Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
The following discussion and
analysis should be read in conjunction with our financial statements and related notes thereto.
CAUTIONARY STATEMENT 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, Hong Kong Takung, operate an electronic online platform located at http://en.takungae.com for artists, art dealers and art
investors to offer and trade valuable artwork. We offer on-line 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. Our platform also makes investment in high-end and expensive artwork more accessible to ordinary people without substantial
financial resources.
We generate revenue from
our services in connection with the offering and trading of artwork on our system, primarily consisting of listing fees, trading commissions
and management fees.
Our headquarter is located
in Hong Kong, Special Administrative Region, People’s Republic of China and we conduct our business primarily in Hong Kong and Tianjin.
Our new principal executive office is located at Room 709, Tower 2, Admiralty Centre, 18 Harcourt Road, Admiralty, Hong Kong.
Recent Developments
While the ongoing coronavirus
pandemic is spreading throughout the world, our operations have fully resumed in March 2020. Overall, we had additional pieces of
artwork listed and a larger trading transaction amounts during the first quarter in 2021 as discussed underneath. Although we do not expect
that the virus will have a material adverse effect on our business or financial results at this time, it is not possible to predict the
unanticipated consequence of the pandemic on our future business performance and liquidity due to the severity of global situation of
COVID-19. To minimize the impact of such uncertainties, we reduced our workforces during the first quarter in 2021.
Results of Operation of Takung
Hong Kong Takung operates
a platform for offering and trading artwork. We generate revenue from our services in connection with the offering and trading of artwork
ownership units on our system, primarily consisting of listing fees, trading commissions, and management fees.
THREE-MONTH
PERIOD ENDED MARCH 31, 2021 COMPARED TO THREE-MONTH PERIOD ENDED MARCH 31, 2020
The following tables set forth our interim condensed
consolidated statements of income data with a percentage:
|
|
Three Months Ended March 31,
|
|
|
|
2021
|
|
|
% of
Revenue
|
|
|
2020
|
|
|
% of
Revenue
|
|
|
|
(Unaudited)
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
Revenue
|
|
$
|
779,108
|
|
|
|
100
|
|
|
$
|
1,181,286
|
|
|
|
100
|
|
Cost of revenue
|
|
|
(252,237
|
)
|
|
|
(32
|
)
|
|
|
(656,514
|
)
|
|
|
(56
|
)
|
Selling expense
|
|
|
(104,911
|
)
|
|
|
(14
|
)
|
|
|
(42,989
|
)
|
|
|
(4
|
)
|
General and administrative expenses
|
|
|
(1,013,158
|
)
|
|
|
(130
|
)
|
|
|
(1,110,447
|
)
|
|
|
(94
|
)
|
Total costs and expenses
|
|
|
(1,370,306
|
)
|
|
|
(176
|
)
|
|
|
(1,809,950
|
)
|
|
|
(154
|
)
|
Loss from operations
|
|
|
(591,198
|
)
|
|
|
(76
|
)
|
|
|
(628,664
|
)
|
|
|
(54
|
)
|
Interest and other income (expenses), net
|
|
|
13,837
|
|
|
|
2
|
|
|
|
(237,303
|
)
|
|
|
(20
|
|
Loss before income tax expense
|
|
|
(577,361
|
)
|
|
|
(74
|
)
|
|
|
(865,967
|
)
|
|
|
(74
|
)
|
Income tax benefit (expense)
|
|
|
4,773
|
|
|
|
1
|
|
|
|
(87,395
|
)
|
|
|
(7
|
)
|
Net loss
|
|
$
|
(572,588
|
)
|
|
|
(73
|
)
|
|
$
|
(953,362
|
)
|
|
|
(81
|
)
|
Revenue
The following table sets forth our interim condensed
consolidated revenue by revenue source:
|
|
Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Listing fee revenue
|
|
$
|
273,792
|
|
|
$
|
176,943
|
|
Commission revenue
|
|
|
358,086
|
|
|
|
900,823
|
|
Management fee revenue
|
|
|
147,230
|
|
|
|
103,520
|
|
Total
|
|
$
|
779,108
|
|
|
$
|
1,181,286
|
|
As of 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.
As of March 31, 2020, a total
of 287 sets of artwork were listed for trade on our platform —comprising 62 sets of paintings and calligraphies from famous Chinese,
Russian and Mongolian artists, with a total listing value of $26,779,740 (HK$208,100,000); 35 pieces of jewelry with a total listing value
of $9,350,389 (HK$72,660,000); 134 pieces of precious stones with a total listing value of $16,991,816 (HK$132,040,000); 29 pieces of
amber with a total listing value of $12,225,254 (HK$95,000,000); 4 pieces of antique mammoth ivory carvings with a total listing value
of $669,172 (HK$5,200,000); 2 pieces of porcelain pastel paintings with a total listing value of $334,586 (HK$2,600,000); 7 pieces of
porcelain with a total listing value of $1,093,838 (HK$8,500,000); 6 sets of Unit+ products with a total listing value of $1,327,276 (HK$10,314,000);
1 piece of Yixing collectable with a listing value of $128,687 (HK$1,000,000); and 7 pieces of Sports memorabilia with a listing value
of $1,095,048 (HK$8,509,400), of which 22.5%-48% (for 62 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, 2020, there
were 2 sets of paintings listed on our platform. Their total listing values were $772,121 (HK$6,000,000) for the paintings, of which 22.83%-23%
(for the paintings) of the listed values were charged as listing fees.
The listing fees charged increased
to $273,792 during the three months ended March 31, 2021 compared to $176,943 for the same period ended March 31, 2020. Compared to those
for the three months ended March 31, 2020, the number of new listing of paintings and the value of the artworks were slightly higher during
the same period in 2021. There were three sets of paintings listed during the three months ended March 31, 2021 while there were two sets
of paintings during the same period in 2020 listed on our platform. The total listing value of the new artworks for the three months ended
March 31, 2021 was $1,095,686 compared to $772,121 for the three months ended March 31, 2020.
|
(ii)
|
Commission fee revenue
|
We generate commission fee
from non-VIP traders and selected traders as follows:
For non-VIP traders, the commission
revenue was calculated based on a percentage of transaction value of artworks, where 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, 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 $0.0013 (HK$0.01).
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 define traders as “inactive”
if they meet the following criteria;
|
·
|
The trader defaults in payment over three months;
|
|
·
|
The trader did not incur any transactions in the month of reassessment;
|
|
·
|
The service agent has confirmed with the relevant trader that he/she was inactive.
|
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.
We used to offer commissions
to Traders and service agents. Effective January 1, 2019, we no longer offered commission to our Traders. For service agents, we offer
a total of 40% to 75% of the commission earned from transactions with new Traders to the service agents when they bring in an agreed number
of Traders to the trading platform.
The commission paid to the
service agents and discounts are recognized as a cost of revenue in the same period the related revenue is recognized.
Total commission revenue decreased
by $542,737 or 60.2% for the three months ended March 31, 2021 to $358,086 compared to $900,823 for the three months ended March 31, 2020.
For the three months ended March 31, 2021, the trading amount was approximately $3,625,533,613 (HKD28,125,802,109) compared to $1,669,248,138
(HK$12,971,393,429) in the same period in 2020. Although we incurred a higher amount of trading amount in the first quarter 2021 compared
to that in the same period in 2020, majority of the transactions were initiated by our VIP traders that would not incur commission revenue.
Therefore, our commission revenue for the first quarter in 2021 was significantly lower than that in the same period in 2020.
|
(iii)
|
Management fee revenue
|
We charge 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 months period
ended March 31, 2021, management fee revenue increased by $43,710, from $103,520 for the three months ended March 31, 2020 to $147,230
in the same period in 2021, due to an increase in trading transaction volume in the first quarter in 2021 compared to that in the same
period in 2020 as discussed above.
Revenue by customer type
The following table presents our revenue by customer
type:
|
|
Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Artwork owners
|
|
$
|
273,792
|
|
|
$
|
176,943
|
|
Non – VIP Traders
|
|
|
312,640
|
|
|
|
856,132
|
|
VIP Traders
|
|
|
192,676
|
|
|
|
148,211
|
|
Total
|
|
$
|
779,108
|
|
|
$
|
1,181,286
|
|
Cost of Revenue
|
|
Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Commissions paid to service agents
|
|
$
|
135,174
|
|
|
$
|
497,601
|
|
Depreciation
|
|
|
69,062
|
|
|
|
96,191
|
|
Internet service charge
|
|
|
19,169
|
|
|
|
34,332
|
|
Artwork insurance
|
|
|
12,744
|
|
|
|
12,120
|
|
Artwork storage
|
|
|
16,088
|
|
|
|
16,270
|
|
Total
|
|
$
|
252,237
|
|
|
$
|
656,514
|
|
Cost
of revenue for the three months ended March 31, 2021 and March 31, 2020 was $252,237 and $656,514, respectively. The decrease in cost
of revenue by $404,277, for the three months ended March 31, 2021 compared to March 31, 2020, was mainly due to a decrease in commissions
paid to service agents by $362,427 because of a decrease in trading transactions initiated by non-VIP traders in the first quarter in
2021, a decrease in depreciation by $27,129 due to having fully depreciated of some of our computer equipment and trading systems, a decline
in internet service charges by $15,163 and artwork storage costs by $182.
Gross Profit
Gross
profit was $526,871 or 67.6% for the three months ended March 31, 2021, compared to $524,772 or 44.4% for the three months ended March
31, 2020.
Although
our total revenue for the three months ended March 31, 2021 decreased by $402,178 or 34% compared to that for the same period in 2020,
our gross profit margin was higher for the three months ended March 31, 2021 compared to that for the same period in 2020 by 23.2%. The
higher gross profit margin in current period was primarily driven by the plummet in the cost of revenue by 61.6% as discussed aforementioned.
Operating Expenses
General and administrative
expenses for the three months ended March 31, 2021 were $1,013,158 compared to $1,110,447 for the three months ended March 31, 2020. The
decrease in general and administrative expenses by $97,289 was predominantly attributable to a decrease in office, insurance and rental
expenses by $198,521 due to an early termination of a lease agreement by Tianjin Takung in May 2020, a reduction in salary and welfare
expense by $98,490 due to fewer employees in the first quarter 2021, a lower travel and accommodation fees by $28,274 and a decrease in
non-deductible input VAT expense by $35,951 as a result of a fall in service fees paid to Tianjin Takung in the first quarter 2021 compared
to that in the same period in 2020. The overall decrease was offset by a rise in consultancy fee by $199,815 as we engaged third-party
computer technicians for system upgrades and an increase in legal and professional fees by $71,760 due to an increase in auditor’s
fee.
The following table sets forth
the main components of the Company’s general and administrative expenses for the three months ended March 31, 2021 and March 31,
2020.
|
|
Three Months Ended
|
|
|
Three Months Ended
|
|
|
|
March 31, 2021
|
|
|
March 31, 2020
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
Amount ($)
|
|
|
% of Total
|
|
|
Amount ($)
|
|
|
% of Total
|
|
Salary and welfare
|
|
|
226,242
|
|
|
|
22.3
|
|
|
|
324,732
|
|
|
|
29.2
|
|
Office, insurance and rental expenses
|
|
|
126,258
|
|
|
|
12.5
|
|
|
|
324,779
|
|
|
|
29.2
|
|
Legal and professional fees
|
|
|
260,978
|
|
|
|
25.8
|
|
|
|
189,218
|
|
|
|
17.1
|
|
Non-deductible input VAT expense
|
|
|
36,142
|
|
|
|
3.6
|
|
|
|
72,093
|
|
|
|
6.5
|
|
Travel and accommodation fees
|
|
|
8,567
|
|
|
|
0.8
|
|
|
|
36,841
|
|
|
|
3.3
|
|
Consultancy fee
|
|
|
234,932
|
|
|
|
23.2
|
|
|
|
35,117
|
|
|
|
3.2
|
|
Depreciation
|
|
|
27,551
|
|
|
|
2.7
|
|
|
|
31,739
|
|
|
|
2.9
|
|
Share based compensation expense
|
|
|
3,717
|
|
|
|
0.4
|
|
|
|
5,986
|
|
|
|
0.5
|
|
Others
|
|
|
88,771
|
|
|
|
8.7
|
|
|
|
89,942
|
|
|
|
8.1
|
|
Total general and administrative expense
|
|
$
|
1,013,158
|
|
|
|
100.0
|
|
|
$
|
1,110,447
|
|
|
|
100.0
|
|
Other income (expenses)
We incurred other income for
the three months ended March 31, 2021, $13,837, compared to other expenses of $237,303 for the same period in 2020. There was a significant
decrease in exchange loss by $227,719, arising from the appreciation of the Renminbi against the US dollar in the first quarter 2021.
Income tax expenses
The Company’s effective
tax rate varies due to the multiple jurisdictions in which it books its pretax income or losses. The Company was subject to a U.S. income
tax rate of 21%, Hong Kong profits tax rate of 8.25% for the first HK$ 2 million (approximately $257,808) assessable profits and at 16.5%
for assessable profits above HK$ 2 million (approximately $257,808) and PRC enterprise income tax rate of 25%.
The effective tax rates for
the three months ended March 31, 2021 and 2020 were 0.8% and (10.1)%, respectively.
Income tax benefit (expense)
for the three months ended March 31, 2021 and 2020 were $4,773 and $(87,395), respectively. Our income tax expense was higher in the three
months ended March 31, 2020 as during the three months ended March 31, 2020, we recognized an uncertain tax position driven by the income
tax examination preliminary result from the tax authority of Hong Kong on the profits tax returns filed for the tax years December 31,
2016 through 2018 by Takung Hong Kong. The tax examination hasn’t been closed as of the filing of this quarterly report.
Net Loss
We recorded a net loss of
$572,588 and $953,362 for the three months ended March 31, 2021 and 2020, respectively.
The reduction in the net loss
by $380,774 during this current period was predominately due to a decrease in foreign exchange loss by $227,719 and a fall in income tax
expense by $92,168.
Liquidity and Capital Resources
The following tables set forth
our interim condensed consolidated statements of cash flow:
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Net cash provided by (used in) operating activities
|
|
$
|
1,651,695
|
|
|
$
|
(1,214,913
|
)
|
Net cash provided by investing activities
|
|
|
389,171
|
|
|
|
-
|
|
Effect of exchange rate change on cash and cash equivalents
|
|
|
(21,443
|
)
|
|
|
(85,550
|
)
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
|
|
2,019,423
|
|
|
|
(1,300,463
|
)
|
Cash, cash equivalents and restricted cash, beginning balance
|
|
|
13,842,745
|
|
|
|
21,829,154
|
|
Cash, cash equivalents and restricted cash, ending balance
|
|
$
|
15,862,168
|
|
|
$
|
20,528,691
|
|
Sources of Liquidity
During the three months ended
March 31, 2021, net cash provided by operating activities totaled $1,651,695, which chiefly driven by a net increase in operating assets
and liabilities, $2,139,959, non-cash adjustments to net loss, $84,324 offset by net loss, $572,588. Net cash provided by investing activities,
$389,171, included loan repayment from a third party, $390,400 offset by a purchase of computer equipment by Tianjin Takung, $1,229. There
was no net cash provided by or used in financing activities during the three months ended March 31, 2021. The resulting change in cash
for the period was an increase of $2,019,423. The cash balance at the beginning of the period was $13,842,745. The cash balance as of
March 31, 2021 was $15,862,168.
During the three months ended
March 31, 2020, net cash used in operating activities totaled $1,214,913, which predominately resulted from the net loss of $953,362 and
a decline in net change in operating assets and liabilities of $654,218 and offset by non-cash adjustments to net loss of $392,667. There
was no net cash provided by or used in investing or financing activities during the three months ended March 31, 2020. The resulting change
in cash for the period was a decrease of $1,300,463. The cash balance at the beginning of the period was $21,829,154. The cash balance
as of March 31, 2020 was $20,528,691.
As of March 31, 2021, the
Company had $20,846,968 in total current liabilities, which included $784,397 in accrued expenses and other payables, $11,478,520 in customers’
deposits, $1,971,718 in short-term borrowings from a third party, $6,431,199 in amount due to a related party, $8,390 in advance from
customers, $73,607 in lease liabilities and $99,137 in VAT payables.
As of December 31, 2020,
the Company had $18,494,724 in total current liabilities, which consisted of $728,088 in accrued expenses and other payables, $9,144,610
in customer deposits, $1,977,109 in short-term borrowings from a third party, $6,448,784 in amount due to related parties, $17,412 in
advance from customers, $72,367 in lease liabilities and $106,354 in VAT payables.
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 stockholders, 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 China only out of their net income, if any, determined in accordance with
PRC accounting standards and regulations. Our operating subsidiaries in China are 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 Kong operating 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.
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
Although our trading volume
increased in the first quarter 2021, our commission revenue was lower in the three months ended March 31, 2021 compared to that in the
same period in 2020 as discussed aforementioned. We continue to explore company restructuring and business opportunities, including re-evaluation
of the company’s unit business and a downsize of the workforce to further streamline our costs of operation. Our management forecasts
that we have sufficient cash from our operations to fund our business organically. However, we may conduct equity sales of our common
shares in order to fund further expansion and growth of our business. Issuances of additional shares will result in dilution to existing
stockholders. There is no assurance that we will achieve any sales of the equity securities to fund expansion and other activities, and
if we are able to, there is no guarantee that existing shareholders will not be substantially diluted. In essence, we do not need to rely
on equity sales to fund our business operations.
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.
See Note 2 to the financial
statements included herewith and Note 2 to the financial statements on Form 10-K for the fiscal year ended December 31, 2020, previously
filed with the SEC.
Recent Accounting Pronouncements
See Note 2 to the financial
statements included herewith and Note 2 to the financial statements on Form 10-K for the fiscal year ended December 31, 2020, previously
filed with the SEC.