, and regulations, and to the extent we are processing payments for a client that
may be in violation of laws, rules, and regulations, we may be subject to enforcement actions and incur losses and liabilities
that may impact our business. For example, all persons offering or providing financial services or products to consumers, directly
or indirectly, can be subject to the prohibition against UDAAPs. The CFPB has enforcement authority to prevent an entity that
offers or provides consumer financial services or products or a service provider from committing or engaging in UDAAPs, including
the ability to engage in joint investigations with other agencies, issue subpoenas and civil investigative demands, conduct hearings
and adjudication proceedings, commence a civil action, grant relief (e.g., limit activities or functions; rescission of contracts),
and refer matters for criminal proceedings.
Anti-money
laundering, anti-bribery, sanctions, and counter-terrorist regulations
We
are contractually required to comply with the anti-money laundering laws and regulations in certain countries. In the U.S., we
comply with certain provisions of the Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001, and its implementing regulations
(collectively “the BSA”) which are enforced by the Financial Crimes Enforcement Network, a bureau of the U.S. Department
of the Treasury and the U.S. Department of Justice. We are also subject to anti-corruption laws and regulations, including the
U.S. Foreign Corrupt Practices Act (“FCPA”) and other laws, that prohibit the making or offering of improper payments
to foreign government officials and political figures and includes anti-bribery provisions enforced by the Department of Justice
and accounting provisions enforced by the SEC. The FCPA has a broad reach and requires maintenance of appropriate records and
adequate internal controls to prevent and detect possible FCPA violations. Many other jurisdictions where we conduct business
also have similar anticorruption laws and regulations. We have policies, procedures, systems, and controls designed to identify
and address potentially impermissible transactions under such laws and regulations.
We
are also subject to certain economic and trade sanctions programs that are administered by the Department of Treasury’s
Office of Foreign Assets Control (“OFAC”), which prohibit or restrict transactions to or from, or dealings with, specified
countries, their governments, and in certain circumstances, their nationals, and with individuals and entities that are specially-designated
nationals of those countries, narcotics traffickers, and terrorists or terrorist organizations. Other group entities may be subject
to additional local sanctions requirements in other relevant jurisdictions. We have policies, procedures, systems, and controls
designed to identify and address compliance with sanctions programs.
Similar
anti-money laundering, counter-terrorist financing, and proceeds of crime laws apply to movements of currency and payments through
electronic transactions. These laws also apply to dealings with persons specified in the lists of OFAC-like organizations of several
other countries, and require specific data retention obligations to be observed by intermediaries in the payment process. Our
businesses in those jurisdictions are subject to those data retention obligations.
Corporate
Information
Our
principal executive office is located at M Floor & 1st Floor, No. 33, Jalan Maharajalela, 50150, Kuala Lumpur,
Malaysia, and our telephone number is +603 9226 0908.
Our
website is www.fintechcashier.com. Information provided on, or accessible through, our website, however, is not part of this Annual
Report on Form 10-K/A and is not incorporated herein by reference.
ITEM
1A. Risk Factors
Risks
Related to Our Business and Industry
We
have a limited operating history with a history of net losses, and our revenue growth rate is likely to slow down as our business
matures.
We
recognized a net loss of $40,662,716, primarily resulted from
an impairment loss of $39,136,871 during the year ended December 31, 2023. As a result of
our limited operating history, we have limited financial data that can be used to evaluate our current business, and such data
may not be indicative of future performance. In particular, we have experienced periods of high revenue growth since we began
selling our products and services, and we do not expect to be able to maintain the same rate of revenue growth as our business
matures. In addition, estimates of future revenue growth are subject to many risks and uncertainties, and our future revenue may
be materially lower than projected.
We
have encountered, and expect to continue to encounter, risks and difficulties frequently experienced by growing companies, including
challenges in financial forecasting accuracy, hiring of experienced personnel, hiring of technology employees, determining appropriate
investments, developing new products and features, assessing legal and regulatory risks, among others. Any evaluation of our business
and prospects should be considered in light of our limited operating history, and the risks and uncertainties inherent in investing
in early-stage companies.
Impairment
of goodwill may adversely impact future results of operations.
Accounting
standards require that we account for acquisitions using a method that could result in goodwill. If the purchase price of the
acquired assets exceeds the fair value of the acquired net assets, the excess will be included in our Statement of Financial Condition
as goodwill. We have a significant goodwill balance, and in accordance with GAAP, we evaluate it for impairment at least annually
and more often if events or circumstances indicate the possibility of impairment. Evaluations may be based on many factors, some
of which are the price of our common stock, discounted cash flow projections and data from comparable market acquisitions. A significant
and sustained decline in our stock price and market capitalization, a significant decline in our expected future cash flows, a
significant adverse change in the business climate or slower growth rates could result in impairment of our goodwill. Future evaluations
of goodwill may result in the impairment and write-down of our goodwill balance which could have a material adverse impact on
our earnings and adversely affect our operating results.
We
have identified a material weakness in our internal control over financial reporting and if our remediation of this material weakness
is not effective, or if we fail to maintain an effective system of internal controls over financial reporting in the future, we
may not be able to accurately or timely report our financial condition or operating results, which may adversely affect our business.
In
June 2024, we identified a material weakness in our internal controls over financial reporting related to the recognition of the results of operation for the acquisition of Fintech, and management
has determined that, as of December 31, 2023 and 2022, we did not maintain effective internal control over financial reporting.
This material weakness and our remediation efforts are described in “Controls and Procedures.” Although management
does not believe the misstatements are material to any of the impacted financial statements, we cannot assure you that we will
adequately remediate the material weakness or that additional material weaknesses in our internal controls will not be identified
in the future. Any failure to maintain or implement required new or improved controls, or any difficulties we encounter in their
implementation, could result in additional material weaknesses, or could result in material misstatements in our financial statements.
Such misstatements have resulted in the restatement of the financial statements included in this Annual Report and misstatements
could result in future restatements of our financial statements, cause us to fail to meet our reporting obligations in addition
to stock exchange listing requirements, investors may lose confidence in our reported financial information, our stock price may
decline as a result, and we could be subject to litigation or regulatory enforcement actions.
We
are in the process of remediating the identified material weakness in our internal controls, but we are unable at this time to
estimate when the remediation effort will be completed. If we fail to remediate this material weakness, there will continue to
be an increased risk that our future financial statements could contain errors that will be undetected. We cannot assure you that
the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material
weaknesses. The potential consequences of any material weakness could have a material adverse effect on our business, results
of operations and financial condition. Further and continued determinations that there are material weaknesses in the effectiveness
of our internal controls could impact the operations of our business, including our ability to obtain financing, the cost of any
financing we obtain or require additional expenditures of resources to comply with applicable requirements.
Our
independent auditors have issued an audit opinion for our company, which includes a statement in the critical audit matters, describing
the impairment of goodwill and its financial implications.
In
their audit report included in this Annual Report on Form 10-K/A, our auditors expressed any further goodwill impairment will cause
a significant adverse financial impact on the Company, and that could raise substantial doubt about the Company’s ability
to continue as a going concern.
We
may operate in jurisdictions with historically high rates of inflation.
High
rates of inflation may have an adverse impact on our business, results of operations, financial condition and prospects, and the
market price of our shares of common stock. Rates of inflation in the countries in which we operate have been historically high,
and there can be no assurance that inflation will not return to high levels. Inflationary pressures may adversely affect our ability
to access foreign financial markets, leading to adverse effects on our capital expenditure plans. In addition, inflationary pressures
may, among other things, reduce consumers’ purchasing power or lead certain anti-inflationary policies to be instituted
by the relevant governments, such as an increase in interest rates. There is no assurance that measures taken by the relevant
governments will curb inflation. Inflationary pressures may harm our business, results of operations, financial condition and
prospects, or adversely affect the price of shares of our common stock.
General
fluctuations in interest rates may adversely affect our business and operations.
Instability
and volatility in interest rates may also increase the risks inherent in our business operations. The ability to refinance debt
may depend on the ability to sell new securities in the debt and equity markets, to borrow from banks or otherwise, which may
not be achievable on favorable terms or at all. A deterioration of the global debt markets (particularly the U.S. debt markets),
any possible future failures of financial services companies or a significant rise in market perception of counterparty default
risk will likely significantly reduce demand and liquidity for senior bank high-yield and investment grade debt, which in turn
is likely to lead some banks and other lenders to be unwilling or significantly less willing to engage in our operations, or to
only engage on less favorable terms than had been prevailing in the past. Our ability to generate returns may be adversely affected
we are unable to obtain favorable financing terms for our operations. A market turmoil may have an adverse impact on the availability
of credit to businesses generally, which in turn may adversely affect or restrict our ability to sell or liquidate assets
at favorable times or at favorable prices or which otherwise may have an adverse impact on our business and operations. Interest
rate changes may also affect the value of a debt instrument directly (in the case of adjustable-rate instruments) or indirectly
(in the case of fixed rate instruments). In general, rising interest rates will negatively impact the price of a fixed rate debt
instrument and falling interest rates will have a positive effect on price. The U.S. Federal Reserve may at some point in the
future tighten the monetary supply and increase benchmark interest rates, which would be expected to negatively impact the price
of debt securities and could adversely affect the value of our assets.
If
we cannot keep pace with rapid developments and changes in our industry and continue to acquire new merchants and partners rapidly,
the use of our services could decline, reducing our revenue.
The
electronic payments market in which we compete is subject to rapid and significant changes. This market is characterized by rapid
technological change, new product and service introductions, evolving industry standards, changing client needs, consolidation
and the entrance of non-traditional competitors. In order to remain competitive and continue to acquire new merchants and partners
rapidly, we are continually involved in a number of projects to develop new services and improve our existing services. These
projects may not be successful and carry some risks, such as cost overruns, delays in delivery, performance problems and lack
of client adoption, and may cause us to become subject to additional regulation. Moreover, the merchant base that we target is
varied and non-geographically bound or restricted by scale, making it more challenging to predict demand for our offerings. Any
inability to develop or delay in the delivery of new services or the failure to differentiate our services or to accurately predict
and address market demand could render our services less desirable, or even obsolete, to our clients. In addition, many current
or prospective customers may find competing services more attractive if we do not keep pace with market innovation, and many may
choose to switch to competing services even if we do our best to innovate and provide superior services.
We
rely in part, and may in the future rely in part, on third parties, including some of our competitors and potential competitors,
for the development of and access to new technologies. If we are unable to maintain these relationships, we may lose access to
new technologies or may not have the speed-to-market necessary to launch new offerings successfully.
Our
future success will depend on our ability to adapt to technological changes and evolving industry standards. We cannot predict
the effects of technological changes on our business. If we are unable to adapt to technological changes or evolving industry
standards on a timely and cost-effective basis by introducing new services and improving existing services, our business, financial
condition, and results of operations could be materially adversely affected.
Substantial
and increasing competition, both within our industry and from other payment methods, and disintermediation from other participants
in the payment chain may harm our business.
The
market for payment processing services is highly competitive. Other providers of payment processing services have established
a sizable market share in the merchant acquiring sector. Our growth will depend on a combination of the continued growth of electronic
payments and our ability to increase our market share.
Our
competitors include traditional merchant acquirers such as financial institutions, affiliates of financial institutions and global
payment providers, as well as local payment providers. These competitors and other industry participants may develop products
and services that compete with or replace our value-added products and services, including products and services that enable payment
networks and banks to transact with consumers directly.
Many
of our competitors, particularly those affiliated with large financial institutions, also have substantially greater financial,
technological, operational, and marketing resources than we have. Accordingly, these competitors may be able to offer their products
and services at more competitive prices. As a result, we may need to reduce our fees or otherwise modify the terms of use of our
products and services to retain existing clients and attract new ones. If we are required to materially reduce our fees to remain
competitive, we will need to aggressively control our costs to maintain our profit margins, and our revenue may be adversely affected.
Our risk management team monitors our client relationships and we have at times terminated, and may continue to terminate, client
relationships that may no longer be profitable to us due to such pricing pressure. Moreover, our competitors may have the ability
to devote significantly more financial and operational resources than we can to the development of new products, services or new
technologies or to acquire other companies or technology so that they can provide improved operating functionality and features
to their existing service offerings. If successful, their efforts in this regard could render our products or services less desirable
to clients, resulting in the loss of existing clients, an inability to obtain new clients, or a reduction in the fees we could
generate from our offerings.
Any
of the foregoing could have a material adverse effect on our business, financial condition and results of operations.
In
addition, we are currently facing new competitive pressure from non-traditional payment processors and other parties entering
the payments industry, which may compete in one or more of the functions performed in processing merchant transactions. These
competitors have significant financial resources and robust networks and are highly regarded by consumers. If these competitors
gain a greater share of total electronic payments transactions, or if we are unable to successfully react to changes in the industry
spurred by the entry of these new market participants, then it could have a material adverse effect on our business, financial
condition and results of operations.
Interruption
or failure of our information technology and communications systems could impair our operations, which could also damage our reputation
and harm our results of operations.
Our
success and ability to process payments and provide high quality client service depend on the efficient and uninterrupted operation
of our computer and information technology systems, as our merchant customers expect a consistent level of quality in providing
our services. Any failure of our computer systems and information technology to operate effectively or to integrate with other
systems, performance inadequacy or breach in security may cause interruptions in the availability of our sites, delays in payment
processing and reduced efficiency of our operations. Factors that could occur and significantly disrupt our operations include
system failures and outages caused by fire, floods, earthquakes, power loss, telecommunications failures, sabotage, vandalism,
terrorist attacks and similar events, software errors, computer viruses, worms, physical or electronic break-ins and similar disruptions
from unauthorized tampering with our computer systems and payments platform. While we have certain backup systems and basic recovery
plans for certain aspects of our operations and business processes, we do not have full redundancy in our infrastructure and our
planning does not account for all possible scenarios, and requires further development, review and updates. Any disruptions or
service interruptions that affect our systems could damage our reputation, require us to spend significant capital and other resources
and expose us to a risk of loss or litigation and possible liability. Certain of our agreements with third-party service providers
do not require those providers to indemnify us for losses resulting from any disruption in service. Furthermore, certain critical
processes, such as hosting, cloud and other IT related services, rely on single vendors or components without built-in redundancy.
Accordingly, we are exposed to potential single point of failure issues that could lead to service interruptions. Any such disruptions
could materially adversely affect our results of operations.
In
addition, our platform and internal systems rely on software developed by us or third parties that is highly technical and complex,
and depend on the ability of such software to store, retrieve, process and manage large amounts of data. The software on which
we rely has contained, and may now or in the future contain, undetected programming errors or flaws. Some errors may only be discovered
after the code has been released for external or internal use. Errors or other design defects within the software on which we
rely may result in a negative experience for companies or end users using any elements of our platform, disruptions to the operations
of our merchants, errors, or compromise our ability to support effective user service and user engagement or make us susceptible
to cybersecurity breaches and attacks, or delay introductions of new features or enhancements. Any errors, bugs or defects discovered
in the software on which we rely could result in harm to our reputation and loss of users, which could adversely affect our business,
results of operations and financial conditions.
If
we cannot retain key personnel, our business, financial condition and results of operations may be adversely affected.
We
are dependent upon the ability and experience of our senior leadership, including the President of our Fintech subsidiary, who
have substantial experience with our operations, the rapidly changing payment processing industry, and emerging markets. It is
possible that the loss of the services of one or a combination of our senior executives or key managers, including key executive
officers, could have a material adverse effect on our business, financial condition, and results of operations.
In
a dynamic industry like ours, the ability to attract, recruit, develop and retain qualified employees is critical to our success
and growth. If we are not able to do so, our business and prospects may be materially and adversely affected.
Our
business functions at the intersection of rapidly changing technological, social, economic and regulatory developments that require
a wide-ranging set of expertise and intellectual capital. In order for us to successfully compete and grow, we must attract, recruit,
develop and retain the necessary personnel who can provide the needed expertise across the entire spectrum of our intellectual
capital needs. In addition, we must also develop our personnel to provide succession plans capable of maintaining continuity in
the midst of the inevitable unpredictability of human capital. However, the market for qualified personnel is competitive, and
we may not succeed in recruiting additional personnel or may fail to effectively replace current personnel who depart with qualified
or effective successors, particularly in the technology business. We must continue to hire additional personnel to execute our
strategic plans. Our effort to retain and develop personnel may also result in significant additional expenses, including option
grants, which could adversely affect our profitability. We cannot assure that qualified employees will continue to be employed
or that we will be able to attract and retain qualified personnel in the future. Failure to retain or attract key personnel could
have a material adverse effect on our business, financial condition, and results of operations.
We
are subject to economic and political risk, the business cycles and credit risk of our clients and volatility in the overall level
of consumer, business and government spending.
The
electronic payments industry depends heavily on the overall level of consumer, business and government spending. This spending
depends on worldwide economic and geopolitical conditions. Key international economies have experienced cyclical downturns from
time to time in which economic activity was impacted by falling supply or demand for a variety of goods and services, restricted
credit, poor liquidity, reduced corporate profitability, inflation, volatility in credit, equity and foreign exchange markets,
bankruptcies, pandemics such as COVID-19, and overall economic uncertainty. We are exposed to general economic conditions that
affect consumer confidence, consumer spending, consumer discretionary income or changes in consumer purchasing habits. The current
deterioration in general economic conditions, including the rise in unemployment rates, inflation and any increases in interest
rates, particularly in Europe, the United States, the U.K. and Canada, may adversely affect consumer spending, consumer debt levels
and credit and debit card usage, and as a result, adversely affect our financial performance by reducing the number or average
purchase amount of transactions made using electronic payments. The conflict in Ukraine could lead to heightened volatility in
the global markets and increase inflation, all of which could reduce our profitability and have a material adverse effect on our
business, results of operations or financial condition.
More
recently, in response to Russian military actions in Ukraine, the United States and certain allies have imposed economic sanctions
and export control measures, and may impose additional sanctions or export control measures in the future, which have and could
in the future result in, among other things, severe or complete restrictions on exports and other commerce and business dealings
involving Russia, certain regions of Ukraine, and/or particular entities and individuals. Such actions could have a significant
adverse impact on the Russian economy and related markets and in turn could adversely affect our customers and business partners
with international operations and exposure to such risks. If our customers make fewer sales of their products and services using
electronic payments or people spend less money per transaction, we will have fewer transactions to process and lower overall volume,
resulting in lower revenue.
In
addition, a recessionary economic environment and markets experiencing relatively high inflation and/or unemployment could affect
our customers through a higher rate of bankruptcy filings, in particular for our SMB clients, which could result in higher customer
attrition and decrease our revenue. Any of the foregoing risks would negatively impact our business, financial condition and results
of operations.
We
may not realize the expected benefits of our recent acquisitions because of integration difficulties and other challenges.
The
success of our recent share exchanges will depend, in part, on our ability to realize the anticipated revenue, cost-savings, tax,
collaboration and other synergies from integrating our two recent acquisitions with our existing business. The integration process
may be complex, costly, and time-consuming. The difficulties of integrating the operations could include, among others:
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failure to implement
our business plan for the combined business; |
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unanticipated issues
in integrating logistics, information, communications, and other systems; |
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unanticipated changes
in applicable laws and regulations; |
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negative impacts
on our internal control over financial reporting accounting; and |
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other unanticipated
issues, expenses, or liabilities that could impact, among other things, our ability to realize any expected synergies on a
timely basis, or at all. |
We
may not accomplish the integration smoothly, successfully, or within the anticipated costs or time frame. The diversion of the
attention of management from our current operations to the integration effort and any difficulties encountered in combining operations
could prevent us from realizing the full benefits anticipated to result from the share exchanges and could adversely affect our
business. In addition, the integration efforts could divert the focus and resources of the management of the Company from other
strategic opportunities and operational matters during the integration process.
If
we fail to raise additional capital, our ability to implement our business model and strategy could be compromised.
We
have limited capital resources and operations. From time to time, we may seek additional financing to provide the capital required
to expand the production of our business operation and development initiatives and/or working capital, as well as to repay outstanding
loans if cash flow from operations is insufficient to do so. We cannot predict with certainty the timing or amount of any
such capital requirements.
If
we do not raise sufficient capital to fund our ongoing development activities, it is likely that we will be unable to carry out
our business plans. We may not be able to obtain additional financing on terms acceptable, or at all. Even if we obtain financing
for near term operations, we may require additional capital beyond the near term. If we are unable to raise capital when needed,
our business, financial condition and results of operations would be materially adversely affected, and we could be forced to
reduce or discontinue our operations.
The
financial technology industry in which we operate is characterized by rapid technological changes, new product introductions,
evolving industry standards and changing customer needs.
We
are a relatively new company in the financial technology industry, and we compete with many established centralized and decentralized
companies with greater financial and other resources. The industry continues to grow as
a result of wider merchant acceptance, advances in payment solutions and digital processing technology, and migration to e-commerce,
omnichannel and contactless payment solutions. The increase of credit and debit cards, as well as other digital payment solutions,
has made the acceptance of digital payments a necessity for many businesses, regardless of size, in order to remain competitive.
The COVID-19 pandemic has further accelerated the use of digital payments, the need for the development of technologies and digital-based
solutions and expansion of e-commerce, omnichannel and contactless payment solutions. To remain competitive in this industry
with constantly evolving standards, we need to develop new platforms, e-commerce services and other new products. Such projects
carry the risks associated with any development effort, including cost overruns, delays in delivery and performance problems.
In the payment solution technology markets, these risks are even more acute. Any delay in the delivery of new services or the
failure to differentiate services could render our services less desirable to our clients. In addition, since the payment solution
services provided by us are designed to process complex transactions at high volumes and processing speed and deliver reports
and other information on those transactions, any failure to deliver an effective and secure product or any performance issue that
arises with a new product or service could result in significant processing or reporting errors or other losses. As a result of
these factors, our development efforts could result in higher costs that could reduce our earnings in addition to a loss of revenues
if new services are not delivered timely to our customers or do not perform as anticipated. If we are not able to respond to our
competitors effectively, our business, operating results, and financial condition may be adversely affected.
We
may experience software defects, undetected errors, and development delays, which could damage client relations, decrease our
potential profitability and expose us to liability.
We
depend on the efficient and uninterrupted operation of our computer systems, software, telecommunications networks, as well as
the systems and services of third parties. The services provided by us are based on software and computing systems that may often
encounter development delays, and the underlying software may contain undetected errors, viruses or defects. Defects in these
software services and errors or delays in the processing of digital transactions could result in additional development costs,
diversion of technical and other resources from other development efforts, loss of credibility with current or potential clients,
may harm our reputation and expose it to liability claims. A system outage or data loss in these services could have a material
adverse effect on the business, financial condition, results of operations and cash flows. In addition, we rely on technologies
and software supplied by third parties that may also contain undetected errors, viruses or defects that could have a material
adverse effect on our business, financial condition, results of operations and cash flows.
Failure
to deal effectively with various types of fraud could materially adversely affect our reputation and our business, results of
operations and financial condition, and could severely diminish merchant confidence in our services.
Various
third parties and internal parties may engage in a variety of fraudulent activity against us using our platform, the components
of our platform, or our alternative payment methods, or APM. For example, a party may knowingly use a stolen or counterfeit credit,
debit or prepaid card, card number, or other credentials to record a false sales transaction or process an invalid card. A merchant
representative, agent or FinTech employee could submit changes in bank account details, thereby resulting in a settlement of funds
to inappropriate persons. Bank employees could engage in fraud in respect of our bank accounts and make illicit withdrawals of
our funds or our clients’ funds, or third parties could impersonate our employees or our clients to gain access to our bank
accounts. Alternatively, our employees could knowingly process unauthorized changes to bank account details or provide or change
such details after falling victim to scamming attempts (such as phishing emails or a fraudulent call posing as FinTech management,
requesting an unauthorized payment of funds or access to information systems), which could also result in a settlement of funds
to inappropriate persons. Moreover, our internal controls may not be sufficient to prevent such actions, especially given our
rapid growth across a variety of jurisdictions.
Criminals
are using increasingly sophisticated methods to engage in illegal fraudulent activities. We also face risks and increasingly receive
complaints from buyers and sellers who may not have received the goods, or have not received the goods that were advertised, that
they had contracted to purchase or payment for the goods that a buyer had contracted to purchase that was paid for using our platform,
including as a result of merchant fraud or user fraud, which may subject us to reputational damage and adversely affect our brand
and business. In addition, in some of the jurisdictions where we operate, regulatory authorities or courts may freeze or block
access to our accounts in response to consumer complaints, which may have a material adverse effect on our business and financial
condition.
It
is possible that incidents of fraud could increase in the future, and our failure to catch such incidents may result in sanctions
and/or fines from regulators, lawsuits, contract disputes with counterparties or merchants, and a decline in our reputation. We
have taken measures to detect and reduce the risk of these types of fraud, but such measures must be continually improved and
may not be effective against new and continually evolving forms of fraud or in connection with new services offerings. If our
fraud prevention measures do not succeed, our business, reputation, brands, financial condition and results of operations could
be materially adversely affected.
Our
controls and procedures may fail or be circumvented, our risk management policies and procedures may be inadequate, and operational
risks could adversely affect our consolidated results of operations.
We
have a limited operating history and are developing various controls, procedures, policies and systems to monitor and manage risk.
We cannot provide assurance that those controls, procedures, policies and systems are or will be adequate to identify and manage
internal and external risks, including risks related to service providers, in our various businesses. We believe that any internal
controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that
the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making
can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by
the individual rogue acts of some persons, including our employees, by collusion of two or more people or by an unauthorized override
of the controls. Accordingly, because of the inherent limitations in our control system, violations of our controls, procedures,
policies and systems and misstatements due to error or fraud may occur and not be detected.
For
example, failure to comply with the various foreign exchange regulations could result in liability under applicable law for circumventing
applicable foreign exchange restrictions, procedures or governmental requirements. In addition, assessing the regulatory landscape
for offering new products and services or expanding into new jurisdictions is complex, and we may not accurately assess the regulatory
requirements or develop the necessary controls and procedures applicable to new products or services that we offer or that may
be applicable to new jurisdictions where we seek to operate. As a result, our business operations and/or our ability to distribute
profits could be materially and adversely affected. Furthermore, as foreign exchange regulations, especially in emerging markets,
are still relatively new and their interpretation and implementation has been constantly evolving, it is unclear how these regulations,
and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the
relevant government authorities.
The
risk of individuals, either employees or contractors, engaging in harmful or misleading conduct, whether unintentional or intentional,
such as consciously circumventing established control mechanisms to perform unauthorized or illegal transactions or otherwise
exceed transaction limitations and restrictions, committing fraud or improperly selling products or services to clients, is particularly
challenging to manage through a control framework. In addition, we are subject to increased resiliency risk, requiring continuous
reinvestment, enhancement and improvement in and of our information technology and operational infrastructure, controls and personnel
which may not be effectively or timely deployed or integrated. Moreover, the financial and reputational impact of control or conduct
failures can be significant. Persistent or repeated issues with respect to controls, information technology and operational resiliency
or individual conduct have raised and may in the future raise concerns among regulators regarding our culture, governance and
control environment. There can be no assurance that our efforts to address such risks will be effective. While we seek to contractually
limit our financial exposure to operational risk, the degree of protection that we are able to achieve varies, and our potential
exposure may be greater than the revenue we anticipate that we will earn from servicing our merchants.
Internal
control policies and procedures and employee training and compliance programs that we have implemented to deter prohibited practices
may not be effective in prohibiting our and our affiliates’ directors, employees, contractors or agents from violating or
circumventing our policies and the law. If we or our affiliates, or either of our respective directors, employees or agents fail
to comply with applicable laws or policies governing our operations, we may face investigations, prosecutions and other legal
proceedings and actions, which could result in civil penalties, administrative remedies and criminal sanctions. Any such government
investigations, prosecutions or other legal proceedings or actions could adversely affect our business, performance, prospects,
value, financial condition, and results of operations
We
compete with companies that have various competitive advantages.
Many
innovative start-up companies and larger companies have made, and continue to make, significant investments in research and development,
and we expect these companies to continue to develop similar or superior products and technologies that may compete with our products
and services. We compete with many companies that have and expected to have various competitive advantages over us, such as:
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greater name recognition,
longer operating histories, larger customer bases, and larger market shares; |
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larger sales and
marketing budgets and organizations; |
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more established
marketing, banking, and compliance relationships; |
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greater resources
to make acquisitions; |
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lower labor, compliance,
risk mitigation, and research and development costs; |
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larger and more
mature intellectual property portfolios; |
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substantially greater
financial, technical, and other resources; and |
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operations in certain
jurisdictions with lower compliance costs and greater flexibility to explore new product offerings. |
If
we are unable to compete successfully, or if competing successfully requires it to take costly actions in response to the actions
of our competitors, our business, operating results, and financial condition could be adversely affected.
Any
factors that reduce cross-border trade in goods or services or make such trade more difficult could harm our business.
Cross-border
trade of goods and/or services (i.e., transactions where the merchant and consumer are in different countries) is an important
source of our revenues and profits. Cross-border transactions generally provide higher revenues and operating income than similar
transactions that take place within a single country or market.
Cross-border
trade may be negatively impacted by various factors, including regional or international tensions, trade wars or international
conflicts of any kind, foreign currency exchange rate fluctuations, and the interpretation and application of laws of multiple
jurisdictions in the context of cross-border trade and foreign exchange. Moreover, governmental authorities in certain countries
may decide to block some or all of our merchants, which could significantly disrupt our operations in such countries. Any factors
that increase the costs of cross-border trade for us, our customers or their end users or that restrict, delay, or make cross-border
trade more difficult or impractical, such as trade policy or higher tariffs, could reduce our cross-border transactions and volume,
negatively impact our revenues and profits, and harm our business.
Certain
shareholders may exercise significant control over our business policies.
Lim Chun Hoo,
an officer and director of both the Company and our subsidiaries, holds ownership of approximately 14.88% of our equity securities
as of September 30, 2024 and has the ability to exercise significant control over our business policies and other corporate matters,
including the composition of our board of directors and any actions requiring the approval of our shareholders, such as the adoption
of amendments to our articles of incorporation, approval of a merger, share exchange or sale of substantially all of our assets.
He will be able to vote his shares in favor of his interests that may not always coincide with the interests of other shareholders.
Risks
Related to Our Intellectual Property
If
we are unable to successfully obtain, maintain, protect, enforce, or otherwise manage our intellectual property and proprietary
rights, we may incur significant expenses, and our business may be adversely affected.
Our
success depends in part, and we place considerable emphasis, on obtaining, maintaining, protecting and enforcing relevant intellectual
property and proprietary rights, which may include patent, design, utility model, trademark, copyright and trade secret protection,
as well as regulatory exclusivity periods and confidentiality agreements (collectively, “IP Rights”). We cannot be
sure that our means of obtaining, maintaining and enforcing our IP Rights in the United States or abroad will be adequate to protect
such rights against infringement, misappropriation or other violation. We may not receive protection for pending or future applications
relating to IP Rights owned by or licensed to us, and the scope of protection granted under any issued or registered IP Rights
may not be sufficiently broad to protect our technology, products, services, systems, brands, trademarks or information. Also,
because of the rapid pace of technological change in our industry, aspects of our business and our products and services rely
on technologies developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies
from these third parties on reasonable terms or at all. Moreover, the laws of certain jurisdictions, including emerging countries,
do not protect IP Rights to the same extent as the laws of the United States. If we cannot adequately obtain, maintain, protect
or enforce our IP Rights, third parties may be able to compete more successfully against us and develop and commercialize substantially
identical products, services or technologies, which could have a material adverse effect on our business, financial condition
or results of operations.
Third
parties may challenge, invalidate, circumvent, infringe or misappropriate our IP Rights, and such IP Rights may be lost or no
longer sufficient to permit us to take advantage of current market trends or to otherwise provide competitive advantages, which
could result in costly redesign efforts, discontinuance of certain service offerings or other competitive harm. Others, including
our competitors, may independently develop similar technology, duplicate our products and services or design around our IP Rights,
and in such cases, we could not assert our IP Rights against such parties. Moreover, third parties may infringe, misappropriate
or otherwise violate IP Rights owned or licensed by us and we may assert claims against such third parties to enforce, or determine
the scope and enforceability of, our IP Rights, which could result in lengthy litigation or other proceedings and could cause
a diversion of resources and may not prove successful. Such third parties could also counterclaim that any IP Rights we assert
are invalid or unenforceable and if such counterclaims are successful, we could lose valuable IP Rights.
We
rely heavily on trade secrets and proprietary know-how to protect our products, services and technology and their development
and commercialization, and rely in part on confidentiality agreements with suppliers and other partners, employees, independent
contractors and consultants. However, we cannot guarantee that we have entered into such agreements with each party that has or
may have had access to our trade secrets. Moreover, these agreements may be breached, and we may not have or be able to enforce
adequate remedies for any such breach. There is also no guarantee that these agreements or other precautions will provide sufficient
protection against any unauthorized access, use or misuse, misappropriation, counterfeiting, cloning, reverse engineering or disclosure
of any of our trade secrets, proprietary know-how and any other information or technology. Trade secrets can be difficult to protect
and some courts inside and outside of the United States are unwilling or less willing to protect trade secrets as compared to
other forms of intellectual property. Defending against unauthorized access, use or misuse, misappropriation, counterfeiting,
cloning, reverse engineering or disclosure of our technology, trade secrets, proprietary know-how and other IP Rights and technology
may result in lengthy and expensive litigation or other proceedings with uncertain outcomes and cause significant disruption to
our business and operations. If we are unable to obtain, maintain, protect or effectively enforce our IP Rights, it could impact
the development, manufacture and commercialization of our products, services and solutions and have a material adverse effect
on our business, financial condition or results of operations.
Claims
by others that we have infringed their proprietary technology or other IP Rights could harm our business.
Our
success depends, in part, on our ability to develop and commercialize our services and technologies without infringing, misappropriating
or otherwise violating the IP Rights of third parties. However, we may not be aware that our products, services, solutions or
technologies are infringing, misappropriating or otherwise violating third-party IP Rights, and such third parties may bring claims
alleging such infringement, misappropriation or violation. Third parties may have issued, or may eventually issue, patents that
could be infringed by our services or technology. Any of these third parties could make a claim of infringement against us with
respect to our services or technology. We may also be subject to claims by third parties for breach of copyright, trademark, license
usage or other IP Rights. When any such claims are asserted against us, we may seek to license the third party’s IP Rights,
which could be expensive. We may be unable to obtain the necessary licenses on satisfactory terms, if at all. Any claim from third
parties may result in a limitation on our ability to use the intellectual property subject to these claims or could prevent us
from registering our brands as trademarks. Even if we believe that intellectual property-related claims are without merit, defending
against such claims is time-consuming and expensive, and could result in the diversion of the time and attention of our management
and employees. Claims of intellectual property infringement also might require us to redesign affected services, enter into costly
settlement or license agreements, pay costly damage awards, change our brands or face a temporary or permanent injunction prohibiting
us from importing, marketing, selling or operating certain of our services, using certain of our brands or operating our business
as presently conducted. Even if we have an agreement for indemnification against such costs, the indemnifying party, if any in
such circumstances, may be unable to uphold our contractual obligations.
We
may be subject to adverse publicity or reputational harm, even if claims against us are later shown to be unfounded or unsubstantiated.
Moreover, there could be public announcements of the results of hearings, motions or other interim proceedings or developments
and if securities analysts or investors perceive these results to be negative, it could have an adverse effect on the price of
our common stock. The award of damages, including material royalty payments, or the entry of an injunction against the manufacture,
import, marketing, sale or operation of some or all of our products or services, or our entry into any license or settlement agreement
in connection with such claims could affect our ability to compete with third parties and have a material adverse effect on our
business, financial condition and results of operations.
If
we are unable to obtain or fail to comply with the required licenses to operate our business or experience disputes with licensors
or disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.
We
have entered into license agreements with third parties and may need to obtain additional licenses from our existing licensors
and others to advance or allow commercialization of our solutions. It is possible that we may be unable to obtain any additional
licenses at a reasonable cost or on reasonable terms, if at all. In that event, we may be required to expend significant time
and resources to redesign our solutions or to develop or license replacement technology, all of which may not be feasible on a
technical or commercial basis. If we are unable to do so, we may be unable to develop or commercialize the affected solutions,
which could disrupt and adversely affect our business.
Disputes
may arise regarding intellectual property, including software and data, that is subject to a licensing agreement, including the
scope of rights granted under the license agreement and other interpretation-related issues. In addition, the agreements under
which we currently license intellectual property or technology from third parties are complex, and certain provisions in such
agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may
arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology or increase
what we believe to be our financial or other obligations under the relevant agreement. If these events were to occur, we may lose
the right to continue to use and exploit such licensed intellectual property or technology in connection with our operations and
solutions, which could have a material adverse effect on our business, financial condition and results of operations.
Third
parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or misappropriated
trade secrets.
We
may also be subject to costly litigation in the event our services and technology infringe upon another party’s proprietary
rights. Third parties may have, or may eventually be issued, patents that could be infringed by our services or technology. We
might employ individuals who were previously employed at other companies, including their competitors or potential competitors.
Although we are trying to ensure that their employees and consultants do not use the proprietary information or know-how of others
in their work, it may be subject to claims that it or our employees, consultants or independent contractors have inadvertently
or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of a former employer
or other third parties. Any of these third parties could make a claim of infringement against us with respect to our services
or technology. We may also be subject to claims by third parties for breach of copyright, trademark or license usage rights. Litigation
may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages,
we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation
could result in substantial costs and be a distraction to our management and other employees.
Risks
Related to Regulation
Complex
and enhanced regulatory oversight in the banking and financial services industry could adversely affect our operations or our
relationships with our banking partners.
The
financial services and banking industry is subject to extensive regulation and oversight. In light of increased regulatory oversight
in recent years, a number of banks are continually examining their business relationships, and certain major national and international
banks have already withdrawn from providing service to payments processing providers, especially in foreign exchange transactions.
In certain markets, we rely on and may in the future rely on local, regional or global banks to process payments and conduct foreign
exchange transactions in local currency, and we may not be able to obtain a license to directly operate in such markets in order
to reduce our reliance on such banks. Changes in foreign exchange controls could make it difficult for us to engage in foreign
exchange transactions or local regulators enforcing such regulations may use their power to slow or halt payments from global
merchants to banks in emerging markets and vice-versa or otherwise prohibit us from providing payment services in a country or
from expanding our services to include additional products. In addition, banks may be reluctant to transact or to accept certain
transaction volumes due to different interpretations of the applicable foreign exchange, anti-money laundering and tax laws. If
we are not able to complete foreign exchange and other transactions with certain banks due to enhanced regulation or different
interpretations of the legal framework, our business could be materially adversely affected.
We
are subject to chargeback and refund liability risk when our merchants refuse to or cannot reimburse chargebacks and refunds resolved
in favor of their customers. Any increase in chargebacks and refunds not paid by our merchants may adversely affect our business,
financial condition or results of operations.
We
are currently, and will continue to be, exposed to certain risks associated with chargebacks and refunds in connection with payment
card fraud or relating to the goods or services provided by our merchant customers. In the event that a billing dispute between
a cardholder and a merchant is not resolved in favor of the merchant, including in situations in which the merchant customer is
engaged in fraud, the transaction is typically “charged back” to the merchant and the purchase price is credited or
otherwise refunded to the cardholder. In certain circumstances where we are unable to collect chargeback or refunds from the merchant’s
account, or if the merchant refuses to or is unable to reimburse us for a chargeback or refunds due to closure, bankruptcy, or
other reasons, we may bear the loss for the amounts paid to the cardholder. Our financial results would be adversely affected
to the extent these merchants do not fully reimburse us for the related chargebacks. In addition, our exposure to these potential
losses from chargebacks increases to the extent that we have provided working capital solutions to such merchants, as the full
amount of the payment is provided up front rather than in installments. While most of our merchant agreements establish that the
chargeback and refund liability risk is with the merchant, and would permit us to collect and retain reserves, we generally do
not collect and maintain reserves from our merchants to cover these potential losses, and for customer relations purposes we sometimes
decline to seek reimbursement for certain chargebacks. If we are unable to maintain our losses from chargebacks at acceptable
levels, the payment network providers could fine us, increase our transaction fees, or terminate our ability to process payment
cards. Any increase in our transaction fees or liability for incorrect charges could damage our business, and if we were unable
to accept payment cards, our business would be negatively affected.
We
have not encountered any significant chargeback of fraud issues to date. Nonetheless, this does not assure immunity from such
risks in the future.
We
are subject to costs and risks associated with new or changing laws and regulations and governmental action affecting our business.
We
operate in a complex regulatory and legal environment and are subject to a wide variety of laws and regulations in the several
jurisdictions in which we operate. Some of the laws and regulations in jurisdictions in which we operate that affect or may affect
us include: those relating to anti-money laundering and cross-border and domestic money transmission; those relating to consumer
products, product liability and consumer protection; those relating to financial services; those relating to the manner in which
we advertise, market and sell products; labor and employment laws, including wage and hour laws; tax laws or interpretations thereof;
bank secrecy laws; data protection and privacy laws and regulations; and securities and exchange laws and regulations. The laws
and regulations specifically applicable to us may also change on the basis of a change in the nature of our products or services,
or a change in the jurisdictions in which those products or services are being offered, including, but not limited to, as a result
of acquisitions. There can be no guarantee that we will have sufficient resources to comply with new laws, regulations or government
action, or to successfully compete in the context of a shifting regulatory environment. Moreover, these laws and regulations may
change, sometimes significantly, as a result of political, economic and social events. Our ability to comply with applicable laws
and rules is also largely dependent on the establishment and maintenance of compliance, review and reporting systems, as well
as the ability to attract and retain qualified compliance and other risk management personnel. We cannot provide any assurance
that our compliance policies and procedures will always be effective or that we will always be successful in monitoring or evaluating
our risks. In the case of alleged non-compliance with applicable laws or regulations or suspension or cancellation of a license,
we could be subject to investigations and judicial or administrative proceedings that may result in substantial penalties or civil
lawsuits, including by customers, for damages, restitution or other remedies, which could be significant. Any of these outcomes,
individually or together, may among other things, materially and adversely affect our reputation, business, operating results
and financial condition.
We
also generate a significant portion of our revenue from customers operating in the regulated services sectors. Regulations in
these sectors vary significantly among different countries and localities. In many cases, they may be unclear and may also change,
sometimes dramatically.
From
time to time, we may also acquire entities subject to local regulatory supervision or oversight. There are substantial costs and
potential operational challenges involved in maintaining and renewing licenses, certifications, and approvals, and we could be
subject to fines, other enforcement actions, and litigation if we are found to violate any of these requirements. There can be
no assurance that we will be able to (or decide to) continue to apply for or obtain any licenses, renewals, certifications, and
approvals in any jurisdictions. In certain markets, we may rely on local banks or other partners to process payments and conduct
financial services transactions in local currency, and local regulators may use their authority over such local partners to prohibit,
restrict, or limit us from doing business. The need to obtain or maintain licenses, certifications, or other regulatory approvals
could impose substantial additional costs, delay or preclude planned transactions, product launches or improvements, require significant
and costly operational changes, impose restrictions, limitations, or additional requirements on our business, products and services,
or prevent us from providing our products or services in a given market.
Changes
in tax law, changes in our effective tax rate or exposure to additional tax liabilities could affect our profitability and financial
condition.
We
carry out our business operations through entities in multiple foreign jurisdictions. As such, we are required to file corporate
income tax returns that are subject to foreign tax laws. The foreign tax liabilities are determined, in part, by the amount of
operating profit generated in these different taxing jurisdictions, as well as by other factors such as the internal services
we provide within certain jurisdictions. Our effective tax rate, earnings and operating cash flows could be adversely affected
by changes in the mix of operating profits generated in countries with higher statutory tax rates as well as by the positioning
of our cash balances globally. or the internal services we provide in certain jurisdictions. If statutory tax rates or tax bases
were to increase or if changes in tax laws, regulations or interpretations or in our business operations were made that impact
us directly, our effective tax rate, earnings and operating cash flows could be adversely impacted.
Any
such adverse changes in the applicability of tax to us could increase the levels of taxation payable by us, which would have an
adverse effect on our business, financial condition, results of operations and prospects.
In
addition to the possibility of a substantial tax burden being imposed on us, the risk that we may become subject to an increased
level of taxation may result in us needing to change our corporate or operational structure, which could have a material adverse
effect on our business, financial condition, results of operations and prospects. Additionally, the tax authorities of the jurisdictions
in which we operate may challenge our methodologies for valuing developed technology or intercompany arrangements. For example,
various levels of government and international organizations, such as the OECD and the EU, increasingly focus on future tax reform
and any result from this development may create changes to long-standing tax principles, which could adversely affect our effective
tax rate. The OECD has issued significant global tax policy changes that include both expanded reporting as well as technical
global tax policy changes. Many countries in which we operate have implemented tax law and administrative changes that align with
many aspects of the OECD policy guidelines. The breadth of this project may impact all multinational businesses by potentially
redefining jurisdictional taxation rights, and could materially impact the law for transfer pricing and permanent establishment
taxation. Additionally, tax authorities at the international, federal, state, and local levels are currently reviewing the appropriate
tax treatment of companies engaged in internet commerce and financial technology. These developing changes could affect our financial
position and results of operations. In particular, due to the global nature of the internet, it is possible that tax authorities
at the international, federal, state, and local levels may attempt to regulate our transactions or levy new or revised sales and
use taxes, VAT, digital services taxes, income taxes, or other taxes relating to our activities in the internet commerce and financial
technology space. New or revised taxes, in particular, sales and use taxes, VAT, and similar taxes, including digital service
taxes, would likely increase the cost of doing business. New taxes could also create significant increases in internal costs necessary
to capture data and collect and remit taxes. Any of these events could have an adverse effect on our business and results of operations.
Furthermore,
any changes in other jurisdictions to the political and social perception of running a business out of a tax-friendly jurisdiction
(such as Malta) or any action by any tax authority to investigate our tax arrangements could result in adverse publicity and reputational
damage for us, which could have an adverse effect on our business, financial condition, results of operations and prospects. The
applicability of taxes to certain arrangements, transactions or structures may involve areas that are inherently subjective, requiring
significant management judgments. If any applicable tax authority is successful in challenging our tax arrangements, we may be
liable for additional tax and penalties and interest related thereto, which may have a significant impact on our business, financial
condition, results of operations and prospects.
Transfer
pricing rules may result in increased tax costs.
Some
of the jurisdictions in which we operate have rules on transfer pricing that require intra-group transactions to be conducted
on arm’s-length terms. Transactions conducted between and among us and our subsidiaries are made on a commercial basis by
application of international guidelines and national regulations. As a consequence of globalization and growing world trade, tax
authorities worldwide have increased their focus on transfer pricing with respect to cross-border intra-group transactions as
part of protecting their respective country’s tax base. Transfer pricing is an inherently subjective area, requiring significant
management judgments. In the event the tax authorities in the jurisdictions where we operate consider our current transfer pricing
not to be on arm’s-length terms and were to succeed with such claims, this could result in an increased tax cost, including
tax surcharges, penalties and interest, which could adversely affect our business.
New
and evolving regulations in respect of the protection of personal data and any failure to comply with these regulations could
have a material adverse effect on our business and financial condition.
We
are subject to laws relating to the collection, use, storage and transfer of the personal data of our service providers, end user,
employees and clients, including in respect of personal financial information.
Several
jurisdictions have implemented new data protection regulations, and others are considering imposing additional restrictions or
regulations. We expect data protection regulations to continue to increase both in number, complexity and in the level of stringency.
The entry into force of the General Data Protection Regulation (EU) 2016/679, or the GDPR, in the European Union prompted various
Latin American countries to begin processes to reform their data protection regimes. For example, Brazil has implemented a comprehensive
data protection regulation intended to mirror the GDPR called the Lei Geral de Proteção de Dados, or LGPD,
and also has a Bank Secrecy Law (Complementary Law No. 105) that applies to certain regulated entities. In addition, certain of
our global enterprise merchants may be subject to data protection regimes or subject to enhanced scrutiny of data protection practices
by the applicable regulatory authorities, which could impact their operations and indirectly impact their business with us. In
many cases, data protection regulations have strict measures regulating both the transfer of data externally, and also the storage
and transfer of data internally among our employees in the course of their work and among our subsidiaries and affiliates. Moreover,
these regulations may have conflicting and/or inconsistent requirements, and compliance with one data protection regime does not
necessarily entail compliance with another data protection regime, and compliance with one data protection regime could potentially
create conflicts in compliance with another data protection regime. In particular, we may transfer data across jurisdictions in
the ordinary course of our operations, and we may not be able to ensure compliance with all applicable data protection regulations
in all jurisdictions at all times. Any failure to comply with applicable data protection regimes could subject us to significant
penalties and negative publicity, which could have a material adverse effect on our business, financial condition, reputation
before our merchants and providers, and results of operations.
We
collect, process, store, and use data, including personal information, which subjects us to governmental regulation and other
legal obligations, including EU financial services regulation, particularly related to privacy, data protection and information
security, marketing, and consumer protection laws across different markets where we conduct our business. Our actual or perceived
failure to comply with such obligations could harm our business and/or result in reputational harm, loss of customers, material
financial penalties and legal liabilities.
In
the U.S. and other jurisdictions in which our services are used, we are subject to various privacy, data protection and information
security, and consumer protection laws (including laws on disputed transactions), related regulations, and industry standards
(e.g., PCI-DSS). If we are found to have breached such laws, regulations, or standards in any such market, we may be subject to
enforcement actions that require us to change our business practices in a manner which may negatively impact our revenue, as well
as expose ourselves to litigation, fines, civil and/or criminal penalties and adverse publicity that could cause our customers
to lose trust in us, negatively impacting our reputation, brand and business in a manner that harms our financial position.
As
part of our business, we collect personal information, as well as other potentially sensitive and/or regulated data from our consumers
and the merchants we work with. As a result, we are subject to certain laws and regulations in the U.S. that restrict how personal
information is collected, processed, stored, transferred, used and disclosed, as well as set standards for its security, implement
notice requirements regarding privacy practices, and provide individuals with certain rights regarding the use, disclosure and
sale of their protected personal information. For example, the FTC and many state attorneys general are interpreting federal and
state consumer protection laws to impose standards for the online collection, use, dissemination, and security of personal information.
Such standards require us to publish statements that describe how we handle personal information and choices individuals may have
about the way we handle their personal information. If such statements that we publish are found to be untrue or inaccurate, we
may be subject to government claims of unfair or deceptive trade practices, which could lead to regulatory investigations, significant
liabilities and other consequences. Moreover, according to the FTC, violating consumers’ privacy rights or failing to take
appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting
commerce in violation of Section 5(a) of the FTC Act. State consumer protection laws provide similar causes of action for unfair
or deceptive practices. Some states, such as California and Massachusetts, have passed specific laws mandating reasonable security
measures for the handling of certain personal information. Further, privacy advocates and industry groups have regularly proposed
and sometimes approved, and may propose and approve in the future, self-regulatory standards with which we must legally comply
or that contractually apply to us.
In
addition, the GLBA regulates, among other things, the use of non-public personal information of consumers that is held by financial
institutions. We may be considered a service provider to “financial institutions” and therefore subject to various
GLBA-related contractual obligations, including requirements relating to the physical, administrative and technological protection
of non-public personal financial information. Breach of the GLBA can result in civil and/or criminal liability and sanctions by
regulatory authorities and/or contractual liability.
Moreover,
in the U.S., both the federal and various state governments have adopted or are considering, additional laws, guidelines or rules
for the collection, distribution, use and storage of information collected from or about consumers or their devices. For example,
California enacted the CPRA in 2020, which requires new disclosures to California residents, imposes new rules for collecting
or using information about California residents, and affords California residents new rights with respect to their personal information,
including rights to opt out of certain disclosures of personal information. The CPRA provides for civil penalties for violations,
as well as a private right of action for certain data breaches that is expected to increase data breach litigation. The effects
of the CPRA and its implementing regulations, and uncertainties about the scope and applicability of exemptions that may apply
to our business (including an exemption as to data that is subject to the GLBA), are potentially significant and may require us
to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to
comply. Additionally, the enactment of the CPRA is prompting a wave of similar legislative developments in other states in the
U.S., which creates the potential for a patchwork of overlapping but different state laws. For example, since the CPRA went into
to effect, comprehensive privacy statutes that share similarities with the CPRA are now in effect and enforceable in Virginia,
Colorado, Connecticut, and Utah, and will soon be enforceable in several other states as well.
We
are also subject to data privacy and security laws in several foreign jurisdictions which have laws and regulations which are
more restrictive in certain respects than the U.S. For example, in the European Economic Area (“EEA”), we are subject
to the EU GDPR and in the United Kingdom, UK GDPR, in each case in relation to our collection, control, processing, sharing, disclosure
and other use of data relating to an identifiable living individual (personal data). The GDPR, and national implementing legislation
in EEA member states, and the UK GDPR, impose a strict data protection compliance regime including: providing detailed disclosures
about how personal data is collected and processed (in a concise, intelligible and easily accessible form); demonstrating that
an appropriate legal basis is in place or otherwise exists to justify data processing activities; granting rights for data subjects
in regard to their personal data (including data access rights, the right to be “forgotten” and the right to data
portability); introducing the obligation to notify data protection regulators or supervisory authorities (and in certain cases,
affected individuals) of significant data breaches; defining pseudonymized (i.e., key-coded) data; imposing limitations on retention
of personal data; maintaining a record of data processing; and complying with the principal of accountability and the obligation
to demonstrate compliance through policies, procedures, training and audit.
The
EU GDPR and UK GDPR regulate cross-border transfers of personal data out of the EEA and the UK. Case law from the Court of Justice
of the European Union (“CJEU”) states that reliance on the standard contractual clauses - a standard form of contract
approved by the European Commission as an adequate personal data transfer mechanism - alone may not necessarily be sufficient
in all circumstances and that transfers must be assessed on a case-by-case basis. On October 7, 2022, President Biden signed an
Executive Order on ‘Enhancing Safeguards for U.S. Intelligence Activities’ which introduced new redress mechanisms
and binding safeguards to address the concerns raised by the CJEU in relation to data transfers from the EEA to the U.S. and which
formed the basis of the new EU-US Data Privacy Framework (“DPF”), as released on December 13, 2022. The European Commission
adopted its Adequacy Decision in relation to the DPF on July 10, 2023, rendering the DPF effective as an EU GDPR transfer mechanism
to U.S. entities self-certified under the DPF. On October 12, 2023, the UK Extension to the DPF came into effect (as approved
by the UK Government), as a UK GDPR data transfer mechanism to U.S. entities self-certified under the UK Extension to the DPF.
We currently rely on the DPF to transfer certain personal data from the EEA to the U.S. and on the UK Extension to the DPF to
transfer certain personal data from the UK to the U.S. We also currently rely on the EU standard contractual clauses and the UK
Addendum to the EU standard contractual clauses and the UK International Data Transfer Agreement as relevant to transfer personal
data outside the EEA and the UK with respect to both intragroup and third party transfers. We expect the existing legal complexity
and uncertainty regarding international personal data transfers to continue. In particular, we expect the DPF Adequacy Decision
to be challenged and international transfers to the U.S. and to other jurisdictions more generally to continue to be subject to
enhanced scrutiny by regulators. As the regulatory guidance and enforcement landscape in relation to data transfers continue to
develop, we could suffer additional costs, complaints and/or regulatory investigations or fines; we may have to stop using certain
tools and vendors and make other operational changes; we may have to implement revised standard contractual clauses for existing
intragroup, customer and vendor arrangements within required time frames; and/or it could otherwise affect the manner in which
we provide our services, and could adversely affect our business, operations and financial condition.
We
are also subject to evolving EU and UK privacy laws on cookies, tracking technologies and e-marketing. In the EU and the UK under
national laws derived from the ePrivacy Directive, informed consent is required for the placement of a cookie or similar technologies
on a user’s device and for direct electronic marketing. The GDPR also imposes conditions on obtaining valid consent for
cookies, such as a prohibition on pre-checked consents and a requirement to ensure separate consents are sought for each type
of cookie or similar technology. Recent European court and regulator decisions are driving increased attention to cookies and
tracking technologies. If the trend of increasing enforcement by regulators of the strict approach to opt-in consent for all but
essential use cases, as seen in recent guidance and decisions continues, this could lead to substantial costs, require significant
systems changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, adversely
affect our margins, and subject us to additional liabilities. In light of the complex and evolving nature of EU, EU Member State
and UK privacy laws on cookies and tracking technologies, there can be no assurances that we will be successful in our efforts
to comply with such laws; violations of such laws could result in regulatory investigations, fines, orders to cease/change our
use of such technologies, as well as civil claims including class actions, and reputational damage.
Restrictions
on the collection, use, sharing or disclosure of personal information or additional requirements and liability for security and
data integrity could require us to modify our solutions and features, possibly in a material manner, could limit our ability to
develop new services and features and could subject us to increased compliance obligations and regulatory scrutiny. Non-compliance
with data protection and privacy requirements may result in regulatory fines (which for certain breaches of the GDPR are up to
the greater of €20 million/£17.5 million or 4% of total global annual turnover), regulatory investigations, reputational
damage, orders to cease/change our processing of our data, enforcement notices, and/ or assessment notices (for a compulsory audit).
We may also face civil claims including representative actions and other class action type litigation (where individuals have
suffered harm), potentially amounting to significant compensation or damages liabilities, as well as associated costs, diversion
of internal resources, and reputational harm.
We
may not be able to continue to expand our share of the existing payment processing markets or expand into new markets, which would
inhibit our ability to grow and increase our profitability.
Our
future growth and profitability depend upon the growth of the markets in which we currently operate and our ability to increase
our penetration and service offerings within these markets, as well as the emergence of new markets for our services and our ability
to successfully expand into these new markets. It is difficult to attract new merchants because of potential disadvantages associated
with switching payment processing vendors, such as transition costs, business disruption and loss of accustomed functionality.
There can be no assurance that our efforts to overcome these factors will be successful, and this resistance may adversely affect
our growth. A merchant’s payment processing activity with us may also decrease for a variety of reasons, including the merchant’s
level of satisfaction with our products and services, the effectiveness of our support services, pricing of our products and services,
the pricing and quality of competing products or services, the effects of global economic conditions, or reductions in consumer
spending levels.
Our
expansion into new markets is also dependent upon our ability to adapt our existing technology and offerings, or to develop new
or innovative applications, to meet the particular service needs of merchants in each new market. In order to do so, we will need
to anticipate and react to market changes and devote appropriate financial and technical resources to our development efforts,
and there can be no assurance that we will be successful in these efforts.
We
are subject to anti-corruption, anti-bribery and anti-money laundering laws and regulations.
We
operate in jurisdictions that have a high risk for corruption, and we are generally subject to anti-corruption, anti-bribery and
anti-money laundering laws and regulations, including the Clean Company Act and the United States Foreign Corrupt Practices Act
of 1977, as amended, or the FCPA and the Proceeds of Crime Act prohibit corporations and individuals from engaging in improper
activities to obtain or retain business or to influence a person working in an official capacity. Both the Clean Company Act and
the FCPA impose liability against companies who engage in bribery of government officials, either directly or through intermediaries.
Applicable money laundering regulations require firms to put preventative measures in place and to perform know-your-customer
procedures, including conducting customer identification and verification and undertaking ongoing monitoring. In addition, regulations
require companies to keep records of identity and to train their staff on the requirements of the relevant money laundering regulations.
Although we have a compliance program focused on the anti-corruption, anti-bribery and anti-money laundering laws, rules, and
regulations that we believe are applicable to our business, we may still be subject to a requirement to change various aspects
of our business or the manner in which we carry out our business in certain countries, or to fines, injunctions or other penalties
levied by regulators in one or more jurisdictions. Violations of the anti-corruption, anti-bribery and anti-money laundering laws
and regulations could result in criminal liability, administrative and civil lawsuits, significant fines and penalties, forfeiture
of significant assets, as well as severe reputational harm and the loss of our banking or other relationships.
Any
determination that we have violated the anti-money-laundering laws could have a material adverse effect on our financial condition,
results of operations and future prospects. For example, the BSA requires us to report currency transactions in excess of US$10,000,
including identification of the customer by name and social security number, to the IRS. This regulation also requires us to report
certain suspicious activity, including any transaction that exceeds US$2,000 that we know, suspect or have reason to believe involves
funds derived from illegal activity or is designed to evade federal regulations or reporting requirements and to verify sources
of such funds. Substantial penalties can be imposed against us if we fail to comply with this regulation. If we fail to comply
with these laws and regulations, the imposition of a substantial penalty could have a material adverse effect on our business,
financial condition and results of operations.
If
any person in the Cayman Islands knows or suspects, or has reasonable grounds for knowing or suspecting that another person is
engaged in criminal conduct or money laundering, or is involved with terrorism or terrorist financing and property, and the information
for that knowledge or suspicion came to their attention in the course of business in the regulated sector, or other trade, profession,
business or employment, the person will be required to report such knowledge or suspicion. If the disclosure relates to criminal
conduct or money laundering, the knowledge or suspicion must be reported to the Financial Reporting Authority of the Cayman Islands
(the “FRA”), pursuant to the Proceeds of Crime Act (as revised) of the Cayman Islands. If the disclosure relates to
involvement with terrorism or terrorist financing and property the knowledge or suspicion must be reported to a police officer
of the rank of constable or higher, or the FRA, pursuant to the Terrorism Act (As Revised) of the Cayman Islands.
Such
laws and regulations are subject to changes and evolving interpretations and application, including by means of legislative changes,
administrative changes and/or executive orders, and it can be difficult to predict how they may be applied to our business and
the way we conduct our operations, particularly as we introduce new products and services and expand into new jurisdictions. Any
perceived or actual breach of laws, regulations, and standards could result in investigations, regulatory inquiries, loss of licensure,
litigation, fines, injunctions, negative customer sentiment, impairment of our existing or planned products and services, or otherwise
materially and adversely impact our business.
In
addition, regulators may increase enforcement of these obligations, which may require us to make adjustments to our compliance
program, including the procedures we use to verify the identity of our customers and to monitor our merchants’ transactions.
Regulators may conduct audits of our compliance framework, which can include a review of all applicable records to verify identities
of customers, reporting of suspicious transactions and transactional activity including monitoring processes implemented and all
components of the compliance framework, and compliance with these audit processes can result in increased costs or subject us
to potential enforcement proceedings. We face risks related to our ability to comply with existing or new anti-corruption, anti-bribery
and anti-money laundering laws and regulations, or being required to comply with anti-corruption, anti-bribery and anti-money
laundering laws and regulations applicable to our merchant customers, as we may not be able to comply fully with, or obtain appropriate
exemptions from, such laws and regulations. Costs associated with fines or enforcement actions, changes in compliance requirements,
or limitations on our ability to grow could harm our business, and any new requirements or changes to existing requirements could
impose significant costs, result in delays to planned product improvements, make it more difficult for new customers to join our
network and reduce the attractiveness of our products and services. Any perceived or actual breach of compliance by us with respect
to applicable laws, rules and regulations could have a significant impact on our reputation as a trusted brand and could cause
us to lose existing customers, prevent us from obtaining new customers, require us to expend significant funds to remedy problems
caused by breaches and to avert further breaches and expose us to legal risk and potential liability.
ITEM
1B. Unresolved Staff Comments
None.
ITEM
1C. Cybersecurity
Risk
Management and Strategy
We
have designed and implemented an information security program that is tailored to our operations and infrastructure, the nature
of our products and services, and the sensitivity of data. Our information security program consists of processes that are designed
to identify, assess, and manage material risks from cybersecurity threats.
We
have implemented cybersecurity risk management processes that include, for example, vulnerability assessments, application security
assessments, penetration testing, third party security assessments, security audits, and ongoing risk assessments. In addition,
we have implemented technical, physical, and organizational safeguards designed to mitigate material risks from cybersecurity
threats, including, for example, depending on the environment or system: information security policies and standards, data protection
policies and standards, security training and awareness campaigns, information protection processes, and systems monitoring for
cybersecurity threats. Further, our assessment and management of material risks from cybersecurity threats are an important element
of our overall enterprise risk management program and included in our annual enterprise risk assessment which we provide to senior
management and the Board.
We
use third-party service providers to assist us from time to time to identify, assess, and manage material risks from cybersecurity
threats, including for example: professional services firms (including legal counsel), threat intelligence service providers,
cybersecurity consultants, cybersecurity software and managed service providers, penetration testing firms, and forensic investigators.
Governance
Our
Board of Directors oversees management’s processes for identifying and mitigating risks, including cybersecurity risks,
to help align our risk exposure with our strategic objectives. Senior leadership, including our cybersecurity consultant, regularly
briefs the Board of Directors on our cybersecurity and information security posture and the Board of Directors is apprised of
cybersecurity incidents deemed to have a moderate or higher business impact, even if immaterial to us. The full Board retains
oversight of cybersecurity because of its importance. In the event of an incident, we intend to follow our detailed incident response
playbook, which outlines the steps to be followed from incident detection to mitigation, recovery, and notification, including
notifying functional areas (e.g., legal), as well as senior leadership and the Board, as appropriate. Our Cybersecurity consultant
has extensive information technology and program management experience. We have implemented a governance structure and processes
to assess, identify, manage, and report cybersecurity risks.
ITEM
2. Properties
Our
corporate headquarters, which include the majority of our product development, sales, marketing, and business operations, is located
at M Floor & 1st Floor, No. 33, Jalan Maharajalela, 50150, Kuala Lumpur, Malaysia, supported by our United Kingdom
branch located at 2 Portman Street, W1H 6DU, London, United Kingdom and Asian branch located at Lot 2-15, Labuan Time Square, Jalan
Merdeka, 87007, Federal Territory of Labuan, Malaysia. Both properties are leased on a rolling contract basis. We believe this
to be sufficient to meet our needs for the foreseeable future and that any additional space we may require will be available on
commercially reasonable terms.
ITEM
3. Legal Proceedings
We
are not a party to existing or pending material legal proceedings against us, and we have no knowledge of any threatened litigation,
nor are we involved as a plaintiff in any proceeding or pending litigation. There are no proceedings in which any of our directors,
officers or any of their respective affiliates, or any beneficial shareholder, is an adverse party or has a material interest
adverse to our interest.
ITEM
4. Mine Safety Disclosures
Not
Applicable.
PART
II
ITEM
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market
Information
Our
common stock trades on the OTC Expert Market under the symbol “FINR.”
Holders
As of September 30, 2024, the Company had
1,903 stockholders of record. The actual number of holders of our common stock is greater than this number of record holders, and
includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or held by other nominees.
This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
We have never declared dividends on our
common stock, and currently do not plan to declare dividends on shares of our common stock in the foreseeable future. We expect
to retain our future earnings, if any, for use in the operation and expansion of our business. Subject to the foregoing, the payment
of cash dividends in the future, if any, will be at the discretion of our Board and will depend upon such factors as restrictions
in debt agreements, earnings levels, capital requirements, our overall financial condition and any other factors deemed relevant
by our Board of Directors.
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
None.
ITEM 6. [Reserved]
ITEM 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations
You should
read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated
financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K/A. In addition to historical information,
this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual
results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but
are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in this
Annual Report on Form 10-K/A for the fiscal year ended December 31, 2023, as may be amended, supplemented or superseded from time
to time by other reports we file with the SEC. All amounts in this report are in U.S. dollars, unless otherwise noted.
Throughout
this Annual Report on Form 10-K/A, references to “we,” “our,” “us,” the “Company,”
or “Fintech Scion” refer to Fintech Scion Limited, individually, or as the context requires, collectively with its
subsidiaries.
Overview
Fintech Scion Limited (“Fintech Scion”,
the “Company”, “we”, “our”, or “us”) is a fintech enterprise poised to revolutionize
the financial landscape through our digital Banking-as-a-Service (BaaS) platform. Our mission is to empower merchants by furnishing
them with an integrated suite of tools, skills, and solutions that streamline payment services, unlocking a realm of secure, online,
and fully managed transactions and settlements. We currently operate through our wholly-owned subsidiaries based in Malaysia and
the United Kingdom.
At the core of
our enterprise lies a sophisticated financial ecosystem, underpinned by a robust technological infrastructure. This infrastructure
has been developed with the mission of empowering financial institutions to offer seamless, consolidated experiences across diverse
verticals encompassing business-to-business, business-to-consumer, and consumer-to-business domains.
In an era where
merchants are leveraging an array of software solutions and digital tools to bolster their competitive edge, our role has emerged
as a pivotal enabler. The intricate challenge of managing disparate software systems sourced from various providers has become
an impediment for merchants of all sizes to seamlessly embrace payments.
Our current clientele
encompasses an array of enterprises and organizations, spanning varied sectors, including, but not limited to the management consultancy
services, development of software and programming activities, e-commerce, tours and entertainment operations, information technology
and investment banking all with a common objective: to minimize the intricacies and costs associated with fund transfers. We extend
our services to online businesses, providing comprehensive solutions encompassing payment collection, cross-border transactions,
FX services, and corporate bank accounts.
Our cutting-edge payments platform
boasts a comprehensive suite of integrated payment products and services tailored to various channels–be it in-store, online,
or through mobile and tablet interfaces. This suite encompasses end-to-end payment processing for an array of payment types, merchant
acquiring and issuing, diverse methods of mobile and contactless payments, and QR code-based solutions. Complementary software
integrations, virtual international bank account numbers (IBAN), integrated mobile point-of-sale (POS) solutions, risk management
tools, and robust reporting and analytics capabilities augment our platform's offerings.
Our payment services
seamlessly integrating e-money remittance solutions within the global marketplace, spanning open banking and credit card processing
to wire transfers. Our unique Software-as-a-Service (SaaS) model empowers clients to focus on their core operations and sales while
we handle the intricate aspects of payment processing. This streamlined approach facilitates efficient onboarding, elevates customer
retention, and cultivates new revenue streams.
Our vision transcends
boundaries as we aspire to cement our position as a global leader in the payments and banking sphere. Our team, comprising seasoned
experts across operations, technology, sales, legal, compliance, and more, forms the backbone of our enterprise.
The crux of our
vision lies in simplifying and automating global fund transfers while upholding the highest standards of security. We endeavor
to furnish merchants with an all-encompassing Merchant Payment Ecosystem (MPE), a unified platform catering to their diverse payment
needs. Our technology leverages the Gateway Cashier Technology to deliver unparalleled services.
Our diverse merchant
base ranges from small to medium-sized enterprises, or SMEs, to large enterprises, spanning sectors such as hospitality, e-gaming,
consulting, retail, marketing, and e-commerce. While we are rooted in the SaaS framework, our belief in democratizing technology
has led us to offer an initial free platform, generating revenue through value-added services.
Our revenue
streams encompass processing fees based on payment volumes, a hybrid model featuring fixed transaction fees and monthly
charges, and diverse layers that allow us to cross-sell services and nurture lasting client relationships. Currently, we
derive all our revenues from our operating subsidiaries based in Malaysia and the United Kingdom. For the fiscal year ended
December 31, 2023, we recorded revenue of $2,420,184, with 81.9% of such revenue being derived from our operating
subsidiaries in the United Kingdom and the remaining 18.1% from our Malaysian subsidiaries. We also recognized a net loss of
$40,662,716 during the fiscal year ended December 31, 2023, primarily resulting from an impairment loss of $39,136,871 (see
Note 5 to the consolidated financial statements for a discussion of the Company’s Goodwill).
In the competitive
landscape, our distinct layers constitute the heart of our approach, underpinned by a commitment to exemplary customer service.
We understand the nuanced needs of various merchants and have meticulously curated layers tailored to their requirements, including
cutting-edge technology, diverse payment processing, integrated banking, and strategic licensing solutions. These layers collectively
form the bedrock of our operations, fostering seamless merchant experiences and propelling us to the forefront of the industry.
As we chart our
course, we stand poised to not only cater to our diverse clientele but to exceed their expectations. Our pursuit of excellence
remains unwavering as we continue to innovate, expand our offerings, and forge new partnerships to reshape the payments and banking
landscape.
Results of Operations
For the year ended December 31, 2023
compared to December 31, 2022
Revenue
|
|
United Kingdom |
|
|
Malaysia |
|
|
Total |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Transaction fees |
|
|
1,983,139 |
|
|
|
2,476,385 |
|
|
|
287,734 |
|
|
|
218 |
|
|
|
2,270,873 |
|
|
|
2,476,603 |
|
Other |
|
|
— |
|
|
|
— |
|
|
|
149,311 |
|
|
|
328 |
|
|
|
149,311 |
|
|
|
328 |
|
Total revenue |
|
|
1,983,139 |
|
|
|
2,476,385 |
|
|
|
437,045 |
|
|
|
546 |
|
|
|
2,420,184 |
|
|
|
2,476,931 |
|
We recognized revenue from transaction
fees earned through financial payment and settlement services of $2,420,184 for the year ended December 31, 2023, a decrease of
$56,747 from sales of $2,476,931 for the year ended December 31, 2022. The reduction in revenue primarily resulted from a restructuring
of revenue streams and to the surrendering of our Credit Token license. Revenue recognized during the year are mainly from transaction
fees earned through financial payment and settlement services provided by FintechCashier Asia P.L.C. (“FintechAsia”
and previously known as “HWGG Capital P.L.C.”) and Fintech.
Our revenue are mostly generated from our
services rendered and therefore, we categorized our revenue as transaction fees, except for whitelabelling. Our revenue can be
further categorized as follows:
| |
Total | |
| |
2023 | | |
2022 | |
Payment Services Provider (PSP) | |
| 817,572 | | |
| 439 | |
Foreign Exchange (FX) Conversion | |
| 1,434,029 | | |
| 2,472,992 | |
Whitelabelling | |
| 168,583 | | |
| 3,500 | |
Acquirer Services(1) | |
| — | | |
| — | |
Business Accounts(2) | |
| — | | |
| — | |
SEPA and SWIFT Payments(3) | |
| — | | |
| — | |
Total Revenue | |
| 2,420,184 | | |
| 2,476,931 | |
| (1) | Acquirer Services is an active business of the Company. However, the Company is currently focusing
on other services and didn’t record any revenue from such service for the financial year ended December 31, 2023 and 2022.
If there are any business opportunities from our clients, we will continue to provide such service. |
| (2) | Business Accounts service is currently complimentary for our existing customers who have been using
our PSP service. Currently, the Company doesn’t have any external clients intending to subscribe our Business Accounts service
solely. |
| (3) | SEPA and SWIFT Payments service is also complimentary for our existing customers who have been
using our PSP service. All fees related to SEPA or SWIFT charged by our partner banks are absorbed by the Company. |
Cost of Revenue
Cost of revenue for the year ended December
31, 2023 was $688,630 compared to $415,010 for the year ended December 31, 2022. The increase for the year ended December 31, 2023
resulted primarily from the restructuring transactions that occurred during 2022; acquisition of FintechAsia and acquisition of
Fintech as mentioned in Corporate History and Structure. In 2023, a full-year Cost of Revenue was recorded for both FintechAsia
and Fintech, whereas in 2022, the Company only recorded FintechAsia’s Cost of Revenue after its acquisition date. Furthermore,
the increase in Cost of Revenue in 2023 was also due to increase in processing fees for our business transaction.
Cost of revenue for the year ended December
31, 2022 has been restated from $430,281 (in the Original Filing of Form 10-K) to $415,010 due to recognition of exclusion of results
of operation of the Group up to acquisition date.
Gross Profit
Gross profit for the year ended December
31, 2023 was $1,731,554 compared to $2,061,921 for the year ended December 31, 2022. The decrease resulted primarily from the restructuring
of revenue streams as described above, increase in Cost of Revenue and the reduction of sources of revenue from FintechAsia and
Fintech.
Operating Expenses
For the year ended December 31, 2023, we
incurred total operating expenses in the amount of $42,552,657 comprised of selling expenses of $nil, general and administrative
expenses of $3,415,786, and impairment of goodwill of $39,136,871. For the year ended December 31, 2022, we incurred total operating
expenses in the amount of $1,246,302, comprised of selling expenses of $977 and general and administrative expenses of $1,245,325.
The decrease of $977 or 100% for the selling expenses, and the increase of $2,170,461, or 174% for the administrative expenses,
and the increase of $39,136,871 or 100% for the impairment of goodwill, caused total operating expenses to increase by $41,306,355
or 3,314%.
Selling expenses refer the marketing costs
incurred by FintechAsia. To align with the group expenses, the Company reclassified all marketing costs into general and administrative
expenses in 2023, resulting in $nil selling expenses for the year.
The administrative expenses of the Company
increased due to the preparation work for the Nasdaq listing, which saw a significant increases in legal fees ($264,373 in 2023
and $nil in 2022), director fees ($124,000 in 2023 and $nil in 2022) and share based payments amounting $52,000 in 2023 and $nil
in 2022.
The increase in the Fintech’s expenses
in 2023 also contributed to higher general and administrative expenses in the Company. These expenses included a 69% increase in
salary costs, a 3,990% rise in consultancy fees, a 175% increase in audit fees, a 161% increase in rental expenses, a 245% increase
in travel expenses, and the research and development costs totaling $409,866 in ($nil in 2022), a cost incurred for new development
of fintech solution purposes.
Liquidity and Capital Resources
To date we have funded our operations primarily
through the sale of equity and debt securities. As of December 31, 2023, we had approximately $3,765,959 in cash and marketable
securities, working capital of approximately $1,591,522 and an accumulated deficit of approximately $40,140,592. Net cash generated
by operating activities was $295,531 and $414,231 for the years ended December 31, 2023 and 2022, respectively. We incurred a loss
of approximately $40,661,803 and a profit of $748,039 for the years ended December 31, 2023 and 2022, respectively. We believe
that our existing cash as of December 31, 2023 will enable us to fund our operating expenses and capital expenditure requirements
for at least 12 months from the date that our audited financial statements are available to be issued.
For the year ended December 31, 2023, we
had a cash balance of $3,765,959. For the year ended December 31, 2023, net cash generated by operating activities totaled $295,531,
net cash used in investing activities totaled $12,496 and net cash used in financing activities totaled $311,858. The resulting
change in cash for the period was $25,419.
For the year ended December 31, 2022, we
had a cash balance of $3,791,378. For the year ended December 31, 2022, net cash generated by operating activities totaled $414,231,
net cash generated by investing activities totaled $3,422,146 and net cash used in financing activities totaled $180,120. The resulting
change in cash for the period was $3,665,324.
For the year ended December 31, 2023, we
had current liabilities of $2,755,862, including $755,040 due to related parties, other payables of $1,953,160 and accounts payable
of $47,662.
For the year ended December 31, 2022, we
had current liabilities of $4,943,467, including $2,463,833 due to related parties, other payables of $1,861,979 and accounts payable
of $617,655.
For the years ended December 31, 2023 and
December 31, 2022, we had net assets of $18,322,482 and $58,881,794, respectively.
For the year ended December 31, 2023, we
have recognized goodwill of $16,657,653 compared to $55,794,524 for the year ended December 31, 2022. After completing our annual
impairment review for each reporting unit during the fourth quarter of 2023, we concluded that goodwill of Fintech was impaired
in the current year and an impairment loss of $39,136,871 has been recorded.
Cash Flows
The following table sets forth summary
cash flow information for the periods presented:
|
|
For the Year Ended December 31, |
|
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
Net (used in) / cash generated by operating activities |
|
$ |
295,531 |
|
|
$ |
414,231 |
|
Net (used in) / cash generated by investing activities |
|
$ |
(12,496 |
) |
|
$ |
3,422,146 |
|
Net cash generated by / (used in) financing activities |
|
$ |
(311,858 |
) |
|
$ |
(180,120 |
) |
Effect of exchange rates on cash |
|
$ |
3,404 |
|
|
$ |
9,067 |
|
Change in cash and cash equivalents |
|
$ |
(25,419 |
) |
|
$ |
3,665,324 |
|
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements,
financings, or other relationships with unconsolidated entities or other persons.
Critical Accounting Policies and Estimates
Goodwill and Intangible Assets –
The Company evaluate the carrying value of goodwill and indefinite life intangible assets annually, or whenever events or circumstances
indicate that the fair value is below its carrying amount. The Company evaluates the carrying value of finite life intangible assets
whenever events or circumstances indicate the carrying value may not be recoverable. Significant assumptions are required to estimate
the fair value of goodwill and intangible assets, most notably estimated future cash flows generated by these assets and risk-adjusted
discount rates. As such, these fair value measurements use significant unobservable inputs. Changes to these assumptions could
require us to record impairment charges on these assets.
In our annual impairment test in the fourth
quarter of 2023, all our reporting units exceeded their carrying values by more than 50 percent. Fair value was determined using
income and market approaches. Fair value under the income approach was determined by discounting to present value the estimated
future cash flows of the reporting units. Significant assumptions are incorporated into the income approach, such as estimated
growth rates, forecasted operating expenses and risk-adjusted discount rates. Fair value under the market approach utilized the
guideline public company methodology, which uses valuation indicators determined from other businesses that are similar to our
reporting units.
Significant
unobservable inputs utilized in the income approach valuation method were the discount rate of 25.05% and the long-term growth
rate of 1.50%. Significant increases (decreases) in growth rates, control premiums and multiples, assuming no change in discount
rates, would result in a significantly higher (lower) fair value measurement. Significant decreases (increases) in discount rates,
assuming no changes in growth rates, control premiums and multiples, would result in a significantly higher (lower) fair value
measurement.
Future impairment in our reporting units
could occur if the estimates used in the income and market approaches change. If our estimates of profitability in the reporting
unit decline, the fair value estimate under the income approach will decline. Additionally, changes in the broader economic environment
could cause changes to our estimated discount rates and comparable company valuation indicators, which may impact our estimated
fair values. Further, changes in foreign currency exchange rates could increase the cost of services from foreign suppliers, which
could reduce reporting unit profitability.
There are no material changes in the critical
accounting policies set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
Please refer to Note 2 Summary of Significant Accounting Policies of the Financial Statements for disclosures regarding the critical
accounting policies related to our business.
Recently Issued Accounting Standards
Our recently issued accounting standards
are included in Note 2 Summary of Significant Accounting Policies of the Financial Statements for disclosures regarding the critical
accounting policies related to our business.
ITEM 7A. Quantitative and Qualitative
Disclosures About Market Risk
The Company is not required to provide
the information required by this Item as it is a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange
Act.
ITEM 8. Financial Statements and Supplementary
Data
FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To: |
The Board of Directors and Stockholders of |
|
Fintech Scion Ltd |
Opinion on the Financial Statements
We have audited the accompanying
consolidated balance sheets of Fintech Scion Ltd (the Company) as of December 31, 2023 and 2022, and the related consolidated
statement of operations and comprehensive income (loss), changes in equity, and cash flow for each of the two years in the
period ended December 31, 2023 and 2022, and the related notes (collectively referred to as the financial statements). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2023 and 2022, and the result of its operations and its cash flow for each of the two years in the period ended
December 31, 2023 and 2022, in conformity with accounting principles generally accepted in the United States.
Restatement of the 2023 Financial Statement.
As discussed in Note 14 to the financial
statements, the accompanying financial statements as of December 31, 2023 and for the period from January 1, 2022 through December
31, 2022 have been restated.
Basis for Opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based
on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required
to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated
below are matters arising from the current period audit of the consolidated financial statements that were communicated to the
audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii)
involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which it relates.
Goodwill
Critical Audit Matter Description
As reflected in the Company’s consolidated
financial statements, at December 31, 2023, the Company’s goodwill was $16,657,653 (2022: $55,794,524). As disclosed in Note
5 to the financial consolidated financial statements, the Company’s evaluation of goodwill for impairment involves the comparison
of the fair value of the reporting unit to its carrying value. The Company uses the discounted cash flow model to estimate fair
value which requires management to make significant estimates and assumptions related to forecasts of future revenue and operating
margin. In additional, the fair value estimates of the reporting units were sensitive to changes in significant assumptions such
as discount rates, expected future cash flows, long-term growth rates and comparable company earnings multiples. Changes in these
assumptions could have a significant impact on either the fair value, the amount of any goodwill impairment charge, or both. Significant
management judgment was required to forecast future revenue and operating margin to estimate the fair value of the reporting unit.
In turn, a high degree of auditor judgment and an increase extend of audit effort were required when performing.
As
discussed in Note 5 to the financial statements, the Company recognized goodwill of $16,657,653 (2022: $55,794,524) being
the balance of goodwill deriving from the reverse acquisition that has occurred during the
year ended December 31, 2022. As a result of the significant carrying amount of goodwill recognized, any further goodwill impairment
will cause a significant adverse financial impact on the Company, and that could raise substantial doubt about the Company’s
ability to continue as a going concern.
How the Critical Audit Matter Was Addressed
in the Audit
Our audit procedures
related to the forecasts of future revenue and operating margin and selection of comparable company valuation indicators
|
● |
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment assessment process. For example, we tested controls over the Company’s long range planning process as well as controls over the review of the significant assumptions in estimating the fair values of the reporting units. |
|
● |
To test the fair values of the reporting units, our audit procedures included, among others, assessing methodologies, testing the significant assumptions described above, and testing the completeness and accuracy of the underlying data used by the Company. Our testing procedures over the significant assumptions included, among others, comparing forecasted revenue and operating margins to current industry and economic trends. We assessed the historical accuracy of management’s estimates by comparing past projections to actual performance and assessed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units resulting from changes in the assumptions. |
Related party balances and transaction
Critical Audit Matter Description
As disclosed in Note 10 to the financial
consolidated financial statements, the Company conducted transactions with its related parties and affiliates during the normal
course of its business in 2023. The Company has entered into a number of transactions with these related parties, including loan
from ex-director and company expenses paid by the director. Auditor judgment was involved in assessing the sufficiency of the procedures
performed to identify related parties and related party transactions of the Company.
How the Critical Audit Matter Was Addressed
in the Audit
We performed the following procedures to
evaluate the identification of related parties and related party transactions by the Company:
● |
Conducted background checks, and reviewed other public research sources for information related to transactions between the Company and its related parties |
● |
Performed confirmations for account balances with related parties |
● |
Reviewed transaction details in the director accounts for transactions with related parties |
● |
Examined the Company’s reconciliation of its related parties’ transactions and balances |
/s/ Pan-China Singapore PAC (6255)
Chartered Accountants
Singapore
May 9, 2024
Except for the effects of the restatement
discussed in Note 14 as to which the date is October 28, 2024.
We have served as the Company’s auditor
since 2021
FINTECH SCION LIMITED
CONSOLIDATED BALANCE SHEETS (AS RESTATED)
(Stated in US Dollars)
|
|
|
|
|
|
|
|
|
As of |
|
|
As of |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
3,765,959 |
|
|
$ |
3,791,378 |
|
Accounts receivable |
|
|
59,974 |
|
|
|
1,792,195 |
|
Amount due from related parties |
|
|
— |
|
|
|
1,296,935 |
|
Other receivables, prepayments and other current assets |
|
|
509,451 |
|
|
|
1,049,292 |
|
Inventories |
|
|
12,000 |
|
|
|
2,272 |
|
Total Current Assets |
|
|
4,347,384 |
|
|
|
7,932,072 |
|
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
Intangible asset |
|
|
34,707 |
|
|
|
59,803 |
|
Goodwill |
|
|
16,657,653 |
|
|
|
55,794,524 |
|
Property and equipment, net |
|
|
38,600 |
|
|
|
38,862 |
|
Total Non-Current Assets |
|
|
16,730,960 |
|
|
|
55,893,189 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
21,078,344 |
|
|
$ |
63,825,261 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Amounts due to related parties |
|
$ |
755,040 |
|
|
$ |
2,463,833 |
|
Accounts payable |
|
|
47,662 |
|
|
|
617,655 |
|
Accruals and other payables |
|
|
1,953,160 |
|
|
|
1,861,979 |
|
Total Current Liabilities |
|
|
2,755,862 |
|
|
|
4,943,467 |
|
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
— |
|
|
|
— |
|
TOTAL LIABILITIES |
|
|
2,755,862 |
|
|
|
4,943,467 |
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 11) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Preferred stock par value $0.001: 25,000,000 shares authorized; and 0 outstanding |
|
|
— |
|
|
|
— |
|
Common stock par value $0.001: 400,000,000 and $0.001: 400,000,000 shares authorized, respectively; 298,742,643 and 198,742,643 shares issued and outstanding, respectively |
|
|
298,743 |
|
|
|
198,743 |
|
Additional paid-in capital |
|
|
58,148,510 |
|
|
|
58,148,510 |
|
Accumulated surplus/(deficit) |
|
|
(40,140,592 |
) |
|
|
521,211 |
|
Accumulated other comprehensive income |
|
|
16,734 |
|
|
|
13,330 |
|
Equity attributable to equity holders of the parent |
|
|
18,323,395 |
|
|
|
58,881,794 |
|
Non-controlling interests |
|
|
(913 |
) |
|
|
— |
|
Total Stockholders’ Equity |
|
|
18,322,482 |
|
|
|
58,881,794 |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
21,078,344 |
|
|
$ |
63,825,261 |
|
The accompanying notes are an integral part
of the consolidated financial statements.
FINTECH SCION LIMITED
CONSOLIDATED STATEMENTS OF INCOME OR
LOSS AND COMPREHENSIVE INCOME OR LOSS (AS RESTATED)
(In U.S. dollars)
|
|
|
|
|
|
|
|
|
For the Years Ended
December, 31 |
|
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
REVENUE |
|
$ |
2,420,184 |
|
|
$ |
2,476,931 |
|
|
|
|
|
|
|
|
|
|
COST OF REVENUE |
|
|
(688,630) |
|
|
|
(415,010) |
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
|
1,731,554 |
|
|
|
2,061,921 |
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
Selling expense |
|
|
— |
|
|
|
(977) |
|
General and administrative expenses |
|
|
(3,415,786) |
|
|
|
(1,245,325) |
|
Impairment of goodwill |
|
|
(39,136,871) |
|
|
|
— |
|
Total Operating Expenses |
|
|
(42,552,657) |
|
|
|
(1,246,302) |
|
|
|
|
|
|
|
|
|
|
PROFIT/(LOSS) FROM OPERATIONS |
|
|
(40,821,103) |
|
|
|
815,619 |
|
|
|
|
|
|
|
|
|
|
OTHER INCOME / (EXPENSE), NET |
|
|
|
|
|
|
|
|
Other income |
|
|
397,532 |
|
|
|
— |
|
Other expense |
|
|
(73,660) |
|
|
|
(67,160) |
|
Total other income / (expense), net |
|
|
323,872 |
|
|
|
(67,160) |
|
|
|
|
|
|
|
|
|
|
Income tax |
|
|
(165,485) |
|
|
|
(420) |
|
NET INCOME / (LOSS) |
|
$ |
(40,662,716) |
|
|
$ |
748,039 |
|
|
|
|
|
|
|
|
|
|
Loss attributable to non-controlling interest |
|
|
913 |
|
|
|
— |
|
NET INCOME / (LOSS) FOR THE PERIOD |
|
|
(40,661,803) |
|
|
|
748,039 |
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME / (LOSS) |
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
|
3,404 |
|
|
|
9,067 |
|
|
|
|
|
|
|
|
|
|
TOTAL COMPREHENSIVE INCOME / (LOSS) |
|
$ |
(40,658,399) |
|
|
$ |
757,106 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding - basic
and diluted (1) |
|
|
198,742,643 |
|
|
|
109,911,475 |
|
|
|
|
|
|
|
|
|
|
Net income / (loss) per share - basic and diluted (1) |
|
$ |
(0.20) |
|
|
$ |
0.01 |
|
The accompanying notes are an integral part
of the consolidated financial statements.
FINTECH SCION LIMITED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY (AS RESTATED)
(Stated in US Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
Additional paid-in |
|
|
Accumulated gain / |
|
|
Accumulated other comprehensive |
|
|
Non-controlling |
|
|
Total stockholders’ |
|
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
(deficit) |
|
|
income / (loss) |
|
|
interest |
|
|
equity |
|
Balance, December 31, 2021 |
|
|
101,666,666 |
|
|
$ |
101,667 |
|
|
$ |
— |
|
|
$ |
(226,828) |
|
|
$ |
4,263 |
|
|
$ |
— |
|
|
$ |
(120,898) |
|
Net income for Fintech Scion UK Group for the 11 months period pre-acquisition |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
716,567 |
|
|
|
— |
|
|
|
— |
|
|
|
716,567 |
|
Acquisition of subsidiaries (Accounting Acquiree) |
|
|
97,075,977 |
|
|
|
97,076 |
|
|
|
58,148,510 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
58,245,586 |
|
Net income for Fintech Scion US Group for the 1 month period post-acquisition |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
31,472 |
|
|
|
— |
|
|
|
— |
|
|
|
31,472 |
|
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9,067 |
|
|
|
— |
|
|
|
9,067 |
|
Balance, December 31, 2022 |
|
|
198,742,643 |
|
|
$ |
198,743 |
|
|
$ |
58,148,510 |
|
|
$ |
521,211 |
|
|
$ |
13,330 |
|
|
$ |
— |
|
|
$ |
58,881,794 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(40,661,803) |
|
|
|
— |
|
|
|
(913) |
|
|
|
(40,662,716) |
|
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,404 |
|
|
|
— |
|
|
|
3,404 |
|
Issuance of stock |
|
|
100,000,000 |
|
|
|
100,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
100,000 |
|
Balance, December 31, 2023 |
|
|
298,742,643 |
|
|
$ |
298,743 |
|
|
$ |
58,148,510 |
|
|
$ |
(40,140,592) |
|
|
$ |
16,734 |
|
|
|
(913) |
|
|
$ |
18,322,482 |
|
The accompanying notes are an integral part
of the consolidated financial statements.
FINTECH SCION LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (AS RESTATED)
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, |
|
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
Net income / (loss) |
|
$ |
(40,662,716 |
) |
|
$ |
748,039 |
|
Items not involving cash: |
|
|
|
|
|
|
|
|
Depreciation and amortization of- property, plant
and equipment and right-of-use assets |
|
|
37,853 |
|
|
|
21,737 |
|
Gain on disposal of subsidiaries |
|
|
— |
|
|
|
— |
|
Impairment on goodwill |
|
|
39,136,871 |
|
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivables |
|
|
1,732,221 |
|
|
|
(1,792,195 |
) |
Other receivables, prepayments and other current assets |
|
|
539,842 |
|
|
|
(1,018,177 |
) |
Inventories |
|
|
(9,728 |
) |
|
|
(2,272 |
) |
Accounts payable |
|
|
(569,993 |
) |
|
|
617,655 |
|
Commission payables |
|
|
— |
|
|
|
— |
|
Accrued expense and other payables |
|
|
91,181 |
|
|
|
1,839,444 |
|
Net (used in) / cash generated by operating activities |
|
|
295,531 |
|
|
|
414,231 |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
(12,496 |
) |
|
|
(112,675 |
) |
Disposal of subsidiaries, net of cash disposed |
|
|
— |
|
|
|
1,049,608 |
|
Acquisition of subsidiaries, net cash acquired |
|
|
— |
|
|
|
2,485,213 |
|
Net (used in) / cash generated by investing activities |
|
|
(12,496 |
) |
|
|
3,422,146 |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Proceed from related parties |
|
|
(411,858 |
) |
|
|
(180,120 |
) |
Proceeds from issuance of shares |
|
|
100,000 |
|
|
|
— |
|
Net cash generated by / (used in) financing activities |
|
|
(311,858 |
) |
|
|
(180,120 |
) |
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATES ON CASH |
|
|
3,404 |
|
|
|
9,067 |
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH EQUIVALENTS |
|
|
(25,419 |
) |
|
|
3,665,324 |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR |
|
|
3,791,378 |
|
|
|
126,054 |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF YEAR |
|
$ |
3,765,959 |
|
|
$ |
3,791,378 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL OF CASH FLOW INFORMATION |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest expenses |
|
$ |
— |
|
|
$ |
— |
|
Cash paid for income tax |
|
$ |
— |
|
|
$ |
— |
|
The accompanying notes are an integral part
of the consolidated financial statements.
FINTECH SCION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars)
1. |
ORGANIZATION
AND BUSINESS |
Fintech
Scion Limited (“the Company”) previously known as HWGC Holdings Limited, incorporated in Nevada.
The
Company holds the following equity interests in its subsidiaries:
|
|
|
|
|
|
Interest |
|
No. |
|
Name
of subsidiary |
|
Country
of
incorporation |
|
2023
% |
|
|
2022
% |
|
|
Principal
activities |
1 |
|
FintechCashier Asia P.L.C., previously known
as HWGG Capital P.L.C. (“FintechAsia”) |
|
Malaysia |
|
100 |
|
|
100 |
|
|
Money broking |
2 |
|
HWG Cash Singapore Pte Ltd (“HCS”) |
|
Singapore |
|
55 |
|
|
55 |
|
|
Trading of digital assets |
3 |
|
HWGC KZ Limited (“HKZ”) |
|
Kazakhstan |
|
100 |
|
|
100 |
|
|
Software development |
4 |
|
Fintech Scion Limited (“Fintech”) |
|
United Kingdom |
|
100 |
|
|
100 |
|
|
Holding company and protection of Intellectual
Property |
5 |
|
Fintech Digital Solutions Limited (“FDS”) |
|
United Kingdom |
|
100 |
|
|
100 |
|
|
Digital payment services |
6 |
|
Fintech Digital Consulting Limited (“FDC”) |
|
United Kingdom |
|
100 |
|
|
100 |
|
|
Technology provider and payment consulting |
7 |
|
Aelora Sdn Bhd, previously known as Vitaxel
Sdn Bhd (“ASB”) |
|
Malaysia |
|
— |
|
|
100(1) |
|
|
Direct selling industry |
8 |
|
Vitaxel Online Mall Sdn Bhd (“VOM”) |
|
Malaysia |
|
— |
|
|
100(1) |
|
|
Online shopping platforms |
The
Company is previously engaged in direct selling industry and online shopping platform primarily through its operating entities
in Malaysia. On December 30, 2022, the Company restructured after the consummation of two share exchange agreements and the disposal
of ASB and VOM. The Company upon the restructuring, offers digital banking services by providing the tools, skills, and solutions
to facilitate payment services to merchants, offering a variety of secured, online and fully managed transactions and settlements.
Restructuring
Transactions
The
following restructuring transactions has occurred during the year ended December 31, 2023 and 2022:
|
i. |
Acquisition of FintechAsia |
|
ii. |
Acquisition of Fintech |
|
iii. |
Disposal of ASB and VOM |
|
iv. |
Acquisition of Assets and Termination |
Acquisition
of FintechAsia
On
July 21, 2022, the Company entered into a share exchange agreement with FintechAsia. Prior to the consummation of the share exchange
agreement, FintechAsia is also under the control of the Company’s management. Under this share exchange agreement, the Company
is to acquire all issued and outstanding ordinary shares of FintechAsia in exchange for an aggregate of $55,000,000. The number
of exchange shares were calculated based on $0.60 share price. The number of shares of common stock of the Company issued upon
consummation of the share exchange agreement was 91,666,667 shares.
On
November 15, 2022, the Company completed the acquisition of FintechAsia upon the consummation of the share exchange agreement
with the shareholders of FintechAsia.
HCS
and HKZ become the subsidiaries of the Company upon the completion of the acquisition of FintechAsia.
The
acquisition of FintechAsia is accounted for as a reorganization of entities under common control. As a result, the Company measured
the recognized assets and liabilities combined at their historical cost at the acquisition date. The difference between consideration
paid and assets and liabilities received are presented as a component of equity; merger reserves and additional paid-in-capital.
The
number of common stock outstanding upon the consummation of the share exchange agreement was 97,075,977.
Acquisition
of Fintech
On
August 9, 2022, the Company entered into a share exchange agreement with Fintech. Under this share exchange agreement with Fintech,
the Company acquired all issued and outstanding ordinary shares of Fintech from the Fintech’s shareholders in exchange for
an aggregate of $61,000,000. The number of exchange shares were calculated based on $0.60 share price. The number of shares of
common stock of the Company issued upon consummation of this share exchange agreement was 101,666,666 shares.
On
November 30, 2022, the Company completed the acquisition of Fintech upon the consummation of the share exchange agreement with
the shareholders of Fintech.
FDS
and FDC become the subsidiaries of the Company upon the completion of the acquisition of Fintech.
Upon
consummation of the share exchange with Fintech, the owners and management of Fintech have voting and operation control of the
Company. This gives effect to the reverse acquisition transaction (“reverse acquisition”). The Company recognized
goodwill arising from the excess in purchase consideration as compared to the estimated fair value of the Company.
In
determining the purchase consideration for both the HWGG and Fintech acquisition, the Company adopted the acquisition date fair
value at $0.60, which is also the most reliable reference estimate which approximate the quoted price of the Company at acquisition
date.
The
number of common stock outstanding upon the consummation of the share exchange agreement was 198,742,643.
Goodwill
recognized is further disclosed in Note 5: Goodwill.
Disposal
of ASB & VOM
On
December 30, 2022, the Company entered into a stock purchase agreement with Mr Leong Yee Ming, the previous director and CEO of
the Company, and for the purposes of the assignment of certain intercompany debt.
Pursuant
to the terms of the agreement, the Company sold to Mr Leong, all issued and outstanding shares of ASB and VOM, for an aggregate
purchase price of RM4,500,002 (approximately $1,124,998). The purchase price was paid by Mr Leong’s assumption of a certain
amount of intercompany debt owed by the Company to ASB.
Acquisitions
of Assets & Termination
On
October 11, 2023, the Company entered into an Asset Conveyance Agreement (the “Purchase Agreement”) with CICO Digital
Solutions Limited, a British Columbia company (“CICO” and a related party company that has a common control by a major
shareholder of the Company). The Purchase Agreement provided for the acquisition by the Company of substantially all of the assets
of CICO (the “Assets”) related to CICO’s business of providing a service platform and software application for
payment services from CICO. As consideration for the transfer and sale of the Assets, the Company issued CICO 100,000,000 restricted
shares of common stock of the Company, par value $0.001 per share (the “Shares”).
On
December 27, 2023, the Company and CICO mutually and voluntarily agreed to unwind the transaction contemplated by the Purchase
Agreement. Upon termination, each of the parties to the Purchase Agreement were relieved of their respective rights, liabilities,
expenses and other obligations under the Purchase Agreement. In connection therewith, CICO transferred the Shares back to the
Company for cancellation upon receipt. The Shares were cancelled and removed from the Company’s issued and outstanding shares
of common stock on January 30, 2024.
2. |
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES |
Basis
of presentation
The
accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”).
This
basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned,
and expenses and losses are recognized when incurred. The Company’s financial statements are expressed in U.S. dollars.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company and its subsidiaries. On consolidation, all intercompany
balances and transactions are eliminated.
Use
of estimates
The
preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions
that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the year. The Company regularly evaluates
estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various
other factors it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources.
Significant areas of estimate include useful lives of property and equipment, impairment of long-term assets and deferred income
tax obligations. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates.
To the extent there are material differences between the estimates and the actual results, future results of operations will be
affected.
Foreign
currency translation and transactions
The
functional currency of the Company is United States Dollar (US Dollars). The Company translates the financial statements
of its foreign subsidiary from the local (functional) currency into US Dollars using the year or reporting period end or average
exchange rates in accordance with the requirements of Accounting Standards Codification subtopic 830-10, Foreign Currency Matters
(“ASC 830-10”). Assets and liabilities of these subsidiaries were translated at exchange rates as of the balance sheet
date. Revenues and expenses are translated at average rates in effect for the periods presented. Translation gains and losses
are recorded in accumulated other comprehensive income or loss as a component of shareholders’ equity.
Cash
and cash equivalents
Cash
and cash equivalents consist of cash on hand and highly liquid investments, which are unrestricted from withdrawal or use, and
which have original maturities of three months or less when purchased.
Accounts
receivable
Accounts
receivable are recognized and carried at original invoiced amount less an allowance for any potential uncollectible amounts. An
estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.
The Company generally does not require collateral from its customers. For the year ended December 31, 2023 and 2022, the Company
wrote down $39,310 and $nil respectively, of its accounts receivable were written off as bad debts.
Fair
value of financial instruments
FASB
ASC 820, “Fair Value Measurement,” specifies a hierarchy of valuation techniques based upon whether the inputs to
those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent
sources (observable inputs). In accordance with ASC 820, the following summarizes the fair value hierarchy:
Level
1 Inputs – Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has
the ability to access.
Level
2 Inputs – Inputs other than the quoted prices in active markets that are observable either directly or indirectly.
Level
3 Inputs – Inputs based on prices or valuation techniques that are both unobservable and significant to the overall fair
value measurements.
ASC
820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure
fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is
based on the lowest level input that is significant to the fair value measurements. Valuation techniques used need to maximize
the use of observable inputs and minimize the use of unobservable inputs. As of December 31, 2023 and 2022, none of the Company’s
assets and liabilities was required to be reported at fair value on a recurring basis. Carrying values of non-derivative financial
instruments, including cash, accounts receivables, payables and accrued liabilities, approximate their fair values due to the
short-term nature of these financial instruments. There were no changes in methods or assumptions during the periods presented.
Inventories
Inventories
consist of finished goods and prepaid cards. Inventories are stated at lower of cost or net realizable value, with cost determined
on a weighted-average method, and not to exceed net realizable value. The Company writes down its inventory balances for obsolete
amounts estimated on an individual basis for the finished goods. For the year ended December 31, 2023 and 2022, the Company wrote
down $nil and $nil respectively, of its inventories that have been obsolete.
Goodwill
Goodwill
is not amortized but is subject to annual impairment tests. Goodwill has been assigned to reporting units. Potential impairment
of a reporting unit is identified by either comparing a reporting unit’s estimated fair value to its carrying amount or
doing a qualitative assessment of a reporting unit’s fair value from the last quantitative assessment to determine if there
is potential impairment. We may do a qualitative assessment when the results of the previous quantitative test indicated the reporting
unit’s estimated fair value was significantly in excess of the carrying value of its net assets and we do not believe there
have been significant changes in the reporting unit’s operations that would significantly decrease its estimated fair value.
If a quantitative assessment is performed, the fair value of the reporting unit and the fair value of goodwill are determined
based upon a discounted cash flow analysis and/or use of a market approach by looking at market values of comparable companies.
Significant assumptions are incorporated into our discounted cash flow analyses such as forecasted net sales, revenue growth rates,
forecasted operating expenses and risk-adjusted discount rates. We perform this test in the fourth quarter of the year or whenever
events or changes in circumstances indicate that the fair value of the reporting unit is more likely than not below its carrying
amount. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded in the amount
that the carrying value of the reporting unit exceeds the fair value. See Note 5 for more information regarding goodwill.
Impairment
of Long-Lived Assets
The
Company periodically reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount
of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount
of the asset exceeds the estimated fair value of the asset.
Intangible
assets
Intangible
assets primarily include trademarks and trade secrets with indefinite lives and customer-relationships with finite lives. Intangible
assets with indefinite lives are not amortized but are tested for impairment on an annual basis, or more frequently if indicators
of impairment are present. Indefinite lived intangible assets are assessed using either a qualitative or a quantitative approach.
The qualitative assessment evaluates factors including macro-economic conditions, industry and company-specific factors, legal
and regulatory environments, and historical company performance in assessing fair value. If it is determined that it is more likely
than not that the fair value of the intangible asset is less than its carrying value, a quantitative test is then performed. Otherwise,
no further testing is required. When using a quantitative approach, the Company compares the fair value of the intangible asset
to its carrying amount, including goodwill. If the estimated fair value of the intangible asset is less than the carrying amount
of the intangible asset, impairment is indicated, requiring recognition of an impairment charge for the differential.
Finite-lived
intangible assets are amortized on a straight-line basis over their estimated useful lives. The Company reviews for impairment
indicators of finite-lived intangibles and other long-lived assets as described in the “Impairment of Long-Lived Assets”
significant accounting policy.
Property
and equipment, net
Property
and equipment are carried at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the
following estimated useful lives:
Schedule of property, plant and equipment estimated useful lives
|
Office equipment |
5 years |
|
|
Computer equipment |
5 years |
|
|
Furniture and fixtures |
5 years |
|
|
Electrical & fitting |
5 years |
|
|
Software and website |
5 years |
|
The
residual values, useful lives and methods of depreciation of property and equipment are reviewed and adjusted if appropriate,
on an annual basis.
Leases
The
Company assesses, at the inception of contract, whether it contains a lease. A contract is classified as a lease if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The
Company recognizes a right-of-use asset and lease liability at the lease commencement date. The right-of-use asset is initially
measured at cost, which comprises of the initial amount of the lease liability adjusted for any lease payments made at or before
the commencement date, plus any indirect costs incurred.
The
right-to-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the
end of the useful life of the right-to-use asset or the end of the lease term. In addition, the right-of-use asset is periodically
reduced by impairment losses and adjusted for certain remeasurements of the lease liability, if any.
The
lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted
using the interest rate implicit in the lease or, if that rate cannot be determined, the Company’s incremental borrowing
rate. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments
made. It is remeasured when there is a change in future lease payment arising from a change in an index or rate, or changes in
assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably
certain not to be exercised.
Revenue
recognition
The
primary source of our revenue is the transaction fees from financial payment and settlement services.
Turnover
is measured at the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other
sales taxes.
Revenue
is generated through delivery services. Revenue is recognized when a customer receives services and is recognized in an amount
that reflects the consideration that the Company expects to receive in exchange for those services. In addition, the standard
requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those services.
The Company applies the following five-step model in order to determine this amount:
(i) identification
of the services in the contract;
(ii)
determination of whether the services are performance obligations, including whether they are distinct in the
context of the contract;
(iii)
measurement of the transaction price, including the constraint on variable consideration;
(iv)
allocation of the transaction price to the performance obligations; and
(v)
recognition of revenue when (or as) the Company satisfies each performance obligation.
The
Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is
entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the
scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company
must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction
price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied.
Generally, the Company’s performance obligations are transferred to customers as services are performed over the remaining
contractual terms.
Research
and Development Costs
Research
and development (“R&D”) costs are charged to expense in the periods incurred. There were no expenditures incurred
by the Company for research and development for the year ended December 31, 2023 and 2022.
Commission
expense
Commission
expense incurred by the Company is recognized as cost of revenue and as a liability (commission payable in the consolidated balance
sheet. Commission expense is not recoverable once recognized and is expensed as incurred.
Income
Taxes
Income
taxes are determined using the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes that date of enactment. In addition, a valuation
allowance is established to reduce any deferred tax asset for which it is determined that it is more likely than not that some
portion of the deferred tax asset will not be realized.
Uncertain
Tax Positions
The
impact of an uncertain income tax position on the income tax return is recognized at the largest amount that is more-likely-than-not
to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less
than a 50% likelihood of being sustained. Interest and penalties on income taxes are classified as a component of the provisions
for income taxes. As of December 31, 2023 and 2022, the Company recognized income tax of expense of $165,485 and $420 respectively.
Comprehensive
income / loss
Comprehensive
income / loss includes net gain/loss and cumulative foreign currency translation adjustments and is reported in the Consolidated
Statement of Comprehensive Income or Loss.
Income
/ Loss per share
The
income / loss per share is computed using the weighted average number of shares outstanding during the fiscal years. For the years
ended December 31, 2023 and 2022, there was no dilutive effect due to net gain / loss.
Related
party transactions
The
Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure
of related party transactions.
Pursuant
to Section 850-10-20 the related parties include (a) affiliates of the registrant; (b) entities for which investments in their
equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section
825–10–15, to be accounted for by the equity method by the investing entity; (c) trusts for the benefit of employees,
such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) principal owners of
the Company; (e) management of the Company; (f) other parties with which the Company may deal if one party controls or can significantly
influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented
from fully pursuing its own separate interests; and (g) Other parties that can significantly influence the management or operating
policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly
influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate
interests. The financial statements include disclosures of material related party transactions, other than compensation arrangements,
expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated
in the preparation of financial statements is not required in those statements. The disclosures shall include: (a) the nature
of the relationship(s) involved; (b) description of the transactions, including transactions to which no amounts or nominal amounts
were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary
to an understanding of the effects of the transactions on the financial statements; (c) the dollar amounts of transactions for
each of the periods for which income statements are presented and the effects of any change in the method of establishing the
terms from that used in the preceding period; and (d) amounts due from or to related parties as of the date of each balance sheet
presented and, if not otherwise apparent, the terms and manner of settlement.
Recently
issued accounting pronouncements
Accounting
standards promulgated by the FASB are subject to change. Changes in such standards may have an impact on the Company’s future
financial statements. The following are a summary of recent accounting developments.
In
August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) to simplify accounting for certain financial instruments.
ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible
instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s
own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are
indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 for the
Company and should be applied on a full or modified retrospective basis, with early adoption permitted beginning January 1, 2021.
The Company has determined not to early adopt ASU 2020-06. The implementation of this accounting treatment is not expected to
have a material effect on the Company’s financial statements.
Other
recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities
and Exchange Commission (“SEC”) did not, or are not believed by management, to have a material impact on the Company’s
present and future consolidated financial statements.
Accounting
Pronouncements Not Yet Adopted
In
November 2023, the Financial Accounting Standards Board (FASB) issued ASU No. 2023-07, Segment Reporting (Topic 280):
Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires an enhanced disclosure of significant segment
expenses on an annual and interim basis. This guidance will be effective for the annual periods beginning the year ended December
31, 2024, and for interim periods beginning January 1, 2025. Early adoption is permitted. Upon adoption, the guidance should be
applied retrospectively to all prior periods presented in the financial statements. We do not expect the adoption of this guidance
to have a material impact on our consolidated financial statements.
In
December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU
2023-09), which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation
of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes
certain other amendments to improve the effectiveness of income tax disclosures. This guidance will be effective for the annual
periods beginning the year ended December 31, 2025. Early adoption is permitted. Upon adoption, the guidance can be applied prospectively
or retrospectively. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
Accounts
receivable represent balances from:
|
(i) |
transactions fees
receivable generated from financial payment and settlement services; |
|
(ii) |
non-interest-bearing
credit tokens issue to authorized agents. |
Services
billed are generally settled upon financial services has been rendered. Only limited clients are extended with credits.
As
at December 31, 2023, we had accounts receivable of $59,974 solely derived from commissions receivables. During the year, the
company recognized bad debts of $39,310. As of December 31, 2022, accounts receivable balances of $1,792,195 mainly derived from
commission receivable of $597,986 and non-interest-bearing credit tokens issued to authorized agents of $1,194,208.
The
company has assessed the impairment and considers the remaining accounts receivable to be fully collectible, therefore no further
impairment is necessary as at December 31, 2023.
4. |
OTHER RECEIVABLES,
PREPAYMENTS AND OTHER CURRENT ASSETS |
Other
receivables, prepayments and other current assets consist of the following:
Schedule of other receivables and other assets
| |
As of December 31, 2023 | | |
As of December 31, 2022 | |
| |
| | |
| |
Other receivables (1) | |
$ | 294,780 | | |
$ | 949,430 | |
Deposits (2) | |
$ | 110,161 | | |
$ | 87,805 | |
Prepayments (3) | |
$ | 4,510 | | |
$ | 12,057 | |
Common stock not paid (4) | |
$ | 100,000 | | |
$ | — | |
Total | |
$ | 509,451 | | |
$ | 1,049,292 | |
The
table below set forth the carrying amount of goodwill for the year ended December 31, 2023 and 2022:
| |
As of December 31, 2023 | | |
As of December 31, 2022 | |
| |
| | |
| |
Gross carrying amount | |
$ | — | | |
$ | — | |
Acquired in business combination (1) | |
| 55,794,524 | | |
| 55,794,524 | |
Total | |
| 55,794,524 | | |
| 55,794,524 | |
Accumulated impairment | |
$ | — | | |
$ | — | |
Impairment (2) | |
| (39,136,871 | ) | |
| — | |
| |
| — | | |
| — | |
| |
| | | |
| | |
Goodwill, net | |
$ | 16,657,653 | | |
$ | 55,794,524 | |
Goodwill
is calculated based on the excess in purchase consideration as compared to the fair value of the Company. The acquisition date
fair value is $58,245,587 (97,075,997 x $0.60). In order to arrive at the fair value of the Company, fair value adjustments have
been made on inventories and related party balances. The estimated fair value of the Company identifiable net assets after fair
value adjustments is as follows
Schedule of fair value adjustment
| |
As of December 31, 2022 | |
| |
| |
Property, plant and equipment, net. | |
$ | 21,807 | |
Intangible asset | |
| 59,803 | |
Current assets | |
$ | 7,239,547 | |
Current liabilities | |
| (4,870,094 | ) |
Net assets acquired | |
$ | 2,451,063 | |
(2) |
The Company performs
our annual test of goodwill impairment in the fourth quarter of every year. In connection with the annual goodwill impairment
test in the fourth quarter of 2023, the Company estimated the fair value of our FintechAsia reporting unit using the income
and market approaches. In the annual 2023 test, the FintechAsia reporting unit exceeded the carrying values by more than 50
percent. The Company performed a qualitative test on our FintechAsia reporting unit and concluded it was more likely than
not the fair value of this reporting unit exceeded its carrying value. |
During
the year ended December 31, 2023, the Company recorded a goodwill impairment charge of $39,136,871 in our FintechAsia reporting
unit, primarily due to the surrendering of our credit token license and significant impacts on money broking transactional volume
following the cryptocurrency market crash in 2022. Both significantly impacted forecasted cash flows used in our analysis. Moreover,
operating expenses did not decline proportionally to revenue. In addition, inflationary pressures also caused our forecasted expenses
to increase. Furthermore, our discounted cash flows utilized a higher risk-adjusted discount rate for the 2023 impairment test,
primarily due to central banks raising interest rates in 2023 and increased country-specific risk due to macroeconomic factors.
The Company estimated the fair
value of the FintechAsia reporting unit based on income and market approaches. Fair value under the income approach was determined
by discounting to present value the estimated future cash flows of the reporting unit. Fair value under the market approach utilized
the guideline public company methodology, which uses valuation indicators from publicly-traded companies that are similar to our
FintechAsia reporting unit and considers differences between our reporting unit and the comparable companies.
In estimating the future cash
flows of the FintechAsia reporting unit, the Company utilized a combination of market and company-specific inputs that a market
participant would use in assessing the fair value of the reporting units. The primary market input was revenue growth rates. These
rates were based upon historical trends and estimated future growth drivers such as the money brokering, payment solutions, and
white labelling growth rate. Significant company-specific inputs included assumptions regarding how the reporting unit could leverage
operating expenses as revenue grows.
Under the guideline public
company methodology, the Company took into consideration specific risk differences between our reporting unit and the comparable
companies, such as recent financial performance, size risks and product portfolios, among other considerations.
The Company used significant
unobservable inputs within the income approach valuation method. These include the discount rate of 25.05% and the long-term growth
rate of 1.50%. Significant increases (decreases) in growth rates, control premiums and multiples, assuming no change in discount
rates, would result in a significantly higher (lower) fair value measurement. Significant decreases (increases) in discount rates,
assuming no changes in growth rates, control premiums and multiples, would result in a significantly higher (lower) fair value
measurement.
The Company will continue to
monitor the fair value of our reporting units in our interim and annual reporting periods. If our estimated cash flows decrease,
the Company may have to record further impairment charges in the future. Factors that could result in our cash flows being lower
than our current estimates include: 1) decreased revenues caused by unforeseen changes the market, 2) our inability to achieve
the estimated operating margins in our forecasts from our restructuring programs, cost saving initiatives, and other unforeseen
factors, and 3) the weakening of foreign currencies against the U.S. Dollar. Additionally, changes in the broader economic environment
could cause changes to our estimated discount rates and comparable company valuation indicators, which may impact our estimated
fair values. Due to the significant carrying amount of goodwill recognized, any further impairment may cause a significant adverse
financial impact on the Company that could raise doubt about the Company’s ability to continue as a going concern.
6. |
PROPERTY AND
EQUIPMENT |
Property
and equipment, net consist of the following:
| |
As of December 31, 2023 | | |
As of December 31, 2022 | |
| |
| | |
| |
Office equipment | |
$ | 8,628 | | |
$ | 7,067 | |
Computer equipment | |
| 49,600 | | |
| 31,959 | |
Furniture and fittings | |
| 4,824 | | |
| 4,501 | |
Software and website | |
| 10,173 | | |
| 17,202 | |
| |
| 73,225 | | |
| 60,729 | |
Less: Accumulated depreciation | |
| (34,625 | ) | |
| (21,867 | ) |
Balance at end of year | |
$ | 38,600 | | |
$ | 38,862 | |
Depreciation
expenses charged to the statements of loss and comprehensive loss for the years ended December 31, 2023 and 2022 were $12,758
and $7,569 respectively.
7. |
ACCRUALS AND
OTHER PAYABLES |