8/Financials
Runway for the company
With the minimum funds raised (1,500,000.00 MYR) , this amount can serve as runway for the company's expenses for 12 months to 18 months. This gives Frac a good buffer of time to test out demand hypothesis when it comes to purchasing of fractions of real world assets. On top of that, as mentioned in the 1/Companypage, Frac's funds and time is largely poured into exploration of Luxury Assets, forming the primary focus for the company, this ensures that quality of success rather than quantity of success. Quality of successful case studies greatly increase confidence in the company's valuation as well as the performance of $FRAC. However, in the scenario where the maximum amount of funds are raised (6,500,000.00 MYR), based on current projections on expenses, (including the scaling of the team to it's full capacity without reaching the stage of diminishing returns) the company's runway can stretch from 36 months to 48 months at max.
Discussions on accounting treatment
The accounting treatment of $FRAC, the Frac Utility Token, involves navigating a complex and evolving landscape of regulations and standards, particularly as they pertain to digital assets and cryptocurrencies. Given the multifaceted utilities of $FRAC as described, several accounting considerations come into play, aligning with principles from both the International Financial Reporting Standards (IFRS) and, potentially, the Generally Accepted Accounting Principles (GAAP) if applicable.
Here's a breakdown of possible accounting treatments based on $FRAC's utilities:
$FRAC as an enterprise's software subscription token:
Recognition and Measurement: When payments are made by Enterprise Partners in $FRAC to Frac (i.e., software subscription fees), they should be recorded as an expense at the fair market value of the $FRAC tokens by the Enterprise Partner, and recorded as revenue by Frac, on the transaction date. The value is based on the most recent transaction or issuance price in a private sale. When $FRAC is listed on an exchange, the fair market value will be determined by the current trading price on that exchange.
Liabilities and Equity: If enterprises can hold $FRAC, for a required period of time to enjoy better commercial terms, these tokens might represent a contractual obligation on Frac's part, potentially classifying them as financial liabilities or equity instruments, depending on the terms and the entity's obligation to deliver cash or another financial asset.
$FRAC as a collector's access token:
Inventory or Intangible Asset: Tokens used to access or trade in unique assets could be considered as part of inventory if held for sale in the ordinary course of business, or as intangible assets if they provide future economic benefits through access to specific assets.
$FRAC as an ecosystem supporters' loyalty token:
Loyalty Programs: Accounting for loyalty programs may require recognizing a deferred revenue liability when tokens are issued, with revenue recognized as obligations are fulfilled. This treatment would depend on the specific mechanics of the loyalty program and the obligations it creates.
$FRAC to be used by enterprises to conduct polling activities:
Equity Instruments: If holding $FRAC provides governance rights, these tokens could be seen as granting a form of ownership or control, potentially classifying them as equity instruments. This classification would depend on the extent of the rights and the structure of the governance model.
Valuation and Disclosure: Valuing $FRAC accurately is critical for financial reporting, requiring ongoing assessment of its fair market value. This can be challenging due to the volatility and liquidity issues common in cryptocurrency markets. Disclosure requirements would likely encompass the nature and use of $FRAC, risks related to its valuation and liquidity, and the impact of $FRAC transactions on the financial statements.
Regulatory Considerations: The regulatory environment for cryptocurrencies and tokens is rapidly evolving. It's crucial for Frac Pte. Ltd. to stay informed about and comply with relevant regulations, which could impact the accounting treatment of $FRAC.
Given the complexity and the lack of definitive guidance specifically addressing all aspects of cryptocurrencies and utility tokens in existing accounting standards, the Frac team will consult with accounting professionals and possibly regulatory bodies to ensure compliance with the relevant financial reporting framework.
Accounting Treatment on the Fundraising Proceeds: Under International Financial Reporting Standards ("IFRS"), the funds raised from the issuance of $FRAC are recorded as a liability under "Deferred Revenue" or "Token Sale Proceeds" in Frac's books. This is because Frac has an obligation to provide the utility or services associated with the token. As Frac fulfills these obligations, the liability is reduced, and the revenue is recognized on the income statement.
Current Key Statistics Frac is a B2B2C Infrastructure Provider, our target audience are business owners and enterprises.
Number of businesses that have agreed to white-labeled the Frac platform: 6
Out of the 6 businesses that Frac has performed a white-label, the gemstones-driven business has completed a successful Initial Gemstone Offering, the Initial Gemstone Offering was a complete sell-out within 3 days and the platform is now preparing for it's second offering. The Fund Infrastructure company has also completed its first offering successfully. The remaining 5 businesses are currently in beta-stage testing with their respective customer groups.
The table below shows the kind of industries these clients are present in and their expected customer base.
Whisky
Between 1000 to 5000 users
Gemstones Private Museum
Between 300 to 600 collectors
Fund Infrastructure
TBC
Digital Asset Custodianship
Between 10 to 20 different properties being placed on-chain
Jewellery Customization
Between 100 to 400 customers
P/S: Please arrange a private appointment with the Frac Team to know more about Frac's customer traction.
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