The following discussion and analysis should be read in conjunction with our financial statements and accompanying notes.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, our management as well as estimates and assumptions made by our management. When used in the report the words "anticipate", "believe", "estimate", "expect", "future", "intend", "plan" or the negative of these terms and similar expressions as they relate to us or our management identify forward-looking statements. Such statements reflect the current view of our management with respect to future events and are subject to risks, uncertainties, assumptions and other factors as they relate to our industry, our operations and results of operations, and any businesses that we may acquire. Should one or more of the events described in these risk factors materialize, or should our underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the
U.S.federal securities laws, we do not intend to update any of the forward-looking statements to conform them to actual results unless required by applicable securities regulations or rules. The following discussion should be read in conjunction with our financial statements and the related notes
filed herein. Overview We, through our wholly owned subsidiary, NFT Exchange, operate an electronic online platform located at https://www.nftoeo.com/for artists, art dealers and art investors to offer and trade valuable artwork. We offer online listing and trading services that allow artists, art dealers and owners to access a much bigger art trading market where they can engage with a wide range of investors that they might not encounter without our platform.
The company’s NFT business prospects can be described in several aspects below.
NFT Market Insights Digital artwork based on NFT technology is becoming a hot asset. The earliest NFT projects can be traced back to the 2017 bull market CryptoKitties (the encrypted cats), which had the properties of scarcity and value anchoring of ownership. At its peak, a virtual cat could sell for more than
$100,000. In terms of NFT artwork, in March 2021, artist Beeple's NFT work "Every Day: The First 5,000 Days" sold for $69.346 million, making it the third-highest price for a living artist. According to a report by Invezz, the NFT market was worth $338 millionin 2020, and it has grown to reach $490 millionin 2021. With the help of the bull market wave, NFT has grown rapidly., As of the first quarter of 2021, the total transaction volume of the NFT market has exceeded 1.5 billion US dollars, an increase of more than 2627% from the previous quarter. In April 2021, the total market value of NFTs exceeded $30 billionfor the first time, setting a new all-time high. Currently, NFTs can be used in the fields including games, artworks, domain names, insurance, collectibles, virtual assets, real assets, identities, etc. With the vigorous development of the digital world, many businesses will appear in the form of digital original ecology, and the huge application space and technological imagination of NFT are expected to become more and more attractive in the new digital economy world. 27 New business model TKAT's business model revolves around the theme of "free circulation of value and creation of a unique digital work exchange platform", allowing each user to create, buy and sell various irreplaceable digital works to realize the value of works. New business types
A. Provide advisory services such as appraisal/appreciation potential of works of art
Away from poor offline communication and incomplete information, there is no misunderstanding of the pain points, and to tap the needs of users to provide comprehensive consulting services such as labor cost, artist influence, artistic value of works, and channels for obtaining works, which not only serves customers but also creates value for the company. B. NFT trading service TKAT has built a fully functional NFT trading platform, which is in the stage of testing to be launched. The platform can meet the categories of digital works including: artwork, music videos, collectibles, game props, sports, metaverse, virtual world, social tokens, and meet the needs of various users as much as possible. And it can realize the whole business process of user registration-certification-work uploading-work casting-work trading. The platform was launched and placed in service in
May 2022. In the transaction process, it not only meets the needs of customers for uploading and purchasing digital works, but the company extracts a portion of the handling fee (including token minting, first sale, and second sale) to create value. C. Advertising service
After the TKAT platform has a certain user base, it can provide advertising and publicity services for users or the company itself. The business model is not limited to categories and industries, such as investment promotion, work promotion, and industry promotion. New Strategic Direction TKAT is committed to creating a digital original ecological platform that integrates games, artworks, domain names, insurance, collectibles, virtual assets, real assets, identity and other fields, and changes the market status of traditional industries through its own efforts. Strategic goals: basic platform building-targeted population entry-providing services (consulting services, transaction services, advertising services)-optimizing the platform and expanding the scope of services-full service. Competitor analysis
Opensea is an NFT market exchange. It has more than 20,000 users. Compared with projects in the popular decentralized finance ("DeFi") field, it is second only to Uniswap, kyber and Compound, and higher than maker, 0x, etc. As a trading platform with a relatively high status in the NFT field, OpenSea has a complete range of collections, equivalent to Taobao in the NFT world. At present, the trading market of OpenSea has nearly 40,000 users, and the monthly transaction volume exceeds
5 million US dollars. Coinbase'snew NFT platform hits 1.4 million signups. The Coinbaseplatform has an active population of 50,000 users. The service rates for each service are as follows: 1. Rarible's minting fees are borne by the creators themselves, and the royalties are also set by the creators themselves, with default amounts of 10%, 20% and 30%. 2. VIV3's NFT minting costs and profits come from the 12.5% service fee it collects on the first and second sales. 3. OpenSea does not need gas fee to mint NFT. 4. Rarible charges a 2.5% service fee on the first sale. On the SuperRare platform, a 15% commission is charged on the first sale and a 3% fee (paid by the buyer) is charged on
the second sale. Competitive Advantages
Takung’s advantages in the NFT and blockchain transaction market are as follows:
Innate industry advantages
In recent years, NFT digital artworks based on blockchain technology have become popular assets. The NFT online platform the company has built can effectively solve the current situation, such as uncertain ownership of property, difficulty in distinguishing authenticity, and low efficiency of artwork circulation. Transform offline business development into online operation, so the value of digital works can flow freely online.
Core Management Team Benefits
Takung core team members have experience in developing blockchain technology and operating the NFT trading platform, which can ensure smoother development and business operation at a later stage.
Takung's platform advantages The currently developed and launched NFT online trading platform supports multi-category product uploads, including: Digital art, Digital oil painting, Produced by Gallery, Personal products, Artist signature, Oil on canvas, Print, Paper ink, Device, Comprehensive media, Derivative, and It will be continuously enriched and improved according to customer interests. The NFT trading platform has stable performance, high security and easy to maintain. At the front end of the system, the Company will continuously improve the operability and user experience of the system focusing on improving the user experience. Technical advantages The Takung's digital works exchange platform that has been launched is built by a professional technical team. Each technician has rich industry experience, can work under a short development cycle or high pressure, and has a number of relevant industry benchmarking projects experience. The capability of the technical team ensures the strong technical support in the later system optimization and iterative update. Marketing advantages The Company has a professional marketing team. After the platform goes online, it can be promoted online and offline simultaneously, so as to quickly increase the popularity of the platform, and use professional marketing solutions to attract more creators and demanders to join in the platform. We expect that we will generate revenue from the offering and trading of NFT on the Company's system, primarily consisting of member fee, trading commission, and advertising fee. 29
THREE MONTHS ENDED
The following tables set forth our interim condensed consolidated statements of income data: Three months ended March 31, % of % of 2022 Revenue 2021 Revenue (Unaudited) (Unaudited) Revenue $ - - $ - - Cost of revenue - - - - Selling expense - - - -
General and administrative expenses (611,475 ) -
(359,990 ) - Total costs and expenses (611,475 ) - (359,990 ) - Loss from operations (611,475 ) - (359,990 ) -
Interest and other income (expenses), net (99 ) - (52 ) - Loss before income tax expense (611,574 ) - (360,042 ) - Loas from discontinued operations (179,765 ) -
(217,319 ) - Income tax benefit (expense) - - 4,773 - Net loss
$ (791,339 )- $ (572,588 )- Revenue For the three months ended March 31, 2022and 2021, our continuing operations did not generate any revenue as our online NFT trading platform was launched in May 2022. For the three months ended March 31, 2022and 2021, our discontinued operations generated revenues in an amount of nil and $779,108, respectively. The listing fee revenue, commission fee revenue and management fee revenue which were generated by Hong Kong Takung were reclassified to and included in the discontinued operations for the three months ended March 31, 2021. Due to the suspension of the legacy online trading platform since the fourth quarter of 2021, Hong Kong Takung did not earn and recognize any listing fee revenue, commission fee revenue and management fee revenue for the three months ended March 31, 2022. We expect that the NFT trading platform, which has been placed in service in May 2022, will generate three kinds of revenue in later periods, which are membership fee, commission and advertising fee. Revenue by category
The following table presents our revenues from our discontinued operations:
Three months ended March 31, 2022 2021 (Unaudited) (Unaudited) Listing fee revenue $ -
$ 273,792Commission revenue - 358,086 Management fee revenue - 147,230 Subtotal - 779,108 Less: Cost of revenue - discontinued operations - (779,108 ) Total $ - $ - 30 Revenue by customer type The following table presents our revenue by customer type of our discontinued operations: Three months ended March 31, 2022 2021 Artwork owners $ - $ 273,792Non - VIP traders - 312,640 VIP traders - 192,676 Subtotal - 779,108 Less: Revenue- discontinued operations - (779,108 ) Total $ - $ - (i) Listing fee revenue
Listing fee revenue is calculated based on a percentage of the listing value and the transaction value of the artworks.
Listing value is the total offering price of an artwork when the ownership units are initially listed on our trading platform. We utilize an appraised value as a basis to determine the appropriate listing value for each artwork, or portfolio of artworks.
In the three months ended
March 31, 2021, a total of 298 sets of artwork were listed for trade on our platform -comprising 73 sets of paintings and calligraphies from famous Chinese, Russian and Mongolian artists, with a total listing value of $30,627,634( HK$237,600,000); 35 pieces of jewelry with a total listing value of $9,366,178( HK$72,660,000); 134 pieces of precious stones with a total listing value of $17,020,509( HK$132,040,000); 29 pieces of amber with a total listing value of $12,245,898( HK$95,000,000); 4 pieces of antique mammoth ivory carvings with a total listing value of $670,302( HK$5,200,000); 2 pieces of porcelain pastel paintings with a total listing value of $335,151( HK$2,600,000); 7 pieces of porcelain with a total listing value of $1,095,686( HK$8,500,000); 6 sets of Unit+ products with a total listing value of $1,329,518( HK$10,314,000); 1 piece of Yixing collectable with a listing value of $128,904( HK$1,000,000); and 7 pieces of Sports memorabilia with a listing value of $1,096,897( HK$8,509,400), of which 22.5%-48% (for 73 sets of paintings), 24%-48.5% (for the 134 pieces of precious stones), 29%-48% (for the 35 pieces of jewelry), 47%-48.5% (for 4 piece of antique mammoth ivory carvings), 32%-48% (for the 29 pieces of amber), 45%-46% (for the 2 pieces of porcelain pastel paintings), 25%-48% (for the 7 pieces of porcelain), 30.25%-45% (for the 6 sets of Unit+ products), 45% (1 piece of Yixing collectable) and 45% (for the 7 pieces of Sports memorabilia) of the listed values were charged as listing fees, respectively. During the three months ended March 31, 2021, there were 3 sets of paintings listed on our platform. Their total listing values were $1,095,686( HK$8,500,000) for the paintings, of which 24.9%-25% (for the paintings) of the listed values were charged as listing fees. Our listing revenue for the three months ended March 31, 2021was included in discontinued operations. (ii) Commission fee revenue
For the three months ended
For non-VIP Traders, the commission revenue was calculated based on a percentage of transaction value of artworks, which we charge trading commissions for the purchase and sale of the ownership shares of the artworks. The commission is typically 0.3% of the total amount of each transaction, but as an initial promotion, we currently charge a reduced fee of 0.2% (resulting in an aggregate of 0.4% for both buy and sell transactions) of the total transaction amount with the minimum charge of
$0.13( HK$1). The commission is accounted for as revenue and immediately deducted from the proceeds from the sales of artwork units when a transaction is completed. On November 7, 2018we lowered the minimum charge to $0.0013( HK$0.01). 31 For selected Traders, starting from April 1, 2016, we charged a predetermined monthly fee (unlimited trades for specific artworks) for specific artworks. These traders are selected by authorized agents and reviewed by us. After review, we negotiate individually with each one of them to determine a fixed monthly fee. Different Traders may have different rates but once negotiated and agreed to, the monthly fee is fixed. Using the output method, we recognize the monthly commission revenue when the selected Traders receive access to our trading platform to make unlimited trades for specific artwork.
We have defined a Selected Trader as an “inactive trader” who meets the following criteria;
? The merchant has defaulted on three monthly commission payments
months; ? The Trader did not incur any transactions in the month of reassessment;
? The service agent has confirmed with the merchant concerned that he has been
Once an inactive Trader has been assessed and identified, his/her contract will be reassessed pursuant to ASC 606-10-25-5 because there has been a significant change in fact and circumstances and pursuant to ASC 606-10-25-1)e), his/her contract will not be deemed to exist and revenue will not be recognized until consideration is received in accordance with ASC 606-10-25-7(a) as we would have already performed our obligations ahead of receiving consideration. We charge a non-transactional transfer commission on the transfer of the ownership of an artwork. The commission amount is calculated based on 0.3% of the close value of the artwork and each artwork unit. For the large volume of transfer or under certain special circumstances, we charge at an agreed-upon percentage of artworks units.
The Company offered a commission to service agents. We offer a total of 40% to 75% of the commission earned on trades with new traders to service agents when they bring an agreed number of traders to the trading platform.
Commission paid to service agents and rebates are recognized as cost of revenue in the same period in which the corresponding revenue is recognised.
Commission revenue for the three months ended
March 31, 2021was $358,086. We included this amount in the discontinued operations. For the three months ended March 31, 2022, we did not earn commission revenue from our legacy online artwork trading system. (iii) Management fee revenue Our legacy online trading platform charges Traders a management fee to cover the costs of insurance, storage, and transportation for an artwork and trading management of artwork units, which is calculated at $0.0013( HK$0.01) per 100 artwork units per day. The management fee is recognized when the artwork is sold and is deducted from proceeds from the sale of artwork ownership shares when there is a purchase and sale transaction.
During the three-month period ended
Cost of Revenue
The cost of revenue from our discontinued operations mainly includes the following items: commissions paid to service agents, depreciation, Internet service charges, artwork insurance and artwork storage fees .
For three months ended March 31, 2022 2021 Commission paid to service agents $ -
$ 135,174Depreciation - 69,062 Internet service charge - 19,169 Artwork insurance - 12,744 Artwork storage - 16,088 Subtotal - 252,237 Less: Cost of revenue - discontinued operations - (252,237 ) Total $ - $ - Cost of revenue of our discontinued operations for the three months ended March 31, 2022and 2021 were $nil and $252,237respectively. The cost of revenue for the three months ended March 31, 2021was incurred related to the revenue generated by our legacy online trading system and was reclassified to and included in the net loss from discontinued operations. Since the legacy online trading system was suspended in the fourth quarter in 2021 and our NFT online trading platform was not launched until May 2022, our discontinued and continuing operations did not generate any revenues and cost of revenue during the three months ended March 31, 2022. 32 Gross Profit Gross profit for our continuing operations was nil for three months ended March 31, 2022and 2021. Due to the suspension of Tianjin'soperation, we reclassified listing revenue, commission revenue and management revenue as well as the corresponding cost of revenue to net loss from discontinued operations for the three months ended March 31, 2021. As our online NFT trading platform was not placed in service until May 2022, no revenue and cost of revenue was generated for the three months ended March 31, 2022. Operating Expenses General and administrative expenses for our continuing operations were $611,475and $359,990for the three months ended March 31, 2022and 2021, respectively. Our general and administrative expenses for continuing operations for the three months ended March 31, 2022was $251,485higher than that for the same period in 2021 primarily due to an increase in consultancy fee by $126,834, a rise in salary and welfare by $75,052and an increase in other expenses by $60,011, offset by a decrease in legal and professional fees by $25,096. During the three months ended March 31, 2022, our continuing operations recruited consultants and employees to assist in setup of the online NFT platform. Additionally, we incurred higher service fees paid to NYSE, LLCfor the private placement and the acquisition of an investment in Cultural Objects Provenance Holdings Limited. Our legal and professional fees were reduced in the three months ended March 31, 2022as we paid additional audit fees to our predecessor auditor. General and administrative expenses for our discontinued operations were $185,334and $653,168for the three months ended March 31, 2022and 2021, respectively. Our general and administrative expenses for our discontinued operations for the three months ended March 31, 2022were significantly reduced by $467,834compared to the same period in 2021. Such decline was mainly driven by the deconsolidation of Tianjin Takung in the fourth quarter of 2021 and the result of the operations of Tianjin Takung was no longer included in our discontinued operations for the three months ended March 31, 2022.
The following table shows the main components of our general and administrative expenses from our continuing operations and discontinued operations for the three months ended
For three months ended For three months ended March 31, 2022 March 31, 2021 (Unaudited) (Unaudited) Amount($) % of Total Amount($) % of Total
Salary and welfare 90,052 11.3 % 15,000 1.5 % Office, insurance and rental expenses 89,206 11.2
% 71,125 7.0 % Legal and professional fees 186,781 23.4 % 211,877 20.9 % Consultancy fee 126,834 15.9 % - - % Depreciation expenses 350 0.0 % - - %
Traveling and accommodation expenses - 0.0
% 30 0.0 % Share-based compensation - 0.0 % 3,717 0.4 % Others 118,252 14.8 % 58,241 5.7 % Total general & administrative expenses-continuing operations 611,475 76.7 % 359,990 35.5 % Total general & administrative expenses-discontinued operations 185,334 23.3
% 653,168 64.5 % Total
$ 796,809100.0 % $ 1,013,158100.0 % Our continuing operations did not incur any selling expense for the three months ended March 31, 2022and 2021. The selling expense of our discontinued operation was nil and $104,911for the three months ended March 31, 2022and 2021, respectively. The selling expense was related to an advertising and promotion expense incurred by Tianjin Takung during the three months ended March 31, 2021. The operation of Tianjin Takung was suspended since the fourth quarter of 2021. 33 Other (expenses) income Other expenses for the continuing operations for the three months ended March 31, 2022and 2021 were $99and $52, respectively. Other expenses were related to bank charges. Other (expenses) income for the discontinued operations for the three months ended March 31, 2022and 2021 were $(167)and $39,018. During the three months ended March 31, 2022, the operation of Tianjin Takung was deconsolidated and other expenses, mainly related to bank charges, were incurred by Hong KongTakung. Other income for the three months ended March 31, 2021was mainly related to foreign currency transaction gain incurred by Hong Kong Takung.
Loss (income) before income taxes
Our continuing operations incurred loss before income taxes
$611,574and $360,042for the three months ended March 31, 2022and 2021, respectively. Loss before income taxes of our continuing operations was significantly higher for the three months ended March 31, 2022compare to the same period in 2021 as we incurred a higher consultancy fee, salary expense and service fees in 2022
as discussed above.
Our discontinued operations incurred loss before income taxes,
$179,765and $217,319for the three months ended March 31, 2022and 2021, respectively. The loss before income taxes of our discontinued operations was comparatively lower for the three months ended March 31, 2022. Due to the loss of control in and deconsolidation of Tianjin Takung in November 2021, the operation of TianjinTakung was not included in our interim condensed consolidated financial statements for the three months ended March 31, 2022. Income tax expense For the three months ended March 31, 2022and 2021, our continuing operations did not incur income tax expense as Takung, NFT Exchange and Hong Kong MQ incurred book loss and tax loss as a full valuation allowance was recognized against the net operating loss carryforwards. It is more likely than not that these two entities will not generate sufficient taxable income to utilize the net operating loss carryforward in the near future. The income tax benefit from the discontinued operations for the three months ended March 31, 2022and 2021 were $nil and $4,773, respectively. Since the fiscal year 2021, we derecognized the deferred tax assets incurred by Hong KongTakung as the Company expected that the net operating loss or deferred tax assets may not be utilized or reversed in a near future due to the shift of its operations from its legacy artwork trading to NFT business. Net Loss As a result of our operations aforementioned, our net losses after income taxes for continuing operations for the three months ended March 31, 2022and 2021 were $611,574and $360,042, respectively. Our discontinued operations generated net loss after income tax $179,765and $212,546for the three months ended March 31, 2022and 2021, respectively.
Foreign currency translation gain (loss)
We recorded a foreign currency translation gain (loss) for the three months ended
As a result of the above, we recorded an overall loss of
Cash and capital resources
The following tables set forth our interim condensed consolidated statements of cash flow: For three months ended March 31 2022 2021 Net cash provided by (used in) operating activities-continuing operations
$ 1,716,197 $ (943 )Net cash provided by (used in) operating activities- discontinued operations (156,101 ) 1,652,638 1,560,096 1,651,695
Net cash used in investing activities- continuing operations - - Net cash used in investing activities- discontinued operations (1,153 ) 389,171 (1,153 ) 389,171 Net cash provided by financing activities-continuing operations 300,000 - Net cash provided by financing activities-discontinued operations - - 300,000 -
Effect of change in exchange rate on cash and cash equivalents and on restricted cash from continuing operations
Effect of change in exchange rate on cash and cash equivalents and on restricted cash from discontinued operations
Net increase (decrease) in cash and cash equivalents – continuing operations
2,058,731 (943 )
(Decrease) net increase in cash and cash equivalents and restricted cash – discontinued operations
Cash and cash equivalents, beginning balance- continuing operations 1,503,153
Cash and cash equivalents and restricted cash, opening balance – discontinued operations
Cash and cash equivalents and restricted cash, closing balance – continuing operations
Cash and cash equivalents and restricted cash, closing balance – discontinued operations
$ 3,686,969 $ 15,862,168Sources of Liquidity The cash and cash equivalent and the restricted cash balances from the continuing operations as of March 31, 2022were $1,533,468and $2,028,416, respectively. Out of the total cash and cash equivalent and restricted cash amount, $3,561,884, we had $2,337,990denominated in U.S.dollars deposited in the financial institutions in the United Statesor other countries, $1,223,894, denominated in HK$ in Hong Kongfinancial institutions. The cash and cash equivalent balance from the discontinued operations as of March 31, 2022was $125,085. Out of this amount, we had $8,457denominated in U.S.dollars deposited in the financial institutions in Hong Kong, $116,627, denominated in HK$ in Hong Kongfinancial institutions. For the three months ended March 31, 2022, net cash provided by operating activities from continuing operation was $1,716,197which was predominantly driven by the receipt of customer deposits, $2,028,416and an increase in accrued expenses and other payables, $231,814, offset by the net loss of $611,574. While there was no cash inflow or outflow from investing activities from our continuing operations during the three months ended March 31, 2022, our continuing operations incur net cash provided by financing activities, $300,000, as NFT Exchange obtained a short-term borrowing from a third party. For the three months ended March 31, 2022, net cash used in operating activities by our discontinued operations was $156,101, which was a result of net loss from discontinued operations, $179,765, offset by non-cash item: depreciation expense, $17,086and an increase in accrued expenses and other payable, $11,480. Net cash used in investing activities by our discontinued operations was $1,153, which was related to a purchase of a computer equipment by Hong Kong Takung. Our discontinued operations did not incur cash inflow or outflow from financing activities.
The balance of cash and cash equivalents from continuing operations as at
The cash and cash equivalent balance from the discontinued operations as of
December 31, 2021was $338,542. Out of this amount, we had $112,397denominated in U.S.dollars deposited in the financial institutions in Hong Kong, $226,145, denominated in HK$ in Hong Kongfinancial institutions. For the three months ended March 31, 2021, net cash used in operating activities by our continuing operations was $943, which was driven by the net loss from continuing operations, $360,042, offset by an increase in accrued expenses and other payables, $319,257, a decrease in prepayments, $36,125and a non-cash item: share-based compensation expense, $3,717. There were no cash inflows or outflows from investing activities or financing activities from our continuing operations. 35 For the three months ended March 31, 2021, net cash provided by operating activities from our discontinued operations was $1,652,638which was mainly resulted from an increase in customers' deposits, $2,333,910, offset by net loss from discontinued operations, $212,546, prepayments remitted to vendors, $348,953, payments to vendors, $20,157and payments to lessors, $15,466. Cash inflows from investing activities from our discontinued operations was $389,171as our third-party lender paid off the loan receivable in January 2021. There was no cash inflow or outflow from financing activities from our discontinued operations. As of March 31, 2022, the total current liabilities from the continuing operations were $2,703,660, which included accrued expense and other payables of US Takung and Hong Kong MQ, $375,244, customer deposits of NFT Exchange, $2,028,416and short-term borrowing from a third party, $300,000. Total current liabilities from our discontinued operations, Hong Kong Takung, $8,671,980, included accrued expenses and other payables, $284,870, amount due to a related party, $6,383,658, a loan payable, $1,957,142and operating lease obligation-current portion, $46,310. As of March 31, 2022, the continuing operations of the Company had cash, restricted cash and cash equivalents of $3,561,884, a working capital in an amount of $1,808,968and the net assets of $10,384,228. The Company's discontinued operations, which primarily consisted of Hong Kong Takung, as of March 31, 2022, had cash and cash equivalent of $125,085, a working deficit of $8,528,910, and net liabilities of $8,377,825. In order to continue to maintain the liquidity requirements, we commenced our online NFT trading platform in May 2022with approximately 60 NFT products listed and 107 new registered users. We continue to promote the NFT trading platform to increase more new registered users. We will negotiate with the third party and the related party lenders for extending the financing arrangements. In April 2022, we had also raised approximately $30 millionin connection with the securities purchase agreement closed in February 2022. Management believed that these measures provided sufficient liquidity and adequate capital to fund the operations and reasonably meet the anticipated liquidity requirements for at least the next twelve months. As of December 31, 2021, total current liabilities from the continuing operations were $143,429which was related to accrued expenses and other payables of US Takung and Hong Kong MQ. Total current liabilities from our discontinued operation, Hong Kong Takung, totaled $8,733,624which consisted of $273,390in accrued expenses and other payables, $6,410,585in amount due to related parties, $21,854in advance from customers, $1,965,398in short-term borrowings from a third party and $62,397in lease liabilities. As of December 31, 2021, the Company's continuing operation had cash and cash equivalents of $1,503,153, a working capital of $1,649,632and the net assets amounted to $10,953,269. The Company's discontinued operations, which primarily related to Hong Kong Takung, had cash and cash equivalents of $338,542, a working deficit of $8,360,145and net liabilities of $8,176,586. In order to continue to maintain the liquidity requirements, the Company introduced NFT business in the fourth quarter of 2021 and developed consultancy service fee on NFT projects. The Company also seeks to negotiate and extend financing arrangements with the related party and the third party. In February 2022, the Company entered into certain securities purchase agreement with certain "non- U.S.persons" and expected to raise approximately $30 millionfrom this offering. Management believed that these measures provided sufficient liquidity and adequate capital to fund the operations and reasonably meet the anticipated liquidity requirements for at least the next twelve months. The Company is aware of events or uncertainties which may affect its future liquidity because of capital controls in the PRC. The RMB is only currently convertible under the "current account," which includes dividends, trade and service-related foreign exchange transactions, but not under the "capital account," which includes foreign direct investment and loans, including loans we may secure from our onshore subsidiaries or variable interest entities. Currently, our PRC subsidiaries, which are wholly-foreign owned enterprises, may purchase foreign currency for settlement of "current account transactions," including payment of dividends to us, without the approval of the State Administration of Foreign Exchange("SAFE") by complying with certain procedural requirements. However, the relevant PRC governmental authorities may limit or eliminate our ability to purchase foreign currencies in the future for current account transactions. The existing and future restrictions on currency exchange may limit our ability to utilize revenue generated in Renminbi to fund our business activities outside of the PRC or pay dividends in foreign currencies to our shareholders, including holders of our shares of common stock. Foreign exchange transactions under the capital account remain subject to limitations and require approvals from, or registration with, SAFE and other relevant PRC governmental authorities. This could affect our ability to obtain foreign currency through debt or equity financing for our PRC subsidiaries. Applicable PRC law permits payment of dividends to us by our operating subsidiaries in Chinaonly out of their net income, if any, determined in accordance with PRC accounting standards and regulations. Our operating subsidiaries in Chinaare also required to set aside a portion of their net income, if any, each year to fund general reserves for appropriations until such reserves have reached 50% of the subsidiary's registered capital. These reserves are not distributable as cash dividends. In addition, registered share capital and capital reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held in each operating subsidiary. In contrast, there is no foreign exchange control or restrictions on capital flows into and out of Hong Kong. Hence, our Hong Kongoperating subsidiary is able to transfer cash without any limitation to the U.S.under normal circumstances. If our operating subsidiaries were to incur additional debt on their own behalf in the future, the instruments governing the debt may restrict the ability of our operating subsidiaries to transfer cash to our U.S. investors. 36
Off-balance sheet arrangements
We have no off-balance sheet arrangements, including arrangements that would affect our liquidity, capital resources, market risk support, and credit risk support or other benefits. Future Financings We may sell our common stock in order to fund our business growth. Issuances of additional shares will result in dilution to existing shareholders. There is no assurance that we will achieve sales of the equity securities or arrange for debt or other financing to fund our growth in case it is necessary, or if we are able to do so, there is no guarantee that existing shareholders will not be
substantially diluted. Critical Accounting Policies
We regularly evaluate the accounting policies and estimates that we use to make budgetary and financial statement assumptions. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management. The discussion of our critical accounting policies contained in Note 2 to our consolidated financial statements, "Summary of Significant Accounting Policies", is incorporated herein by reference.
Recent accounting pronouncements
The discussion of recent accounting pronouncements contained in Note 2 to our Consolidated Financial Statements, “Summary of Significant Accounting Policies”, is incorporated herein by reference.
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