The
accompanying notes are an integral part of these interim condensed consolidated financial statements.
The
accompanying notes are an integral part of these interim condensed consolidated financial statements.
The accompanying notes
are an integral part of these interim condensed consolidated financial statements.
The accompanying notes
are an integral part of these interim condensed consolidated financial statements.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND
DESCRIPTION OF BUSINESS
Takung Art
Co., Ltd and Subsidiaries (“Takung”, “Company”), a Delaware corporation (formerly Cardigant Medical Inc.) through
Hong Kong Takung Art Company Limited (“Hong Kong Takung”), a Hong Kong company and its wholly owned subsidiary, operates an
electronic online platform located at www.takungae.com for artists, art dealers and art investors to offer and trade in valuable artwork.
Hong Kong
Takung was incorporated in Hong Kong on September 17, 2012 and operates an electronic online platform for offering and trading
artwork. The Company generates revenue from its services in connection with the offering and trading of artwork on its system, primarily
consisting of listing fees, trading commissions, and management fees. The Company conducts business primarily in Hong Kong, People’s
Republic of China.
Takung (Shanghai)
Co., Ltd (“Shanghai Takung”) is a limited liability company, with a registered capital of $1 million, located in the
Shanghai Pilot Free Trade Zone. Shanghai Takung was incorporated on July 28, 2015. It is engaged in providing services to its parent
company Hong Kong Takung by receiving deposits from and making payments to online artwork traders of Takung for and on behalf of Takung.
Shanghai Takung was deregistered on May 8, 2020 and the Company merged the operations of Shanghai Takung with Takung Cultural Development
(Tianjin) Co., Ltd.
Takung Cultural
Development (Tianjin) Co., Ltd (“Tianjin Takung”) provides technology development services to Hong Kong Takung and also carries
out marketing and promotion activities in mainland China. It is engaged in providing services to its parent company Hong Kong Takung by
receiving deposits from and making payments to online artwork traders of Takung for and on behalf of Takung when Shanghai Takung was deregistered.
On November 8, 2021, the Management became aware of the suspension of the operation of Tianjin Takung by the local authority.
Hong Kong
Takung Art Holdings Company Limited (“Takung Art Holdings”) was formed in Hong Kong on July 20, 2018 and operates as a holding
company to control an online platform for offering, selling and trading whole piece of artwork. Takung Art Holdings was deregistered on
April 29, 2020 due to deregistration of its wholly-owned subsidiary, Art Era Internet Technology (Tianjin) Co., Ltd., on June 18, 2019.
Hong Kong
MQ Group Limited (“Hong Kong MQ”) was formed in Hong Kong on November 27, 2018, and is engaged in blockchain and non-fungible
tokens (“NFT”) businesses, including consultancy service for NFT launch projects, developing its own NFT marketplace to facilitate
users to buy and sell NFTs, as well as development of block chain-based online games. On June 19, 2019, as a result of a private transaction, one (1)
share of common stock of Hong Kong MQ was transferred from Ms. Hiu Ngai Ma to the Company. The net asset of Hong Kong MQ was $nil as
of the acquisition date. The consideration paid for the ownership transfer, which represent 100% of the issued and outstanding share
capital of Hong Kong MQ, was $0.13 (HK$1). Hong Kong MQ became a direct wholly-owned subsidiary of the Company.
MQ (Tianjin)
Enterprise Management Consulting Co., Ltd. (“Tianjin MQ”) was incorporated in Tianjin, PRC on July 9, 2019 and is
a directly wholly owned subsidiary of Hong Kong MQ. It was established as a limited liability company with a registered capital of $100,000 located
in the Pilot Free Trade Zone in Tianjin. Tianjin MQ focused on exploring business opportunities and promoting its artwork trading business.
Tianjin MQ was deregistered on August 10, 2020 due to the Company streamlining its operation.
NFT Digital
Technology Limited (“NFT Digital”) was incorporated in Albany, New York on December 13, 2021 and is a wholly-owned subsidiary
of Takung. This entity primarily provides administrative and technical supports for the development of NFT projects.
NFT Exchange
Limited (“NFT Exchange”) was incorporated in Wyoming on January 7, 2022 and is wholly owned by Takung. This entity facilitates
the business and operation of the new NFT exchange market.
Metaverse
Digital Payment Co., Limited (“Metaverse”) was formed in Hong Kong on January 27, 2022, and is wholly owned by NFT Exchange.
This entity is engaged in digital payment service.
Cultural
Objects Provenance Holdings Limited
Cultural
Objects Provenance Holdings Limited is an investment holding company. Its wholly-owned subsidiary is headquartered in Hong Kong, with
global outposts in China (Shenzhen), Europe (Germany), and USA (NY/LA). It is an artwork authentication platform powered by blockchain.
According to company home page, the subsidiary is the official technology partner for NANZUKA Gallery in Tokyo, Japan. It authenticated
some sought-after editions and limited edition works from some of the world’s most prolific artists, including Hajime Sorayama,
Javier Calleja, Daniel Arsham, James Jarvis, and more.
On May 28,
2021, Takung entered into a Securities Purchase Agreement (the “SPA”) with Cultural Objects Provenance Holdings Limited (“Cultural
Objects”), a British Virgin Islands company with a wholly-owned subsidiary in Hong Kong engaging in an operation of an artwork authentication
platform powered by blockchain with global presence in China, Germany and the United States. Takung shall invest in Cultural Objects through
paying certain purchase that consists of cash consideration, $500,000 and issuance of 282,000 shares of common stock of
Takung in exchange for 54,100 shares of common stock of Cultural Objects and 290,000 unvested restricted shares of
common stock of Takung to Cultural Objects in exchange for 32,460 unvested shares of common stock of Cultural Objects.
On August 21, 2021, Takung and
Cultural Objects entered to an amendment to the SPA. The amendment provides that the original purchase price was amended to be $500,000
in cash and the issuance of 771,040 restricted shares of common stock of Takung to Cultural Objects in exchange for 54,100 shares of common
stock of Cultural Objects, and, subject to the satisfaction of the conditions stipulated in the SPA, the issuance of 787,440 unvested
restricted shares of common stock of Takung to Cultural Objects in exchange for 32,460 unvested shares of common stock of Cultural Objects.
The cash consideration of $500,000 was paid to Cultural Objects by the end of August 2021. On September 9, 2021, an aggregate amount of
1,558,480 restricted shares of common stock of Takung issued to Cultural Objects in an exchange for an aggregate 86,560 shares of common
stock of Cultural Objects. Together with the cash consideration paid $500,000 and the total value of the restricted shares issued to Cultural
Objects, $10,130,120, the total value of the investment in Cultural Objects was $10,630,120. As of June 30, 2022 the initial cost
of this investment was adjusted to $3,030,928 after a further impairment charge, $6,265,686 was recorded (see Note 5).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The interim
condensed consolidated financial statements have been prepared in accordance with the generally accepted accounting principles in the
United States (“U.S. GAAP”).
This basis
of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses
and losses are recognized when incurred. The Company’s financial statements are expressed in U.S. dollars.
Use of estimates
The preparation
of interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim
condensed consolidated financial statements and the amount of revenues and expenses during the reporting periods. Actual results could
differ materially from those results.
Basis of consolidation
The
interim condensed consolidated financial statements include the financial statements of the Company, and its subsidiaries, NFT
Exchange, NFT Digital, Metaverse Payment, Hong Kong Takung, Tianjin Takung and Hong
Kong MQ. All intercompany transactions and balances have been eliminated on consolidation.
Discontinued
operations
The Company
has adopted ASC Topic 205 “Presentation of Financial Statements” Subtopic 20-45, in determining whether any of its business
component(s) classified as held for sale, disposed of by sale or other than by sale is required to be reported in discontinued operations.
In accordance with ASC Topic 205-20-45-1, a discontinued operation may include a component of an entity or a group of components of an
entity, or a business or non-profit activity. A disposal of a component of an entity or a group of components of an entity is required
to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s
operations and financial results when any of the following occurs: (1) the component of an entity or group of components of an entity
meets the criteria to be classified as held for sale; (2) the component of an entity or group of components of an entity is disposed of
by sale; (3) the component of an entity or group of components of an entity is disposed of other than by sale (for example, by abandonment
or in a distribution to owners in a spinoff).
For the
component disposed of other than by sale in accordance with paragraph 360-10-45-15, the Company adopted ASC Topic 205-20-45-3 and reported
the results of operations of the discontinued operations, less applicable income tax expenses or benefits as a separate component in in
the statement where net income (loss) is reported for current and all prior periods presented.
Due to the
suspension of the operation of Tianjin Takung by the local authority in the fourth quarter of 2021, Hong Kong Takung lost its control
over Tianjin Takung. The Company plans to dispose Hong Kong Takung, and is actively seeking buyers for Hong Kong Takung and related operations
in order to focus on its blockchain and NFT business operation. As of June 30, 2022 and December 31, 2021, the operation of Hong Kong
Takung was classified as a discontinued operation and as of December 31, 2021, the operation Tianjin Takung was deconsolidated. For the
six months ended June 30, 2022, the operation of Hong Kong Takung was presented in discontinued operations.
Deconsolidation
Under the
ASC Subtopic 810-10-40, “Consolidation-Overall-Derecognition”, a reporting entity will deconsolidate a subsidiary in the period
when the loss of control over such subsidiary incurred as a result of one or more of the following events: (i) a parent sells all or part
of its ownership interest in its subsidiary; (ii) the expiration of a contractual agreement that gave control of the subsidiary to the
parent; (iii) the subsidiary issues shares which reduces the parent’s ownership interest in the subsidiary to an extent that the
parent no longer has a controlling financial interest in such subsidiary; (iv) the subsidiary becomes subject to the control of a government,
court, administrator, or regulator. Upon deconsolidation, the reporting entity would no longer include the subsidiary’s assets,
liabilities and results of operations in its consolidated financial statements. Due to the suspension of the operation of Tianjin Takung
by the local authority. The financial information of Tianjin Takung was deconsolidated as of December 31, 2021.
Fair
value measurements
The Company
applies the provisions of ASC Subtopic 820-10, “Fair Value Measurements”, for fair value measurements of financial assets
and financial liabilities and for fair value measurements of non-financial items that are recognized or disclosed at fair value in the
financial statements. ASC 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.
Fair value
is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to
be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers
assumptions that market participants would use when pricing the asset or liability.
ASC 820
establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value. The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy
are as follows:
| ● | Level 1 inputs to the valuation
methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| ● | Level 2 inputs to the valuation
methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets
or liability, either directly or indirectly, for substantially the full term of the financial instruments. |
| ● | Level 3 inputs to the valuation
methodology are unobservable and significant to the fair value. |
There were
no assets or liabilities measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 as of June 30,
2022 and December 31, 2021.
Comprehensive
loss
The Company
follows the provisions of the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”)
220 “Reporting Comprehensive Income” and establishes standards for the reporting and display of comprehensive income, its
components and accumulated balances in a full set of general purpose financial statements. For the six months ended June 30, 2022 and
2021, the Company’s comprehensive loss includes net loss and foreign currency translation adjustment.
Foreign
currency translation and transaction
The
functional currency of Metaverse Payment, Hong Kong Takung, Hong Kong MQ and Tianjin
Takung are the Hong Kong Dollar (“HKD”); NFT Digital and NFT Exchange
are the United States Dollar (“USD”)
The reporting
currency of the Company is USD.
Transactions
in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the date of the transaction.
At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at the end
of the reporting periods. Exchange differences arising on the settlement of monetary items and on re-translation of monetary items at
period-end are included in income statement of the period.
For the purpose
of presenting these financial statements, the Company’s assets and liabilities with functional currency of HKD are expressed in
USD at the exchange rate on the balance sheet’s dates, which is 7.8472 and 7.7996 as of June 30, 2022 and December
31, 2021, respectively;
The resulting
translation adjustments are reported under accumulated other comprehensive loss in the stockholders’ equity section of the balance
sheets.
Cash
and cash equivalents
Cash and
cash equivalents consist of cash on hand, cash in bank with no restrictions, as well as highly liquid investments which are unrestricted
as to withdrawal or use, and which have original maturities of three months or less when initially purchased.
Restricted
cash
Restricted
cash represents the cash deposited by the NFT traders into a specific bank account under Takung (“the broker’s account”)
in order to facilitate the trading of NFT in our online NFT platform. After the user’s registration is successful, the customer
deposits must be transferred to the designated account of the platform through the bank account added by the user before the transaction
starts, and a transfer application is submitted on the platform, which can enter the buyer’s platform account after financial review.
Except for instructing the bank to deduct the commission, Takung has no right to use any funds in the broker’s account. Our restricted
cash is denominated in USD. As of June 30, 2022, the ending balance of our restricted cash was $4,645,449.
Accounts
receivable and allowance for doubtful accounts
Accounts
receivable are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. The Company
makes estimates for the allowance for doubtful accounts based upon the assessment of various factors, including historical, experience,
the age of the accounts receivable balances, credit quality of the customers, current economic conditions, and other factors that may
affect customers’ ability to pay.
Prepayment and other current
assets, net
Prepayment
and other current assets mainly consist of the prepayment for income taxes, maintenance of online trading system, advertising and promotional
services, insurances, financial advisory, professional services, rental deposits, as well as other current assets.
Property and equipment, net
Property
and equipment are stated at cost less accumulated depreciation and impairment losses. Gains or losses on dispositions of property and
equipment are included in operating income or expense. Major additions, renewals and betterments are capitalized, while maintenance and
repairs are expensed as incurred. Depreciation and amortization are provided over the estimated useful lives of the assets using the straight-line
method from the time the assets are placed in service.
The Company
developed systems and solutions for solely internal use. Certain costs incurred in connection with developing or obtaining internal use
software are capitalized. Unamortized capitalized costs are included in computer trading and clearing system, within property and equipment,
net in the Consolidated Balance Sheets. Capitalized software costs are amortized on a straight-line basis over the estimated useful lives
of the software of 5 years. Amortization of these costs is included in depreciation and amortization expense in the Consolidated
Statements of Operations.
Estimated
useful lives are as follows, taking into account the assets’ estimated residual value:
Classification |
|
Estimated
useful life |
Furniture, fixtures and equipment |
|
5 years |
Leasehold improvements |
|
Shorter of the remaining lease
terms and the estimated 3 years |
Computer trading and clearing system |
|
5 years |
Long-lived
assets
The Company
evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets
may not be recoverable. When these events occur, the Company assesses the recoverability of these long-lived assets by comparing the carrying
amount of the assets to the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition.
If the future undiscounted cash flow is less than the carrying amount of the assets, the Company recognizes an impairment equal to the
difference between the carrying amount and fair value of these assets.
During
2021, we recorded $16.5million in asset impairments due to the deconsolidation of Tianjin Takung as a result of the loss of control in
this entity. Please refer to Note 6 for details. In addition, we determined that the future undiscounted cash flow was less than the carrying
cost of our non-marketable investment and recognized an impairment charge of $1,333,506 for
twelve months ended December 31, 2021 and a further charge of $6,265,686 for six months ended June 30, 2022 against our non-marketable
investment. Please refer to Note 5 for details.
Intangible
assets
Intangible
assets represent the licensing cost for the trademark registration. For intangible assets with indefinite lives, the Company evaluates
intangible assets for impairment at least annually and more often whenever events or changes in circumstances indicate that the carrying
value may not be recoverable. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the
carrying value exceeds the fair value. For intangible assets with definite lives, they are amortized over estimated useful lives, and
are reviewed annually for impairment. The Company has not recorded impairment of intangible assets as of June 30, 2022 and December 31,
2021.
Advance
from customers
Advance
from customers represent the cash deposited by the traders into a specific bank account under Takung (“the broker’s account”)
in order to facilitate the trading ownership units of the NFT. The traders are required to have their funds transferred to the broker’s
account before the trading take place.
Revenue Recognition
Under ASC
606, an entity recognizes revenue as the Company satisfies a performance obligation when its customer obtains control of promised goods
or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services.
To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the
following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine
the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in
the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step
model to contracts when it is probable that the Company will collect the consideration to which it is entitled in exchange for the goods
or services it transfers to the customer.
The Company
recognizes revenue when control of the promised services is transferred to the traders. Revenue is measured at the transaction price,
which is based on the amount of consideration that the Company expects to receive in exchange for transferring the promised services to
the traders.
Our discontinued
operations generated revenue from its services in connection with the offering and trading of artworks on the Company’s legacy online
trading system primarily consisted of listing fee, commission fee and management fee.
Listing
fee
The Company
recognizes the listing fee revenue at a point in time when the ownership units of the artwork are listed and available for trading on
the Company’s system, at an amount of an agreed percentage of the total offering price. The amount is collected from the money raised
from the issuance of such units.
Commission
The Company
generates commission fee from non-VIP traders and selected traders.
For non-VIP
traders, the commission is calculated based on a percentage of transaction value of artworks when there is purchase and sale of the ownership
shares of the artworks. The commission revenue is recognized at a point in time when each purchase and sale transaction is completed.
For selected
traders, starting from April 1, 2016, the Company charged a predetermined monthly commission fee which allows the selected traders to
conduct unlimited trades for specific artworks. The commission revenue is recognized on a monthly basis as the Company continuously satisfied
its performance obligation.
Management
fee
The Company
provides custody and insurance service for artworks listed and traded on the Company’s platform. Management fee is calculated
at a rate of $0.0013 (HK$0.01) per 100 artwork units per day. The management fee is recognized and is deducted from proceeds from
the sale of artwork ownership shares when there is a purchase and sale transaction. A discount program is offered to waive the management
fee during certain promotion periods. Such discounts are recognized as a reduction of the revenue.
Beginning
in the fourth quarter 2021, we introduced consultancy service and setup NFT business through our subsidiaries, NFT Exchange and NFT Digital.
In early May 2022, we launched a NFT trading platform at www.nftoeo.com. Through the new NFT platform, we introduced three main revenue
categories: (i) Listing fee, (ii) Commission, and (iii) Management fee.
Cost
of revenue
The Company’s
cost of revenue primarily consists of expenses associated with the delivery of its service of our continued operations. These include
expenses related to the operation of the data centers, such as facility and lease of the server equipment, development and maintenance
of the platform system, as well as the cost of insurance, storage and transportation of the artworks. Cost of revenue also includes commission
paid to service agent.
The Company
has elected to apply the practical expedient in ASC 606-10 and does not disclose information about remaining performance obligations that
have original expected durations of one year or less.
The contract
liabilities are the Company’s obligation to transfer services to traders for which the Company has received consideration from the
traders. All contract liabilities are expected to be recognized as revenue within one month and are presented in Advance from Customers
in the Interim Condensed Consolidated Balance Sheet.
Leases
In February
2016, the FASB issued ASU 2016-12, Leases (ASC Topic 842), which amends the leases requirements in ASC Topic 840, Leases. Under the new
lease accounting standard, a lessee will be required to recognize a right-of-use asset and lease liability for most leases on the balance
sheet. The new standard also modifies the classification criteria and accounting for sales-type and direct financing leases, and enhances
the disclosure requirements. Leases will continue to be classified as either finance or operating leases.
The Company
determines if an arrangement is a lease at inception. The lease payments under the lease arrangements are fixed. Non-lease components
include payments for building management, utilities and property tax. It separates the non-lease components from the lease components
to which they relate.
Lease assets
and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used
to determine the present value of the future lease payments is the Company’s incremental borrowing rate, because the interest rate
implicit in the leases is not readily determinable. The incremental borrowing rate is estimated to approximate the interest rate on a
collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. The lease terms
include periods under options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
The Company generally uses the base, non-cancellable, lease term when determining the lease assets and liabilities.
Income
taxes
The Company
accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets
based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided
for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not
that these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.
Under ASC
740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained
in a tax examination, with a tax examination being presumed to occur. The evaluation of a tax position is a two-step process. The first
step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution
of any related appeals or litigations based on the technical merits of that position. The second step is to measure a tax position that
meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position
is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions
that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which
the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized
in the first subsequent financial reporting period in which the threshold is no longer met. Penalties and interest incurred related to
underpayment of income tax are classified as income tax expense in the year incurred. GAAP also provides guidance on de-recognition, classification,
interest and penalties, accounting in interim periods, disclosures and transition.
The Company
accounts for an unrecognized tax benefit from an uncertain tax position only if it is more likely than not that the tax position will
be sustained upon examination by the tax authorities. The Company considers and estimates interest and penalties related to the gross
unrecognized tax benefits and includes as part of its income tax provision based on the applicable income tax regulations.
The Company
did not accrue any liability, interest or penalties related to uncertain tax positions in the provision for income taxes line of the interim
condensed consolidated statements of operations for the six months ended June 30, 2022 and as of December 31, 2021.
Earnings (loss) per share
Basic net
income (loss) per share (EPS) is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding
during the year. Diluted income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted-average
number of shares of common stock outstanding during the period adjusted to include the effect of potentially dilutive securities. Potentially
dilutive securities are excluded from the computation of dilutive EPS in periods in which the effect would be antidilutive .
Concentration of risks
Concentration of credit risk
Financial
instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted
cash, account receivables. The carrying values of the financial instruments approximate their fair values due to their short-term maturities.
The Company places its cash and cash equivalents and restricted cash with financial institutions with high-credit ratings and quality.
Account receivables primarily comprise of amounts receivable from the trader customers. With respect to the prepayment to service suppliers,
the Company performs on-going credit evaluations of the financial condition of these suppliers. The Company establishes an allowance for
doubtful accounts based upon estimates, factors surrounding the credit risk of specific service providers and other information.
Concentration of customers
There were
no revenues from customers that individually represent greater than 10% of the total revenues during the six months ended June 30,
2022 and 2021.
Concentration
of customer deposits
As of June
30, 2022 and December 31, 2021, there were no traders that individually accounted for greater than 10% of the Company’s total
customer deposits.
Accounting
standards adopted on January 1, 2021
Income
Taxes: On December 18, 2019, the FASB issued ASU No. 2019-12, Income taxes (Topic 740), Simplifying the Accounting for Income
Taxes. This guidance amends ASC Topic 740 and addresses several aspects including 1) evaluation of step-up tax basis of goodwill when
there is not a business combination, 2) policy election to not allocate consolidated taxes on a separate entity basis to entities not
subject to income tax, 3) accounting for tax law changes or rates during interim periods, 4) ownership changes from equity method investment
to subsidiary or vice versa, 5) elimination of exception to intraperiod allocation when there is gain in discontinued operations and a
loss from continuing operations, 6) treatment of franchise taxes that are partially based on income. The Company adopted ASU2019-12 effective
January 1, 2021.
Accounting pronouncements
issued but not yet adopted
Financial
Instruments - Credit Losses: In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):
The amendments in this Update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented
at the net amount expected to be collected. The amendments broaden the information that an entity must consider in developing its expected
credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely
information in the estimate of expected credit loss, which will be more decision useful to users of the financial statements. In November
2019, FASB issued ASU 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and
Leases (Topic 842).” This ASU defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting
companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.
The Company is planning to adopt this standard in the first quarter of fiscal 2023.The Company is currently evaluating the potential effects
of adopting the provisions of ASU No. 2016-13 on its consolidated financial statements, particularly its recognition of allowances for
accounts receivable.
The Company
does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect
on the consolidated financial position, statements of operations and cash flows.
3. PREPAYMENT AND OTHER CURRENT ASSETS,
NET
Prepayment and other current
assets mainly consist of the prepaid tax, prepaid service fees, as well as staff advance.
| |
June 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
| |
(Unaudited) | | |
| |
Prepaid tax | |
$ | - | | |
$ | - | |
Prepaid service fees | |
| 81,240 | | |
| 196,497 | |
Deposit | |
| 5,557 | | |
| 5,557 | |
Other current assets | |
| - | | |
| 2,791 | |
Subtotal | |
| 86,797 | | |
| 204,845 | |
Less: Prepayment and other current assets, net-discontinued operations | |
| (13,305 | ) | |
| (34,937 | ) |
Prepayment and other current assets, net | |
$ | 73,492 | | |
$ | 169,908 | |
No provision for doubtful accounts was recognized for the three
and six months ended June 30, 2022 and 2021, respectively.
4. ACCOUNT RECEIVABLES, NET
Account receivables consisted
of the following:
| |
June 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
| |
(Unaudited) | | |
| |
Listing fee | |
$ | - | | |
$ | 154,771 | |
Consultancy service | |
| 99,290 | | |
| 120,000 | |
Less: allowance for doubtful accounts | |
| - | | |
| (154,771 | ) |
Account receivables, net | |
$ | 99,290 | | |
$ | 120,000 | |
No provision for
doubtful accounts was recognized for the three and six months ended June 30, 2022 and 2021, respectively.
5. INVESTMENTS
We adopted
ASU 2016-01 on January 1, 2018. This guidance requires us to measure all equity investments that are not accounted for under the equity
method or result in consolidation at fair value and recognize any changes in net income. For equity investments with readily determinable
and observable fair values, we use quoted market prices to determine the fair value of equity securities. For equity investments without
readily determinable fair values, we have elected the measurement alternative under which we measure these investments at cost minus impairment,
if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment
of the same issuer.
Equity investments
with readily determinable fair values that are not accounted for under the equity method classified as trading are not assessed for impairment,
since they are carried at fair value with the change in fair value included in net income. Similarly, prior to the adoption of ASU 2016-01,
equity investment classified as trading was not tested for impairment.
Equity investments
without readily determinable fair values are reviewed each reporting period to determine whether a significant event or change in circumstances
has occurred that may have an adverse effect on the fair value of each investment. When such events or changes occur, we assess the fair
value compared to our cost basis in the investment. We also perform this assessment every reporting period for each investment for which
our cost basis has exceeded the fair value.
For investments
in privately-held companies, management’s assessment of fair value is based on valuation methodologies such as discounted cash flows,
estimates of revenue and appraisals, as applicable. We consider and apply the assumptions that we believe market participants would use
in evaluating estimated future cash flows when utilizing the discounted cash flow or estimates of revenue valuation methodologies. In
the event the fair value of an investment declines below our cost basis, management determines if the decline in fair value is other than
temporary and records an impairment accordingly.
As of December
31, 2021, our investment merely includes a non-marketable investment in a privately held company incorporated in British Virgin Islands
without readily determinable market values. We elected the measurement alternative under which we measured the investment at cost minus
impairment with an adjustment to the changes from observable price changes in orderly transactions for the similar investments of the
same issuer.
Management
considered market conditions as the result of the global pandemic and other global macroeconomic conditions and the potential impact on
the value of the Company’s investment; accordingly, management conducted a review of each of its investments. After its review management
determined that the future undiscounted cash flows were less than the carrying cost of our non-marketable investment and recognized an
impairment charge, $7,599,192 against our non-marketable investment. Management estimated future revenues and costs, and the related cash
flows regarding this investment, as well as applying assumptions regarding the proper inputs into the weighted average cost of capital
which included the consideration of comparable market participants and the Company’s own capital structure in developing a discounted
flow model to determine an update carrying value for the private-held investment.
The carrying
value is measured as the total initial cost minus impairment. The carrying value for our non-marketable investment is summarized below:
| |
June 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Total initial cost | |
$ | 10,630,120 | | |
$ | 10,630,120 | |
Cumulative net gain (loss) | |
| - | | |
| - | |
Provision for impairment | |
| (7,599,192 | ) | |
| (1,333,506 | ) |
Total carrying value | |
$ | 3,030,928 | | |
$ | 9,296,614 | |
We recorded
an unrealized loss in connection with the non-marketable investment, a further impairment loss of $6,265,686 was recognized for six months
ended June 30, 2022.
6. ASSET IMPAIRMENTS
Our subsidiary,
Hong Kong Takung, recorded an asset impairment charge of $16,538,781, as a result of the deconsolidation of Tianjin Takung due to the
loss of control of Tianjin Takung in the fourth quarter of 2021. Hong Kong Takung considered the receivables from Tianjin Takung to be
uncollectible and wrote off its investment in Tianjin Takung. These charges have been included in the net loss from discontinued operations
for the year ended December 31, 2021. As of the June 30, 2022, we did not incur additional receivable balances nor impairments.
The following represents the
detail of the asset impairments as of June 30, 2022 and December 31, 2021.
| |
June 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Receivables from Tianjin Takung | |
$ | - | | |
$ | 16,388,254 | |
Investment in Tianjin Takung | |
| - | | |
| 150,527 | |
Subtotal | |
| - | | |
| 16,538,781 | |
Less: asset impairments – discontinued operations | |
$ | - | | |
$ | (16,538,781 | ) |
Total | |
| - | | |
| - | |
7. PROPERTY AND EQUIPMENT, NET
Property and equipment
consisted of the following:
| |
June 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
| |
(Unaudited) | | |
| |
Furniture, fixtures and equipment | |
$ | 68,910 | | |
$ | 63,392 | |
Leasehold improvements | |
| 22,938 | | |
| 23,078 | |
Computer trading and clearing system | |
| 2,410,388 | | |
| 2,429,883 | |
Sub-total | |
| 2,502,236 | | |
| 2,516,353 | |
Less: accumulated depreciation | |
| (2,437,316 | ) | |
| (2,428,936 | ) |
Sub-total | |
$ | 64,920 | | |
$ | 87,417 | |
Less: Property and equipment, net-discontinued operations | |
| (58,542 | ) | |
| (80,534 | ) |
Property and equipment, net | |
| 6,378 | | |
| 6,883 | |
8. ACCRUED EXPENSES AND OTHER PAYABLES
Accrued expenses and other
payables as of June 30, 2022 and December 31, 2021 consisted of the following:
|
|
June 30, |
|
|
December 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(Unaudited) |
|
|
|
|
Accruals for professional fees |
|
$ |
272,318 |
|
|
$ |
90,642 |
|
Accruals for consulting fees |
|
|
278,604 |
|
|
|
266,304 |
|
Payroll payables |
|
|
285,277 |
|
|
|
55,964 |
|
Trading and clearing system |
|
|
- |
|
|
|
2,364 |
|
Other payables |
|
|
1,447,879 |
|
|
|
1,546 |
|
Subtotal |
|
$ |
2,284,078 |
|
|
$ |
416,820 |
|
Less: Accrued expenses and other payables-discontinued operations |
|
|
(277,016 |
) |
|
|
(273,391 |
) |
Total accrued expenses and other payables |
|
|
2,007,062 |
|
|
|
143,429 |
|
9. RELATED PARTY BALANCES AND TRANSACTIONS
On
May 29, 2021, our discontinued operation, Hong Kong Takung, entered into an interest-free loan agreement (the “HK Dollar Working
Capital Loan”) with Sze Chan (“Chan”), Vice President of Hong Kong Takung, for the loan of $6,371,699 (HK$50,000,000)
to Hong Kong Takung. The purpose of the loan is to provide Hong Kong Takung with sufficient Hong Kong Dollar-denominated currency to meet
its working capital requirements with the maturity date of the loan as May 15, 2022.
In April 2022 Chan assigned loan receivables in Hong Kong Takung to
Jin Wang, one of the members of management team and it was still outstanding as at June 30, 2022.
The
ending balance of the amount due to a related party as of respective period is indicated as follows:
| |
June 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
| |
(Unaudited) | | |
| |
Chan | |
$ | - | | |
$ | 6,410,585 | |
Wang | |
| 6,371,699 | | |
| - | |
Subtotal | |
$ | 6,371,699 | | |
$ | 6,410,585 | |
Less: amount due to related party – discontinued operations | |
| (6,371,699 | ) | |
| (6,410,585 | ) |
Total | |
| - | | |
| - | |
10. INCOME TAXES
Takung,
NFT Exchange and NFT Digital were incorporated in the State of Delaware, Wyoming and New York, respectively; therefore, are subject to
United States income tax. Metaverse Payment, Hong Kong Takung
and Hong Kong MQ were incorporated in Hong Kong S.A.R. and are subject to Hong Kong profits tax. Tianjin Takung was incorporated in the
PRC and is subject to the Enterprise Tax.
United
States of America
Takung,
NFT Exchange and NFT Digital are subject to the U.S. federal and state corporate income taxes. The federal corporate income tax rate is 21%.
Corporate entities are required to file state income taxes in accordance with the applicable state corporate income regulations.
Hong
Kong
Two-tier
Profits Tax Rates
The two-tier
profits tax rates system was introduced under the Inland Revenue (Amendment)(No.3) Ordinance 2018 (“the Ordinance”) of Hong
Kong became effective for the assessment year 2018/2019. Under the two-tier profit tax rates regime, the profits tax rate for the first
HKD 2 million (approximately $257,311) of assessable profits of a corporation will be subject to the lowered tax rate, 8.25%
while the remaining assessable profits will be subject to the legacy tax rate, 16.5%. The Ordinance only allows one entity within
a group of “connected entities” is eligible for the two-tier tax rate benefit. An entity is a connected entity of another
entity if (1) one of them has control over the other; (2) both of them are under the control (more than 50% of the issued share capital)
of the same entity; (3) in the case of the first entity being a natural person carrying on a sole proprietorship business-the other entity
is the same person carrying on another sole proprietorship business. Since Hong Kong Takung, Takung Art Holdings and Hong Kong MQ are
wholly owned and under the control of Takung U.S, these entities are connected entities. Under the Ordinance, it is an entity’s
election to nominate the entity that will be subject to the two-tier profits tax rates on its profits tax return. The election is irrevocable.
The Company elected Hong Kong Takung to be subject to the two-tier profits tax rates.
The
provision for current income and deferred taxes of Hong Kong Takung has been calculated by applying the new tax rate of 8.25%. Hong
Kong MQ still apply the original tax rate of 16.5% for its provision for current income and deferred taxes.
PRC
In accordance with the
relevant tax laws and regulations of the PRC, a company registered in the PRC is subject to income taxes within the PRC at the applicable
tax rate on taxable income. All the PRC subsidiaries were subject to income tax at a rate of 25%.
The income tax provision
consists of the following components:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
(Unaudited) |
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
State |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Foreign |
|
|
48,996 |
|
|
|
(9,261 |
) |
|
|
48,996 |
|
|
|
10,947 |
|
Total Current |
|
$ |
48,996 |
|
|
$ |
(9,261 |
) |
|
$ |
48,996 |
|
|
$ |
10,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
State |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Foreign |
|
|
- |
|
|
|
20,627 |
|
|
|
- |
|
|
|
(4,354 |
) |
Total Deferred |
|
$ |
- |
|
|
$ |
20,627 |
|
|
$ |
- |
|
|
$ |
(4,354 |
) |
Total income tax expense |
|
$ |
48,996 |
|
|
$ |
11,366 |
|
|
$ |
48,996 |
|
|
$ |
6,593 |
|
A reconciliation between
the Company’s actual provision for income taxes and the provision at the Hong Kong statutory rate is as follows:
| |
Three Months Ended | | |
Six Months Ended | |
| |
June 30, | | |
June 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | |
Loss before income tax expense | |
$ | (7,108,774 | ) | |
$ | (7,214,465 | ) | |
$ | (7,900,113 | ) | |
$ | (7,791,826 | ) |
Computed tax benefit with statutory tax rate | |
| (344,263 | ) | |
| (1,515,040 | ) | |
| (1,089,572 | ) | |
| (1,636,285 | ) |
Impact of different tax rates in other jurisdictions | |
| (13,363 | ) | |
| (2,622 | ) | |
| (13,363 | ) | |
| 1,097 | |
Impact of preferred tax rate | |
| 56,724 | | |
| (40,760 | ) | |
| 272,399 | | |
| 5,390 | |
Non-deductible items: | |
| | | |
| | | |
| | | |
| | |
Tax effect of non-deductible expenses | |
| - | | |
| 71,454 | | |
| - | | |
| 64,376 | |
Changes in valuation allowance | |
| 349,898 | | |
| 1,498,334 | | |
| 879,532 | | |
| 1,573,161 | |
Others | |
| - | | |
| - | | |
| - | | |
| (1,146 | ) |
Total income tax expense | |
$ | 48,996 | | |
$ | 11,366 | | |
$ | 48,996 | | |
$ | 6,593 | |
Uncertain tax positions
The reconciliation of
the beginning and ending amount of liabilities associated with uncertain tax positions is as follows:
| |
June 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
Uncertain tax liabilities, beginning of period | |
$ | - | | |
$ | 101,789 | |
Settlements with tax authority during current year | |
| - | | |
| (101,789 | ) |
Uncertain tax liabilities, end of period | |
$ | - | | |
$ | - | |
The Company
files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company
is subject to examination by the respective jurisdictions, where applicable. The statute of limitations for the tax returns varies by
jurisdictions.
The amounts
of uncertain tax liabilities listed above are based on the recognition and measurement criteria of ASC Topic 740, and the balance is presented
as current liability in the consolidated financial statements as of March 31, 2022 and December 31, 2021. The Company anticipated that
the settlements with the taxing authority are remitted within one year.
Our
policy is to include interest and penalty charges related to uncertain tax liabilities as necessary in the provision for income taxes.
The Company has a liability for accrued interest of $nil as of June 30, 2022 and December 31, 2021, respectively.
Our discontinued
operation, Hong Kong Takung, was selected for routine examination for its tax years ended December 31, 2016 through 2018 by Hong Kong
Inland Revenue Department (“IRD”) during the fiscal year ended 2020. The examination had been concluded in May 2021 and the
ultimate resolution of the tax examination concurred with the uncertain tax liabilities previously accrued. Hong Kong Takung settled the
entire tax liabilities in June 2021. The Company does not expect the position of uncertain tax liabilities will significantly fluctuate
within the next twelve months.
The statute
of limitations for the Internal Revenue Services to assess the income tax returns on a taxpayer expires three years from the due date
of the profits tax return or the date on which it was filed, whichever is later.
In accordance
with the Hong Kong profits tax regulations, a tax assessment by the IRD may be initiated within six years after the relevant year of assessment,
but extendable to 10 years in the case of potential willful underpayment or evasion.
In accordance
with PRC Tax Administration Law on the Levying and Collection of Taxes, the PRC tax authorities generally have up to five years to assess
underpaid tax plus penalties and interest for PRC entities’ tax filings. In the case of tax evasion, which is not clearly defined
in the law, there is no limitation on the tax years open for investigation. Accordingly, the PRC entities remain subject to examination
by the tax authorities based on the above.
11. LEASES
The Company has operating
leases for its office facilities and artwork storages. The Company’s leases have remaining terms of less than one year to
approximately four years. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes
lease expense for these leases on a straight-line basis over the lease term. The Company does not separate non-lease components from the
lease components to which they relate, and instead accounts for each separate lease and non-lease component associated with that lease
component as a single lease component for all underlying asset classes.
The following table provides
a summary of leases by balance sheet location as of June 30, 2022 and December 31, 2021 respectively:
| |
| |
As of | | |
As of | |
| |
| |
June 30, | | |
December 31, | |
Assets/liabilities | |
Classification | |
2022 | | |
2021 | |
| |
| |
(Unaudited) | | |
(Unaudited) | |
Assets | |
| |
| | |
| |
Operating lease right-of-use assets | |
Operating lease assets | |
$ | 31,908 | | |
$ | 62,397 | |
| |
| |
| | | |
| | |
Liabilities | |
| |
| | | |
| | |
Current | |
| |
| | | |
| | |
Operating lease liability - current | |
Current operating lease liabilities | |
$ | 31,908 | | |
$ | 62,397 | |
| |
| |
| | | |
| | |
Long-term | |
| |
| | | |
| | |
Operating lease liability - non-current | |
Long-term operating lease liabilities | |
| - | | |
| - | |
| |
| |
| | | |
| | |
Total lease liabilities | |
| |
$ | 31,908 | | |
$ | 62,397 | |
The operating lease expenses
for the three months and six months ended June 30, 2022 and 2021 were as follows:
| |
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
Lease Cost | |
Classification | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
| |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | |
Operating lease cost | |
Cost of revenue, general and administrative expenses | |
$ | 21,864 | | |
$ | 109,951 | | |
$ | 83,869 | | |
$ | 167,226 | |
Total lease cost | |
| |
$ | 21,864 | | |
$ | 109,951 | | |
$ | 83,869 | | |
$ | 167,226 | |
Operating lease cost-discontinued operations | |
Cost of revenue, general and administrative expenses | |
| (21,864 | ) | |
| (109,951 | ) | |
| (83,869 | ) | |
| (167,226 | ) |
Total lease cost | |
| |
| - | | |
| - | | |
| - | | |
| - | |
Maturities of operating
lease liabilities at June 30, 2022 were as follows:
| |
Operating | |
Maturity of Lease Liabilities | |
Leases | |
2022 | |
$ | 32,563 | |
2023 | |
| - | |
2024 | |
| - | |
2025 | |
| - | |
Thereafter | |
| - | |
Total lease payments | |
$ | 32,563 | |
Less: interest | |
| (655 | ) |
Present value of lease payments | |
$ | 31,908 | |
12. LOSS PER SHARE
The computation of the Company’s basic and diluted net loss per
share is as follows:
| |
Three Months Ended | | |
Six Months Ended | |
| |
June 30, | | |
June 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | |
Numerator: | |
| | |
| | |
| | |
| |
Net loss - continuing operations | |
$ | (7,084,353 | ) | |
$ | (7,020,900 | ) | |
$ | (7,695,927 | ) | |
$ | (7,380,942 | ) |
Net loss - discontinued operations | |
| (73,417 | ) | |
| (204,931 | ) | |
| (253,182 | ) | |
| (417,477 | ) |
Total net loss | |
| (7,157,770 | ) | |
| (7,225,831 | ) | |
| (7,949,109 | ) | |
| (7,798,419 | ) |
| |
| | | |
| | | |
| | | |
| | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Weighted-average shares outstanding - Basic | |
| 23,036,046 | | |
| 11,579,690 | | |
| 18,728,132 | | |
| 11,427,248 | |
Stock options and restricted shares | |
| - | | |
| - | | |
| - | | |
| - | |
Weighted-average shares outstanding - Diluted | |
| 49,027,125 | | |
| 11,579,690 | | |
| 31,795,470 | | |
| 11,427,248 | |
| |
| | | |
| | | |
| | | |
| | |
Loss per share-continuing operations | |
| | | |
| | | |
| | | |
| | |
-Basic | |
| (0.308 | ) | |
| (0.606 | ) | |
| (0.411 | ) | |
| (0.646 | ) |
-Diluted | |
| (0.144 | ) | |
| (0.606 | ) | |
| (0.242 | ) | |
| (0.646 | ) |
| |
| | | |
| | | |
| | | |
| | |
Loss per share-discontinued operations | |
| | | |
| | | |
| | | |
| | |
-Basic | |
| (0.003 | ) | |
| (0.018 | ) | |
| (0.014 | ) | |
| (0.037 | ) |
-Diluted | |
| (0.001 | ) | |
| (0.018 | ) | |
| (0.008 | ) | |
| (0.037 | ) |
Diluted earnings per share
takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted
into common stock.
As
of June 30, 2022 and December 31, 2021, there were no outstanding stock options, but there were warrants attached to PIPE executed on
April 14, 2022 securities that would potentially be converted to additional shares of common stock that would have been outstanding if
the dilutive potential shares of common stock had been issued were excluded from the calculation of diluted net loss per share.
13. SUBSEQUENT EVENTS
On
June 27, 2022, Takung Art Co., Ltd., a Delaware corporation (the “Company”) entered into certain securities purchase
agreement (the “SPA”) with certain “non-U.S. Persons” (the “Purchasers”) as defined
in Regulation S of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to which the Company agreed
to sell 15,789,474 units, each consisting of one share of the common stock of the Company, par value $0.001 per share (the “Common
Stock”) and a warrant to purchase two shares of Common Stock. The purchase price of each Unit is $1.9.
Upon
further discussion among the parties, on July 27, 2022, the Company and the Purchasers agreed to amend and restate the SPA to make amendments
to the number of Units and the Unit purchase price (the “Amended SPA”). Pursuant to the Amended SPA, the Company agreed
to sell 10,380,623 Units. The purchase price of each Unit is $2.89. The gross proceeds to the Company from this offering will be approximately
$30 million. The Amended SPA is subject to various conditions to closing including NYSE American’s completion of its review of the
notification to NYSE American regarding the listing of the Units.
Other than
the events aforementioned, the Company has evaluated subsequent events through the date of issuance of the consolidated financial statements,
there were no other subsequent events occurred that would require recognition or disclosure in the consolidated financial statements.