TAKUNG ART CO., LTD Management’s discussion and analysis of financial condition and results of operations. (Form 10-Q)

The following discussion and analysis should be read in conjunction with our financial statements and accompanying notes.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains or may contain forward-looking
statements and information that are based upon beliefs of, and information
currently available to, our management as well as estimates and assumptions made
by our management. When used in the report the words "anticipate", "believe",
"estimate", "expect", "future", "intend", "plan" or the negative of these terms
and similar expressions as they relate to us or our management identify
forward-looking statements. Such statements reflect the current view of our
management with respect to future events and are subject to risks,
uncertainties, assumptions and other factors as they relate to our industry, our
operations and results of operations, and any businesses that we may acquire.
Should one or more of the events described in these risk factors materialize, or
should our underlying assumptions prove incorrect, actual results may differ
significantly from those anticipated, believed, estimated, expected, intended or
planned.


Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the U.S. federal securities laws, we do not intend to update any of
the forward-looking statements to conform them to actual results unless required
by applicable securities regulations or rules. The following discussion should
be read in conjunction with our financial statements and the related notes
filed
herein.



Overview



We, through our wholly owned subsidiary, NFT Exchange, operate an electronic
online platform located at https://www.nftoeo.com/for artists, art dealers and
art investors to offer and trade valuable artwork. We offer online listing and
trading services that allow artists, art dealers and owners to access a much
bigger art trading market where they can engage with a wide range of investors
that they might not encounter without our platform.



In July 2021Takung appointed Mr. Kwok Leung Li as CEO to lead the new direction with three initiatives to grow our blockchain and NFT businesses.

In May 2022we launched our NFT blockchain online platform at www.nftoeo.com.



NFT Market Insights



Digital artwork based on NFT technology is becoming a hot asset. The earliest
NFT projects can be traced back to the 2017 bull market CryptoKitties (the
encrypted cats), which had the properties of scarcity and value anchoring of
ownership. At its peak, a virtual cat could sell for more than $100,000. In
terms of NFT artwork, in March 2021, artist Beeple's NFT work "Every Day: The
First 5,000 Days" sold for $69.346 million, making it the third-highest price
for a living artist. According to a report by Invezz, the NFT market was worth
$338 million in 2020, and it has grown to reach $490 million in 2021. With the
help of the bull market wave, NFT has grown rapidly., As of the first quarter of
2021, the total transaction volume of the NFT market has exceeded 1.5 billion US
dollars, an increase of more than 2627% from the previous quarter. In April
2021, the total market value of NFTs exceeded $30 billion for the first time,
setting a new all-time high. Currently, NFTs can be used in the fields including
games, artworks, domain names, insurance, collectibles, virtual assets, real
assets, identities, etc. With the vigorous development of the digital world,
many businesses will appear in the form of digital original ecology, and the
huge application space and technological imagination of NFT are expected to
become more and more attractive in the new digital economy world.



New Business Model



TKAT's business model revolves around the theme of "free circulation of value
and creation of a unique digital work exchange platform," allowing each user to
create, buy and sell various irreplaceable digital works to realize the value of
works.



                                       20





New Business Services



A.     Providing consulting services such as artwork valuation/appreciation
       potential




TKAT taps into the needs of users to provide comprehensive consulting services
such as labor cost, artist influence, artistic value of works, and channels for
obtaining works, which not only serves customers but also creates value for
the
company.



B. NFT trading service



TKAT has built a fully functional NFT trading platform, which was launched in
May 2022. The platform carries the categories of digital works including
artwork, music videos, collectibles, game props, sports, metaverse, virtual
world, social tokens, and meet the needs of various users as much as possible.
Users are able to complete the whole business process including user
registration, certification, work uploading, work casting, and work trading
through the platform. The platform was launched and placed in service in May
2022. In the transaction process, it not only meets the needs of customers for
uploading and purchasing digital works, but the company also extracts a portion
of the handling fee (including token minting, first sale, and second sale)
to
create value.



C. Advertising service




Once the TKAT platform has accumulated a larger user base, it can provide
advertising and publicity services for users or the company itself. The business
model is not limited to categories and industries, such as investment promotion,
work promotion, and industry promotion.



New Strategic Direction



TKAT is committed to creating a digital original ecological platform that
integrates games, artworks, domain names, insurance, collectibles, virtual
assets, real assets, identity and other fields, and changes the market status of
traditional industries through its own efforts. Strategic goals include basic
platform building, targeted population entry, providing services (consulting
services, transaction services, advertising services), optimizing the platform
and expanding the scope of services.



Competitor analysis


Opensea is an NFT market exchange. It has more than 20,000 users. Compared with
projects in the popular decentralized finance ("DeFi") field, it is second only
to Uniswap, kyber and Compound, and higher than maker, 0x, etc. As a trading
platform with a relatively high status in the NFT field, OpenSea has a complete
range of collections, equivalent to Taobao in the NFT world. At present, the
trading market of OpenSea has nearly 40,000 users, and the monthly transaction
volume exceeds 5 million US dollars. Coinbase's new NFT platform hits 1.4
million signups. The Coinbase platform has an active population of 50,000 users.
The service rates for each service are as follows: 1. Rarible's minting fees are
borne by the creators themselves, and the royalties are also set by the creators
themselves, with default amounts of 10%, 20% and 30%. 2. VIV3's NFT minting
costs and profits come from the 12.5% service fee it collects on the first and
second sales. 3. OpenSea does not need gas fee to mint NFT. 4. Rarible charges a
2.5% service fee on the first sale. On the SuperRare platform, a 15% commission
is charged on the first sale and a 3% fee (paid by the buyer) is charged on
the
second sale.



                                       21





Competitive Advantages


Takung’s advantages in the NFT and blockchain transaction market are as follows:



Innate industry advantages



In recent years, digital artworks of NFT technology based on blockchain
technology are becoming popular assets. The NFT online platform the Company
built can effectively solve the current situation such as unclear ownership of
property, difficulty in distinguishing authenticity and low efficiency of
artwork circulation. Converting the business development from offline to online
operation, so that the value of digital works can be freely circulated online.



Core Management Team Benefits

Takung core team members have experience in developing blockchain technology and operating the NFT trading platform, which can ensure smoother development and business operation at a later stage.


Takung's platform advantages



The currently developed and launched NFT online trading platform supports
multi-category product uploads, including Digital art, Digital oil painting,
Produced by Gallery, Personal products, Artist signature, Oil on canvas, Print,
Paper ink, Device, Comprehensive media, Derivative, and it will be continuously
enriched and improved according to customer interests. The NFT trading platform
has stable performance, high security and is easy to maintain. At the front end
of the system, the Company will continuously improve the operability and user
experience of the system focusing on improving the user experience.



Technical advantages


Takung's digital works exchange platform that has been launched is built by a
professional technical team. Each technician has rich industry experience, can
work under a short development cycle or high pressure, and has a number of
relevant industry benchmarking projects experience. The capability of the
technical team ensures the strong technical support in later system optimization
and iterative updates.



Marketing advantages



The Company has a professional marketing team. After the platform goes online,
it can be promoted online and offline simultaneously, so as to quickly increase
the popularity of the platform, and use professional marketing solutions to
attract more creators and purchasers to join in the platform.



We expect to generate revenue from the offering and trading of NFTs on the Company’s system, consisting primarily of membership fees, trading commissions and advertising costs.


                                       22




THREE MONTHS ENDED JUNE 30, 2022 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2021

The following tables present our condensed interim consolidated statements of earnings data with a percentage:


                                                          Three Months Ended June 30,
                                                              %  of                           % of
                                               2022          Revenue          2021          Revenue
                                           (Unaudited)                    (Unaudited)
Revenue-Continuing operations              $    694,175           100     $          -              -
Revenue-Discontinued operations                       -             -        1,143,495            100
Cost of revenue-Continuing operations          (150,930 )         (22 )              -              -
Cost of revenue-Discontinued operations               -             -         (452,465 )          (40 )
Selling expenses-Continuing operations                -             -                -              -
Selling expenses-Discontinued operations              -             -         (131,558 )          (12 )
General and administrative
expenses-Continuing operations               (7,578,425 )       (1092 )     (7,182,662 )            -
General and administrative
expenses-Discontinued operations                (73,419 )           -         (769,652 )           67
Total costs and expenses-Continuing
opertions                                    (7,729,355 )       (1113 )     (7,182,662 )            -
Total costs and expenses-Discontinuing
opertions                                       (73,419 )           -       (1,353,675 )         (118 )
Loss from continuing operations              (7,035,180 )       (1013 )     (7,182,662 )            -
Other(expenses)income - Continuing
opertions                                          (177 )          (0 )        161,762              -
Other(expenses)income - Discontinuing
opertions                                             2             -           16,615              1
Loss before income taxes -Continuing
operations                                   (7,035,357 )      (1,013 )     (7,020,900 )            -
Income tax expense                               48,996             7                0              -

Net loss from continuing operations ($7,084,353) (1,021) ($7,020,900)

            -
Loss before income tax-Discontinued
operatons                                       (73,417 )           -         (193,565 )          (17 )
Income tax expenses-Discontinued
operations
Tax expense                                           -             -           24,334              2
Deferred tax benefit                                  -             -          (35,700 )           (3 )
Net loss from Discontinued operations           (73,417 )           -      
  (204,931 )          (18 )
Net loss                                     (7,157,770 )      (1,031 )     (7,225,831 )         (632 )




Revenue


For the three months ended June 30, 2022 and 2021, our operations generated revenues in the amount of $694,175 and $1,143,495respectively.



The following table sets forth our interim condensed consolidated revenue by
revenue source:



                                              Three Months Ended
                                                    June 30,
                                             2022              2021
                                          (Unaudited)      (Unaudited)
Listing fee-Continuing operations        $           -     $          -
Listing fee-Discontinued operations                  -          283,302
Commission-Continuing operations               694,175                -
Commission-Discontinued operations                   -          648,310
Management fee-Continuing operations                 -                -
Management fee-Discontinued operations               -          211,883

Total revenue – Continuing operations $694,175 $ – Total revenue – Discontinued operations

                -        1,143,495




                                       23





(i) Listing fee revenue



Listing fee revenue is calculated based on a percentage of the listing value and the transaction value of the artworks.

Listing value is the total offering price of an artwork when the ownership units
are initially listed on our trading platform. We utilize an appraised value as a
basis to determine the appropriate listing value for each artwork, or portfolio
of artworks. For the three months ended June 30, 2021 and 2022, listing fee was
$283,302 and $nil from discontinued and continued operations respectively.

  (ii) Commission fee revenue




For non-VIP Traders, the commission revenue was calculated based on a percentage
of transaction value of artworks, which we charge trading commissions for the
purchase and sale of the ownership shares of the artworks. The commission is
typically 5% of the total amount of each transaction. The commission is
accounted for as revenue and immediately deducted from the proceeds from the
sales of artwork units when a transaction is completed.



Commission income for the three months ended June 30, 2021 and 2022 was
$648,310 and $694,175 from discontinued and continuing operations respectively.


  (iii) Management fee revenue




Our legacy online trading platform from discontinued operations charges Traders
a management fee to cover the costs of insurance, storage, and transportation
for an artwork and trading management of artwork units. 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.



Our operations did not generate management fee revenue from our legacy trading
platform for the three months ended June 30, 2022 and had $211,883 for the three
months ended June,30, 2021.



Revenue by customer type


The following table presents our revenues by type of client:


                          Three months ended
                               June 30,
                        2022              2021
                     (Unaudited)      (Unaudited)
Artwork owners      $           -     $    283,302
Non - VIP Traders         694,175          645,954
Selected Traders                -          214,239
Total               $     694,175     $  1,143,495




                                       24





Cost of Revenue



                                           Three months ended
                                                June 30,
                                         2022              2021
                                      (Unaudited)       (Unaudited)
Commissions paid to service agents   $           -           351,352
Depreciation                                     -     $      45,482
Internet service charge                    150,930            26,808
Artwork insurance                                -            12,731
Artwork storage                                  -            16,092
Total                                $     150,930     $     452,465



Cost of revenue from continuing and discontinued operations for the three months ended June 30, 2022 and 2021 have been $150,930 and $452,465, respectively. The cost of revenue for the three months ended June 30, 2022 was incurred due to revenue generated from our NFT online trading system.


Gross Profit


The gross profit from our operations was $543,245 and $691,030 for three months ended
June 30, 2022 and 2021, respectively.


Operating Expenses


General and administrative expenses for the three months ended June 30, 2022
were $7,651,844 compared to $7,952,314 for the three months ended June 30, 2021.

The following table sets forth the main components of the Company's general and
administrative expenses for the three months ended June 30, 2022 and June 30,
2021.



                                                             Three months ended June 30,
                                               2022          % of Total          2021          % of Total
                                           (Unaudited)                       (Unaudited)
Salary and welfare                         $    767,214             10.0     $    234,071              2.9
Office, insurance and rental expenses            34,682              0.5          172,986              2.2
Legal and professional fees                     339,836              4.4          239,685              3.0
Non-deductible input VAT expense                      -                -           48,739              0.6
Travel and accommodation fees                         -                -   
       24,639              0.3
Consultancy fee                                 170,892              2.2          315,214              4.0
Depreciation                                        115              0.0           25,547              0.3
Share based compensation expense                      -                -   
    6,864,150             86.3
Impairment loss                               6,265,686             81.9                -                -
Others                                           73,419              1.0           27,283              0.4
Total general and administrative expense   $  7,651,844            100.0     $  7,952,314            100.0
Deduct:General and administrative
expense-Discontinued operations                 (73,419 )            1.0         (769,652 )            9.7
General and administrative
expense-Discontinuing operations              7,578,425             99.0   
    7,182,662             90.3




                                       25





Other (expenses) income


Other operating expenses for the three months ended June 30, 2022 and 2021 have been ($175) and $178,377respectively.


Loss before income taxes


Our continuing operations incurred a loss before income taxes $7,084,353 and
$7,020,900 for the three months ended June 30, 2022 and 2021, respectively.

Our discontinued operations incurred a loss before income taxes, $73,417 and
($204,931) for the three months ended June 30, 2022 and 2021, respectively.


Income tax expense


For the three months ended June 30, 2022 and 2021, our continuing operations incurred an income tax expense $48,996 and $nil, respectively.

The income tax expense of discontinued operations for the three months ended June 31, 2022 and 2021 were zero and ($11,366).


Net Loss



As a result of our operations aforementioned, our net losses after income taxes
for continuing operations for the three months ended June 30, 2022 and 2021 were
$7,084,353 and $7,020,900, respectively. Our discontinued operations generated
net loss after income tax $73,417 and $204,931 for the three months ended June
30, 2022 and 2021, respectively.



Foreign currency translation gain (loss)

We recorded a foreign currency translation gain (loss) for the three months ended
June 30, 2022 and 2021 from $180,638 and $3,933respectively.


Comprehensive loss


As a result of the above, we recorded an overall loss of $6,977,132 and
$7,221,898 for the three months ended June 30, 2022 and 2021, respectively.


                                       26




SIX MONTHS ENDED JUNE 30, 2022 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2021



The following tables set forth our condensed consolidated statements of income
data:



                                                           Six Months Ended June 30,
                                                              %  of                          %  of
                                               2022          Revenue          2021          Revenue
                                           (Unaudited)                    (Unaudited)
Revenue-Continuing operations                   694,175           100                -              -
Revenue-Discontinued operations                       -             -        1,922,603            100
Cost of revenue-Continuing operations          (150,930 )         (22 )              -              -
Cost of revenue-Discontinued operations                                       (704,702 )          (37 )
Selling expenses-Continuing operations                -             -                -              -
Selling expenses-Discontinued operations              -             -         (236,469 )          (12 )
General and administrative
expenses-Continuing operations               (8,189,900 )      (1,180 )     (7,542,652 )            -
General and administrative
expenses-Discontinued operations               (253,017 )           -       (1,422,820 )          (74 )
Total costs and expenses-Continuing
operations                                   (8,340,830 )      (1,202 )     (7,542,652 )            -
Total costs and expenses-Discontinued
operations                                     (253,017 )           -       (2,363,991 )         (123 )
Loss from continuing operations              (7,646,655 )      (1,102 )     (7,542,652 )            -

Other (expenses) income-continuing

operations                                         (276 )           -          161,710              -

Other (expenses) income-Discontinued

operations                                         (165 )           -           30,504              2
Loss before income taxes-Continuing
operations                                   (7,646,931 )      (1,102 )     (7,380,942 )            -
Income tax expenses-Continuing
operations                                       48,996             7                -              -

Net loss from continuing operations ($7,695,927) (1,109) ($7,380,942)

            -
Loss before income tax-Discontinued
operatons                                      (253,182 )           -         (410,884 )          (21 )
Income tax expenses-Discontinued
operations
Tax expense                                           -             -            4,126              -
Deferred tax benefit                                  -             -          (10,719 )           (1 )
Net loss from Discontinued operations          (253,182 )           -      
  (417,477 )          (22 )
Net loss                                     (7,949,109 )      (1,145 )     (7,798,419 )         (406 )




Revenue



The following table sets forth our condensed consolidated revenue by revenue
source:



                                                Six months ended
                                                    June 30,
                                             2022              2021
                                          (Unaudited)      (Unaudited)
Listing fee-Continuing operations        $           -     $          -
Listing fee-Discontinued operations                             557,094
Commission-Continuing operations               694,175                -
Commission-Discontinued operations                            1,006,396
Management fee-Continuing operations                 -                -
Management fee-Discontinued operations               -          359,113
Revenue-Continuing operations            $     694,175     $          -
Revenue-Discontinued operations                      -        1,922,603




 (i) Listing fee revenue



Listing fee revenue is calculated based on a percentage of the listing value and the transaction value of the artworks.

Listing value is the total offering price of an artwork when the ownership units
are initially listed on our trading platform. We utilize an appraised value as a
basis to determine the appropriate listing value for each artwork, or portfolio
of artworks. For the six months ended June 30, 2021 and 2022, listing fee was
$557,094 and $nil from discontinued and continued operations respectively.

 (ii) Commission fee revenue




For non-VIP Traders, the commission revenue was calculated based on a percentage
of transaction value of artworks, which we charge trading commissions for the
purchase and sale of the ownership shares of the artworks. The commission is
typically 5% of the total amount of each transaction. The commission is
accounted for as revenue and immediately deducted from the proceeds from the
sales of artwork units when a transaction is completed.



Commission income for the six months ended June 30, 2021 and 2022 was
$1,006,396 and $694,175 from discontinued and continuing operations respectively.


                                       27





(iii) Management fee revenue



Our legacy online trading platform charges Traders a management fee to cover the
costs of insurance, storage, and transportation for an artwork and trading
management of artwork units. 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.



Our operations did not generate management fee income from our legacy trading platform for the six months ended June 30, 2022but generate $359,113
management fee income for the six months ended June 30, 2021.


Revenue by customer type


The following table presents our revenues by type of client:


                           Six months ended
                               June 30,
                        2022              2021
                     (Unaudited)      (Unaudited)
Artwork owners      $           -     $    557,094
Non - VIP traders         694,175          958,593
Selected traders                -          406,916
Total               $     694,175     $  1,922,603




Cost of Revenue



                                            Six months ended
                                                June 30,
                                         2022              2021
                                      (Unaudited)       (Unaudited)
Commissions paid to service agents   $           -     $     486,526
Depreciation                                     -           114,544
Internet service charge                    150,930            45,977
Artwork insurance                                -            25,475
Artwork storage                                  -            32,180
Total                                $     150,930     $     704,702




Cost of revenue for the six months ended June 30, 2022 and June 30, 2021 was
$150,930 and $704,702, respectively. The decline in cost of revenue for the six
months ended June 30, 2022 compared to June 30, 2021 was mainly due to the
continuing operations from the new NFT business is on the start stage and legacy
business is treated as discontinued operations.



Gross Profit


Gross profit was $543,245 or 78.3% of the total revenue for the six months ended
June 30, 2022, compared to $1,217,901 or 63.3% of the total revenue for the six
months ended June 30, 2021.  Gross profit amount was reduced by $674,656 while
the gross profit margin was increased by 15%.



                                       28




Overall total revenue for the six months ended June 30, 2022 abandoned
$1,228,428 or 63.9% compared to the same period in 2021, due to new early-stage NFT activity.


Operating Expenses


General and administrative expenses for the six months ended June 30, 2022 were
$8,442,917compared to $8,965,472for the six months ended June 30, 2021.



The following table sets forth the main components of the Company's general and
administrative expenses for the six months ended June 30, 2022 and June 30,
2021.



                                                              Six months ended June 30,
                                               2022          % of Total          2021          % of Total
                                           (Unaudited)                       (Unaudited)
Salary and welfare                         $    857,266             10.2     $    460,313              5.1
Legal and professional fees                     644,869              7.6          500,663              5.6
Office, insurance and rental expenses           123,888              1.5          299,244              3.3
Consultancy fee                                 297,726              3.5          550,145              6.1
Non-deductible input VAT expense                      -                -           84,881              0.9
Depreciation                                        465                -           53,098              0.6
Traveling and accommodation fees                      -                -           33,206              0.4
Share Based Compensation Expense                      -                -   
    6,867,867             76.6
Impairment loss                               6,265,686             74.2                -                -
Others                                          253,017              3.0          116,055              1.4
Total general and administrative expense   $  8,442,917            100.0     $  8,965,472            100.0
Deduct: General and administrative
expense-Discontinued operations                (253,017 )            3.0       (1,422,820 )           15.9
General and administrative
expense-Continuing operations                 8,189,900             97.0   
    7,542,652             84.1




Other income (expenses)



During the six months ended June 30, 2022, the Company incurred other income in
an amount of $(441) whilst it incurred other income in an amount of $192,214 for
the six months ended June 30, 2021.  The Company incurred exchange gain, of
$201,697 in the six months ended June 30, 2022 whereas it incurred exchange loss
of  $33,830 in the same period in 2021. The exchange gain or loss was
attributable to the fluctuations of the Renminbi against the US dollar.



                                       29





Income tax expense



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 $257,676) assessable profits and at 16.5% for assessable
profits above HK$ 2 million (approximately $257,676) and PRC enterprise income
tax rate of 25%.


Effective tax rates for the six months ended June 30, 2021 and 2020 were (0.1)% and (10.9)%, respectively.

The income tax expense was $48,996 and $6,593 for the six months ended June 30, 2022 and 2021, respectively.


Net loss


We recorded a net loss for the six months ended June 30, 2022 of $7,949,109
compared to the net loss of $7,798,419 for the six months ended June 30, 2021.

The increase in the net loss of $150,690 in this current period compared to the same period ended June 30, 2021 as discussed above.

Cash and capital resources

The following tables present our consolidated statements of cash flows:


                                                                     Six months ended
                                                                         June 30,
                                                                   2022             2021
                                                               (Unaudited)      (Unaudited)
Net cash provided by operating activities-continuing
operations                                                     $  5,196,432     $  8,844,238
Net cash provided by operating activities- discontinued
operations                                                          185,654          987,134
                                                                  5,382,086        9,831,372

Net cash provided by investing activities- continuing
operations                                                             (505

) 145,824 Net cash provided by investing activities – discontinued operations

                                                           (1,151 

) 243 143

                                                                     (1,656 )        388,967
Proceeds from a short-term borrowing from a third party             300,000
Net cash provided by financing activities-continuing
operations                                                       30,000,007                -
Net cash provided by financing activities-discontinued
operations                                                                -          180,485
                                                                 30,300,007          180,485

Effect of change in exchange rate on cash and cash equivalents and on restricted cash from continuing operations

                      184,573 

19,976

Effect of change in exchange rate on cash and cash equivalents and on restricted cash from discontinued operations

                   (400,243 

) 33,293

                                                                   (215,670 

) 53,269

Net increase in cash and cash equivalents - continuing
operations                                                       35,680,507

9,010,038

Net increase in cash and cash equivalents and restricted cash – discontinued operations

                                      (215,740 

) 1,444,055

                                                                 35,464,767 

10,454,093

Cash, cash equivalents and restricted cash, opening balance – continuing operations

                                    1,503,153 

31,188

Cash and cash equivalents and restricted cash, opening balance – discontinued operations

                                    338,542 

13,811,557

                                                                  1,841,695 

13,842,745

Cash and cash equivalents and restricted cash, closing balance – continuing operations

                                 $ 37,183,660 

$9,041,226
Cash and cash equivalents and restricted cash, closing balance – discontinued operations

                                    122,802       15,255,612
                                                                 37,306,462       24,296,838




                                       30





Sources of Liquidity


Cash and cash equivalents and restricted cash balances from continuing operations as at June 30, 2022 and 2021 have been $37,183,660 and
$9,041,226 respectively.

The balance of cash and cash equivalents from discontinued operations as of June 30, 2022 has been $122,802Which one is $963,482 denominated in HK$ in hong kong
financial institutions.



For the six months ended June 30, 2022, net cash provided by operating
activities from continuing operation was $5,196,432. While there was $505 cash
outflow from investing activities from our continuing operations during the six
months ended June 30, 2022, our continuing operations incur net cash provided by
financing activities, $30,000,007, as TKAT obtained a PIPE financing from
investors.



For the six months ended June 30, 2022, net cash provided by in operating
activities by our discontinued operations was $185,654, which was a result of
net loss from discontinued operations,. Net cash used in investing activities by
our discontinued operations was $nil. Our discontinued operations did not incur
cash inflow or outflow from financing activities.



As of June 30, 2022, the total current liabilities from the continuing
operations were $6,701,507, which included accrued expense and account payables
amounting to $2,007,062 and advance from customers amounting to 4,645,449. Total
current liabilities from our discontinued operations amount to $8,939,854.

Of the June 30, 2022the Company’s continuing operations had cash, restricted cash and cash equivalents of $37,183,600working capital in the amount of $30,654,935 and the total assets of $40,393,888. The Company’s discontinued operations have total assets of $276,752.

Of the June 30, 2022the Company’s continuing operations had cash and cash equivalents of $37,183,660. The Company’s discontinued operations, mainly related to Hong Kong Takung, had cash and cash equivalents of
$122,802.



In order to continue to maintain the liquidity requirements, the Company
introduced NFT business in the fourth quarter of 2021 to developed service fee
on NFT projects and has generated commission revenue of $694,175 by the end of
June 30, 2022. The Company also seeks to negotiate and extend financing
arrangements with the related party and the third party.



The Company is aware of events or uncertainties which may affect its future
liquidity because of capital controls in the PRC. The RMB is only currently
convertible under the "current account," which includes dividends, trade and
service-related foreign exchange transactions, but not under the "capital
account," which includes foreign direct investment and loans, including loans we
may secure from our onshore subsidiaries or variable interest entities.
Currently, our PRC subsidiaries, which are wholly-foreign owned enterprises, may
purchase foreign currency for settlement of "current account transactions,"
including payment of dividends to us, without the approval of the State
Administration of Foreign Exchange ("SAFE") by complying with certain procedural
requirements. However, the relevant PRC governmental authorities may limit or
eliminate our ability to purchase foreign currencies in the future for current
account transactions. The existing and future restrictions on currency exchange
may limit our ability to utilize revenue generated in Renminbi to fund our
business activities outside of the PRC or pay dividends in foreign currencies to
our shareholders, including holders of our shares of common stock. Foreign
exchange transactions under the capital account remain subject to limitations
and require approvals from, or registration with, SAFE and other relevant PRC
governmental authorities. This could affect our ability to obtain foreign
currency through debt or equity financing for our PRC subsidiaries.



Applicable PRC law permits payment of dividends to us by our operating
subsidiaries in 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.



                                       31





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



We may sell our common stock in order to fund our business growth. Issuances of
additional shares will result in dilution to existing shareholders. There is no
assurance that we will achieve sales of the equity securities or arrange for
debt or other financing to fund our growth in case it is necessary, or if we are
able to do so, there is no guarantee that existing shareholders will not be
substantially diluted.



Critical Accounting Policies


We regularly evaluate the accounting policies and estimates that we use to make
budgetary and financial statement assumptions. A complete summary of these
policies is included in the notes to our financial statements. In general,
management's estimates are based on historical experience, on information from
third party professionals, and on various other assumptions that are believed to
be reasonable under the facts and circumstances. Actual results could differ
from those estimates made by management. The discussion of our critical
accounting policies contained in Note 2 to our consolidated financial
statements, "Summary of Significant Accounting Policies", is incorporated herein
by reference.


Recent accounting pronouncements

The discussion of recent accounting pronouncements contained in Note 2 to our Consolidated Financial Statements, “Summary of Significant Accounting Policies”, is incorporated herein by reference.

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