UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
| 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:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (I.R.S. Employer Identification No.) | |
| N/A | ||
| (Address of principal executive offices) | (Zip Code) |
+
(Registrant’s telephone number, including area code)
Not applicable.
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☐
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐
As of November 18, 2024, there were shares of the issuer’s common stock issued and outstanding.
1
FINTECH SCION LIMITED AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED March 31, 2024
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:
| ● | our projected financial position and estimated cash burn rate; | |
| ● | our estimates regarding expenses, future revenues and capital requirements; |
2
| ● | our ability to continue as a going concern; | |
| ● | our need to raise substantial additional capital to fund our operation; | |
| ● | our dependence on third parties in the conduct of our operations; | |
| ● | our ability to obtain the necessary regulatory approvals to market and commercialize our products; | |
| ● | the impact of a health epidemic, on our business, our operations or the global economy as a whole; | |
| ● | the results of market research conducted by us or others; | |
| ● | our ability to obtain and maintain intellectual property protection for our current and future products; | |
| ● | 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; | |
| ● | 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; | |
| ● | our reliance on third-party suppliers and manufacturers; | |
| ● | the success of competing payment platforms and products that are or become available; | |
| ● | our ability to expand our organization to accommodate potential growth and our ability to retain and attract key personnel; | |
| ● | 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 | |
| ● | 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 Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.
This Quarterly Report on Form 10-Q may include market data and certain industry data and forecasts, which we may obtain from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications, articles and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third-party sources.
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FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
4
FINTECH SCION LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In U.S. dollars)
| As of | As of | |||||||
| March 31, | December 31, | |||||||
2024 (Unaudited) | 2023 (Audited) | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Amount due from related parties | ||||||||
| Inventories | ||||||||
| Other receivables, prepayments and other current assets | ||||||||
| Total Current Assets | ||||||||
| Non-current assets | ||||||||
| Intangible asset | ||||||||
| Goodwill | ||||||||
| Property and equipment, net | ||||||||
| Total Non-Current Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES | ||||||||
| Current liabilities | ||||||||
| Amounts due to related parties | $ | $ | ||||||
| Accounts payable | ||||||||
| Accruals and other payables | ||||||||
| Total Current Liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and Contingencies (Note 10) | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock par value $: shares authorized; and outstanding | ||||||||
| Common stock par value $: and $: shares authorized, respectively; and shares issued and outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated surplus | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Equity attributable to equity holders of the parent | ||||||||
| Non-controlling interests | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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FINTECH SCION LIMITED AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(In U.S. dollars)
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| REVENUE | $ | $ | ||||||
| COST OF REVENUE | ( | ) | ( | ) | ||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES | ||||||||
| General and administrative expenses | ( | ) | ( | ) | ||||
| Total operating expenses | ( | ) | ( | ) | ||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| OTHER INCOME/(EXPENSE), NET | ||||||||
| Other income | ||||||||
| Other expense | ( | ) | ( | ) | ||||
| Total Other income / (Expense), net | ( | ) | ||||||
| NET INCOME / (LOSS) BEFORE TAX | $ | ( | ) | $ | ||||
| Income tax | ( | ) | ||||||
| NET LOSS | $ | ( | ) | $ | ||||
| Loss attributable to non-controlling interest | ||||||||
| NET INCOME / (LOSS) FOR THE PERIOD | ( | ) | ||||||
| OTHER COMPREHENSIVE INCOME / (LOSS) | ||||||||
| Foreign currency translation adjustment | ||||||||
| TOTAL COMPREHENSIVE INCOME / (LOSS) | $ | ( | ) | $ | ||||
| Weighted average number of common shares outstanding - basic and diluted | ||||||||
| Net income / (loss) per share - basic and diluted | $ | ( | ) | $ | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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FINTECH SCION LIMITED AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In U.S. dollars)
For the Period Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ||||
| Items not involving cash: | ||||||||
| Depreciation and amortization of– property and equipment and right-of-use assets | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivables | ||||||||
| Other receivables, prepayments and other current assets | ||||||||
| Inventories | ||||||||
| Accounts Payable | ( | ) | ||||||
| Accrued expense and other payables | ( | ) | ( | ) | ||||
| Net (used in) / cash generated by operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment and rights-of-use assets | ( | ) | ||||||
| Net (used in) / cash generated by investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of shares | ( | ) | ||||||
| (Repayments) / Proceeds from related parties | ( | ) | ||||||
| Net cash generated by / (used in) financing activities | ( | ) | ||||||
| EFFECT OF EXCHANGE RATES ON CASH | ||||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL OF CASH FLOW INFORMATION | ||||||||
| Cash paid for interest expenses | $ | $ | ||||||
| Cash paid for income tax | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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FINTECH SCION LIMITED AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In U.S. dollars)
| 1. | ORGANIZATION AND BUSINESS |
Fintech Scion Limited (“the Company”) formerly 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 |
2024 % |
2023 % |
Principal activities | ||||||||
| 1 | FintechCashier Asia P.L.C., formerly known as HWGG Capital P.L.C. (“FintechAsia”) | ||||||||||||
| 2 | HWG Cash Singapore Pte Ltd (“HCS”)* | ||||||||||||
| 3 | HWGC KZ Limited (“HKZ”)* | ||||||||||||
| 4 | Fintech Scion Limited (“Fintech”) | ||||||||||||
| 5 | Fintech Digital Solutions Limited (“FDS”) | ||||||||||||
| 6 | Fintech Digital Consulting Limited (“FDC”) | ||||||||||||
| * |
The Company 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.
| 2. | UNAUDITED INTERIM FINANCIAL STATEMENTS |
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information under Article 8 of Regulation S-X. They do not include all information and foot notes required by U.S. GAAP for complete financial statements. Except as disclosed herein, there have been no material changes in the information disclosed in the notes to the consolidated financial statement for the year ended December 31, 2023, included in the Company’s Form 10-K/A filed with the SEC on October 28, 2024 (“Annual Report on Form 10-K/A”). The interim unaudited consolidated financial statements should be read in conjunction with those audited consolidated financial statements included in our Annual Report on Form 10-K/A.
In the opinion of management, the Company has made all adjustments necessary to present a fair statement of the financial position as of March 31, 2024, results of operations for the three months ended March 31, 2024 and 2023, and cash flows for the three months ended March 31, 2024 and 2023. All significant intercompany transactions and balances are eliminated on consolidation. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results of operations for the entire fiscal year.
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Recently issued accounting pronouncements
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial position or results of operations upon adoption.
| 3. | ACCOUNTS RECEIVABLES |
Accounts receivable represent balances from transactions fees receivable generated from financial payment and settlement services such as from the Payment Services Provider, Foreign Exchange (FX) Conversion fees and whitelabelling services.
Services billed are generally settled upon financial services have been rendered. Only limited clients are extended with credits.
As of March 31, 2024, accounts
receivable balances of $
The company considers accounts receivable to be fully collectible, therefore no impairment is necessary as at March 31, 2024 and December 31, 2023.
| 4. | OTHER RECEIVABLES, PREPAYMENTS AND OTHER CURRENT ASSETS |
Other receivables, prepayments and other current assets consist of the following:
| March 31, 2024 | December 31, 2023 | |||||||
| Other receivables (1) | $ | $ | ||||||
| Deposits (2) | $ | $ | ||||||
| Prepayments (3) | $ | $ | ||||||
| Common stock not paid (4) | $ | $ | ||||||
| Total | $ | $ | ||||||
| (1) |
| (2) | ||
| (3) |
| (4) |
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| 5. | GOODWILL |
The table below sets forth the carrying amount of goodwill for March 31, 2024 and December 31, 2023.
| As of March 31, 2024 |
As of December 31, 2023 |
|||||||
| Gross carrying amount | $ | $ | ||||||
| Acquired in business combination (1) | ||||||||
| Total | ||||||||
| Accumulated impairment | $ | ( |
) | $ | ||||
| Impairment (2) | ( |
) | ||||||
| — | — | |||||||
| Goodwill, net | $ | $ | ||||||
| (1) |
| (2) |
|
During the year ended
December 31, 2023, the Company recorded a goodwill impairment charge of $
The Company estimated the fair value of the FintechAsia reporting unit based on income approach. Fair value under the income approach was determined by discounting to present value the estimated future cash flows of the reporting unit.
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 |
10
The Company will continue to monitor the fair value of our reporting units in our interim and annual reporting periods. While the policy of the Company on conducting impairment on annual basis stand, it is the directors’ responsibility to ensure that the reports (including annual and quarterly reports) are accurate. Hence, for good corporate governance practice purposes, the directors have also reviewed the fair value of goodwill in both quantitative and qualitative information during this quarterly period. 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.
For the quarterly period ended March 31, 2024, the management has determined that a quarterly goodwill impairment assessment is not necessary for the following reasons, despite the annualized financial performance of the FintechAsia reporting unit for the full year 2024 being lower than our current estimates:
1. New Clients Onboarding: FintechAsia has onboarded new clients with the potential for significant transaction volumes. The level of contribution from these new clients remains undetermined, as it will depend on the volume of transactions. Based on discussions with clients, the Company believes there is still a possibility of reaching breakeven for FintechAsia by the end of 2024. 2. Cost Saving Initiatives: The costs associated with Fintech are expected to decrease significantly in 2024. These cost savings are expected to be reflected in the Company’s financial performance starting from the quarterly period ending September 30, 2024. The full impact of these cost-saving initiatives will be more accurately reflected in the Company’s results when the books are closed at year-end.
Given these factors, the management believes that conducting a quarterly goodwill impairment test would not provide an accurate reflection of the Company’s financial position and would not align with the adopted policy. The year-end goodwill impairment review for the annual financial statements is based on a complete 12-month period of results, allowing for a more robust assessment of the contracts entered into by the Company. This approach is consistent with the policy adopted for the Company’s goodwill assessment and the impairment provisions for the Form 10-K for the financial year ended December 31, 2023. Management will conduct a more detailed analysis to determine whether further impairment is required when preparing the Form 10-K for the financial year ending December 31, 2024.
For the quarterly period ended
March 31, 2024, our total assets stood at $
For the quarterly period ended
March 31, 2024, the Company reported amounts due to related parties totalling $ |
11
| 6. | PROPERTY AND EQUIPMENT, NET |
Property and equipment, net consist of the following:
|
As of March 31, |
As of December 31, 2023 |
|||||||
| Office equipment | $ | $ | ||||||
| Computer equipment | ||||||||
| Furniture and fittings | ||||||||
| Software and website | ||||||||
| Less: Accumulated depreciation | ( |
) | ( |
) | ||||
| Balance at end of period/year | $ | $ | ||||||
Depreciation expenses charged to the statements of
operations and comprehensive loss for the three months periods ended March 31, 2024 and 2023 were $
| 7. | ACCRUED EXPENSE AND OTHER PAYABLES |
Accrued expense and other payables consist of the following:
|
As of March 31, |
As of December 31, 2023 |
|||||||
| Provisions and accruals (1) | $ | $ | ||||||
| Others (2) | ||||||||
| Balance at end of period/year | $ | $ | ||||||
| (1) | ||
| (2) |
| 8. | REVENUE |
Within the current period, the Company mainly derives its revenue from its whitelabelling service. The Company considers its performance obligation satisfied and recognizes revenue over time when the service is provided.
Previously, the Company derived its revenue mainly from transaction fees earned through financial payment and settlement services. For these transaction fee revenues, the Company views itself as the agent in these transactions and as a result, records revenue on a net basis. The Company considers its performance obligation satisfied and recognizes revenue at the point in time the transaction is processed.
The disaggregation of revenue of the Company by the services rendered for the period ended March 31, 2024 and 2023 is as follows:
| Total | ||||||||
| 2024 | 2023 | |||||||
| Payment Services Provider (PSP) | ||||||||
| Foreign Exchange (FX) Conversion | ||||||||
| Whitelabelling | ||||||||
| Referral fees(1) | ||||||||
| Total Revenue | ||||||||
| (1) |
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| 9. | RELATED PARTY BALANCES AND TRANSACTIONS |
| As of March 31, 2024 | As of December 31, 2023 | |||||||
| Amount due to related parties | ||||||||
| Ho Wah Genting Group Sdn Bhd (1) | $ | $ | ||||||
| Shalom Dodoun (2) | ||||||||
| Natalie Kastberg (3) | ||||||||
| CICO Digital Solutions Limited (4) | ||||||||
| Total Amount due to related parties | $ | $ | ||||||
The related party balances are
unsecured,
| (1) |
Mr Lim Chun Hoo, the previous CFO and the current CEO and director of the Company, is a previous director of HWGGSB.
The amount due to HWGGSB as at March 31, 2024 and December 31, 2023, were advances made by HWGGSB to the Company.
| (2) |
| |
| (3) |
| |
| (4) |
13
| (5) |
Total payment made in the form of compensation,
which includes salary, bonus, stock awards and all other compensation have been made to the following officer of the Company that
are individually in excess of $
|
| As of March 31, 2024 | As of December 31, 2023 | |||||||
| Directors & Officers | ||||||||
| Shalom Dodoun – Previous Director, Chief Executive Officer of the Company | $ | $ | ||||||
| Richard Berman – Non-executive Director of the Company (6) | $ | $ | ||||||
| (6) |
| 10. | COMMITMENTS AND CONTINGENCIES |
Capital Commitments
| (1) |
| ||
| (2) | Following the financial year end, the shares that were issued to CICO for the acquisition of assets as disclosed in our Annual Report on Form 10-K/A for the year ended December 31, 2023, were cancelled and removed from the Company’s issued and outstanding shares of common stock on January 30, 2024. The total issued and outstanding shares of the Company will be reduced to shares on January 30, 2024. | ||
| ITEM 2. | 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 unaudited interim condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 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 Quarterly Report on Form 10-Q, references to “we,” “our,” “us,” the “Company,” “Fintech,” or “Fintech Scion” refer to Fintech Scion Limited, individually, or as the context requires, collectively with its subsidiaries.
Overview
Fintech Scion Limited (“Fintech Scion”, the “Company”, “we”, “our”, or “us”) 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.
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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.
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.
15
Results of Operations
Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023
Revenue
Revenue generated by the Company during the three months ended March 31, 2024 consists of three components, including: Payment Service Provider (PSP), Foreign Exchange (FX) Conversion and Whitelabelling. The revenue generated from each component is outlined in the following table.
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Payment Services Provider (PSP) | $ | — | $ | 177,825 | ||||
| Foreign Exchange (FX) Conversion | 27,057 | 658,869 | ||||||
| Whitelabelling | 150,118 | 10,500 | ||||||
| Referral fees(1) | 82,219 | — | ||||||
| Total Revenue | $ | 259,394 | $ | 847,194 | ||||
| (1) | Referral fees is a new revenue stream within 2024 following the discontinue of our EMD agency service in December 2023, to comply with updated regulatory compliance mandates from the United Kingdom. As a result, the existing client base of Fintech was transferred to a third party and a revenue share agreement was established. |
We recognized $259,394 and $847,194 revenues for the three months ended March 31, 2024 and 2023, respectively. The decrease in revenue was primarily due to lower-than-expected transactions for both the Payment Services Provider and Foreign Exchange (FX) Conversion services. There has been less onboarding of new clients in the first quarter of 2024 for our services, which mean we are primarily servicing existing clients. Additionally, the discontinue of our EMD agency service in December 2023, to comply with updated regulatory compliance mandates from the United Kingdom, also partially impacted our operations. Revenue recognized during the period is mainly from whitelabelling provided by FintechAsia and referral fees provided by FDS.
Cost of Revenue
Cost of revenue for the three months ended March 31, 2024 was $37,150 compared to $35 for the three months ended March 31, 2023, due to increase in processing fees for our business transaction.
Gross Profit
Gross profit for the three months ended March 31, 2024 was $222,244 compared to $847,159 for the period ended March 31, 2023. The decrease resulted primarily from the lower-than-expected revenue generated from our services and higher cost of revenue.
Operating Expenses
For the three months ended March 31, 2024, we incurred total operating expenses in the amount of $883,892 compared to $871,366 for the three months ended March 31, 2023. The increase of $12,526 or 1% was mainly attributed to the increased costs associated with preparation for the Nasdaq listing. Specifically, legal fees rose to $106,638 in Q1FY2024 from $17,500 in Q1FY2023, director fees increased to $36,000 in Q1FY2024 from $10,000 in Q1FY2023, and share-based payments were $13,000 in Q1FY2024 compared to $nil in Q1FY2023. However, the increase in the above costs was partially offset by a decrease in the general and administrative expenses of Fintech. This includes a $81,475 or 49% decrease of banking and processing fees, $31,941 or 15% decrease of consultation fees, and a $25,777 or 85% decrease of professional fees.
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Liquidity and Capital Resources
As of March 31, 2024, we had a cash balance of $3,585,341. During the period ended March 31, 2024, net cash used in operating activities totaled $231,191. Net cash generated from investing activities totaled $259. Net cash generated by financing activities during the period totaled $42,137. The resulting change in cash for the period was a decrease of $180,618, which was primarily due to cash used in operating activities. As of March 31, 2024, we had current liabilities of $3,054,144, which was composed of amount due to related parties of $897,177, accounts payable of $327,122, and accruals and other payable of $1,829,845. We had net assets of $17,493,692 and $18,322,482 as of March 31, 2024 and December 31, 2023, respectively. For the period ended March 31, 2024, we have recognized goodwill of $16,657,653 compared to $16,657,653 for the year ended December 31, 2023. 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 year ended December 31, 2023 and an impairment loss of $39,136,871 was recorded. We have recognized goodwill of $16,657,653 as a result from the acquisition of Fintech during the year ended December 31, 2022. We believe no impairment is required during the period ended March 31, 2024. However, due to the significant carrying amount of goodwill recognized, any indication of impairment that causes losses and give rise to substantial doubt about our ability to continue as going concern.
Cash Flows for the Three Months Ended March 31, 2024 and 2024.
The following table sets forth summary cash flow information for the periods presented:
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Net (used in) / cash generated by operating activities | $ | (231,191 | ) | $ | 933,677 | |||
| Net (used in) / cash generated by investing activities | $ | 259 | $ | (6,500 | ) | |||
| Net cash generated by / (used in) financing activities | $ | 42,137 | $ | (839,697 | ) | |||
| Effect of exchange rates on cash | $ | 8,177 | $ | 14,024 | ||||
| Change in cash and cash equivalents | $ | (180,618 | ) | $ | 101,504 | |||
Cash Flows from Operating Activities
For the three months ended March 31, 2024, cash used in operating activities was $231,191 which consisted of a net loss for the three months ended March 31, 2024 of $736,967. Cash generated by other receivables, prepayments and other assets was $319,616, accounts payables was $279,460, accounts receivable was $19,663, and depreciation and amortization of property and equipment and right-of-use assets was $10,352. Cash used by accrued expense and other payables was $123,315.
For the three months ended March 31, 2023, net cash generated by operating activities was $933,677 which consisted of a net loss for the three months ended March 31, 2023 of $3,569. Cash generated from accounts receivables was $650,768, other receivables, prepayments and other assets was $583,475, depreciation and amortization was $10,819, and inventories was $35. Cash used by accounts payables was $198,653 and accrued expense and other payables was $116,336.
Cash Flows from Investing Activities
For the three months ended March 31, 2024, net cash generated by investing activities was $259 which consisted of cash generated by purchase of property and equipment and right-of-use assets of $259.
For the three months ended March 31, 2023, cash used in investing activities was $6,500 which consisted of cash used in purchase of property and equipment and right-of-use assets of $6,500.
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Cash Flows from Financing Activities
For the three months ended March 31, 2024, net cash generated by financing activities was $42,137 which consisted of cash generated by proceeds from related parties of $142,137 and cash used in the issuance of shares of $100,000.
For the three months ended March 31, 2023, cash used in financing activities was $839,697 which consisted of repayments to related parties of $839,697.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, financing, or other relationships with unconsolidated entities or other persons.
Critical Accounting Policies and Estimates
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates. Estimates are used in the following areas, among others: research and development expense recognition, valuation of common shares and stock options, allowances of deferred tax assets, valuation of debt related instruments, and cash flow assumptions regarding going concern considerations. Although management believes the estimates that have been used are reasonable, actual results could vary from the estimates that were used.
Recently Issued Accounting Standards
The recently issued accounting pronouncements are included in Note 2 Unaudited Interim Financial Statements for disclosures on accounting policies related to our business.
| ITEM 3. | 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 4. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
We maintain controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management including our principal executive and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. Based upon their evaluation of those controls and procedures performed as of the end of the period covered by this report, our principal executive and principal financial officer concluded that our disclosure controls and procedures were effective in ensuring that: (i) information required to be disclosed by us in reports that we file or submit to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for accurate and timely decisions regarding required disclosure.
In order to ensure that our subsequent periodic quarterly reports for the financial year 2024 are filed in accordance with effective internal control over financial reporting, the company has temporarily held the filings of these quarterly reports until our Annual Report for the year ended December 31, 2023 is evaluated as effective by management.
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For the financial year ended December 31, 2023, our management concluded that we did not maintain effective internal control over financial reporting, due to a weakness in our internal control over financial reporting, related to the acquisition of Fintech. This weakness was brought to our attention only when we received the SEC Staff Statement on June 11, 2024. In response to this weakness, the management has recognized the impact of the financial statement as described in the Annual Report on Form 10-K/A for the year ended December 31, 2023. Due to this weakness, the Company’s management has expended, and will continue to expend, substantial effort and resources for the remediation and improvement of our internal control over financial reporting.
On October 28, 2024, we filed the Annual Report on Form 10-K/A for the year ended December 31, 2023 with SEC. On November 4, 2024, we received the SEC Staff Statement confirming that they have completed their review of our Form 10-K/A. Hence, we are now filing this Quarterly Report for the period ended March 31, 2024 after the quarterly evaluation on our internal control over financial reporting has been completed, as described below.
Management’s Quarterly Report on Internal Control over Financial Reporting.
Lim Chun Hoo, our Chief Executive Officer (“CEO”), is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, our principal executive and principal financial officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
| a) | Ensuring that the management of each subsidiary pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
| b) | Exercising the rights as the CEO of Company to oversee all internal control’s function, instruct amendment to policy and procedures, carry out internal control audit and other necessary means on each of the subsidiary to ensure that it is consistent with the Securities Exchange Act of 1934; |
| c) | Provide reasonable assurance by involving in the subsidiary’s material decision-making process that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and our directors; and |
| d) | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. All material acquisition and disposal of subsidiary’s asset shall be approved by the board of director of the Company. |
| e) | Because of its inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree goodwill of compliance with the policies or procedures may deteriorate. |
Our Chief Executive Officer assessed the effectiveness of our internal control over financial reporting as of March 31, 2024. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013). A material weakness, as defined by SEC rules, is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. Our management has carried out an evaluation, with the participation and under the supervision of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon their participation in that evaluation, the CEO and CFO concluded that the disclosure controls and procedures were effective as of March 31, 2024.
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Accordingly management believes, based on its knowledge, that (1) this report does not contain any untrue statement of a material fact or omit to state a material face necessary to make the statements made not misleading with respect to the period covered by this report, and (2) the financial statements, and other financial information included in this report, fairly present in all material respects our financial condition, results of operations and cash flows for the years and periods then ended.
This report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this report.
Changes in Internal Controls
As discussed above, there were changes in the Company’s internal control over financial reporting during the most recent fiscal year that have affected the effectiveness of the Company’s internal control over financial reporting. Our current plans include acquiring enhanced access to accounting literature, research materials and documents, and increasing communication among our personnel, and considering the engagement of third-party professionals to consult with us on the application of complex accounting transactions.
PART II - OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS |
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties and an adverse result in these, or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.
| ITEM 1A. | RISK FACTORS |
Risk factors that affect our business and financial results are discussed in Part I, Item 1A “Risk Factors,” in our Annual Report on Form 10-K/A for the year ended December 31, 2023 as filed with the SEC on October 28, 2024. There have been no material changes in our risk factors from those previously disclosed in our Periodic Reports. You should carefully consider the risks described in our Periodic Reports, which could materially affect our business, financial condition or future results. The risks described in our Periodic Reports are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
None.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
| ITEM 5. | OTHER INFORMATION |
During the fiscal quarter ended March 31, 2024, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”
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| ITEM 6. | EXHIBITS |
| Exhibit Number |
Description of Exhibit | |
| 31.1* | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 | |
| 31.2* | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 | |
| 32.1** | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS* | Inline XBRL Instance Document | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.LAB* | Inline XBRL Taxonomy Extension Labels Linkbase Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 104* | Cover Page Interactive Data File – the cover page from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, is formatted in Inline XBRL and included in the Exhibit 101 Inline XBRL Document Set | |
* Filed herewith
** Furnished herewith
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| FINTECH SCION LIMITED | ||
| Date: November 19, 2024 | By: | /s/ Lim Chun Hoo |
|
Lim Chun Hoo Chief Executive Officer | ||
| Date: November 19, 2024 | By: | /s/ Colin Ellis |
|
Colin Ellis Chief Financial Officer (Principal Financial and Accounting Officer) | ||
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