COSMOS GROUP HOLDINGS INC. This discussion summarizes the significant factors affecting the operating
results, financial condition, liquidity and cash flows of the Company and its
subsidiary for the fiscal years ended
Except for historical information, the matters discussed in this section are forward looking statements that involve risks and uncertainties and are based upon judgments concerning various factors that are beyond the Company's control. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report.
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Currency and exchange rate
Unless otherwise noted, all currency figures quoted as "
We are not required to obtain permission from the Chinese authorities to operate or to issue securities to foreign investors.
We, through our subsidiaries are currently engaged in the rendering of financial
and money lending services in
We are at a development stage company and reported a net loss of
Our financial statements for the years ended
Results of Operations.
Comparison of the fiscal years ended
The following table sets forth certain operational data for the years indicated:
Fiscal Years Ended
December 31,
2021 2020
Revenues:
Lending segment $ 6,413,284 $ 4,356,617
Arts and collectibles technology ("ACT") segment 3,645,265 -
Total revenue 10,058,549 4,356,617
Cost of revenue:
Lending segment (733,937 ) (839,709 )
ACT segment (1,020,704 ) -
Total cost of revenue (1,754,641 ) (839,709 )
Gross profit 8,303,908 3,516,908
Operating expenses:
Sales and marketing (1,680,536 ) (122,701 )
Technology and support (9,222,103 ) -
Corporate development (5,418,075 ) -
General and administrative expenses (16,077,156 ) (3,099,322 )
Income (loss) from operation (24,093,962 ) 294,885
Other income (expense), net (621,180 ) 166,788
Income (loss) before income taxes (24,715,142 ) 461,673
Income tax benefit (expense) (434,257 ) 6,052
Net income (loss) $ (25,149,399 ) $ 467,725
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Revenue
For the year ended
Year ended December 31, 2021 December 31, 2021
Percentage Accounts
Customer Revenues of revenues receivable
$ - - % $ -
% -
Total: $ - - % Total: $ -
Cost of Revenue
Cost of revenue of approximately
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Gross Profit
We achieved a gross profit of
Sales and Marketing Expenses
Sales and marketing expenses of
Technology and support Expenses
Technology and support expenses of
Corporate Development Expenses
Corporate development expenses of
General and Administrative Expenses ("G&A")
General and administrative expenses of
Income Tax Expense (Benefit)
We incurred income tax expense of
We incurred income tax benefit of
Liquidity and Capital Resources
As of
We expect to incur significantly greater expenses in the near future as we
develop our product offerings or enter into strategic partnerships. We also
expect our general and administrative expenses to increase as we expand our
finance and administrative staff, add infrastructure, and incur additional costs
related to being reporting act company, including directors' and officers'
insurance and increased professional fees. We believe that we will require
approximately
We have never paid dividends on our Common Stock. Our present policy is to apply cash to investments in product development, acquisitions or expansion; consequently, we do not expect to pay dividends on Common Stock in the foreseeable future.
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Going Concern Uncertainties
Our continuation as a going concern is dependent upon improving our
profitability and the continuing financial support from our stockholders. Our
sources of capital in the past have included the sale of equity securities,
which include common stock sold in private transactions and public offerings,
lease liability and short-term and long-term debts. In addition, with respect to
the ongoing and evolving coronavirus (COVID-19) outbreak, which was designated
as a pandemic by the
We require additional funding to meet its ongoing obligations and to fund anticipated operating losses. Our auditor has expressed substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on raising capital to fund its initial business plan and ultimately to attain profitable operations. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.
We expect to incur marketing and professional and administrative expenses as well expenses associated with maintaining our filings with the Commission. We will require additional funds during this time and will seek to raise the necessary additional capital. If we are unable to obtain additional financing, we may be required to reduce the scope of our business development activities, which could harm our business plans, financial condition and operating results. Additional funding may not be available on favorable terms, if at all. We intend to continue to fund its business by way of equity or debt financing and advances from related parties. Any inability to raise capital as needed would have a material adverse effect on our business, financial condition and results of operations.
If we cannot raise additional funds, we will have to cease business operations. As a result, our common stock investors might lose all of their investment.
Years Ended December 31,
2021 2020
Net cash used in operating activities
For the year ended
For the year ended
We expect to continue to rely on cash generated through financing from our existing shareholders and private placements of our securities to finance our operations and future acquisitions in the next twelve months.
For the year ended
Net Cash Provided By Financing Activities.
For the year ended
For the year ended
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Material Cash Requirements
We have not achieved profitability since our inception and we expect to continue
to incur net losses for the foreseeable future. We expect net cash expended in
2022 to be significantly higher than 2021. As of
We had the following contractual obligations and commercial commitments as ofDecember 31, 2021 : Contractual Less than More than 5 Obligations Total 1 year 1-3 Years 3-5 Years Years $ $ $ $ $ Amounts due to related parties 20,954,836 20,954,836 - - - Tax obligation 431,463 431,463 - - - Accounts payable 240,156 240,156 - - - Loan Payable 489,836 489,836 - - - Other contractual liabilities (1) 399,968 399,968 - - - Commercial commitments - - - - - Bank loan repayment - - - - - Total obligations 22,516,259 22,516,259 - - -
(1) Includes all obligations included in "Accrued liabilities and other payables" in current liabilities in the "Consolidated Balance Sheet" that are contractually fixed as to timing and amount.
On
Off-Balance Sheet Arrangements
We have no outstanding off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.
Critical Accounting Policies and Estimates.
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in
· Use of estimates and assumptions
In preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the years reported. Actual results may differ from these estimates. If actual results significantly differ from the Company's estimates, the Company's financial condition and results of operations could be materially impacted. Significant estimates in the period include the impairment loss on digital assets, valuation and useful lives of intangible assets and deferred tax valuation allowance.
· Basis of consolidation
The consolidated financial statements include the accounts of COSG and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
· Cash and cash equivalents
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Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
· Digital assets
The Company's digital assets mainly represent the cryptocurrencies held in its
e-wallet. The Company accounts for its digital assets in accordance with
The Company's cryptocurrencies are deemed to have an indefinite useful life; therefore amounts are not amortized, but rather are assessed for impairment.
· Loan receivables, net
Loans receivables are carried at unpaid principal balances, less the allowance for loan losses and charge-offs. The loans receivables portfolio consists of real estate mortgage loans, commercial and personal loans.
Loans are placed on nonaccrual status when they are past due 180 days or more as to contractual obligations or when other circumstances indicate that collection is not probable. When a loan is placed on nonaccrual status, any interest accrued but not received is reversed against interest income. Payments received on a nonaccrual loan are either applied to protective advances, the outstanding principal balance or recorded as interest income, depending on an assessment of the ability to collect the loan. A nonaccrual loan may be restored to accrual status when principal and interest payments have been brought current and the loan has performed in accordance with its contractual terms for a reasonable period (generally six months).
If the Company determines that a loan is impaired, the Company next determines the amount of the impairment. The amount of impairment on collateral dependent loans is charged off within the given fiscal quarter. Generally the amount of the loan and negative escrow in excess of the appraised value less estimated selling costs, for the fair value of collateral valuation method, is charged off. For all other loans, impairment is measured as described below in Allowance for Loan Losses.
· Allowance for loan losses ("ALL")
The adequacy of the Company's ALL is determined, in accordance with ASC Topic 450-20 Loss Contingencies includes management's review of the Company's loan portfolio, including the identification and review of individual problem situations that may affect a borrower's ability to repay. In addition, management reviews the overall portfolio quality through an analysis of delinquency and non-performing loan data, estimates of the value of underlying collateral, current charge-offs and other factors that may affect the portfolio, including a review of regulatory examinations, an assessment of current and expected economic conditions and changes in the size and composition of the loan portfolio.
The ALL reflects management's evaluation of the loans presenting identified loss potential, as well as the risk inherent in various components of the portfolio. There is significant judgment applied in estimating the ALL. These assumptions and estimates are susceptible to significant changes based on the current environment. Further, any change in the size of the loan portfolio or any of its components could necessitate an increase in the ALL even though there may not be a decline in credit quality or an increase in potential problem loans.
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· Property and equipment
Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:
Expected useful life
Computer and office equipment 5 years
Expenditure for repairs and maintenance is expensed as incurred. When assets have retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.
· Intangible assets
Intangible assets represented the acquired technology software, licensed technology know-how, trademark and trade names for its internal use to facilitate and support its platform operation. They are stated at the purchase cost and are amortized based on their economic benefit expected to be realized.
· Impairment of long-lived assets
In accordance with the provisions of ASC Topic 360, "Impairment or Disposal of Long-Lived Assets", all long-lived assets such as plant and equipment and intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment charge for the years presented.
· Revenue recognition
The Company adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09") using the full retrospective transition method. The Company's adoption of ASU 2014-09 did not have a material impact on the amount and timing of revenue recognized in its consolidated financial statements.
Under ASU 2014-09, the Company recognizes revenue when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
· identify the contract with a customer;
· identify the performance obligations in the contract;
· determine the transaction price;
· allocate the transaction price to performance obligations in the contract;
and
· recognize revenue as the performance obligation is satisfied.
Revenue is recognized when the Company satisfies its performance obligation under the contract by transferring the promised product to its customer that obtains control of the product and collection is reasonably assured. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. Most of the Company's contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct.
Lending Business
The Company is licensed to originate personal loan, company loan and mortgage
loan in
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Arts and Collectibles Technology Business
Commencing from
Sale of arts and collectibles products: The Company recognizes revenue derived from the sales of the arts and collectibles when the Company has transferred the risks and rewards to the customers. The minted item of the individual art or collectibles which are sold in crypto asset transaction is the only performance obligation under the fixed-fee arrangements. The corresponding fees received upon each sale transaction is recognized as revenue, is recognized when the designated token, minted with the corresponding art and collectibles is delivered to the end user, together with the transfer of both digital and official title.
Transaction fee income: The Company also generates revenue through transaction fees transacted on its platform or other marketplaces. The Company charges a fee to individual customer at the secondary transaction level, which is allocated to the single performance obligation. The transaction fee is collected from the customer in digital assets, with revenue measured based on a certain percentage of the value of digital assets at the time the transaction is executed. The Company's service is comprised of a single performance obligation to provide a platform facilitating the transfer of its DOTs. The Company considers its performance obligation satisfied, and recognizes revenue, at the point in time the transaction is processed.
In this segment, the transaction consideration that the Company receives is a
non-cash consideration in the form of digital assets, which are
cryptocurrencies. The Company measures the related cryptocurrencies at fair
value on the date received, at the same time, the revenue is recognized. Fair
value of the digital asset award received is determined using the average
Expenses associated with operating the Arts and Collectibles Technology Business, such as minting cost and purchase cost of collectibles and artworks are also recorded as cost of revenues.
· Lease
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. However, certain adjustments to the right-of-use assets may be required for items such as prepaid or accrued lease payments. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
In accordance with the guidance in ASC Topic 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.
The Company made the policy election to not separate lease and non-lease components. Each lease component and the related non-lease components are accounted for together as a single component.
· Income taxes
The Company adopted the ASC 740 "Income tax" provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
· Foreign currencies translation
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statement of operations.
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The reporting currency of the Company is United States Dollar ("US$") and the
accompanying consolidated financial statements have been expressed in US$. In
addition, the Company is operating in
Translation of amounts from HKD and SGD into US$ has been made at the following exchange rates for the following periods:-
December 31, December 31,
2021 2020
Year-end HKD:US$ exchange rate 0.1283 0.1290
Annualized average HKD:US$ exchange rate 0.1287 0.1289
December 31, December 31,
2021 2020
Year-end SGD:US$ exchange rate 0.7411 N/A
Annualized average SGD:US$ exchange rate 0.7443 N/A
· Comprehensive income
ASC Topic 220, "Comprehensive Income", establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statements of changes in stockholders' equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
· Segment reporting
ASC Topic 280, "Segment Reporting" establishes standards for reporting information about operating segments on a basis consistent with the Company's internal organization structure as well as information about geographical areas, business segments and major customers in the consolidated financial statements.
· Retirement plan costs
Contributions to retirement plans (which are defined contribution plans) are charged to general and administrative expenses in the accompanying statements of operation as the related employee service are provided.
· Related parties
The Company follows the ASC 850-10, "Related Party Disclosures" for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the
The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
· Commitments and contingencies
The Company follows the ASC 450-20, "Contingencies" to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
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If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company's financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company's business, financial position, and results of operations or cash flows.
· Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification ("Paragraph 820-10-35-37") to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
Level 1 Quoted market prices available in active markets for identical assets
or liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted prices in active markets included in
Level 1, which are either directly or indirectly observable as of the
reporting date.
Level 3 Pricing inputs that are generally observable inputs and not
corroborated by market data.
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company's financial assets and liabilities, such as cash and cash equivalents, approximate their fair values because of the short maturity of these instruments.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board ("FASB") or other standard setting bodies and adopted by the Company as of the specified effective date. 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 financial position or results of operations upon adoption.
In
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In
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.
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