NUKKLEUS INC. Management report and analysis of the financial situation and operating results. (Form 10-Q)

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The following discussion and analysis of our financial condition and results of
operations for the three and nine months ended June 30, 2022 and 2021 should be
read in conjunction with our unaudited condensed consolidated financial
statements and related notes to those unaudited condensed consolidated financial
statements that are included elsewhere in this report.



Certain matters discussed herein are forward-looking statements. These forward-looking statements contained in this Form 10-Q involve risks and uncertainties, including statements regarding:

? our future operating results;



 ? our business prospects;



? any contractual arrangements and any relationships with third parties;

? the dependence of our future success on the general economy;

? possible funding; and

? the adequacy of our liquidity and working capital.

Impact of COVID-19 on our operations

The ramifications of the outbreak of the novel strain of COVID-19, reported to
have started in December 2019 and spread globally, are filled with uncertainty
and changing quickly. Our operations have continued during the COVID-19 pandemic
and we have not had significant disruption. Due to the nature of our business,
the technology we use and offer to our customers, and our employees' ability to
work remotely, there was no material impact of COVID-19 on our business,
operations and financial results.



The Company is operating in a rapidly changing environment so the extent to
which COVID-19 impacts its business, operations and financial results from this
point forward will depend on numerous evolving factors that the Company cannot
accurately predict. Those factors include the following: the duration and scope
of the pandemic, and governmental, business and individuals' actions that have
been and continue to be taken in response to the pandemic.



Overview



We are a financial technology company which is focused on providing software and
technology solutions for the worldwide retail foreign exchange ("FX") trading
industry. We primarily provide our software, technology, customer sales and
marketing and risk management technology hardware and software solutions package
to TCM. The FXDD brand (e.g., see FXDD.com) is the brand utilized in the retail
forex trading industry by TCM.



We have ownership of FOREXWARE, the primary software suite and technology
solution which powers the FXDD brand globally today. We also have ownership of
the FOREXWARE brand name. We have also acquired ownership of the customer
interface and other software trading solutions being used by FXDD.com. By virtue
of our relationship with TCM and FXDIRECT, we provide turnkey software and
technology solutions for FXDD.com. We offer the customers of FXDD 24 hours, five
days a week direct access to the global over the counter ("OTC") FX market,
which is a decentralized market in which participants trade directly with one
another, rather than through a central exchange.



In an FX trade, participants effectively buy one currency and simultaneously
sell another currency, with the two currencies that make up the trade being
referred to as a "currency pair". Our software and technology solutions enable
FXDD to present its customers with price quotations on over the counter
tradeable instruments, including over the counter currency pairs, and also
provide our customers the ability to trade FX derivative contracts on currency
pairs through a product referred to as Contracts for Difference ("CFD"). Our
software solutions also offer other CFD products, including CFDs on metals, such
as gold, and on futures linked to other products.



In July 2018, the Company incorporated Nukkleus Malta Holding Ltd., which is a
wholly-owned subsidiary. In July 2018, Nukkleus Malta Holding Ltd. incorporated
MDTG, formerly known as Nukkleus Exchange Malta Ltd. MDTG was exploring
potentially obtaining a license to operate an electronic exchange whereby it
would facilitate the buying and selling of various digital assets as well as
traditional currency pairs used in FX Trading. During the fourth quarter of
fiscal 2020, management made the decision to exit the exchange business and to
no longer pursue the regulatory licensing necessary to operate an exchange
in
Malta.



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On August 27, 2020, the Company renamed Nukkleus Exchange Malta Ltd. to Markets
Direct Technology Group Ltd ("MDTG"). MDTG manages the technology and IP behind
the Markets Direct brand (which is operated by TCM). MDTG holds all the IP
addresses and all the software licenses in its name, and it holds all the IP
rights to the brands such as Markets Direct and TCM. MDTG then leases out the
rights to use these names/brands licenses to the appropriate entities.



On May 24, 2021, the Company and the shareholders of Match Financial Limited
(the "Match Shareholders"), a private limited company formed in England and
Wales ("Match"), entered into a Purchase and Sale Agreement (the "Match
Agreement"), pursuant to which the Company, on May 28, 2021, acquired 1,152
ordinary shares of Match representing 70% of the issued and outstanding ordinary
shares of Match in consideration of 70,000,000 shares of common stock of the
Company (the "Initial Transaction"). On August 30, 2021, the Company exercised
its option pursuant to which it acquired from the Match Shareholders the balance
of 493 ordinary shares of Match representing 30% of the issued and outstanding
ordinary shares of Match for an additional 30,000,000 shares of common stock of
the Company. Match is engaged in providing payment services from one fiat
currency to another.



On October 20, 2021, the Company and the shareholders (the "Original
Shareholders") of Jacobi Asset Management Holdings Limited ("Jacobi") entered
into a Purchase and Sale Agreement (the "Jacobi Agreement") pursuant to which
the Company agreed to acquire 5.0% of the issued and outstanding ordinary shares
of Jacobi in consideration of 20,000,000 shares of common stock of the Company
(the "Jacobi Transaction"). On December 15, 2021, the Company, the Original
Shareholders and the shareholders of Jacobi that were assigned their interest in
Jacobi by the Original Shareholders (the "New Jacobi Shareholders") entered into
an Amendment to Stock Purchase Agreement agreeing that the Jacobi Transaction
will be entered between the Company and the New Jacobi Shareholders. The Jacobi
Transaction closed on December 15, 2021. Jacobi is a company focused on digital
asset management that has received regulatory approval to launch the world's
first tier one Bitcoin ETF. The transactions contemplated by the Jacobi
Agreement constituted a "related-party transaction" as defined in Item 404 of
Regulation S-K because of Mr. Khurshid's and Mr. Gregory's position as
beneficial owner of one or more Original Shareholders and New Jacobi
Shareholders.



On December 30, 2021, the Company and the shareholder (the "Digiclear
Shareholder") of Digiclear Ltd. ("Digiclear") entered into a Purchase and Sale
Agreement (the "Digiclear Agreement) pursuant to which the Company agreed to
acquire 5,400,000 of the issued and outstanding ordinary shares of Digiclear in
consideration of 15,151,515 shares of common stock of the Company (the
"Digiclear Transaction"). The Digiclear Transaction closed on March 17, 2022.
Digiclear is a company developing a custody and settlement utility operating
system.


Key Performance Indicators (KPIs)

The KPIs described below are the metrics that provide management with the most immediate understanding of the drivers of business performance and tracking of financial goals.


                              Three Months Ended                  Nine Months Ended
                                    June 30                            June 30,
Performance Indicator        2022             2021              2022              2021
Trading volume             49,413,367        2,575,246        108,718,193        2,575,246
Trading revenue          $    352,192      $    41,602      $     970,224      $    41,602
Trading loss             $   (348,513 )    $  (103,179 )    $  (1,428,096 )    $  (103,179 )
Average cost per trade   $      2,375      $    12,065      $       4,038      $    12,065
Average trade                 167,503          214,604            183,027          214,604
Number of trades                  295               12                594               12
Clients active                     39                5                 52                5
Gross trading margin              0.7 %            1.6 %              0.9 %            1.6 %
Gross margin                    (99.0 )%        (248.0 )%          (147.2 )%        (248.0 )%




On May 28, 2021, the Company acquired a controlling interest in Match. There was
no comparable information prior to the date the Company acquired a controlling
interest in Match.



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Trading volume is measured by the number of trades.

Trading revenue represents the front line revenue generated from trading, before taking into account the costs associated with generating trading revenue.

Trading loss is measured as trading revenue, less the costs of carrying out
those trades. During the period from May 28, 2021 through June 30, 2021, we
engaged with introducing brokers in an effort to expand trading volume/revenue.
The costs associated with introducing brokers increased the average cost per
trade however we expect to gain economies of scale on these fees as the trading
volume and average trade value increases.



Average cost per trade is driven by bank, front office employee and introducing
broker costs. As previously mentioned, we expect to gain economies of scale for
these costs as we will see increased trading volume and average trade value.



Active clients for the three months ended June 30, 2022 and 2021 was 39 and 5,
respectively. Active clients for the nine months ended June 30, 2022 and 2021
was 52 and 5, respectively. We continue to bring on introducing brokers as well
as increases in marketing spend from which we continue to add new clients.

Gross trading margin is a metric that measures gross revenue against gross trading volume.



Critical Accounting Policies



Use of Estimates



The preparation of our unaudited condensed consolidated financial statements in
conformity with accounting principles generally accepted in the United States
requires us to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenue and expense, and related disclosure of
contingent assets and liabilities. When making these estimates and assumptions,
we consider our historical experience, our knowledge of economic and market
factors and various other factors that we believe to be reasonable under the
circumstances. Actual results could differ from these estimates. Significant
estimates during the three and nine months ended June 30, 2022 and 2021 include
the useful life of intangible assets, assumptions used in assessing impairment
of long-term assets, valuation of deferred tax assets and the associated
valuation allowances, and valuation of stock-based compensation.



Investment, at Cost



Investment in which the Company does not have the ability to exercise
significant influence over operating and financial matters is accounted for
using the cost method. Under the cost method, investment is recorded at cost,
with gains and losses recognized as of the sale date, and income recorded when
received. The Company periodically evaluates its cost method investment for
impairment due to decline considered to be other than temporary. If the Company
determines that a decline in fair value is other than temporary, then a charge
to earnings is recorded in "Other income (expense), net" in the accompanying
unaudited condensed consolidated statements of operations and comprehensive
loss, and a new basis in the investment is established.



Investment in Non-consolidated companyDigiclear Ltd.

The Company uses the equity method of accounting for its investment in, and
earning or loss of, a company that it does not control but over which it does
exert significant influence. The Company considers whether the fair value of its
equity method investment has declined below its carrying value whenever adverse
events or changes in circumstances indicate that recorded value may not be
recoverable. If the Company considers any decline to be other than temporary
(based on various factors, including historical financial results and the
overall health of the investee), then a write-down would be recorded to
estimated fair value.



Intangible Assets



Intangible assets consist of trade names, regulatory licenses, technology and
software, which are being amortized on a straight-line method over the estimated
useful life of 3 - 5 years.


Impairment of long-lived assets

In accordance with ASC Topic 360, the Company reviews long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be fully recoverable, or at least
annually. The Company recognizes an impairment loss when the sum of expected
undiscounted future cash flows is less than the carrying amount of the asset.
The amount of impairment is measured as the difference between the asset's
estimated fair value and its book value. There were no triggering events
requiring assessment of impairment as of June 30, 2022. For the three and nine
months ended June 30, 2022 and 2021, no impairment of long-lived assets was
recognized.



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Revenue Recognition


The Company recognizes its revenue under the provisions of ASC Topic 606.

The Company’s revenue comes from the provision of:

? General support services under a GSA to a related party. The price of transactions

is determined in accordance with the terms of the GSA and payments are due on a

monthly basis. There are several services provided under the GSA and these

performance obligations are aggregated into a single unit of account. The fees are

recognized as revenue over time as services are rendered under the

the GSA. Revenue is recorded on a gross basis because the Company is deemed to be a

principal in transactions.

? Financial services to its customers. Income related to its financial services

   offerings are recognized at a point in time when service is rendered.




Stock-based Compensation



The Company accounts for its stock-based compensation awards in accordance with
ASC Topic 718, Compensation-Stock Compensation ("ASC 718"). ASC 718 requires all
stock-based payments to employees and non-employees including grants of stock
options, to be recognized as expense in the statements of operations based on
their grant date fair values. The Company estimates the grant date fair value of
each option award using the Black-Scholes option-pricing model.



Results of Operations



Summary of Key Results


For the three and nine months ended June 30, 2022 compared to the three and nine month periods ended June 30, 2021


Revenues



For both of the three months ended June 30, 2022 and 2021, we had revenue from
general support services rendered to TCM under a GSA of $4,800,000. For both of
the nine months ended June 30, 2022 and 2021, we had revenue from general
support services rendered to TCM under a GSA of $14,400,000.



We had revenue from financial services commencing in May 2021. For the three
months ended June 30, 2022, we had revenue from financial services of $352,192,
as compared to $41,602 for the three months ended June 30, 2021, an increase of
$310,590, or 746.6%. For the nine months ended June 30, 2022, we had revenue
from financial services of $970,224, as compared to $41,602 for the nine months
ended June 30, 2021, an increase of $928,622, or 2,232.2%. The significant
increase was primarily attributable to our business expansion. We expect that
our revenue from financial services will continue to increase in the near future
since we are making efforts on expanding our financial services.



Costs of Revenues



For both of the three months ended June 30, 2022 and 2021, our cost of general
support services was $4,725,000, which represented amount incurred for services
rendered by FXDIRECT under a GSA. For both of the nine months ended June 30,
2022 and 2021, our cost of general support services was $14,175,000, which
represented amount incurred for services rendered by FXDIRECT under a GSA.



Cost of financial services include amortization of intangible assets which
consist of license and banking infrastructure acquired on Match acquisition,
consulting costs, banking, and trading fees incurred associated with delivery of
our services.



For the three months ended June 30, 2022, cost of financial services amounted to
$700,705, as compared to $144,781 for the three months ended June 30, 2021, an
increase of $555,924, or 384.0%. For the nine months ended June 30, 2022, cost
of financial services amounted to $2,398,320, as compared to $144,781 for the
nine months ended June 30, 2021, an increase of $2,253,539, or 1,556.5%. The
significant increase was primarily attributable to the increase in amortization
costs of intangible assets which consist of license and banking infrastructure
acquired on Match acquisition.



                                       26





Gross Profit (Loss)


For both of the three months ended June 30, 2022 and 2021, our gross profit from
general support services was $75,000, representing gross margin of 1.6%. For
both of the nine months ended June 30, 2022 and 2021, our gross profit from
general support services was $225,000, representing gross margin of 1.6%.



Gross loss from financial services for the three months ended June 30, 2022 was
$348,513, as compared to $103,179 for the three months ended June 30, 2021, an
increase of $245,334, or 237.8%. Gross margin increased to (99.0)% for the three
months ended June 30, 2022 from gross margin of (248.0)% for the three months
ended June 30, 2021. Gross loss from financial services for the nine months
ended June 30, 2022 was $1,428,096, as compared to $103,179 for the nine months
ended June 30, 2021, an increase of $1,324,917, or 1,284.1%. Gross margin
increased to (147.2)% for the nine months ended June 30, 2022 from gross margin
of (248.0)% for the nine months ended June 30, 2021. The gross losses were
primarily attributable to a large portion of our cost of financial services are
fixed and do not change along with the increase/decrease in our revenue from
financial services. The significant increase in our gross margin for the
financial services segment for the three and nine months ended June 30, 2022 as
compared to the corresponding periods in fiscal 2021 was primarily attributed to
the increased scale of operations resulting from larger revenue, which is
reflected in the allocation of fixed costs, mainly consisting of amortization
costs of intangible assets and consulting costs, to cost of revenue. We expect
that our gross margin for the financial services segment will continue to
increase since we anticipate we will generate more revenue from financial
services and we can improve our gross margin from financial services segment to
the extent that we can become more efficient by increasing our revenue.



Operating Expenses



Operating expenses consisted of advertising and marketing, professional fees,
compensation and related benefits, amortization of intangible assets, and other
general and administrative expenses.



Advertising and marketing



For the three and nine months ended June 30, 2022, advertising and marketing
expense amounted to $147,177 and $345,826, respectively. In the nine months
ended June 30, 2022, we incurred advertising and marketing activities to enhance
the visibility and marketability of our services and to improve brand
recognition and awareness. We did not have any advertising and marketing costs
during the three and nine months ended June 30, 2021. We expect that our
advertising and marketing expense will remain in its current quarterly level
with minimal increase in the near future.



Professional fees



Professional fees primarily consisted of audit fees, legal service fees,
advisory fees, and consulting fees. For the three months ended June 30, 2022,
professional fees increased by $860,356, or 1,670.6%, as compared to the three
months ended June 30, 2021. The significant increase was primarily attributable
to an increase in consulting fees of approximately $811,000, which was mainly
due to the increase in options granted to consultants of approximately $526,000
and the increase of approximately $285,000 related to merger and acquisition
consulting services, and an increase in other miscellaneous items of
approximately $49,000 resulting from our business expansion. For the nine months
ended June 30, 2022, professional fees increased by $2,710,632, or 1,428.4%. The
significant increase was primarily attributable to an increase in advisory
service fees of $300,000 mainly due to increased advisory service related to our
merger and acquisition, an increase in legal service fees of approximately
$224,000 due to increased legal service related to our merger and acquisition,
an increase in consulting fees of approximately $2,100,000, which was due to the
increase in options granted to consultants of approximately $1,430,000 and the
increase of approximately $670,000 mainly related to merger and acquisition
consulting services, and an increase in other miscellaneous items of
approximately $87,000 resulting from our business expansion. We expect that our
professional fees will remain in its current quarterly level with minimal
increase in the near future.



Compensation and related benefits



For the three months ended June 30, 2022, our compensation and related benefits
increased by $90,115, or 901.2%, as compared to the three months ended June 30,
2021. For the nine months ended June 30, 2022, our compensation and related
benefits increased by $325,359, or 1,084.5%, as compared to the nine months
ended June 30, 2021. The increase was mainly attributable to increased
management in our financial services segment. We expect that our compensation
and related benefits will remain in its current quarterly level with minimal
increase in the near future.



                                       27




Amortization of intangible assets



For the three months ended June 30, 2022, our amortization of intangible assets
increased by $66,291, or 100.0%, as compared to the three months ended June 30,
2021. For the nine months ended June 30, 2022, our amortization of intangible
assets increased by $197,935, or 100.0%, as compared to the nine months ended
June 30, 2021. The increase was primarily attributable to increased intangible
assets in fiscal 2022 periods. We expect that our amortization of intangible
assets will remain in its current quarterly level in the near future.



Other general and administrative costs

Other general and administrative expenses primarily comprised rent, application fees, miscellaneous taxes and other miscellaneous items.



For the three months ended June 30, 2022, total other general and administrative
expenses increased by $145,470, or 1,444.7%, as compared to the three months
ended June 30, 2021. The increase was mainly due to an increase in rent expense
of approximately $55,000 resulting from our business expansion, an increase in
filing fee of approximately $50,000, and an increase in miscellaneous taxes of
approximately $41,000. For the nine months ended June 30, 2022, total other
general and administrative expenses increased by $396,893, or 758.5%, as
compared to the nine months ended June 30, 2021. The increase was mainly due to
an increase in rent expense of approximately $133,000 resulting from our
business expansion, an increase in filing fee of approximately $51,000, an
increase in platform fee of approximately $21,000, an increase in miscellaneous
taxes of approximately $41,000, and an increase in other miscellaneous items of
approximately $151,000 resulting from our business expansion. We expect that
other general and administrative expenses will remain in its current quarterly
level with minimal increase in the near future.



Other Expense


Other charges include loss on investment under the equity method and other miscellaneous charges.

Other expenses totaled $331,796 for the three months ended June 30, 2022compared to $790 for the three months ended June 30, 2021an augmentation of
$331,006which is mainly explained by an increase in the loss related to the equity method of approximately $331,000.

Other expenses totaled $405,904 for the nine months ended June 30, 2022compared to $3,810 for the nine months ended June 30, 2021an augmentation of
$402,094which is mainly explained by an increase in the loss related to the equity method of approximately $401,000.


Net Loss


As a result of the factors described above, our net loss was $1,986,287 for the
three months ended June 30, 2022, as compared to $100,538 for the three months
ended June 30, 2021, an increase of $1,885,749 or 1,875.7%.



As a result of the factors described above, our net loss was $5,857,740 for the
nine months ended June 30, 2022, as compared to $154,084 for the nine months
ended June 30, 2021, an increase of $5,703,656 or 3,701.7%.



Net loss attributable to Nukkleus Inc. Ordinary shareholders



The net loss attributable to Nukkleus Inc. common stockholders was $1,986,287 or
$0.01 per share (basic and diluted) for the three months ended June 30, 2022, as
compared with $103,804 or $0.00 per share (basic and diluted) for the three
months ended June 30, 2021, an increase of $1,882,483 or 1,813.5%.



The net loss attributable to Nukkleus Inc. common stockholders was $5,857,740 or
$0.02 per share (basic and diluted) for the nine months ended June 30, 2022, as
compared with $157,350 or $0.00 per share (basic and diluted) for the nine
months ended June 30, 2021, an increase of $5,700,390 or 3,622.7%.



Foreign currency translation adjustment



The reporting currency of the Company is U.S. Dollars. The functional currency
of the parent company, Nukkleus Inc., Nukkleus Limited, Nukkleus Malta Holding
Ltd. and its subsidiaries, is the U.S. dollar and the functional currency of
Match Financial Limited and its subsidiaries is the British Pound ("GBP"). The
financial statements of our subsidiaries whose functional currency is the GBP
are translated to U.S. dollars using period end rates of exchange for assets and
liabilities, average rate of exchange for revenues, costs, and expenses and cash
flows, and at historical exchange rates for equity. Net gains and losses
resulting from foreign exchange transactions are included in the results of
operations. As a result of foreign currency translations, which are a non-cash
adjustment, we reported a foreign currency translation gain of $27,644 and $121
for the three months ended June 30, 2022 and 2021, respectively. As a result of
foreign currency translations, which are a non-cash adjustment, we reported a
foreign currency translation gain of $38,631 and $121 for the nine months ended
June 30, 2022 and 2021, respectively. This non-cash gain had the effect of
decreasing our reported comprehensive loss.



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Comprehensive Loss



As a result of our foreign currency translation adjustment, we had comprehensive
loss of $1,958,643 and $100,417 for the three months ended June 30, 2022 and
2021, respectively.


Due to our foreign currency translation adjustment, we incurred an overall loss of $5,819,109 and $153,963 for the nine months ended June 30, 2022 and 2021, respectively.

Cash and capital resources



Liquidity is the ability of a company to generate funds to support its current
and future operations, satisfy its obligations and otherwise operate on an
ongoing basis. At June 30, 2022 and September 30, 2021, we had cash balances of
$23,142 and $355,673, respectively. We had working capital deficit of $3,484,888
as of June 30, 2022.


Our ability to continue as a going concern is dependent upon the management of
expenses and our ability to obtain the necessary financing to meet our
obligations and pay our liabilities arising from normal business operations when
they come due, and upon profitable operations.



We need to either borrow funds or raise additional capital through equity or
debt financings. However, we cannot be certain that such capital (from our
stockholders or third parties) will be available to us or whether such capital
will be available on terms that are acceptable to us. Any such financing likely
would be dilutive to existing stockholders and could result in significant
financial operating covenants that would negatively impact our business. In the
event that there are any unforeseen delays or obstacles in obtaining funds
through the aforementioned sources, CMH has committed to inject capital into the
Company in order to maintain the ongoing operations of the business.



The following table provides a summary of changes in our working capital since
September 30, 2021 at June 30, 2022:


                                             June 30,        September 30,               Changes in
                                               2022              2021              Amount         Percentage
Working capital deficit:
Total current assets                       $    972,195     $     3,043,720     $ (2,071,525 )          (68.1 )%
Total current liabilities                     4,457,083           4,638,513         (181,430 )           (3.9 )%
Working capital deficit                    $ (3,484,888 )   $    (1,594,793 )   $ (1,890,095 )          118.5 %




Our working capital deficit increased by $1,890,095 to $3,484,888 at June 30,
2022 from $1,594,793 at September 30, 2021. The increase in working capital
deficit was primarily attributable to a decrease in cash of approximately
$333,000, a decrease in due from affiliates of approximately $1,747,000
resulting from the payments received from our affiliates in the nine months
ended June 30, 2022, and an increase in accounts payable and accrued liabilities
of approximately $163,000, which mainly attributable to the increase in accrued
professional fees of approximately $113,000 resulting from the increase in
professional service providers and the increase in accrued directors'
compensation of approximately $37,000, offset by a decrease in due to affiliates
of approximately $344,000 due to the payments made to our affiliates in the
nine
months ended June 30, 2022.


Since the translation of the exchange rate is different for the condensed consolidated balance sheets and the condensed consolidated statements of cash flows, the changes in assets and liabilities reflected in the condensed consolidated statements of cash flows are not necessarily identical to the changes comparables reflected in the condensed consolidated statements of cash flows. balance sheets.

Cash flow for the nine months ended June 30, 2022 Compared to the nine months ended June 30, 2021



Net cash flow used in operating activities for the nine months ended June 30,
2022 was $328,926, which primarily reflected our consolidated net loss of
approximately $5,858,000, and the changes in operating assets and liabilities,
primarily consisting of a decrease in due to affiliates of approximately
$316,000 due to the payments made to our affiliates in the nine months ended
June 30, 2022, offset by a decrease in due from affiliates of approximately
$1,747,000 resulting from the payments received from our affiliates in the nine
months ended June 30, 2022, and an increase in accounts payable and accrued
liabilities of approximately $183,000 which was mainly due to the increase in
accrued professional fees of approximately $113,000 resulting from the increase
in professional service providers, and the non-cash items adjustment primarily
consisting of amortization of intangible assets of approximately $2,098,000,
stock-based compensation and service expense of approximately $1,430,000, and
loss on equity method investment of approximately $401,000.



Net cash flow provided by operating activities was $291,404 for the nine months
ended June 30, 2021, which primarily reflected the non-cash items mainly
consisting of amortization of intangible assets of approximately $117,000, and
the changes in operating assets and liabilities, primarily consisting of a
decrease in due from affiliates of approximately $1,092,000 resulting from the
payments received from our affiliates in the nine months ended June 30, 2021,
offset by a decrease in due to affiliates of approximately $771,000 due to the
payments made to our affiliates in the nine months ended June 30, 2021, and our
consolidated net loss of approximately $154,000.



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There was no investing activity during the nine months ended June 30, 2022.



Net cash flow used in investing activities was $9,302 for the nine months ended
June 30, 2021. During the nine months ended June 30, 2021, we made payments for
acquisition of approximately $31,000, offset by cash acquired on acquisition of
approximately $21,000.


Our operations will require additional funding for the foreseeable future.
Unless and until we are able to generate a sufficient amount of revenue and
reduce our costs, we expect to finance future cash needs through public and/or
private offerings of equity securities and/or debt financings. We do not
currently have any committed future funding. To the extent we raise additional
capital by issuing equity securities, our stockholders could at that time
experience substantial dilution. Any debt financing we are able to obtain may
involve operating covenants that restrict our business. Our capital requirements
for the next twelve months primarily relate to mergers, acquisitions and the
development of business opportunities. In addition, we expect to use cash to pay
fees related to professional services. The following trends are reasonably
likely to result in a material decrease in our liquidity over the near to long
term:


? Working capital requirements to finance our current activities;

? The use of capital for mergers, acquisitions and business development

   opportunities;




? Adding staff as the business grows; and

? The cost of being a public company.




We need to either borrow funds or raise additional capital through equity or
debt financings. However, we cannot be certain that such capital (from our
stockholders or third parties) will be available to us or whether such capital
will be available on terms that are acceptable to us. Any such financing likely
would be dilutive to existing stockholders and could result in significant
financial operating covenants that would negatively impact our business. If we
are unable to raise sufficient additional capital on acceptable terms, we will
have insufficient funds to operate our business or pursue our planned growth.
However, CMH has committed to inject capital into the Company in order to
maintain the ongoing operations of the business.



Consistent with Section 144 of the Delaware General Corporation Law, it is our
current policy that all transactions between us and our officers, directors and
their affiliates will be entered into only if such transactions are approved by
a majority of the disinterested directors, are approved by vote of the
stockholders, or are fair to us as a corporation as of the time it is
authorized, approved or ratified by the board. We will conduct an appropriate
review of all related party transactions on an ongoing basis.



Contractual obligations and off-balance sheet arrangements


Contractual Obligations


From June 30, 2022we had no material contractual obligations other than:
FXDirectDealer LLC receives a minimum of $1,575,000 per month and this obligation may be terminated by the Company upon 90 days notice.

Off-balance sheet arrangements

We had no outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign exchange contracts. We do not engage in trading activities involving non-exchange traded contracts.

Recently issued accounting pronouncements

For information about recently issued accounting standards, refer to Note 3 to
our Unaudited Condensed Consolidated Financial Statements appearing elsewhere in
this report.



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