COSG 10-K & 10-Q changes, risk factors and insider trading
Cosmos Group Holdings Inc. · OTC · Finance Services · CIK 1706509 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
Largest changes
As of December 31,see in full comparison2023,2024, we are indebted to companies beneficially owned byLeeChanYing Chiu Herbert, our director and shareholder, in an amount of $15,851, and ChanMan Chung, ourCEO,ex-CEO, CFO, Secretary and director, in an amount of$130,596.$37,590. We may not be able to generate sufficient cash flow to repay these loans. If we issue additional securities as repayment, our shareholders may experience significant dilution. The advances are not expected to be repayable within the next twelve months. Additionally, loan repayment before achievement of profitability may cause us to delay implementing our business plans to expand.
Full comparison: every changed paragraph (3)
As an enterprise whose business
lines include innovative technology as well as payments made in cryptocurrency,technology, we depend to a significant extent on its relationships
with its clients and its reputation for integrity
and high-caliber professional services. As a result, if a client is not satisfied with
our services or if there are allegations of improper
conduct, including improper conduct by any of our partners, by private litigants
or regulators, whether the ultimate outcome is favorable
or unfavorable to us, or if there is negative publicity and press speculation
about us, whether or not valid, it may harm our reputation
and may be more damaging to us than to businesses in other industries unrelated
to this sector.
As of December 31, 2023,2024, we
are indebted to companies beneficially owned by LeeChan Ying Chiu Herbert, our director and shareholder, in an amount of $15,851, and Chan
Man Chung, our CEO,ex-CEO, CFO, Secretary and director, in an amount of $130,596.$37,590. We may
not be able to generate sufficient cash flow to repay
these loans. If we issue additional securities as repayment, our shareholders may
experience significant dilution. The advances are not
expected to be repayable within the next twelve months. Additionally, loan repayment
before achievement of profitability may cause us
to delay implementing our business plans to expand.
COSG is organized under the
laws of the State of Nevada as a holding company that conducts its business through number of subsidiaries organized under the laws of
foreign jurisdictions such as Singapore, Hong Kong and the British Virgin Islands. This may have an adverse impact on the ability of U.S. investors
investors to enforce a judgment obtained in U.S. Courts against these entities, or to effect service of process on the officers and directors managing
managing the foreign subsidiaries.
Management's Discussion & Analysis (MD&A)
Removed heading “Lending Business”
Removed heading “Arts and Collectibles Technology Business”
Removed heading “Recently adopted accounting pronouncements”
Removed heading “Accounting pronouncements pending adoption”
Largest changes
For the year ended December 31,see in full comparison2022,2023, net cashprovidedusedbyin operating activities from continuing operations was$3,658,974,$67,007,786, which consisted primarily of a net loss fromfromcontinuing operations of$102,627,165, depreciation of property and equipment of $3,194, amortization of intangible assets of $3,931,641, imputed interest expense of $949,790, digital assets paid for expense of $29,607,771, impairment loss on digital assets of $12,633, impairment loss on goodwill of $816,263,$10,957,249, shares issued for services rendered of$86,572,168, loss on disposal of subsidiaries of $181,$10,322,092, decrease ininventories of $938,151,prepayments and other receivables of$94,191,$7,041, an increase in accrued liabilities and other payables of $33,098 and accrued consulting service fee of $126,000, offset by decrease in accounts payables of$2,141,273, accrued consulting service fee of $5,769,457, produced content cost $543,895, income tax payable of $7,618, offset by decrease in accrued liabilities and other payables of $226,137.$165,024.
Total other income (expenses ) from continuing operations ofsee in full comparison$48,915,422$10,411,708 and$5,963,440$(262,887) for the years ended December 31,20232024 and2022,2023, respectively. These expenses primary include interest income,impairment loss on digital assets, impairment loss on goodwill,convertible notes interest expense, loan interest expense, loss on disposal ofsubsidiariessubsidiaries, loss on acquisition of subsidiaries, written off of related party’s debt and sundry income.
“On March 31, 2022, the Securities and Exchange Commission (the “SEC”) issued Staff Accounting Bulletin No. 121 (“SAB 121”). SAB 121 sets out interpretive guidance from the staff of the SEC regarding the accounting for obligations to safeguard crypto assets that an entity holds for its customers. Safeguarding is defined as taking actions to secure customer crypto assets and the associated cryptographic key information and protecting them from loss, theft, or other misuse. …”see in full comparison
Full comparison: every changed paragraph (60)
We, through our subsidiaries
are currently engaged in the rendering of financial and money lending services in Hong Kong and operating an online platform to sell and
distribute the arts and collectibles to end-users, with the use of blockchain technologies
and minting tokens.
We are at a development stage
company and reported a continuous loss of $77,330,993 for the year ended December 31, 2023. We had current assets of $8,786,605 $43,344
and current
liabilities of $65,453,469$47,272,390 as of December 31, 2023.2024. As of December 31, 2022,2023, our current assets and current liabilities were
$8,786,605 $22,613,793
and $32,693,033,$65,453,469, respectively.
For the years ended December
31, 2023 and 2022, there was no single customer whose revenue exceeded 10% of the revenue.
Revenue from continuing operations of
approximately $618,197$6,408 and $14,059,050$0 for the years ended December 31, 20232024 and 2022,2023, respectively, decreasedincreased by $13,440,853,$6,408, or 95.6%.
100%. Revenue from discontinued
operations of approximately $3,102,101$51,266 and $6,550,670$3,720,298 for the years ended December 31, 20232024 and 2022,2023, respectively,
decreased by $3,448,569, $3,669,032,
or 52.6%.98.6%. The breakdown of revenue is summarized as follows:-
The Company currently operates its online platform in sale and distribution of arts and collectibles, with the use of blockchain technologies and minting tokens. The lending business segment was disposed on September 30, 2023. The decrease in revenue mainly due to disposal of lending segment.
The Company is licensed to
originate personal loan, company loan and mortgage loan in Hong Kon to earn interest income under lending business segment. The interest
rates on loans issued were ranged from 13% to 59% (2022: from 13% to 59%) per annum for the year ended December 31, 2023. The interest
rate variations depend on the types of loan, maturity period and principal amount. The Company also operates its online platform in sale
and distribution of arts and collectibles, with the use of blockchain technologies and minting tokens. The increase in revenue is attributable
to the rapid growth in Arts and collectibles technology business.
Cost of revenue from continuing
operations of approximately $386,157$3,845 and $3,019,794$0 for the years ended December 31, 20232024 and 2022,2023, respectively, decreasedincreased by $2,633,637
$3,845 or 87.2%. 100%.
Cost of revenue from discontinued operations of approximately $94,843$34,605 and $405,972$481,000 for the years ended December 31, 2023
2024 and 2022, 2023,
respectively, decreased by $311,129$446,395 or 76.6%.92.8%. It consisted primarily of interest expense and cost of purchasing collectibles,
in line
with sales drop. It consisted primarily of interest expense and cost of purchasing collectibles, in line with sales drop.
We achieved a gross profit
from continuing operations of $232,040$2,563 and $11,039,256$0 for the years ended December 31, 20232024 and 2022,2023, respectively. We achieved
a gross profit
from continuingdiscontinued operations of $3,007,258$20,506 and $6,114,698$3,239,298 for the years ended December 31, 20232024 and 2022,2023, respectively.
The decrease
in gross profit is mainly attributable to a decrease in our ACT volume.
Sales and marketing expenses
from continuing operations of $1,706,772$6,373 and $27,097,615$3,317 for the years ended December 31, 20232024 and 2022,2023, respectively, decreased
increased by $25,390,844, 93.7%.$3,056,
92.1%. Sales and marketing expenses from discontinued operations of $119,377$509,000 and $273,934$1,822,831 for the years ended December
31, 2023 2024
and 2022,2023, respectively, decreased by $154,557,$1,313,831, 56.4%.72.1%. It primarily includes costs related to public relations, consultancy fee, advertising
advertising and marketing programs, and personnel-related expenses.
Technology and support expenses
from continuing operations of $3,694,807 and $43,301,993 for the years ended December 31, 2023 and 2022, respectively, including
(i) development of the DOT(digital ownership token), an effective application of NFT technologies to real world assets, both tangible
and intangible, (ii) research and development of blockchain smart contracts and other coding to apply the most suitable blockchains for
DOTs and maintaining a distributed ledger to record all transactions and (iii) Development of a client management system to facilitate
the sale and purchase of DOTs by both crypto and non-crypto natives.
No such expenses for continuing
discontinued operation for the years ended December 31, 20232024 and 2022.2023.
Technology and support expenses from discontinued operations of $288,860 and $3,694,807 for the years ended December 31, 2024 and 2023, respectively, including (i) development of the DOT(digital ownership token), an effective application of NFT technologies to real world assets, both tangible and intangible, (ii) research and development of blockchain smart contracts and other coding to apply the most suitable blockchains for DOTs and maintaining a distributed ledger to record all transactions and (iii) Development of a client management system to facilitate the sale and purchase of DOTs by both crypto and non-crypto natives.
CorporateNo developmentsuch expenses
from for continuing operations of $867,193 and $26,898,128
operation for the years ended December 31, 20232024 and 2022,2023 Corporate development expenses
from discontinued operations of $385,100 and $867,193 for the years ended December 31, 2024 and 2023, respectively, primarily include
personnel-related expenses incurred to support our corporate development.
No such expenses for discontinued
operation for the years ended December 31, 2023 and 2022
General and administrative
expenses from continuing operations of $19,427,301$272,727 and $9,911,316$10,691,045 for the years ended December 31, 20232024 and 2022,2023, respectively. General
and administrative expenses from discontinued operations of $5,075,640$4,291,537 and $6,740,650$13,811,898 for the years ended December 31, 20232024 and
2023, 2022,
respectively. These expenses primarily include professional fees, audit fees, other miscellaneous expenses incurred in connection
with with
general operations and personnel-related expenses incurred to support our business, including legal, finance, executive, and other
support support
operations. G&A expenses from continued operations increaseddecreased by approximately $9,515,985$10,418,318 in the year ended December 31, 20232024
from from
$9,911,316$10,691,045 for the same period of 2022.2023.
Other income (expenses)
Total other income (expenses )
from continuing
operations of $48,915,422$10,411,708 and $5,963,440$(262,887) for the years ended December 31, 20232024 and 2022,2023, respectively. These expenses
primary include
interest income, impairment loss on digital assets, impairment loss on goodwill, convertible notes interest expense, loan interest expense,
loss on disposal of subsidiariessubsidiaries, loss on
acquisition of subsidiaries, written off of related party’s debt and sundry income.
We incurreddid not incur income tax
expense expense
from continuing operations of $0 and 3,303 during the yearyears ended December 31, 20232024 and 2022,2023, respectively.
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 $50 million over the next 12-24 months to implement our business plan. For the immediate future,
we intend to finance our business expansion efforts through equity purchase by institutional banks, and loans from existing shareholders
or financial institutions.
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 World Health Organization on March 11, 2020, the outbreak has caused substantial disruption
in international economies and global trades and if repercussions of the outbreak are prolonged, could have a significant adverse impact
on our business. Given the addition political and public health challenges, our ability to obtain external financing or financing from
existing shareholders to fund our working capital needs has been materially and adversely impacted, and there can be no assurance that
we will be able to raise such additional capital resources on satisfactory terms. We believe that our current cash and other sources of
liquidity discussed below are
adequate to support general operations for at least the next 12 months.
Cash Flows
The following table summarizes our cash flows for the years indicated:
Net Cash (Used In) Provided by Operating Activities.
For the year ended December
31, 2023,2024, net cash used in operating activities from continuing operations was $692,780,$4,955,120, which consisted primarily of a net lossincome from
continuing operations of $76,841,450,$10,135,171, depreciationwritten off of propertyrelated andparty’s equipmentdebt of $829,$189,877,240, amortizationloss on acquisition of intangible assetssubsidiaries of
$3,245, $3,392,423,
shares issued for services rendered of $10,322,092 and loss on disposal of subsidiaries of $48,644,345,$658,000, decrease in inventories of $48,801,
prepayments and other receivables of $434,967,$5,973 anand increase in accounts
payables of $339,733, accrued consulting service fee of $13,819,369,
offset by increase in account receivables of $692,138 and decrease in$36,612, accrued liabilities and other payables of $161,751.$16,877 and accrued consulting and service fee of $63,000, offset by gain
on disposal of subsidiaries of $200,297,163.
For the year ended December
31, 2022,2023, net cash providedused byin operating activities from continuing operations was $3,658,974,$67,007,786, which consisted primarily of a net loss from
from continuing operations of $102,627,165, depreciation of property and equipment of $3,194, amortization of intangible assets of $3,931,641,
imputed interest expense of $949,790, digital assets paid for expense of $29,607,771, impairment loss on digital assets of $12,633, impairment
loss on goodwill of $816,263,$10,957,249, shares issued for services rendered of $86,572,168, loss on disposal of subsidiaries of $181,$10,322,092, decrease in
inventories of $938,151, prepayments and other receivables
of $94,191,$7,041, an increase in accrued liabilities and other payables of $33,098 and accrued consulting service fee of $126,000, offset by
decrease in accounts payables of $2,141,273, accrued consulting
service fee of $5,769,457, produced content cost $543,895, income tax payable of $7,618, offset by decrease in accrued liabilities and
other payables of $226,137.$165,024.
Net Cash (Used In) Provided byBy Investing Activities.
The net cash providedused byin investing
activities from continuing operations of $10,101,$3,245, for the year ended December 31, 20232024 mainly consisted of cash from acquisition of non-controllinga subsidiary,
interestnet of $10,246cash and offset by purchaseacquired of intangible assets of $145.$3,245.
The net cash provided by investing
activities from continuing operations of $1,000,911$10,246, for the year ended December 31, 20222023 mainly consisted of cash from acquisition of non-controlling
interest of
$1,005,654 and offset by payment to acquire property and equipment of $2,859 and purchase of intangible assets of $1,884.$10,246.
Net Cash Provided By (Used In) Financing Activities.
For the year ended December
31, 2023,2024, net cash usedprovided inby financing activities from continuing operations was $1,113,045$3,541,014 consisting primarily of repaymentadvance tofrom related
parties of $1,113,045.$3,541,014.
For the year ended December
31, 2022,2023, net cash used in financing activities from continuing operations was $3,150,303$1,113,046 consisting primarily of proceeds from convertible
note payables of $412,783 and offset by repayment to related
parties of $3,563,086.$1,113,046.
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 periodyear include the impairment loss on digital assets,inventories, valuation and useful lives of intangible assets and deferred
deferred tax valuation allowance.
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.
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.
In accordance with the provisions
of ASC Topic 360, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as plantproperty and equipment
and intangible assets held under discontinued operations 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.
On September 30, 2023, the Company disposed the lending segment and related assets and liabilities have been accounted for as discontinued operations in the Company’s consolidated balance sheets for all periods presented. The operating results related to these lines of business have been included in discontinued operations in the Company’s consolidated statement of operations for all years presented.
On December 30, 2024, the Company disposed Massive Treasure Limited and its subsidiaries and related assets and liabilities have been accounted for as discontinued operations in the Company’s consolidated balance sheets for all years presented. The operating results related to these lines of business have been included in discontinued operations in the Company’s consolidated statement of operations for all periods presented.
ASC Topic 280, Segment Reporting, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for detailing the Company’s business segments.
The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer. The CODM reviews the consolidated results when making decisions about allocating resources and accessing performance of the Company as a whole and hence, the Company has only one reportable segment. The Company does not distinguish between markets or segments for the purpose of internal reporting.
Substantially all of the Company’s revenues and expenses are derived from Hong Kong. Therefore, no geographical segments are presented.
Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. The cost includes the purchase cost of arts and collectibles from related party and independent artists and the costs associated with token minting for collectible pieces. The Company will reduce inventory on hand to its net realizable value on an item-by-item basis when it is apparent that the expected realizable value of an inventory item falls below its original cost. A charge to cost of sales results when the estimated net realizable value of specific inventory items declines below cost. Management regularly reviews the Company’s inventories for such declines in value. Although inventories are classified as current assets in the accompanying balance sheets, the Company anticipates that certain inventories will be sold beyond twelve months from December 31, 2024.
Lending Business
The Company is licensed to
originate personal loan, company loan and mortgage loan in Hong Kong. During the years ended December 31, 2023 and 2022, the Company originated
loans generally ranging from $644 to $579,000, with terms ranging from 1 week to 120 months. The Company mainly derives a portion of its
revenue from loan which is specifically excluded from the scope of this standard, that is, interest on loan receivable is accrued monthly
and credited to income as earned.
Arts and Collectibles Technology Business
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 digitalfiat assets,and/or cash, with revenue measured based on a certain percentage of the value of digital assets at
the the
time the transaction is executed. The Company’s service is comprised of a single performance obligation to provide a platform
facilitating 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 U.S. dollar spot rate of the related digital currency at the time
of receipt.
In March 2023, the FASB issued ASU No. 2023-01, Leases (Topic 842) – Common-Control Arrangements. This guidance amends the accounting for leasehold improvements in common-control arrangements by requiring a lessee in a common-control arrangement to amortize leasehold improvements that it owns over the improvements’ useful life to the common-control group, regardless of the lease term, if the lessee continues to control the use of the underlying asset through a lease. The new standard will become effective for the Company beginning in fiscal year 2025. The Company is currently evaluating the impact of this standard on its consolidated financial statements.
In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, which incorporates certain SEC disclosure requirements into the FASB Accounting Standards Codification. This update will improve disclosure and presentation requirements of a variety of topics and align the requirements in the FASB codification with the SEC’s regulations. The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements, but does not expect the impact to be material.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The purpose of the update was to improve financial reporting by requiring disclosures of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted and require retrospective application to all periods presented in the combined financial statements. The Company has adopted this new standard on its combined financial statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its consolidated financial statements.
In March 2024, the FASB issued ASU No. 2024-02, which removes references to the Board’s concepts statements from the FASB Accounting Standards Codification (the “Codification” or ASC). The ASU is part of the Board’s standing project to make “Codification updates for technical corrections such as conforming amendments, clarifications to guidance, simplifications to wording or the structure of guidance, and other minor improvements.” The Company’s management does not believe the adoption of ASU 2024-02 will have a material impact on its consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires that an entity disclose, in the notes to financial statements, specified information about certain costs and expenses. The amendment in the ASU is intended to enhance the transparency and decision usefulness to better understand the major components of an entity’s income statement. The amendments in this Update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of the new standard on its consolidated financial statements which is expected to result in enhanced disclosures.
Recently adopted accounting pronouncements
On October 28, 2021, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2021-08, Accounting for Contract Assets
and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). ASU 2021-08 amends Accounting Standards Codification
805 (“ASC 805”) to require acquiring entities to apply Topic 606 - Revenue from Contracts with Customers to recognize
and measure contract assets and contract liabilities in a business combination. The Company early adopted the standard on January 1, 2022.
The adoption of the standard did not have a material impact on the Company’s consolidated financial statements.
On March 31, 2022, the Securities
and Exchange Commission (the “SEC”) issued Staff Accounting Bulletin No. 121 (“SAB 121”). SAB 121 sets out interpretive
guidance from the staff of the SEC regarding the accounting for obligations to safeguard crypto assets that an entity holds for its customers.
Safeguarding is defined as taking actions to secure customer crypto assets and the associated cryptographic key information and protecting
them from loss, theft, or other misuse. The guidance requires an entity to recognize a liability for the obligation to safeguard the users’
assets, and recognize an associated asset for the crypto assets safeguarded. Both the liability and asset should be measured initially
and subsequently at the fair value of the crypto assets being safeguarded. The guidance also requires additional disclosures related to
the nature and amount of crypto assets that the entity is responsible for holding for its customers, with separate disclosure for each
significant crypto asset, and the vulnerabilities the entity has due to any concentration in such activities. The adoption of the standard
did not have a material impact on the Company’s consolidated financial statements.
Accounting pronouncements pending adoption
On June 30, 2022, FASB issued
Accounting Standards Update No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU
2022-03”). ASU 2022-03 clarifies that a contractual sale restriction prohibiting the sale of an equity security is a characteristic
of the reporting entity holding the equity security and is not included in the equity security’s unit of account. The standard requires
specific disclosures related to equity securities that are subject to contractual sale restrictions, including (1) the fair value of such
equity securities reflected in the balance sheet, (2) the nature and remaining duration of the corresponding restrictions, and (3) any
circumstances that could cause a lapse in the restrictions. The new standard is effective for the Company for its fiscal year beginning
January 1, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard on the Company’s
consolidated financial statements.
What changed in the latest 10-Q
Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Revenue and Cost of Revenue”
Removed heading “Commentary on DOT Revenue – our key growth driver”
Removed heading “Other Activities”
Removed heading “Gross Income (Loss)”
Removed heading “Corporate Development Expenses”
Removed heading “Comparison of the nine months ended September 30, 2024 and 2023”
Removed heading “Sales and Marketing Expenses”
Removed heading “Corporate Development Expenses”
Removed heading “Technology and support Expenses”
Removed heading “General and Administrative Expenses (“G&A”)”
Removed heading “Income Tax Expense”
Largest changes
“For the nine months ended September 30, 2023, net cash used in operating activities from continuing operations was $1,644,100 which consisted primarily of a net loss of $64,542,901, depreciation of $663, amortization of $2,524,214, shares issued for services rendered of $10,322,092, loss on disposal pf subsidiaries, a decrease in inventories of $17,778, a decrease in prepayments and other receivables of $6,497, an increase in accrued consulting and service fee of $2,225,870; …”see in full comparison
“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. …”see in full comparison
“The recent outbreak of COVID-19, which has been declared by the World Health Organization to be a pandemic, has spread across the globe and is impacting worldwide economic activity. The COVID-19 pandemic has significantly impacted health and economic conditions throughout Asian region. National, regional and local governments took a variety of actions to contain the spread of COVID-19, including office and store closures, quarantining suspected COVID-19 patients, and capacity limitations. …”see in full comparison
“Comparison of the nine months ended September 30, 2024 and 2023”see in full comparison
Full comparison: every changed paragraph (81)
We are a Nevada holding company
with operations conducted through our subsidiaries based in Singapore and Hong Kong. The Company, through its subsidiaries, is engaged
in two business segments: (i) the physical arts and collectibles business, and (ii) the financing/money lending business.
We are a Nevada holding company with operations conducted through our subsidiaries based in Hong Kong. The Company, through its subsidiaries, is engaged in one business segment: the physical arts and collectibles business Through our physical arts and collectibles business, we provide authentication, valuation and certification (“AVC”) service, sale and purchase, hire purchase, financing, custody, security and exhibition (“CSE”) services to art and collectibles buyers through traditional methods as well as through leveraging blockchain technology through the creation of Digital Ownership Tokens (“DOTs”).
We conduct our DOT operations
from Singapore. In Singapore, cryptocurrencies and the custodianship of such cryptocurrencies are not specifically regulated. Cryptocurrency
exchanges and trading of cryptocurrencies are legal, but not considered legal tender. To the extent that cryptocurrencies or tokens are
considered “capital market products” such as securities, spot foreign exchange contracts, derivatives and the like, they will
be subject to the jurisdiction of the Monetary Authority of Singapore (“MAS”), Securities and Futures Act, anti-money laundering
and combating the financing of terrorism laws and requirements. To the extent that tokens are deemed “digital payment tokens,”
they will be subject to the Payment Services Act of 2019 which, among other things, require compliance with anti-money laundering and
combating the financing of terrorism laws and requirements. According to the Payment Services Act of 2019, “digital payment token”
means any digital representation of value (other than an excluded digital representation of value) that (a) is expressed as a unit; (b)
is not denominated in any currency, and is not pegged by its issuer to any currency; (c) is, or is intended to be, a medium of exchange
accepted by the public, or a section of the public, as payment for goods or services or for the discharge of a debt; (d) can be transferred,
stored or traded electronically; and (e) satisfies such other characteristics as the Authority may prescribe. Our DOTs, therefore, are
not securities or digital payment tokens subject to these acts.
We receive fiat and cryptocurrency
from the sale of art and collectibles and collection of transaction fees derived from the secondary and subsequent sales of the collectibles.
In order to minimize the risk of price fluctuation in cryptocurrency, after we receive the cryptocurrencies, we will recognize the value
by immediately exchange them into US dollar or stable currencies that are pegged with US dollar.
As a U.S.-listed company
with operations in Hong Kong, we may face heightened scrutiny, criticism and negative publicity, which could result in a material change
in our operations and the value of our common stock. It could also significantly limit or completely hinder our ability to offer or continue
to offer securities to investors and cause the value of such securities to significantly decline or be worthless. Additionally, changes
in Chinese internal regulatory mandates, such as the M&A rules, Anti-Monopoly Law, and the soon to be effective Data Security Law,
may target the Company’s corporate structure and impact our ability to conduct business in Hong Kong, accept foreign investments,
or list on an U.S. or other foreign exchange. For a detailed description of the risks facing the Company and the offering associated with
our operations in Hong Kong, please refer to “Risk Factors – Risk Factors Relating to Our Operations in Hong Kong” as
disclosed in our set forth in the Company’s Registration Statement on Form 1010-K filed with the U.S. Securities and Exchange Commission
(the “SEC”) on April 16,15, 20242025 (the “Form 10-K”).
Note 1: In May
2021, Massive Treasure entered into a Share Swap Letter Agreement (the “100% Share Swap Letter”) with the shareholders of
each of E-on Finance Limited (“E-on”) and 8M Limited (“8M”) to acquire 100% of each of E-on and 8M for 20,110,604
and 10,055,302 shares of common stock of COSG respectively based upon the closing price of the common stock of COSG as of the date of
signing of the 100% Share Swap Letter and determined in accordance with the terms of the 100% Share Swap Letter on the date. The acquisition
of E-on and 8M consummated in May 2021. Thereon, COSG issued 10,256,409 shares and 5,128,204 shares to the shareholders of E-on and 8M
respectively.
COSG is obligated to issue
9,854,195 and 4,927,098 shares on the first anniversary of the closing of the acquisition to the former shareholders of E-on and 8M respectively,
subject to certain clawback provisions. E-on and 8M are obligated to meet certain financial milestones in each of the two-year anniversaries
following the closing. Failure to meet such milestones will result in a clawback of the shares issued to the former shareholders. On the
second anniversary of the closing, if E-on or 8M exceeds the aggregate financial milestone set for the two years, the former shareholders
thereof shall be entitled to additional shares of COSG as determined in accordance with the 100% Share Swap Letter.
Note 2: In May
and June 2021, Massive Treasure entered into a Share Swap Letter Agreement (the “51% Share Swap Letter”) with the shareholders
of each of the entities to acquire 51% of the issued and outstanding securities of the entities for an aggregate amount of
23,589,736 shares of COSG’s common stock as set forth below (the “First Tranche Shares”), based upon the closing price
of the common stock of COSG as of the date of signing the 51% Share Swap Letter and determined in accordance with the terms of the 51%
Share Swap Letter. The acquisition of the entities consummated in May and June 2021. Thereon, COSG issued the First Tranche Shares.
On the first anniversary
of the closing, COSG is obligated to issue a second tranche of shares of its common stock, based upon the closing price of its shares
as of the fifth business day prior to such first anniversary as determined in accordance with the terms of the 51% Share Swap Letter (the
“Second Tranche Shares”). Upon the issuance of the Second Tranche Shares, each of the entities will deliver the
remaining 49% of the issued and outstanding securities to COSG to become wholly owned subsidiaries of COSG. Each of the entities are obligated
to meet certain financial milestones in each of the two-year anniversaries following the closing. Failure to meet such milestones will
result in a clawback of the shares issued to the former shareholders. On the second anniversary of the closing, if any entity exceeds
the aggregate financial milestone set for the two years, the former shareholders thereof shall be entitled to additional shares of COSG
as determined in accordance with the 51% Share Swap Letter.
Note 3: On February
10, 2022, the Company consummated the acquisition of 80% of the issued and outstanding securities of Grand Gallery Limited, a Hong Kong
limited liability company engaged in the business of selling traditional art and collectible pieces, through the issuance of 153,060 shares
of our common stock, at a valuation of $4.00 per share. The Company believes that this acquisition will strengthen our DOT business by
expanding our access to buyers of arts and collectibles.
In this quarter, we have continued revenue in the arts and collectibles. The total revenue for 2025 Q1 was approximately $19,281, mainly attributable to the consultancy service income in the sale and distribution of arts and collectibles.
The total revenue for 2024
Q2 was $19,185 from the DOT business segment. Our DOT revenue are primarily attributable to consultancy service.
Commentary on DOT Revenue
– our key growth driver
As a whole, the 2024 Q2 revenue
growth is in line with Management’s expectations. Our business model focuses on the rights of ownership through a digital ownership
token attached to physical art or some other collectible with real world tangible value. The business is fundamentally different from
the model NFT marketplaces like OpenSea or Rarible that list third party NFTs for sale. Given the business model targets the physical
art and collectibles market, the relative growth in the overall art markets sales at major auction houses and art fairs, we were less
affected by the recent negative sentiment in the crypto and NFT markets.
We currently generate revenue
from primary sales, or sales of new collectibles DOTs and resale transaction fees between 8% and 10% each time the DOT is sold in the
secondary market. Because each collectible has the potential of generating revenue beyond the initial sale, we intend to focus on bringing
quality primary sales DOT for long term ownership as well as resale potential to market. A key focus of the company is to work with appropriate
partners to mint and sell DOTs attached to high quality collectibles in an increasing range of art such as photographs and sculptures
and a range of other market segments including sports. We feel that DOTs are an attractive way for artists, galleries, auction houses
to engage with existing and new buyer bases in addition to their current sales strategies. We see further opportunity to engage with partners
to support strategies using applications of DOTs such as in the luxury goods segment.
The sports collectibles
market is another area of potential application for DOTs. According to Market Decipher, the market value of sports collectibles –
which is currently at US$26.1billion, is expected to reach US$227 billion by 2032. Sports related NFTs, with a current estimated market
value of US$1.4 billion, is also expected to reach an estimated market value of US$92 billion by 2032.
Other Activities
In March 2022, we launched
a new sports division in our MetaMall and partnering with a former NBA basketball player as president of Coinllectible Sports. We hope
to exploit our DOT technology and the metaverse to bring innovation to the sports space, bridge the intersection of our DOT technology
and Sports memorabilia to improve experiences for fans, athletes, teams, events and partners.
The recent outbreak of COVID-19,
which has been declared by the World Health Organization to be a pandemic, has spread across the globe and is impacting worldwide economic
activity. The COVID-19 pandemic has significantly impacted health and economic conditions throughout Asian region. National, regional
and local governments took a variety of actions to contain the spread of COVID-19, including office and store closures, quarantining suspected
COVID-19 patients, and capacity limitations. These developments have significantly impacted the results of operations, financial condition
and cash flows of the Company included in this reporting. The impact included the difficulties of working remotely from home including
slow Internet connection, the inability of our accounting and financial officers to collaborate as effectively as they would otherwise
have in an office environment and issues arising from mandatory state quarantines.
While it is not possible
at this time to estimate with sufficient certainty the impact that COVID-19 could have on the Company’s business, the continued
spread of COVID-19 and the measures taken by federal, state, local and foreign governments could disrupt the operation of the Company’s
business. The COVID-19 outbreak and mitigation measures have also had and may continue to have an adverse impact on global and domestic
economic conditions, which could have an adverse effect on the Company’s business and financial condition, including on its potential
to conduct financings on terms acceptable to the Company, if at all. In addition, the Company has taken temporary precautionary measures
intended to help minimize the risk of the virus to its employees, including temporarily requiring employees to work remotely, and discouraging
employee attendance at in-person work-related meetings, which could negatively affect the Company’s business. These measures are
continuing. The extent to which the COVID-19 outbreak impacts the Company’s results will depend on future developments that are
highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions
to contain its impact.
As of SeptemberMarch 30,31, 2024,20255, we
we had a working capital of $58,037,288$41,261,443 and accumulated deficit of $210,258,497.$200,806,742. As a result, our continuation as a going concern is dependent
dependent upon improving our profitability and continued financial support from our stockholders or other capital sources. Management
believes that
continued financial support from existing shareholders and external financing will provide the additional cash necessary
to meet our obligations
as they become due. Our 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.
Comparison of the three
months ended SeptemberMarch 30,31, 20242025 and 20232024
The following table sets
forth certain operational data for the three months ended SeptemberMarch 30,31, 2024,2025, compared to the three months ended SeptemberMarch 30,31, 20232024:
Revenue and Cost of Revenue
RevenueRevenues fromwere continuing operations ofapproximately
approximately $19,218$19,281 and $0 for the three months ended SeptemberMarch 30,31, 20242025 and 2023,2024, respectively, increased by $19,218,$19,281, or 100%. Revenue
fromNo revenue for discontinued operations of approximately $0 and $1,557,887
operation for the three months ended SeptemberMarch 30,31, 20242025 and 2023, respectively,
decreased by $1,557,887, or 100.0%. The breakdown of revenue is summarized as follows:-2024.
We currently operate the sale and distribution of arts and collectibles offline and online with the use of blockchain technologies and minting tokens. The revenue is related to the consultancy service income from the sale and distribution of arts and collectibles.
The Company is licensed to
originate personal loan, company loan and mortgage loan in Hong Kong to earn interest income under lending business segment. The interest
rates on loans issued were ranged from 13% to 59% (2023: from 13% to 59%) per annum for the three months ended September 30, 2023. The
interest rate variations depend on the types of loan, maturity period and principal amount. The Company also operates its online platform
in sale and distribution of arts and collectibles, with the use of blockchain technologies and minting tokens. The increase in revenue
is attributable to the rapid growth in Arts and collectibles technology business.
CostCosts of revenue from continuing
operations ofwere approximately $11,531
$11,568 and $53,372$0 for the three months ended SeptemberMarch 30,31, 20242025 and 2023,2024, respectively, decreasedincreased by
$41,841 $11,568 or 78.4%.100%. CostNo cost of revenue from
discontinued operations of approximately $0 and $58,985operation for the three months ended September
30,March 202431, 2025 and 2023, respectively, decreased by $58,985 or 100.0%. It consisted primarily of interest expense and cost of purchasing collectibles,
in line with sales drop. It consisted primarily of interest expense and cost of purchasing collectibles, in line with sales drop.2024.
Gross Profit
Gross Income (Loss)
We achieved a gross profit
(loss) from continuing operations of $7,687$7,713 and $(53,372)$0 for the three months ended SeptemberMarch 30,31, 20242025 and 2023,2024, respectively. We
achieved aNo gross profit from discontinued operations of $0 and $1,498,902operation for the
three months ended SeptemberMarch 30,31, 20242025 and 2023,
respectively. The decrease in gross profit is mainly attributable to a decrease in our ACT volume.2024.
Sales and marketing expenses
from continuing operations of $0 and $(9) for the three months ended September 30, 2024 and 2023, respectively, decreased by $9,
100%. Sales and marketing expenses from discontinued operations of $0 and $25,617 for the three months ended September 30, 2024 and
2023, respectively, decreased by $25,617, 100.0%. It primarily includes costs related to public relations, consultancy fee, advertising
and marketing programs, and personnel-related expenses.
Corporate Development
Expenses
CorporateSales developmentand marketing expenses
from continuing operationswere of $0 and $13,905$200 for the three months ended SeptemberMarch 30,31, 20242025 and 2023,2024, respectively, decreased by $200, 100.0%. It primarily includeincludes
costs personnel-related
expenses incurredrelated to supportpublic our corporate development.relations.
No such expenses forfrom discontinued
operation for the three months ended SeptemberMarch 30,31, 20242025 and 2023.2024.
Technology and support expenses were $3,081 and $0 for the three months ended March 31, 2025 and 2024, respectively, including web hosting service. Technology and support expenses from discontinuing operations of $0 and $26,540 for the three months ended March 31, 2025 and 2024, respectively.
Technology and support expenses
from continuing operations of $187 and $18,489 for the three months ended September 30, 2024 and 2023, respectively, including (i)
development of the DOT(digital ownership token), an effective application of NFT technologies to real world assets, both tangible and
intangible, (ii) research and development of blockchain smart contracts and other coding to apply the most suitable blockchains for DOTs
and maintaining a distributed ledger to record all transactions and (iii) Development of a client management system to facilitate the
sale and purchase of DOTs by both crypto and non-crypto natives.
No such expenses for discontinued
operation for the three months ended September 30, 2024 and 2023.
General and administrative
expenses fromwere continuing operations of $967,682$55,780 and $1,068,316$143,522 for the three months ended SeptemberMarch 30,31, 20242025 and 2023,2024, respectively.
General and administrative expenses
from discontinued operations of $0 and $788,603$875,722 for the three months ended SeptemberMarch 30,31, 2024
2025 and 2023,2024, respectively. These expenses
primarily include professional fees, audit fees, other miscellaneous expenses incurred in connection
with general operations and personnel-related
expenses incurred to support our business, including legal, finance, executive, and other
support operations. G&A expenses from continued
operations decreased by approximately $100,634$87,742 in the three months ended September
30,March 202431, 2025 from $1,068,316$143,522 for the same period of 2023.2024.
Total other expenses fromwere
continuing operations of $0 and $48,711,937$(4,970) for the three months ended SeptemberMarch 30,31, 20242025 and 2023,2024, respectively. These expenses
primary include interest income, convertible notes interest expense, loan interest expense and sundry income.
expense.
We did not incur anyincurred income
tax expense from continuing operations during the three months ended SeptemberMarch 30,31, 20242025 and 2023.2024, respectively.
Comparison of the nine
months ended September 30, 2024 and 2023
The following table sets
forth certain operational data for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023:
Revenue from continuing operations of
approximately $38,403 and $597,351 for the nine months ended September 30, 2024 and 2023, respectively, decreased by $558,948, or 93.57%.
Revenue from discontinued operations of approximately $0 and $3,100,102 for the nine months ended September 30, 2024 and 2023, respectively,
decreased by $3,100,102, or 100.0%. The breakdown of revenue is summarized as follows:-
The Company is licensed to
originate personal loan, company loan and mortgage loan in Hong Kong to earn interest income under lending business segment. The interest
rates on loans issued were ranged from 13% to 59% (2023: from 13% to 59%) per annum for the nine months ended September 30, 2023. The
interest rate variations depend on the types of loan, maturity period and principal amount. The Company also operates its online platform
in sale and distribution of arts and collectibles, with the use of blockchain technologies and minting tokens. The increase in revenue
is attributable to the rapid growth in Arts and collectibles technology business.
Cost of revenue from continuing
operations of approximately $23,042 and $313,601 for the nine months ended September 30, 2024 and 2023, respectively, decreased by
$290,559 or 92.7%. Cost of revenue from discontinued operations of approximately $0 and $94,782 for the nine months ended September
30, 2024 and 2023, respectively, decreased by $94,782 or 100.0%. It consisted primarily of interest expense and cost of purchasing collectibles,
in line with sales drop. It consisted primarily of interest expense and cost of purchasing collectibles, in line with sales drop.
Gross Income
We achieved a gross profit
from continuing operations of $15,361 and $283,750 for the nine months ended September 30, 2024 and 2023, respectively. We achieved
a gross profit from discontinued operations of $0 and $3,005,320 for the nine months ended September 30, 2024 and 2023, respectively.
The decrease in gross profit is mainly attributable to a decrease in our ACT volume.
Sales and Marketing Expenses
Sales and marketing expenses
from continuing operations of $515,373 and $5,641 for the nine months ended September 30, 2024 and 2023, respectively, increased
by $509,732, 9036.2%. Sales and marketing expenses from discontinued operations of $0 and $119,300 for the nine months ended September
30, 2024 and 2023, respectively, decreased by $119,300, 100.0%. It primarily includes costs related to public relations, consultancy fee,
advertising and marketing programs, and personnel-related expenses.
Corporate Development
Expenses
Corporate development expenses
from continuing operations of $385,100 and $71,113 for the nine months ended September 30, 2024 and 2023, respectively, primarily include
personnel-related expenses incurred to support our corporate development.
No such expenses for discontinued
operation for the nine months ended September 30, 2024 and 2023
Technology and support
Expenses
Technology and support expenses
from continuing operations of $288,599 and $35,369 for the nine months ended September 30, 2024 and 2023, respectively, including
(i) development of the DOT(digital ownership token), an effective application of NFT technologies to real world assets, both tangible
and intangible, (ii) research and development of blockchain smart contracts and other coding to apply the most suitable blockchains for
DOTs and maintaining a distributed ledger to record all transactions and (iii) Development of a client management system to facilitate
the sale and purchase of DOTs by both crypto and non-crypto natives.
No such expenses for discontinued
operation for the nine months ended September 30, 2024 and 2023.
General and Administrative
Expenses (“G&A”)
General and administrative
expenses from continuing operations of $3,643,029 and $15,425,508 for the nine months ended September 30, 2024 and 2023, respectively.
General and administrative expenses from discontinued operations of $0 and $2,611,966 for the nine months ended September 30, 2024
and 2023, respectively. These expenses primarily include professional fees, audit fees, other miscellaneous expenses incurred in connection
with general operations and personnel-related expenses incurred to support our business, including legal, finance, executive, and other
support operations. G&A expenses from continued operations decreased by approximately $11,782,479 in the nine months ended September
30, 2024 from $15,425,508 for the same period of 2023.
Other expenses
Total other expenses from
continuing operations of $4,970 and $48,799,514 for the nine months ended September 30, 2024 and 2023, respectively. These expenses
primary include interest income, convertible notes interest expense, loan interest expense and sundry income.
COSG insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding COSG (13F)
None of the 59 investors we track reported a position in their latest 13F.