☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark ~~whether~~whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~May 6,~~August 9, 2022, the Company had outstanding ~~358,320,541~~385,306,097 shares of common stock.

INTRODUCTORY COMMENTS

We are a Nevada holding company with operations conducted through our wholly owned subsidiaries based in Hong Kong and Singapore. Our investors hold shares of common stock in Cosmos Group Holdings Inc., the Nevada holding company. This structure presents unique risks as our investors may never directly hold equity interests in our Hong Kong subsidiary and will be dependent upon contributions from our subsidiaries to finance our cash flow needs. Our ability to obtain contributions from our subsidiaries are significantly affected by regulations promulgated by Hong Kong and Singaporean authorities. Any change in the interpretation of existing rules and regulations or the promulgation of new rules and regulations may materially affect our operations and or the value of our securities, including causing the value of our securities to significantly decline or become worthless. For a detailed description of the risks facing the Company associated with our structure, please refer to “Risk Factors –Risks Relating to Doing Business in Hong Kong.” set forth in the Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 15, 2022 (the “Form 10-K”).

Cosmos Group Holdings Inc. and our Hong Kong subsidiaries are not required to obtain permission or approval from the Chinese authorities including the China Securities Regulatory Commission, or CSRC, the Cybersecurity Administration Committee, or CAC, to operate our business or to issue securities to foreign investors. However, in light of the recent statements and regulatory actions by the People’s Republic of China (“the PRC”) government, such as those related to Hong Kong’s national security, the promulgation of regulations prohibiting foreign ownership of Chinese companies operating in certain industries, which are constantly evolving, and anti-monopoly concerns, we may be subject to the risks of uncertainty of any future actions of the PRC government in this regard including the risk that we inadvertently conclude that such approvals are not required, that applicable laws, regulations or interpretations change such that we are required to obtain approvals in the future, or that the PRC government could disallow our holding company structure, which would likely result in a material change in our operations, including our ability to continue our existing holding company structure, carry on our current business, accept foreign investments, and offer or continue to offer securities to our investors. These adverse actions could cause the value of our common stock to significantly decline or become worthless. We may also be subject to penalties and sanctions imposed by the PRC regulatory agencies, including the CSRC, if we fail to comply with such rules and regulations, which would likely adversely affect the ability of the Company’s securities to continue to trade on the Over-the-Counter Bulletin Board, which would likely cause the value of our securities to significantly decline or become worthless.

There are prominent legal and operational risks associated with our operations being in Hong Kong. For example, as a U.S.-listed Hong Kong public company, 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. We are subject to risks arising from the legal system in China where there are risks and uncertainties regarding the enforcement of laws including where the Chinese government can change the rules and regulations in China and Hong Kong, including the enforcement and interpretation thereof, at any time with little to no advance notice and can intervene at any time with little to no advance notice. Changes in Chinese internal regulatory mandates, such as the M&A rules, Anti-Monopoly Law, and Data Security Law, may target the ~~Company's~~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. By way of example, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. In April 2020, the Cyberspace Administration of China and certain other PRC regulatory authorities promulgated the Cybersecurity Review Measures, which became effective in June 2020. Pursuant to the Cybersecurity Review Measures, operators of critical information infrastructure must pass a cybersecurity review when purchasing network products and services which do or may affect national security. On July 10, 2021, the Cyberspace Administration of China issued a revised draft of the Measures for Cybersecurity Review for public comments (“Draft Measures”), which required that, in addition to “operator of critical information infrastructure,” any “data processor” carrying out data processing activities that affect or may affect national security should also be subject to cybersecurity review, and further elaborated the factors to be considered when assessing the national security risks of the relevant activities, including, among others, (i) the risk of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegally used or exited the country; and (ii) the risk of critical information infrastructure, core data, important data or a large amount of personal information being affected, controlled, or maliciously used by foreign governments after listing abroad. The Cyberspace Administration of China has said that under the proposed rules companies holding data on more than 1,000,000 users must now apply for cybersecurity approval when seeking listings in other nations because of the risk that such data and personal information could be “affected, controlled, and maliciously exploited by foreign governments,” The cybersecurity review will also investigate the potential national security risks from overseas IPOs. On January 4, 2022, the CAC, in conjunction with 12 other government departments, issued the New Measures for Cybersecurity Review (the "“New Measures"”) on January 4, 2022. The New Measures amends the Draft Measures released on July 10, 2021 and became effective on February 15, 2022.

The business of our subsidiaries are not subject to cybersecurity review with the Cyberspace Administration of China, given that: (i) we do not have one million individual online users of our products and services in Hong Kong; (ii) we do not possess a large amount of personal information in our business operations. In addition, we are not subject to merger control review by China’s anti-monopoly enforcement agency due to the level of our revenues which provided from us and audited by our auditor and the fact that we currently do not expect to propose or implement any acquisition of control of, or decisive influence over, any company with revenues within China of more than Renminbi (“RMB”) 400 million. Currently, these statements and regulatory actions have had no impact on our daily business operations, the ability to accept foreign investments and list our securities on an U.S. or other foreign exchange. However, since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business operation, the ability to accept foreign investments and list our securities on an U.S. or other foreign exchange. For a detailed description of the risks the Company is facing and the offering associated with our operations in Hong Kong, please refer to “Risk Factors – Risks Relating to Doing Business in Hong Kong.” set forth in the Form 10-K.

The recent joint statement by the SEC and Public Company Accounting Oversight Board (“PCAOB”), and the Holding Foreign Companies Accountable Act (“HFCAA”) all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. Trading in our securities may be prohibited under the HFCAA if the PCAOB determines that it cannot inspect or investigate completely our auditor, and that as a result, an exchange may determine to delist our securities. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act which would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two thus reducing the time before our securities may be prohibited from trading or being delisted. On December 2, 2021, the SEC adopted rules to implement the HFCAA. Pursuant to the HFCAA, the PCAOB issued its report notifying the Commission that it is unable to inspect or investigate completely accounting firms headquartered in mainland China or Hong Kong due to positions taken by authorities in mainland China and Hong Kong. Our auditor is based in Kuala Lumpur, Malaysia and is subject to PCAOB’s inspection. It is not subject to the determinations announced by the PCAOB on December 16, 2021. However, in the event the Malaysian authorities subsequently take a position disallowing the PCAOB to inspect our auditor, then we would need to change our auditor to avoid having our securities delisted. Furthermore, due to the recent developments in connection with the implementation of the HFCAA, we cannot assure you whether the SEC or other regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements. The requirement in the HFCAA that the PCAOB be permitted to inspect the issuer’s public accounting firm within two or three years, may result in the delisting of our securities from applicable trading markets in the U.S, in the future if the PCAOB is unable to inspect our accounting firm at such future time. Please see “Risk Factors- The Holding Foreign Companies Accountable Act requires the Public Company Accounting Oversight Board (PCAOB) to be permitted to inspect the ~~issuer's~~issuer’s public accounting firm within three years. This three-year period will be shortened to two years if the Accelerating Holding Foreign Companies Accountable Act is enacted. There are uncertainties under the PRC Securities Law relating to the procedures and requisite timing for the U.S. securities regulatory agencies to conduct investigations and collect evidence within the territory of the PRC. If the U.S. securities regulatory agencies are unable to conduct such investigations, they may suspend or de-register our registration with the SEC and delist our securities from applicable trading market within the U.S.” set forth in the Form 10-K.

In addition to the foregoing risks, we face various legal and operational risks and uncertainties arising from doing business in Hong Kong as summarized below and in “Risk Factors — Risks Relating to Doing Business in Hong Kong.” set forth in the Form 10-K.

Adverse changes in economic and political policies of the PRC government could have a material and adverse effect on overall economic growth in China and Hong Kong, which could materially and adversely affect our business. Please see “Risk ~~Factors~~-WeFactors-We face the risk that changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in Hong Kong and the profitability of such business.” and “Substantial uncertainties and restrictions with respect to the political and economic policies of the PRC government and PRC laws and regulations could have a significant impact upon the business that we may be able to conduct in the PRC and accordingly on the results of our operations and financial condition.” set forth in the Form 10-K.

We are a holding company with operations conducted through our wholly owned subsidiaries based in Hong Kong and Singapore. This structure presents unique risks as our investors may never directly hold equity interests in our Hong Kong and Singapore subsidiaries and will be dependent upon contributions from our subsidiaries to finance our cash flow needs. Any limitation on the ability of our subsidiaries to make payments to us could have a material adverse effect on our ability to conduct business. We do not anticipate paying dividends in the foreseeable future; you should not buy our stock if you expect dividends. Please see “Risk Factors- Because our holding company structure creates restrictions on the payment of dividends, our ability to pay dividends is ~~limited~~.limited.” set forth in the Form 10-K.

There is a possibility that the PRC could prevent our cash maintained in Hong Kong from leaving or the PRC could restrict the deployment of the cash into our business or for the payment of dividends. We rely on dividends from our Hong Kong subsidiaries for our cash and financing requirements, such as the funds necessary to service any debt we may incur. Any such controls or restrictions may adversely affect our ability to finance our cash requirements, service debt or make dividend or other distributions to our shareholders. Please see ~~“Risk~~“Risk Factors - PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds we receive from offshore financing activities to make loans to or make additional capital contributions to our Hong Kong subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand business.”; “Risk Factors - Because our holding company structure creates restrictions on the payment of dividends or other cash payments, our ability to pay dividends or make other payments is limited.” and “Transfers of Cash to and from our Subsidiaries.” set forth in the Form 10-K.

PRC regulation of loans to and direct investments in PRC entities by offshore holding companies may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our operating subsidiaries in Hong Kong. Substantial uncertainties exist with respect to the interpretation of the PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations. Please see “Risk Factors- PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds we receive from offshore financing activities to make loans to or make additional capital contributions to our Hong Kong subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand business.” set forth in the Form 10-K.

In light of China’s extension of its authority into Hong Kong, the Chinese government can change Hong Kong’s rules and regulations at any time with little or no advance notice, and can intervene and influence our operations and business activities in Hong Kong. We are currently not required to obtain approval from Chinese authorities to list on U.S. exchanges. However, if our subsidiaries or the holding company were required to obtain approval in the future, or we erroneously conclude that approvals were not required, or we were denied permission from Chinese authorities to operate or to list on U.S. exchanges, we will not be able to continue listing on a U.S. exchange and the value of our common stock would likely significantly decline or become worthless, which would materially affect the interest of the investors. There is a risk that the Chinese government may intervene or influence our operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in Hong Kong-based issuers, which could result in a material change in our operations and/or the value of our securities. Further, any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers would likely 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. Please see “Risk ~~Factors~~-WeFactors-We face the risk that changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in the Hong Kong and the profitability of such business.” and “Substantial uncertainties and restrictions with respect to the political and economic policies of the PRC government and PRC laws and regulations could have a significant impact upon the business that we may be able to conduct in the PRC and accordingly on the results of our operations and financial condition.” and “The Chinese government exerts substantial influence over the manner in which we must conduct our business activities. We are currently not required to obtain approval from Chinese authorities to list on U.S. exchanges. However, to the extent that the Chinese government exerts more control over offerings conducted overseas and/or foreign investment in China-based issuers over time and if our PRC subsidiaries or the holding company were required to obtain approval in the future and were denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange and the value of our common stock may significantly decline or become worthless, which would materially affect the interest of the investors.”set forth in the Form 10-K.

Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.

We may become subject to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection. We may be liable for improper use or appropriation of personal information provided by our customers. Please see “Risk Factors- The Chinese government exerts substantial influence over the manner in which we must conduct our business activities. We are currently not required to obtain approval from Chinese authorities to list on U.S exchanges. However, to the extent that the Chinese government exerts more control over offerings conducted overseas and/or foreign investment in China-based issuers over time and if our PRC subsidiaries or the holding company were required to obtain approval in the future and were denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange and the value of our common stock may significantly decline or become worthless, which would materially affect the interest of the investors.” set forth in the Form 10-K.

Under the Enterprise Income Tax Law of the PRC (“EIT Law”), we may be classified as a “Resident Enterprise” of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC shareholders. Please see “Risk Factors- Our global income may be subject to PRC taxes under the PRC Enterprise Income Tax Law, which could have a material adverse effect on our results of operations.” set forth in the Form 10-K.

Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident Shareholders to personal liability, may limit our ability to acquire Hong Kong and PRC companies or to inject capital into our Hong Kong subsidiary, may limit the ability of our Hong Kong subsidiaries to distribute profits to us or may otherwise materially and adversely affect us.

You may be subject to PRC income tax on dividends from us or on any gain realized on the transfer of shares of our common stock. Please see “Risk Factors- Dividends payable to our foreign investors and gains on the sale of our shares of common stock by our foreign investors may become subject to tax by the PRC.” set forth in the Form 10-K.

We face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies. Please see “Risk Factors- We and our shareholders face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.” set forth in the Form 10-K.

We are organized under the laws of the State of Nevada as a holding company that conducts its business through a number of subsidiaries organized under the laws of foreign jurisdictions such as Hong Kong, Singapore and the British Virgin Islands. This may have an adverse impact on the ability of U.S. investors to enforce a judgment obtained in U.S. Courts against these entities, bring actions in Hong Kong against us or our management or to effect service of process on the officers and directors managing the foreign subsidiaries. Please see “Risk Factors- It may be difficult for stockholders to enforce any judgment obtained in the United States against us, which may limit the remedies otherwise available to our stockholders.” set forth in the Form 10-K.

U.S. regulatory bodies may be limited in their ability to conduct investigations or inspections of our operations in China.

There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits. Please see “Risk Factors- Our global income may be subject to PRC taxes under the PRC Enterprise Income Tax Law, which could have a material adverse effect on our results of operations.” set forth in the Form 10-K.

References in this registration statement to the “Company,” “~~COSG~~,“COSG,” “we,” “us” and “our” refer to Cosmos Group Holdings ~~Inc~~.Inc., a Nevada company and all of its subsidiaries on a consolidated basis. Where reference to a specific entity is required, the name of such specific entity will be referenced.

Transfers of Cash to and from Our Subsidiaries

Cosmos Group Holdings Inc. is a Nevada holding company with no operations of its own. We conduct our operations in Hong Kong primarily through our subsidiaries in Hong Kong and Singapore. We may rely on dividends or other transfers of cash or assets to be made by our Hong Kong and Singapore subsidiaries to fund our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our operating expenses. If our Hong Kong and Singapore subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. To date, our subsidiaries have not made any transfers, dividends or distributions to Cosmos Group Holdings Inc. and Cosmos Group Holdings Inc. has not made any transfers, dividends or distributions of cash flows or other assets to our subsidiaries.

We do not intend to make dividends or distributions to investors of Cosmos Group Holdings Inc. in the foreseeable future.

We currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, contractual requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments.

Cosmos Group Holdings Inc. (Nevada corporation)

Subject to the Nevada Revised Statutes and our bylaws, our board of directors may authorize and declare a dividend to shareholders at such time and of such an amount as they think fit if they are satisfied, on reasonable grounds, that immediately following the dividend the value of our assets will exceed our liabilities and we will be able to pay our debts as they become due. There is no further Nevada statutory restriction on the amount of funds which may be distributed by us by dividend. Accordingly, Cosmos Group Holdings Inc. is permitted under the Nevada laws to provide funding to our subsidiaries in Singapore and Hong Kong through loans or capital contributions without restrictions on the amount of the funds, subject to satisfaction of applicable government registration, approval and filing requirements.

Singapore and Hong Kong Subsidiaries

Our Hong Kong subsidiaries and our Singapore subsidiary are also permitted under the laws of Hong Kong and Singapore to provide funding to Cosmos Group Holdings Inc. through dividend distribution without restrictions on the amount of the funds. If our Hong Kong and Singapore subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. To date, our subsidiaries have not made any transfers, dividends or distributions to Cosmos Group Holdings Inc. and Cosmos Group Holdings Inc. has not made any transfers, dividends or distributions to our subsidiaries.

Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by us. The laws and regulations of the PRC do not currently have any material impact on transfer of cash from Cosmos Group Holdings Inc. to our Hong Kong subsidiaries or from our Hong Kong subsidiaries to Cosmos Group Holdings Inc. There are no restrictions or limitation under the laws of Hong Kong imposed on the conversion of Hong Kong dollar (“HKD”) into foreign currencies and the remittance of currencies out of Hong Kong or across borders and to U.S. investors.

There is a possibility that the PRC could prevent our cash maintained in Hong Kong from leaving or the PRC could restrict the deployment of the cash into our business or for the payment of dividends. Any such controls or restrictions may adversely affect our ability to finance our cash requirements, service debt or make dividend or other distributions to our shareholders. Please see “Risk Factors - “Risk Factors - PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds we receive from offshore financing activities to make loans to or make additional capital contributions to our Hong Kong subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand business.”; “Risk Factors - Because our holding company structure creates restrictions on the payment of dividends or other cash payments, our ability to pay dividends or make other payments is limited.” set forth in the Form 10-K.

Current PRC regulations permit PRC subsidiaries to pay dividends to Hong Kong subsidiaries only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entity in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation. As of the date of this report, we do not have any PRC subsidiaries.

The PRC government imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency to finance our cash requirements, service debt or make dividend or other distributions to our shareholders. Furthermore, if our subsidiaries in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments. If we or our subsidiaries are unable to receive all of the revenues from our operations, we may be unable to pay dividends on our common stock.

Cash dividends, if any, on our common stock will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10%.

If in the future we have PRC subsidiaries, certain payments from such PRC subsidiaries to Hong Kong subsidiaries will be subject to PRC taxes, including business taxes and VAT. As of the date of this report, we do not have any PRC subsidiaries and our Hong Kong subsidiaries have not made any transfers, dividends or distributions nor do we expect to make such transfers, dividends or distributions in the foreseeable future.

Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC entity. However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including, without limitation, that (a) the Hong Kong entity must be the beneficial owner of the relevant dividends; and (b) the Hong Kong entity must directly hold no less than 25% share ownership in the PRC entity during the 12 consecutive months preceding its receipt of the dividends. In current practice, a Hong Kong entity must obtain a tax resident certificate from the Hong Kong tax authority to apply for the 5% lower PRC withholding tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement with respect to dividends to be paid by a PRC subsidiary to its immediate holding company. As of the date of this report, we do not have a PRC subsidiary. In the event that we acquire or form a PRC subsidiary in the future and such PRC subsidiary desires to declare and pay dividends to our Hong Kong subsidiary, our Hong Kong subsidiary will be required to apply for the tax resident certificate from the relevant Hong Kong tax authority. In such event, we plan to inform the investors through SEC filings, such as a current report on Form 8-K, prior to such actions. See “Risk Factors – Risks Relating to Doing Business in Hong Kong.” set forth in the Form 10-K.

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical facts, included in this Form 10-Q including, without limitation, statements in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, events or developments which the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof); expansion and growth of the Company’s business and operations; and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate under the circumstances. However, whether actual results or developments will conform with the Company’s expectations and predictions is subject to a number of risks and uncertainties, including general economic, market and business conditions; the business opportunities (or lack thereof) that may be presented to and pursued by the Company; changes in laws or regulation and other factors, most of which are beyond the control of the Company.

These forward-looking statements can be identified by the use of predictive, future-tense or forward-looking terminology, such as “believes,” “anticipates,” “expects,” “estimates,” “plans,” “may,” “will,” or similar terms. These statements appear in a number of places in this filing and include statements regarding the intent, belief or current expectations of the Company, and its directors or its officers with respect to, among other things: (i) trends affecting the Company’s financial condition or results of operations for its limited history; (ii) the Company’s business and growth strategies; and, (iii) the Company’s financing plans. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. Such factors that could adversely affect actual results and performance include, but are not limited to, the Company’s limited operating history, potential fluctuations in quarterly operating results and expenses, government regulation, technological change and competition. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to our filings with the SEC under the Exchange Act and the Securities Act of 1933, as amended, including our Current Report on Form 10-K filed with the Securities and Exchange Commission on April 15, 2022.

Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The Company assumes no obligations to update any such forward-looking statements.

TABLE OF CONTENTS.

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~~TABLE OF CONTENTS.~~

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PART I FINANCIAL INFORMATION

ITEM 1		Financial Statements		10 9

		Unaudited Condensed Consolidated Balance Sheets as of ~~March 31,~~June 30, 2022 and December 31, 2021		~~F-2~~ 9

		Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Six Months Ended ~~March 31,~~June 30, 2022 and 2021		~~F-3~~ 10

		Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2022 and 2021		~~F-4~~ 11

		Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Deficit for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2022		~~F-5~~ 12

		Notes to Unaudited Condensed Consolidated Financial Statements		~~F-6 - F26~~ 13-37

ITEM 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations		11 38

ITEM 3		Quantitative and Qualitative Disclosures about Market Risk		23 48

ITEM 4		Controls and Procedures		23 48

PART II OTHER INFORMATION

ITEM 1		Legal Proceedings		24 49

ITEM 1A		Risk Factors		24 49

ITEM 2		Unregistered Sales of Equity Securities and Use of Proceeds		24 49

ITEM 3		Defaults upon Senior Securities		24 49

ITEM 4		Mine Safety Disclosures		24 49

~~ITEM 5~~	~~Other Information~~		24

~~ITEM 6~~	~~Exhibits~~		25

~~SIGNATURES~~			26


9
ITEM 5	Other Information	49
~~Table Of Contents~~
ITEM 6	Exhibits	50

SIGNATURES		51

PART I FINANCIAL INFORMATION

ITEM 1 Financial Statements

~~Table Of Contents~~

COSMOS GROUP HOLDINGS INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Currency expressed in United States Dollars (“US$”), except for number of shares)

March 31,

December 31,

2022

2021

ASSETS

(Audited)

Current asset:

Cash and cash equivalents

$ 1,698,505

$ 1,131,128

Digital assets

4,146

35,451

Loan receivables, net

20,339,940

19,052,594

Loan interest and fee receivables, net

306,126

483,371

Inventories

1,437,646

2,103,038

Prepayment and other receivables

882,852

877,802

Right-of-use assets, net

295,491

298,317

Total current assets

24,964,706

23,981,701

Non-current assets:

Property and equipment, net

58,623

59,270

Intangible assets, net

17,562,861

18,554,389

Goodwill

554,098

0

TOTAL ASSETS

$ 43,140,288

$ 42,595,360

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:

Accounts payable

$ 239,358

$ 240,156

Accrued liabilities and other payables

356,789

399,968

Accrued consulting and service fee

62,367,500

0

Loan payables

911,240

489,836

Amounts due to related parties

20,105,289

20,954,836

Income tax payable

629,296

431,463

Operating lease liabilities

234,596

231,816

Total current liabilities

84,844,068

22,748,075

Non-current liabilities

Operating lease liabilities:

71,195

78,216

TOTAL LIABILITIES

84,915,263

22,826,291

Commitments and contingencies

0

0

STOCKHOLDERS’ (DEFICIT) EQUITY

Common stock, $0.001 par value; 500,000,000 shares authorized; 358,320,541 and 358,067,481 issued and outstanding as of March 31, 2022 and December 31, 2021

358,321

358,067

Common stock to be issued

806,321

806,321

Additional paid-in capital

45,778,659

44,930,337

Accumulated other comprehensive loss

(18,030 )

(7,588 )
Accumulated deficit

(88,828,230 )

(26,436,477 )

(41,902,959 )

19,650,660

Noncontrolling interest

127,984

118,409

Stockholders’ (deficit) equity

(41,774,975 )

19,769,069

TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY

$ 43,140,288

$ 42,595,360

	June 30,			December 31,
	2022			2021
ASSETS				(Audited)
Current asset:
Cash and cash equivalents	$	1,772,287		$	1,131,128
Digital assets, net		187,810			35,451
Loan receivables, net		20,652,941			19,052,594
Loan interest and fee receivables, net		283,844			483,371
Inventories		1,329,121			2,103,038
Prepayment and other receivables		865,328			877,802
Right-of-use assets, net		288,870			298,317

Total current assets		25,380,201			23,981,701

Non-current assets:
Property and equipment, net		59,962			59,270
Intangible assets, net		16,569,525			18,554,389
Goodwill		552,961			-

TOTAL ASSETS	$	42,562,649		$	42,595,360

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	374,510		$	240,156
Accrued liabilities and other payables		455,351			399,968
Accrued consulting and service fee		1,089,371			-
Loan payables		1,070,624			489,836
Amounts due to related parties		17,985,430			20,954,836
Income tax payable		773,904			431,463
Operating lease liabilities		214,793			231,816

Total current liabilities		21,963,983			22,748,075

Non-current liabilities
Operating lease liabilities:		82,925			78,216

TOTAL LIABILITIES		22,046,908			22,826,291

Commitments and contingencies		-			-

STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value; 500,000,000 shares authorized; 385,306,097 and 358,067,481 issued and outstanding as of June 30, 2022 and December 31, 2021		385,306			358,067
Common stock to be issued		800,000			806,321
Additional paid-in capital		128,656,667			44,930,337
Accumulated other comprehensive loss		(12,108	)		(7,588	)
Accumulated deficit		(109,488,080	)		(26,436,477	)
		20,341,785			19,650,660
Noncontrolling interest		173,956			118,409

Stockholders’ equity		20,515,741			19,769,069

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	42,562,649		$	42,595,360

See accompanying notes to unaudited condensed consolidated financial statements.

~~F-2~~

~~Table Of Contents~~

COSMOS GROUP HOLDINGS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

~~(Currency expressed in United States Dollars (“US$”))~~

Three months ended
March 31,

2022

2021

Revenue, net

(Restated)

Interest income

$ 1,666,141

$ 1,601,622

Arts and collectibles technology income

2,514,806

0

4,180,947

1,601,622

Cost of revenue

Interest expense

(46,906 )

(503,947 )
Arts and collectibles technology expense

(665,759 )

0

(712,665 )

(503,947 )

Gross profit

3,468,282

1,097,675

Operating expenses:

Sales and marketing expenses

(19,364,656 )

(29,263 )
Corporate development expense

(18,988,606 )

0

Technology and development expense

(24,353,672 )

0

General and administrative expenses

(2,729,002 )

(855,739 )
Total operating expenses

(65,435,936 )

(885,002 )

(LOSS) INCOME FROM OPERATION

(61,967,654 )

212,673

Other (expense) income:

Interest income

39

16

Impairment loss on digital assets

(3,199 )

0

Imputed interest expense

(237,114
)

0

Sundry income

23,939

2,282

Total other income (expense), net

(216,335
)

2,298

(LOSS) INCOME BEFORE INCOME TAXES

(62,183,989 )

214,971

Income tax expense

(211,155 )

(6,056 )

NET (LOSS) INCOME

(62,395,144 )

208,915

Net loss attributable to noncontrolling interest

(3,391
)

(139,945 )

Net (loss) income attributable to common shareholders

(62,391,753 )

348,860

Other comprehensive income:

Foreign currency adjustment loss

(10,442 )

(292 )

COMPREHENSIVE (LOSS) INCOME

$ (62,402,195 )

$ 348,568

Net (loss) income per share:

– Basic

$ (0.19 )

$
0.00#

– Diluted

$ (0.05 )

$
0.00#

Weighted average common shares outstanding:

– Basic

334,072,705

333,910,484

– Diluted

1,140,394,061

1,133,910,484

~~#: less than 0.01~~

~~See accompanying notes to unaudited condensed consolidated financial statements.~~

~~F-3~~

~~Table Of Contents~~

~~COSMOS GROUP HOLDINGS INC.~~

~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Currency expressed in United States Dollars (“US$”))~~

Three months ended
March 31,

2022

2021

Cash flows from operating activities:

Net (loss) income

$ (62,395,144 )

$ 208,915

Adjustments to reconcile net (loss) income to net cash used in operating activities

Depreciation of property and equipment

1,986

7,065

Amortization of intangible assets

993,249

0

Imputed interest expense

237,114

0

Digital assets received as revenue

(2,514,806 )

0

Digital assets paid for expense

2,542,912

0

Impairment loss on digital assets

3,199

0

Change in operating assets and liabilities:

Loan receivables

(1,287,346 )

(721,832 )
Loan interest and fee receivables

177,245

(31,414 )
Inventories

665,392

0

Prepayment and other receivables

6,196

24,805

Accrued liabilities and other payables

(47,432
)

(101,673 )
Accrued consulting and service fee

62,367,500

Right-of-use assets and operating lease liabilities

(1,415 )

11,426

Income tax payable

211,155

6,047

Net cash provided by (used in) operating activities

959,805

(596,661 )

Cash flows from investing activities:

Receive from disposal of property and equipment

2,599

159,443

Payment to acquire intangible assets

(1,878 )

0

Cash from acquisition of subsidiary

33,404

0

Net cash provided by investing activities

34,125

159,443

Cash flows from financing activities:

Proceeds from loan payables

421,404

294,271

(Repayment of) advance from related parties

(827,715 )

294,485

Net cash provided by (used in) financing activities

(406,311 )

588,756

Foreign currency translation adjustment

(20,242 )

(292 )

Net change in cash and cash equivalents

567,377

151,246

BEGINNING OF PERIOD

1,131,128

773,381

END OF PERIOD

$ 1,698,505

$ 924,627

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for income taxes

$ 0

$ 0

Cash paid for interest

$ 46,906

$ 503,947

~~See accompanying notes to unaudited condensed consolidated financial statements.~~

~~F-4~~

~~Table Of Contents~~

~~COSMOS GROUP HOLDINGS INC.~~

~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)~~

~~FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021~~

(Currency expressed in United States Dollars (“US$”), except for number of shares)

~~(Unaudited)~~

Common stock

Common stock

Additional paid-

Accumulated other

(Accumulated losses)

Non-

Total stockholders’

No. of
shares

Amount

to be
issued
��

in
capital

comprehensive
loss

retained
earnings

controlling
interest

(deficit)
equity

Balance as of January 1, 2021 (restated)

333,910,484

$ 333,911

$ 800,000

0

$ (5,374 )

$ (1,379,358 )

$ 237,590

$ (13,231 )

Foreign currency translation adjustment

-

0

0

0

(292 )

0

0

(292 )
Net income for the period

-

0

0

0

0

348,860

(139,945 )

208,915

Balance as of March 31, 2021

333,910,484

$ 333,911

$ 800,000

0

$ (5,666 )

$ (1,030,498 )

$ 97,645

$ 195,392

Balance as of January 1, 2022

358,067,481

$ 358,067

$ 806,321

44,930,337

$ (7,588 )

$ (26,436,477 )

$ 118,409

$ 19,769,069

Foreign currency translation adjustment

-

0

0

0

(10,442 )

0

0

(10,442 )
Imputed interest on related party loans

-

0

0

236,336

0

0

0

236,336

Commitment Share issued for private placement

100,000

100

0

(100 )

0

0

0

0

Share issued for acquired subsidiary

153,060

154

0

612,086

0

0

12,966

625,206

Net loss for the period

-

0

0

0

0

(62,391,753 )

(3,391
)

(62,395,144 )

Balance as of March 31, 2022

358,320,541

$ 358,321

$ 806,321

$
45,778,659

$ (18,030 )

$ (88,828,230 )

$ 127,984

$ (41,774,975 )

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
				(restated)						(restated)
Revenue, net
Lending segment	$	1,649,528		$	1,626,323		$	3,315,669		$	3,227,945
Arts and collectibles technology segment		3,043,530			-			5,558,336			-
		4,693,058			1,626,323			8,874,005			3,227,945
Cost of revenue
Lending segment		(293,385	)		(272,999	)		(340,291	)		(776,946	)
Arts and collectibles technology segment		(141,376	)		-			(807,135	)		-
		(434,761	)		(272,999	)		(1,147,426	)		(776,946	)
Gross profit		4,258,297			1,353,324			7,726,579			2,450,999
Operating expenses:
Sales and marketing expenses		(6,892,199	)		(13,091	)		(26,256,855	)		(42,354	)
Corporate development expense		(6,743,525	)		-			(25,732,131	)		-
Technology and development expense		(8,204,895	)		-			(32,558,567	)		-
General and administrative expenses		(2,669,294	)		(793,985	)		(5,398,296	)		(1,649,724	)
Total operating expenses		(24,509,913	)		(807,076	)		(89,945,849	)		(1,692,078	)
(LOSS) INCOME FROM OPERATION		(20,251,616	)		546,248			(82,219,270	)		758,921
Other income (expense):
Interest income		2,116			-			2,155			16
Impairment loss on digital assets		(6,957	)		-			(10,156	)		-
Imputed interest expense		(242,377	)		-			(479,491	)		-
Sundry income		31,069			-			55,008			2,282
Gain from forgiveness of related party debt		-			138,414			-			138,414
Total other income (expense)		(216,149	)		138,414			(432,484	)		140,712
(LOSS) INCOME BEFORE INCOME TAXES		(20,467,765	)		684,662			(82,651,754	)		899,633
Income tax expense		(146,113	)		(207,873	)		(357,268	)		(213,929	)
NET (LOSS) INCOME		(20,613,878	)		476,789			(83,009,022	)		685,704
Net income attributable to noncontrolling interest		45,972			469,721			42,581			329,776
Net (loss) income attributable to common shareholders		(20,659,850	)		7,068			(83,051,603	)		355,928
Other comprehensive income:
Foreign currency adjustment (loss) gain		5,922			(43	)		(4,520	)		(335	)
COMPREHENSIVE (LOSS) INCOME	$	(20,653,928	)	$	7,025		$	(83,056,123	)	$	355,593
Net (loss) income per share
– Basic	$	(0.06	)	$	#0.00		$	(0.23	)	$	#0.00
– Diluted	$	(0.06	)	$	#0.00		$	(0.23	)	$	#0.00
Weighted average common shares outstanding
– Basic		364,686,715			333,910,484			364,686,715			333,910,484
– Diluted		364,686,715			333,910,484			364,686,715			333,910,484

#: less than 0.01

See accompanying notes to unaudited condensed consolidated financial statements.

~~F-5~~

~~Table Of Contents~~

COSMOS GROUP HOLDINGS INC.

~~NOTES TO~~ UNAUDITED CONDENSED CONSOLIDATED ~~FINANCIAL~~ STATEMENTS OF CASH FLOWS

(Currency expressed in United States Dollars (“US$”))

Six months ended
June 30,

2022 2021
Cash flows from operating activities:
Net (loss) income $ (83,009,022 ) $ 685,704

Adjustments to reconcile net (loss) income to net cash used in operating activities
Depreciation of property and equipment 1,986,506 10,060
Amortization of intangible assets 4,325 -
Gain from forgiveness of related party debts - (138,414 )
Imputed interest expense 479,491 -
Digital assets received as revenue (5,746,724 ) -
Digital assets paid for expense 5,584,209 -
Impairment loss on digital assets 10,156 -
Share issued for services rendered 82,656,800

Change in operating assets and liabilities:
Loan receivables (1,600,347 ) (5,039,086 )
Loan interest and fee receivables 199,527 (266,290 )
Inventories 773,917 -
Prepayment and other receivables 23,697 (629,627 )
Accrued liabilities and other payables 51,139 43,302
Accrued consulting and service fee 1,089,371 -
Accounts payables 135,300 -
Right-of-use assets and operating lease liabilities (2,867 ) -
Income tax payable 357,268 213,821
Net cash provided by (used in) operating activities 2,992,746 (5,120,530 )

Cash flows from investing activities:
(Acquisition of) Receive from disposal of property and equipment (2,861 ) 164,172
Payment to acquire intangible assets (1,874 ) -
Cash from acquisition of subsidiary 33,336 -
Net cash provided by investing activities 28,601 164,172

Cash flows from financing activities:
Proceeds from (repayment of) loan payables 580,788 (2,402,993 )
(Repayment of) advance from related parties (2,947,618 ) 8,141,550
Net cash provided by (used in) financing activities (2,366,830 ) 5,738,557

Foreign currency translation adjustment (13,358 ) (7,950 )

Net change in cash and cash equivalents 641,159 774,249

BEGINNING OF PERIOD 1,131,128 773,381

END OF PERIOD $ 1,772,287 $ 1,547,630

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ - $ -
Cash paid for interest $ 340,291 $ 776,946
See accompanying notes to unaudited condensed consolidated financial statements.

COSMOS GROUP HOLDINGS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

Common stock Common
stock Additional
Accumulated
other
(Accumulated
losses) Non-
Total
stockholders’

No. of shares Amount to be issued paid- in capital comprehensive loss retained earnings controlling
interest (deficit)
equity

Balance as of January 1, 2021 (restated) 333,910,484 $ 333,911 $ 800,000 - $ (5,374 ) $ (1,379,358 ) $ 237,590 $ (13,231 )

Foreign currency translation adjustment - - - - (292 ) - - (292 )
Net income for the period - - - - - 348,860 (139,945 ) 208,915

Balance as of March 31, 2021 333,910,484 $ 333,911 $ 800,000 - $ (5,666 ) $ (1,030,498 ) $ 97,645 $ 195,392

Foreign currency translation adjustment - - - - (43 ) - - (43 )
Net income for the period - - - - - 7,068 469,721 476,789

Balance as of June 30, 2021 333,910,484 $ 333,911 $ 800,000 - $ (5,709 ) $ (1,023,430 ) $ 567,366 $ 672,138

Balance as of January 1, 2022 358,067,481 $ 358,067 $ 806,321 $ 44,930,337 $ (7,588 ) $ (26,436,477 ) $ 118,409 $ 19,769,069

Foreign currency translation adjustment - - - - (10,442 ) - - (10,442 )
Imputed interest on related party loans - - - 236,336 - - - 236,336
Commitment Share issued for private placement 100,000 100 - (100 ) - - - -
Share issued for acquired subsidiary 153,060 154 - 612,086 - - 12,966 625,206
Net loss for the period - - - - - (62,391,753 ) (3,391 ) (62,395,144 )

Balance as of March 31, 2022 358,320,541 $ 358,321 $ 806,321 $ 45,778,659 $ (18,030 ) $ (88,828,230 ) $ 127,984 $ (41,774,975 )

Foreign currency translation adjustment - - - - 5,922 - - 5,922
Imputed interest on related party loans - - - 241,872 - - - 241,872
Share issued for service rendered 26,985,556 26,985 (6,321 ) 82,636,136 82,656,800
Net loss for the period - - - - - (20,659,850 ) 45,972 (20,613,878 )

Balance as of June 30, 2022 385,306,097 $ 385,306 $ 800,000 $ 128,656,667 $ (12,108 ) $ (109,488,080 ) $ 173,956 $ 20,515,741
See accompanying notes to unaudited condensed consolidated financial statements.

COSMOS GROUP HOLDINGS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with both accounting principles generally accepted in the United States (“GAAP”), and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.

In the opinion of management, the consolidated balance sheet as of December 31, 2021 which has been derived from audited financial statements and these unaudited condensed consolidated financial statements reflect all normal and recurring adjustments considered necessary to state fairly the results for the periods presented. The results for the period ended ~~March 31,~~June 30, 2022 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2022 or for any future period.

NOTE 2 - ORGANIZATION AND BUSINESS BACKGROUND

Cosmos Group Holdings Inc. (the “Company” or “COSG”) was incorporated in the state of Nevada on August 14, 1987.

The Company currently offers financial and money lending services in Hong Kong and operates an online platform for the sale and distribution of arts and collectibles around the world, ~~with~~through the use of blockchain technologies and minting token.

~~F-6~~

~~Table Of Contents~~

COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

Description of subsidiaries

Company name

Place of incorporation and kind of

legal entity

Principal activities and place of operation

Particulars of registered/ paid up

share capital

Effective interest held

Massive Treasure Limited

BVI, limited liability company

Investment holding

50,000 ordinary shares with a par value of US$1 each

~~100%~~

100

Coinllectibles (HK) Limited

Hong Kong, limited liability company

Corporate management in Hong Kong

1,000 ordinary shares for HK$1,000

~~100%~~

100

Coinllectibles Wealth Limited

Hong Kong, limited liability company

Corporate management in Hong Kong

1 ordinary share for HK$1

~~100%~~

100

Coinllectibles DeFi Limited

Hong Kong, limited liability company

Financing service management in Hong Kong

10,000 ordinary shares for HK$10,000

~~100%~~

100

Coinllectibles Private Limited

Singapore, limited liability company

Corporate management and IT development in Singapore

1,000 ordinary shares for S$1,000

~~100%~~

100

Coinllectibles Limited

BVI, limited liability company

Procurement of art and collectibles in Singapore

1,000 ordinary shares with a par value of US$1 each

~~100%~~

100

Healthy Finance Limited

Hong Kong, limited liability company

Money lending service in Hong Kong

10,000 ordinary shares for HK$10,000

~~51%~~

8M Limited

Hong Kong, limited liability company

Money lending service in Hong Kong

10 ordinary shares for HK$10

~~100%~~

100

Dragon Group Mortgage Limited

Hong Kong, limited liability company

Money lending service in Hong Kong

10,000 ordinary shares for HK$10,000

~~51%~~

E-on Finance Limited

Hong Kong, limited liability company

Money lending service in Hong Kong

2 ordinary shares for HK$2

~~100%~~

100

Lee Kee Finance Limited

Hong Kong, limited liability company

Money lending service in Hong Kong

920,000 ordinary shares for HK$920,000

~~51%~~

Rich Finance (Hong Kong) Limited

Hong Kong, limited liability company

Money lending service in Hong Kong

10,000 ordinary shares for HK$10,000

~~51%~~

Long Journey Finance Limited

Hong Kong, limited liability company

Money lending service in Hong Kong

100 ordinary shares for HK$100

~~51%~~

Vaav Limited

Hong Kong, limited liability company

Money lending service in Hong Kong

10,000 ordinary shares for HK$10,000

~~51%~~

Star Credit Limited

Hong Kong, limited liability company

Money lending service in Hong Kong

1,000,000 ordinary shares for HK$1,000,000

~~51%~~

NFT Limited

BVI, limited liability company

Procurement of intangible assets in Hong Kong

10,000 ordinary shares with a par value of US$1 each

~~51%~~

Grandway Worldwide Holding Limited

BVI, limited liability company

Development of mobile application

50,000 ordinary shares for USD$50,000

~~51%~~

Grand Town Development Limited

Hong Kong, limited liability company

Provision treasury management

2 ordinary shares for HK$2

~~100%~~

100

Grand Gallery Limited

Hong Kong, limited liability company

Procurement of art and collectibles in Hong Kong

400,000 ordinary shares for HK$400,000

~~80%~~

Phoenix Waters Group Limited

BVI, limited liability company

Investment holding

50,000 ordinary shares with a par value of US$1 each

~~100%~~

100

~~F-7~~

~~Table Of Contents~~

COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

The Company and its subsidiaries are hereinafter referred to as (the “Company”).

NOTE 3 - ~~SUMMARY~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying condensed consolidated financial statements and notes.

·●	Basis of presentation

These accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

●

Use of estimates and assumptions

In preparing these condensed 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 periods reported. Actual results may differ from these estimates. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted. Significant estimates in the period include the goodwill, impairment loss on digital assets, valuation and useful lives of intangible assets and property and equipment and deferred tax valuation allowance.

·●	Basis of consolidation

The condensed consolidated financial statements include the accounts of COSG and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.

·●	Segment reporting

Accounting Standard Codification (“ASC”) Topic 280, Segment Reporting establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in condensed consolidated financial statements. Currently, the Company operates in two reportable operating segments in Hong Kong and Singapore.

·●	Cash and cash equivalents

Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.

●	Inventories

~~Inventories~~

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 ~~March 31,~~June 30, 2022.

·●	Digital assets

The Company’s digital assets mainly represent the cryptocurrencies held in its e-wallet. The Company accounts for its digital assets in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 350, “General Intangibles Other Than Goodwill” (“ASC 350”). ASC 350 requires assets to be measured based on the fair value of the consideration given or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measurable. Accordingly, if the fair market value at any point during the reporting period is lower than the carrying value an impairment loss equal to the difference will be recognized in the consolidated statement of operations. If the fair market value at any point during the reporting period is higher than the carrying value, the basis of the digital assets will not be adjusted to account for this increase. Gains on digital assets, if any, will be recognized upon sale or disposal of the assets.

~~F-8~~

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COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

The Company’s cryptocurrencies are deemed to have an indefinite useful life, therefore amounts are not amortized, but rather are assessed for impairment.

·●	Loan receivables, net

Loans receivables are carried at unpaid principal balances, less the allowance for loan losses and charge-offs. The loans receivables portfolio consists of real estate mortgage loans, commercial and personal loans.

Loans are placed on nonaccrual status when they are past due 180 days or more as to contractual obligations or when other circumstances indicate that collection is not probable. When a loan is placed on nonaccrual status, any interest accrued but not received is reversed against interest income. Payments received on a nonaccrual loan are either applied to protective advances, the outstanding principal balance or recorded as interest income, depending on an assessment of the ability to collect the loan. A nonaccrual loan may be restored to accrual status when principal and interest payments have been brought current and the loan has performed in accordance with its contractual terms for a reasonable period (generally six months).

If the Company determines that a loan is impaired, the Company next determines the amount of the impairment. The amount of impairment on collateral dependent loans is charged off within the given fiscal quarter. Generally, the amount of the loan and negative escrow in excess of the appraised value less estimated selling costs, for the fair value of collateral valuation method, is charged off. For all other loans, impairment is measured as described below in Allowance for Loan Losses.

·●	Allowance for loan losses (“ALL”)

The adequacy of the Company’s ALL is determined, in accordance with ASC Topic 450-20 Loss Contingencies includes management’s review of the Company’s loan portfolio, including the identification and review of individual problem situations that may affect a borrower’s ability to repay. In addition, management reviews the overall portfolio quality through an analysis of delinquency and non-performing loan data, estimates of the value of underlying collateral, current charge-offs and other factors that may affect the portfolio, including a review of regulatory examinations, an assessment of current and expected economic conditions and changes in the size and composition of the loan portfolio.

The ALL reflects management’s evaluation of the loans presenting identified loss potential, as well as the risk inherent in various components of the portfolio. There is significant judgment applied in estimating the ALL. These assumptions and estimates are susceptible to significant changes based on the current environment. Further, any change in the size of the loan portfolio or any of its components could necessitate an increase in the ALL even though there may not be a decline in credit quality or an increase in potential problem loans.

·●	Property and equipment

Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:

		Expected useful life
Computer and office equipment		5 years

Expenditure for repairs and maintenance is expensed as incurred. When assets have retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.

Depreciation expense for the ~~periods~~three months ended ~~March 31,~~June 30, 2022 and 2021 totaled ~~$1,986~~$2,339 and ~~$7,065,~~$2,995, respectively.

~~F-9~~

Depreciation expense for the six months ended June 30, 2022 and 2021 totaled $4,325 and $10,060, respectively.

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COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

·●	Business Combination

We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill to reporting units based on the expected benefit from the business combination. Allocation of purchase consideration to identifiable assets and liabilities affects the amortization expense, as acquired finite-lived intangible assets are amortized over the useful life, whereas any indefinite-lived intangible assets, including goodwill, are not amortized. During the measurement period, which is not to exceed one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Acquisition-related expenses are recognized separately from business combinations and are expensed as incurred.

·●

Goodwill

~~We allocate~~In accordance with ASC 350, the goodwill towe determined for reporting units is based on the expected benefit from business combinations. We evaluate our reporting units annually, as well as when changes in our operating segments occur. For changes in reporting units, we reassign goodwill using a relative fair value allocation approach. Goodwill is tested for impairment at the reporting unit level annually or more frequently if events or changes in circumstances would more likely than not reduce the fair value of a reporting unit below its carrying value. We have two reporting units subject to goodwill impairment testing. As of ~~March~~June 30, 2022 and December 31, ~~2022,~~2021, no impairment of goodwill has been identified.

·●	Intangible assets

The Company accounts for its intangible assets in accordance with ASC 350. Intangible assets represented the acquired technology software, licensed technology know-how, trademark and trade names for its internal use to facilitate and support its platform operation. They are stated at the purchase cost and are amortized based on their economic benefit expected to be realized.

·●	Impairment of long-lived assets

In accordance with the provisions of ASC Topic 360, Impairment or Disposal of Long-Lived Assets, all long-lived assets such as property and equipment and intangible assets owned and held 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.

·●	Revenue recognition

ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers.

The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:

·●	identify the contract with a customer;
·●	identify the performance obligations in the contract;
·●	determine the transaction price;
·●	allocate the transaction price to performance obligations in the contract; and
·●	recognize revenue as the performance obligation is satisfied.

~~F-10~~

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COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

Revenue is recognized when the Company satisfies its performance obligation under the contract by transferring the promised product to its customer that obtains control of the product and collection is reasonably assured. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. Most of the Company’s contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct.

Lending Business

The Company is licensed to originate personal loan, company loan and mortgage loan in Hong Kong. During the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, 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

~~Commencing from October 1, 2021, the~~The Company ~~launched~~currently operates its online platform in the sale and distribution of arts and collectibles, with the use of blockchain technologies and minting tokens. The item of arts and collectibles is individually monetized as non-interchangeable unit of data stored on a blockchain, which is a form of digital ledger that can be sold, in the form of a minting token on the online platform. The Company involves with the following activities to earn its revenue in this segment:

Sale of arts and collectibles products: The Company recognizes revenue derived from the sales of the arts and collectibles when the Company has transferred the risks and rewards to the customers.

The minted item of the individual art or ~~collectibles~~collectible which ~~are~~is sold in crypto asset transaction is the only performance obligation under the fixed-fee arrangements. The corresponding fees received upon each sale transaction is recognized as revenue, is recognized when the designated token, minted with the corresponding art and collectibles is delivered to the end user, together with the transfer of both digital and official title.

Transaction fee income:

The Company also generates revenue through transaction fees transacted on its platform or other marketplaces. The Company charges a fee to individual customer at the secondary transaction level, which is allocated to the single performance obligation. The transaction fee is collected from the customer in digital assets, with revenue measured based on a certain percentage of the value of digital assets at the time the transaction is executed.

The Company’s service ~~is comprised~~comprises of a single performance obligation to provide a platform facilitating the transfer of its DOTs. The Company considers its performance obligation satisfied, and recognizes revenue, at the point in time the transaction is processed.

~~F-11~~

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COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

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.

Expenses associated with operating the Arts and Collectibles Technology Business, such as minting cost and purchase cost of collectibles and artworks are also recorded as cost of revenues.

·●

Leases

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. However, certain adjustments to the right-of-use assets may be required for items such as prepaid or accrued lease payments. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

In accordance with the guidance in ASC Topic 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.

The Company made the policy election to not separate lease and non-lease components. Each lease component and the related non-lease components are accounted for together as a single component.

·●	Income taxes

The Company adopted the ASC Topic 740 Income tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.

·●	Uncertain tax positions

The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC Topic 740 provisions of Section 740-10-25 for the ~~periods~~six months ended ~~March 31,~~June 30, 2022 and 2021.

~~F-12~~

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COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

·●	Foreign currencies translation

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statement of operations.

The reporting currency of the Company is United States Dollar (“US$”) and the accompanying consolidated financial statements have been expressed in US$. In addition, the Company has operations in Hong Kong and Singapore and maintains the books and record in the local currency, Hong Kong Dollars (“HKD”) and Singapore Dollars (“SGD”), which is a functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiary whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, Translation of Financial Statement, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statements of changes in stockholder’s equity.

Translation of amounts from HKD and SGD into US$ has been made at the following exchange rates for the following periods:-

March 31,
2022

March 31,
2021

Period/ year-end HKD:US$ exchange rate

0.1277

0.1286

Annualized average HKD:US$ exchange rate

0.1281

0.1289

June 30,

2022

June 30,

2021

Period-end HKD:US$ exchange rate

0.1274

0.1288

Period average HKD:US$ exchange rate

0.1278

0.1288

March 31,
2022

March 31,
2021

Period/ year-end SGD:US$ exchange rate

0.7387

0.7433

Annualized average SGD:US$ exchange rate

0.7396

0.7507

June 30,

2022

June 30,

2021

Period-end SGD:US$ exchange rate

0.7189

0.7437

Period average SGD:US$ exchange rate

0.7328

0.7506

·●	Comprehensive income

ASC Topic 220, Comprehensive Income, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statements of changes in stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

·●	Noncontrolling interest

The Company accounts for noncontrolling interest in accordance with ASC Topic 810-10-45, which requires the Company to present noncontrolling interests as a separate component of total shareholders’ equity on the consolidated balance sheets and the consolidated net loss attributable to the noncontrolling interest be clearly identified and presented on the face of the consolidated statements of operations and comprehensive loss.

·●	Net loss per share

The Company calculates net loss per share in accordance with ASC Topic 260, Earnings per Share. Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.

~~F-13~~

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COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

·●	Stock based compensation

Pursuant to ASU 2018-07, the Company follows ASC 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all share-based payment awards (employee or non-employee), are measured at grant-date fair value of the equity instruments that an entity is obligated to issue. Restricted stock units are valued using the market price of the Company’s common shares on the date of grant. The Company uses a Black-Scholes option model to estimate the fair value of employee stock options at the date of grant. As of ~~March 31,~~June 30, 2022, those shares issued and stock options granted for service compensations were immediately vested, and therefore these amounts are thus recognized as expense in the operation.

·●	Related parties

The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.

Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

The condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

·●	Commitments and contingencies

The Company follows the ASC 450-20, Commitments to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

·●	Fair value of financial instruments

~~F-14~~

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COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:

Level 1	Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2	Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Level 3	Pricing inputs that are generally observable inputs and not corroborated by market data.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

~~F-15~~

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COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, loan and fee receivable, prepayments and other receivables, amounts due from related parties, accrued liabilities and other payables, loans payable, amounts due to related parties approximate their fair values because of the short maturity of these instruments.

·●	Recent accounting pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

~~In May 2021, the FASB issued ASU 2021-04,~~ Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), (“ASU 2021-04”). This ASU reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. This ASU provides guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic. It specifically addresses: (1) how an entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange; (2) how an entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange; and (3) how an entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. This ASU became effective for all entities for fiscal years beginning after December 15, 2021. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. The adoption of ASU 2021-04 on January 1, 2022 did not have a material impact on the Company’s financial statements or disclosures.

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.

NOTE 4 - GOING CONCERN UNCERTAINTIES

The accompanying condensed consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company has suffered from an accumulated deficit of ~~$88,828,230~~$109,488,080 and working capital ~~deficit~~ of ~~$59,879,362~~$3,416,218 at ~~March 31,~~June 30, 2022. 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 the Company’s business.

~~F-16~~

~~Table Of Contents~~

~~COSMOS GROUP HOLDINGS INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021~~

~~(Currency expressed in United States Dollars (“US$”), except for number of shares)~~

The continuation of the Company as a going concern in the next twelve months is dependent upon the continued financial support from its stockholders. Management believes the Company is currently pursuing additional financing for its operations. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain the operations.

COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.

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 the 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.NOTE 5 - BUSINESS COMBINATION

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.

~~NOTE 5 – BUSINESS COMBINATION~~

On February 10, 2022, the Company issued 153,060 shares of its common stock, at a price of $4.00 per share at its current market price, in exchange for 80% of equity interest of Grand Gallery Limited, a Hong Kong limited liability company. The Company accounted for the transaction as an acquisition of a business pursuant to ASC 805, “Business Combinations” (“ASC 805”).

The transaction was accounted for using the acquisition method. Accordingly, goodwill has been measured as the excess of the total consideration over the amounts assigned to the identifiable assets acquired and liabilities assumed based on their preliminary estimated fair values.

The purchase price allocation resulted in ~~$554,098~~$552,961 of goodwill, as below:

Acquired assets:

Property and equipment

$ 2,599

Cash and cash equivalents

33,404

Deposit, prepayment and other receivables

11,247

Amounts due from related parties

21,832

69,082

Less: Assumed liabilities

Accrued liabilities and other payables

(4,253 )

(4,253 )
Fair value of net assets acquired

64,829

Noncontrolling interest

(12,966 )
Foreign translation adjustment

6,279

Goodwill recorded

554,098

Consideration allocated, payable by the Company’s common stock

$ 612,240

Acquired assets:
Property and equipment	$	2,594
Cash and cash equivalents		33,336
Deposit, prepayment and other receivables		11,223
Amounts due from related parties		21,788
		68,941
Less: Assumed liabilities
Accrued liabilities and other payables		(4,244	)
		(4,244	)
Fair value of net assets acquired		64,697
Noncontrolling interest		(12,966	)
Foreign translation adjustment		7,548
Goodwill recorded		552,961
Consideration allocated, payable by the Company’s common stock	$	612,240

Under the acquisition method of accounting, the total acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market data. The preliminary allocation of the purchase price is based on the best information available and is pending, amongst other things: (i) the finalization of the valuation of the fair values and useful lives of tangible assets acquired; (ii) finalization of the valuation of accrued expenses; and (iii) finalization of the fair value of non-cash consideration.

The Acquisition was accounted for as a business combination in accordance with ASC 805 “Business Combinations”. The Company has allocated the purchase price consideration based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed and intangible assets identified as of the acquisition date and considered a number of factors including valuations from management estimation. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense.

NOTE 6 –- REVENUE FROM CONTRACTS WITH CUSTOMERS

The following is a disaggregation of the Company’s revenue by major source for the respective periods:

Three months ended
March 31,

2022

2021

Interest income

$ 1,666,141

$ 1,601,622

ACT income:

- Sale of arts and collectibles products

1,208,146

0

- Transaction fee income and others

1,306,660

0

2,514,806

0

$ 4,180,947

$ 1,601,622

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021

Interest income	$	1,649,528	$	1,626,323	$	3,315,669	$	3,227,945
ACT income
- Sale of arts and collectibles products		198,304		-		1,406,450		-
- Transaction fee income and others		2,845,226		-		4,151,886		-
		3,043,530		-		5,558,336		-

	$	4,693,058	$	1,626,323	$	8,874,005	$	3,227,945

~~F-17~~

~~Table Of Contents~~

COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

NOTE 7 –- BUSINESS SEGMENT INFORMATION

Currently, the Company has ~~two~~2 reportable business segments:

(i)	Lending Segment, mainly provides financing and lending services; and

(ii)	Arts and Collectibles Technology (“ACT”) Segment, mainly operates an online platform to sell and distribute the arts and collectibles to end-users, with the use of blockchain technologies and minting tokens.

In the following table, revenue is disaggregated by primary major product line, and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the reportable segments.

Three months ended March 31, 2022

Lending
Segment

ACT
Segment

Total

Revenue from external customers:

Interest income

$ 1,666,141

$ 0

$ 1,666,141

Arts and collectibles technology income

0

2,514,806

2,514,806

Total revenue, net

1,666,141

2,514,806

4,180,947

Cost of revenue:

Interest expense

(46,906 )

0

(46,906 )
Arts and collectibles technology expense

0

(665,759 )

(665,759 )
Total cost of revenue

(46,906 )

(665,759 )

(712,665 )

Gross profit

1,619,235

1,849,047

3,468,282

Operating Expenses

Sales and marketing

(6,684 )

(19,357,972 )

(19,364,656 )
Corporate development

0

(18,988,606 )

(18,988,606 )
Technology and development

0

(24,353,672 )

(24,353,672 )
General and administrative

(1,009,521 )

(1,719,481 )

(2,729,002 )
Total operating expenses

(1,016,205 )

(64,419,731 )

(65,435,936 )

Income (loss) from operations

603,030

(62,570,684 )

(61,967,654 )

Other income (loss):

Interest income

36

3

39

Impairment loss on digital assets

0

(3,199 )

(3,199 )
Imputed interest expense

(237,114
)

0

(237,114
)
Sundry income

23,939

0

23,939

Total other loss, net

(213,139
)

(3,196 )

(216,335
)

Segment income (loss)

$ 389,891

$ (62,573,880 )

$ (62,183,989 )

	Three months ended June 30, 2022
	Lending Segment			ACT Segment			Total
Revenue from external customers:
Interest income	$	1,649,528		$	-		$	1,649,528
Arts and collectibles technology income		-			3,043,530			3,043,530
Total revenue, net		1,649,528			3,043,530			4,693,058

Cost of revenue:
Interest expense		(293,385	)		-			(293,385	)
Arts and collectibles technology expense		-			(141,376	)		(141,376	)
Total cost of revenue		(293,385	)		(141,376	)		(434,761	)

Gross profit		1,356,143			2,902,154			4,258,297

Operating Expenses
Sales and marketing		(246,234	)		(6,645,965	)		(6,892,199	)
Corporate development		-			(6,743,525	)		(6,743,525	)
Technology and development		-			(8,204,895	)		(8,204,895	)
General and administrative		(803,139	)		(1,866,155	)		(2,669,294	)
Total operating expenses		(1,049,373	)		(23,460,540	)		(24,509,913	)

Income (loss) from operations		306,770			(20,558,386	)		(20,251,616	)

Other income (loss):
Interest income		2,113			3			2,116
Impairment loss on digital assets		-			(6,957	)		(6,957	)
Imputed interest expense		(242,377	)		-			(242,377	)
Sundry income		30,563			506			31,069
Total other loss, net		(209,701	)		(6,448	)		(216,149	)

Segment income (loss)	$	97,069		$	(20,564,834	)	$	(20,467,765	)

~~F-18~~

~~Table Of Contents~~

COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

Three months ended March 31, 2021

Lending
Segment

ACT
Segment

Total

Revenue from external customers:

Interest income

$ 1,601,622

$ 0

$ 1,601,622

Arts and collectibles technology income

0

0

0

Total revenue, net

1,601,622

0

1,601,622

Cost of revenue:

Interest expense

(503,947 )

0

(503,947 )
Arts and collectibles technology expense

0

0

0

Total cost of revenue

(503,947 )

0

(503,947 )

Gross profit

1,097,675

0

1,097,675

Operating Expenses

Sales and marketing

(29,263 )

0

(29,263 )
General and administrative

(855,739 )

0

(855,739 )
Total operating expenses

(885,002 )

0

(885,002 )

Income from operations

212,673

0

212,673

Other income:

Interest income

16

0

16

Sundry income

2,282

0

2,282

Total other income, net

2,298

0

2,298

Segment income

$ 214,971

$ 0

$ 214,971

	Three months ended June 30, 2021
	Lending Segment			ACT Segment		Total
Revenue from external customers:
Interest income	$	1,626,323		$	-	$	1,626,323
Arts and collectibles technology income		-			-		-
Total revenue, net		1,626,323			-		1,626,323

Cost of revenue:
Interest expense		(272,999	)		-		(272,999	)
Arts and collectibles technology expense		-			-		-
Total cost of revenue		(272,999	)		-		(272,999	)

Gross profit		1,353,324			-		1,353,324

Operating Expenses
Sales and marketing		(13,091	)		-		(13,091	)
General and administrative		(793,985	)		-		(793,985	)
Total operating expenses		(807,076	)		-		(807,076	)

Income from operations		546,248			-		546,248

Other income:
Interest income		-			-		-
Sundry income		-			-		-
Gain from forgiveness of related party debt		138,414			-		138,414
Total other income, net		138,414			-		138,414

Segment income	$	684,662		$	-	$	684,662

COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

	Six months ended June 30, 2022
	Lending Segment			ACT Segment			Total
Revenue from external customers:
Interest income	$	3,315,669		$	-		$	3,315,669
Arts and collectibles technology income		-			5,558,336			5,558,336
Total revenue, net		3,315,669			5,558,336			8,874,005

Cost of revenue:
Interest expense		(340,291	)		-			(340,291	)
Arts and collectibles technology expense		-			(807,135	)		(807,135	)
Total cost of revenue		(340,291	)		(807,135	)		(1,147,426	)

Gross profit		2,975,378			4,751,201			7,726,579

Operating Expenses
Sales and marketing		(252,918	)		(26,003,937	)		(26,256,855	)
Corporate development		-			(25,732,131	)		(25,732,131	)
Technology and development		-			(32,558,567	)		(32,558,567	)
General and administrative		(1,812,660	)		(3,585,636	)		(5,398,296	)
Total operating expenses		(2,065,578	)		(87,880,271	)		(89,945,849	)

Income (loss) from operations		909,800			(83,129,070	)		(82,219,270	)

Other income (loss):
Interest income		2,149			6			2,155
Impairment loss on digital assets		-			(10,156	)		(10,156	)
Imputed interest expense		(479,491	)		-			(479,491	)
Sundry income		54,502			506			55,008
Total other loss, net		(422,840	)		(9,644	)		(432,484	)

Segment income (loss)	$	486,960		$	(83,138,714	)	$	(82,651,754	)

COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

	Six months ended June 30, 2021
	Lending Segment			ACT Segment		Total
Revenue from external customers:
Interest income	$	3,227,945		$	-	$	3,227,945
Arts and collectibles technology income		-			-		-
Total revenue, net		3,227,945			-		3,227,945

Cost of revenue:
Interest expense		(776,946	)		-		(776,946	)
Arts and collectibles technology expense		-			-		-
Total cost of revenue		(776,946	)		-		(776,946	)

Gross profit		2,450,999			-		2,450,999

Operating Expenses
Sales and marketing		(42,354	)		-		(42,354	)
General and administrative		(1,649,724	)		-		(1,649,724	)
Total operating expenses		(1,692,078	)		-		(1,692,078	)

Income from operations		758,921			-		758,921

Other income:
Interest income		16			-		16
Sundry income		2,282			-		2,282
Gain from forgiveness of related party debt		138,414			-		138,414
Total other income, net		140,712			-		140,712

Segment income	$	899,633		$	-	$	899,633

The below revenues are based on the countries in which the customer is located. Summarized financial information concerning the geographic segments is shown in the following tables:

Three months ended March 31,

2022

2021

Hong Kong

$ 1,666,141

$ 1,601,622

Around the world

2,514,806

0

$ 4,180,947

$ 1,601,622

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021

Hong Kong	$	1,649,528		1,626,323	$	3,315,669		3,227,945
Around the world		3,043,530		-		5,558,336		-

		4,693,058		1,626,323		8,874,005		3,227,945

COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

NOTE 8 - LOAN RECEIVABLES, NET

The Company’s loan portfolio was as follows:

March 31,
2022
December 31,
2021
Personal loans
$
17,913,525
$ 17,352,856
Commercial loans
1,545,024
1,186,339
Mortgage loans
2,219,997
1,294,601
Total loans
21,678,546
19,833,796
Less: Allowance for loan losses
(1,338,606
)
(781,202 )
Loans receivables, net
$
20,339,940
$
19,052,594
Reclassifying as:
Current portion
$
20,339,940
$
19,052,594
Non-current portion
0
0
Total loans receivables
$
20,339,940
$ 19,052,594

	June 30, 2022			December 31, 2021

Personal loans	$	19,140,816		$	17,352,856
Commercial loans		1,456,001			1,186,339
Mortgage loans		1,873,454			1,294,601
Total loans		22,470,271			19,833,796
Less: Allowance for loan losses		(1,817,330	)		(781,202	)
Loans receivables, net	$	20,652,941		$	19,052,594

Reclassifying as:
Current portion	$	20,652,941		$	19,052,594
Non-current portion		-			-

Total loans receivables	$	20,652,941		$	19,052,594

Allowance for loan losses for the three months ended June 30, 2022 and 2021 totaled $478,724 and $11,114, respectively.

Allowance for loan losses for the six months ended June 30, 2022 and 2021 totaled $1,036,128 and $21,223, respectively.

The interest rates on loans issued were ranged from 13% to 59% (2021: from 13% to 59%) per annum for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021.

~~F-19~~

~~Table Of Contents~~

COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

All loans are made to either business or individual customers in Hong Kong for a period of 1 week to 120 months.

Allowance for loan losses is estimated on an annual basis based on an assessment of specific evidence indicating doubtful collection, historical experience, loan balance aging and prevailing economic conditions.

Interest on loan receivable is accrued and credited to income as earned. The Company determines a loan’s past due status by the number of days that have elapsed since a borrower has failed to make a contractual loan payment. Accrual of interest is generally discontinued when either (i) reasonable doubt exists as to the full, timely collection of interest or principal or (ii) when a loan becomes past due by more than 180 days (The further extension of loan past due status is subject to management final approval and on case-by-case basis).

NOTE 9 –- DIGITAL ASSETS, NET

During the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, the changes in carrying value of digital assets are summarized as follows:

March 31,
2022

March 31,
2021

Balance at January 1

$ 35,451

$ 0

Received as revenue

2,514,806

0

Paid as expense

(2,542,912 )

0
Impairment loss

(3,199 )

0
Balance at March 31

$ 4,146

$ 0

	June 30, 2022			June 30, 2021

Balance at January 1	$	35,451		$	-

Received as revenue		5,746,724			-
Paid as expense		(5,584,209	)		-
Impairment loss		(10,156	)		-
Balance at June 30	$	187,810		$	-

The following is the breakdown of cryptocurrencies held as digital assets:

March 31,
2022

December 31,
2021

USDT

$ 576

$ 25,576

BUSD

606

0

OKT

18

34

ETH

1,652

5,658

BNB

1,006

1,612

COTK

288

2,571

$ 4,146

$ 35,451

	June 30, 2022		December 31, 2021

USDT	$	576	$	25,576
BUSD		162,362		-
OKT		9		34
ETH		23,435		5,658
BNB		1,428		1,612
COTK		-		2,571
	$	187,810	$	35,451

As of ~~March 31,~~June 30, 2022 and December 31, 2021, the fair value of the digital assets held by the Company was ~~$4,146~~$187,810 and $35,451, respectively.

~~F-20~~

~~Table Of Contents~~

COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

NOTE 10 - INTANGIBLE ASSETS, NET

A summary of intangible assets as of ~~March 31,~~June 30, 2022 and December 31, 2021 is as follows:

Estimated
useful life

March 31,
2022

December 31,
2021

At cost:

Acquired technology software

5 years

$ 17,344,690

$ 17,344,690

Licensed technology knowhow

4 years

2,000,000

2,000,000

Trademarks and trade name

10 years

41,148

39,270

Less: accumulated amortization

(1,822,825 )

(829,575 )
Foreign translation adjustment

(152 )

4

$ 17,562,861

$ 18,554,389

	Estimated useful life	June 30, 2022			December 31, 2021
At cost:
Acquired technology software	5 years	$	17,344,690		$	17,344,690
Licensed technology knowhow	4 years		2,000,000			2,000,000
Trademarks and trade name	10 years		41,144			39,270
Less: accumulated amortization			(2,816,076	)		(829,575	)
Foreign translation adjustment			(233	)		4
		$	16,569,525		$	18,554,389

As of ~~March 31,~~June 30, 2022, the estimated annual amortization expense for intangible assets for each of the succeeding five years and thereafter is as follows

Period ending March 31:

2023

$ 3,973,050

2024

3,973,050

2025

3,973,050

2026

3,598,050

2027

2,027,659

Thereafter

18,002

$ 17,562,861

Period ending June 30:
2023	$	3,973,028
2024		3,973,028
2025		3,973,028
2026		3,473,028
2027		1,160,402
Thereafter		17,011
	$	16,569,525

Amortization of intangible assets for the three months ended ~~March 31,~~June 30, 2022 and 2021 totaled ~~$993,249~~$993,257 and $0, respectively.

Amortization of intangible assets for the six months ended June 30, 2022 and 2021 totaled $1,986,506 and $0, respectively.

NOTE 11 - ACCRUED CONSULTING AND SERVICE FEE

For the ~~three~~six months ended ~~March 31,~~June 30, 2022, the Company agreed to compensate certain business or professional service providers, in which rendered IT development service, sale and marketing service, corporate development service and administrative service. These consulting and service fees totaled ~~$62,367,500~~$1,089,371 and agreed to be settled in lieu of the common stock of the Company.

NOTE 12 - LOAN PAYABLES

The amounts represented temporary advances received from the third parties for the lending business, which carried annual interest at the rate of 18% to 21%. These amounts were unsecured and will become repayable within one year. The loan payable balance was ~~$911,240~~$1,070,624 and $489,836 as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively.

Interest related to the loan payables was ~~$46,906~~$293,385 and ~~$503,947~~$272,999 for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively.

~~F-21~~

~~Table Of Contents~~

Interest related to the loan payables was $340,291 and $776,946 for the six months ended June 30, 2022 and 2021, respectively.

COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

NOTE 13 - AMOUNTS DUE TO RELATED PARTIES

The amounts represented temporary advances to the Company for the lending business, which were unsecured, interest-free and had no fixed terms of repayments. The related party balances were ~~$20,105,289~~$17,985,430 and $20,954,836 as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively.

During the ~~period~~three and six months ended ~~March 31,~~June 30, 2022, the Company recorded and imputed additional non-cash interest of ~~$237,114~~$242,377 and $479,491 at the market rate of 5% per annum on these interest-free related party loans, under ASC 835-30 “Imputation of Interest”.

NOTE 14 - LEASES

The Company entered into operating leases primarily for office premises with lease terms generally 2 years. The Company adopted Topic 842, using the modified-retrospective approach as discussed in Note 3, and as a result, recognized a right-of-use asset and a lease liability. The Company uses a 5% rate to determine the present value of the lease payments. The remaining life of the lease was two years.

The Company excludes short-term leases (those with lease terms of less than one year at inception) from the measurement of lease liabilities or right-of-use assets.

As of ~~March 31,~~June 30, 2022, right-of-use assets were ~~$295,491~~$288,870 and lease liabilities were ~~$305,791.~~$297,718.

For the three months ended ~~March 31,~~June 30, 2022 and 2021, the Company charged to operations lease as expenses of ~~$10,343~~$69,926 and ~~$12,683,~~$0, respectively.

For the six months ended June 30, 2022 and 2021, the Company charged to operations lease as expenses of $139,983 and $0, respectively.

The maturity of the Company’s lease obligations is presented below:

Period Ending March 31,

2023

$ 193,957

2024

107,305

2025

15,884

Total

317,146

Less: interest

$ (11,355 )
Present value of lease liabilities – current liability

234,596

Present value of lease liabilities – non-current liability

$
71,195

Period Ending June 30,
2023	$	223,910
2024		84,736
2025		-

Total		308,646
Less: interest	$	(10,928	)
Present value of lease liabilities – current liability		214,793
Present value of lease liabilities – non-current liability	$	82,925

~~F-22~~

NOTE 15 – STOCK-BASED COMPANESATION

~~Table Of Contents~~

On May 19, 2022, the Company has filed a Registration Statement on Form S-8 and includes a Reoffer Prospectus that the Reoffer Prospectus may be used for reoffers and resales of shares of the Company. The Reoffer Prospectus covers the Shares issuable to the Selling Securityholders pursuant to awards granted to the Selling Securityholders under the Coinllectibles Inc. 2022 Stock Incentive Plan. The Company will not receive any proceeds from the sale of the shares offered by the Reoffer Prospectus.

As of June 30, 2022, there were 26,921,356 shares of the Company have been issued to consultants who have provided services to the Company.

The following table presents the stock-based compensation expenses for shares granted consultants during the three and six months ended June 30, 2022 and 2021:

Three months ended
June 30, Six months ended
June 30,
2022 2021 2022 2021

Corporate Development expenses $ 6,563,701 $ - $ 25,313,701 $ -
Technology and development expenses 8,030,000 - 32,060,000 -
Sales and marketing expenses 6,483,470 - 25,763,470 -
General and administrative expenses 331,500 - 639,000 -
$ 21,408,671 $ - $ 83,776,171 $ -

COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

The market value of stock-based compensation expenses was $21,408,671 during three months ended June 30, 2022.

The market value of stock-based compensation expenses was $83,776,171 during the six months ended June 30, 2022.

NOTE 1516 - STOCKHOLDERS’ EQUITY

Authorized stock

The Company’s authorized share is 500,000,000 common shares with a par value of $0.001 per share.

Common stock outstanding

On January 19, 2022, the Company issued 100,000 shares of its common stock as Commitment Shares to Williamsburg Venture Holdings, LLC (the “Investor”), under an Equity Purchase Agreement dated December 31, 2021 (the “Agreement”), in consideration for the Investor’s execution and delivery of, and performance under the Agreement.

On February 10, 2022, the Company issued 153,060 shares of its common stock, at a price of $4.00 per share at its current market price, in exchange for 80% of equity interest of Grand Gallery Limited, a Hong Kong limited liability company, which is engaged in the business of selling traditional art and collectible pieces. The Company believes that this acquisition will strengthen the DOT business by expanding its access to buyers of arts and collectibles.

On May 19, 2022, the Company issued 26,921,356 shares of its common stock to settle the common stock to be issued and accrued consulting and service fee to consultants who have provided services to the Company.

On May 24, 2022, the Company issued 64,200 shares of its common stock, at a price of $4.00 per shares at its current market price, to a consultant who has provided service to the Company under Rule 144.

As of ~~March 31,~~June 30, 2022 and December 31, 2021, the Company had a total of ~~358,320,541~~385,306,097 shares and 358,067,481 shares of its common stock issued and outstanding, respectively.

Common stock to be issued

As of ~~March 31,~~June 30, 2022, ~~and~~the Company had 800,000,000 shares of its common stock to be issued to Dr. Lee, a director of the Company, in connection with the acquisition of Massive Treasure.

As of December 31, 2021, the Company had ~~806,321,356 and~~ 806,321,356 shares of its common stock to be issued, ~~respectively,~~ comprising of 800,000,000 shares outstanding to Dr. Lee, a director of the Company, in connection with the acquisition of Massive Treasure, 235,294 shares outstanding to Mr. Tan, a director of the Company, in connection with his service to the Company for the year ended December 31, 2021, and 6,086,062 shares outstanding to 17 consultants for their services rendered to the Company for the year ended December 31, 2021.

NOTE 1617 - INCOME TAX

The provision for income taxes consisted of the following:

Three months ended
March 31,

2022

2021

Current tax:

- Local

$
0

$
0

- Foreign

211,155

6,056

Deferred tax

- Local

0

0

- Foreign

0

0

Income tax expense

$ 211,155

$ 6,056

	Six months ended June 30,
	2022		2021
Current tax:
- Local	$	-	$	-
- Foreign		357,268		213,929

Deferred tax
- Local		-		-
- Foreign		-		-

Income tax expense	$	357,268	$	213,929

COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

The effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate. The Company mainly operates in Singapore and Hong Kong that is subject to taxes in the jurisdictions in which they operate, as follows:

~~F-23~~

~~Table Of Contents~~

~~COSMOS GROUP HOLDINGS INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021~~

~~(Currency expressed in United States Dollars (“US$”), except for number of shares)~~

United States of America

COSG is registered in the State of ~~Delaware~~Nevada and is subject to the tax laws of United States of America. The U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”) was signed into law. The Tax Reform Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits in its income tax provision. The Company has not accrued or paid interest or penalties which were not material to its results of operations for the periods presented. Deferred tax asset is not provided for as the tax losses may not be able to carry forward after a change in substantial ownership of the Company.

For the ~~periods~~six months ended ~~March 31,~~June 30, 2022 and 2021, there were no operating income in US tax regime.

BVI

Under the current BVI law, the Company is not subject to tax on income.

Republic of Singapore

The Company’s subsidiaries are registered in Republic of Singapore and are subject to the Singapore corporate income tax at a standard income tax rate of 17% on the assessable income arising in Singapore during its tax year. The operation in Singapore incurred an operating loss due to certain charges within the group and there is no provision for income tax for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021.

Three months ended March 31,

2022

2021

Loss before income taxes

$ (61,636,397 )

$ 0

Statutory income tax rate

17
%

17
%
Income tax expense at statutory rate

(10,478,187 )

0

Net operating loss

10,478,187

0

Income tax expense

$ 0

$ 0

	Six months ended June 30,
	2022			2021
Loss before income taxes	$	(80,797,297	)	$	-
Statutory income tax rate		17	%		17	%
Income tax expense at statutory rate		(13,735,540	)		-
Net operating loss		13,735,540			-
Income tax expense	$	-		$	-

~~F-24~~

~~Table Of Contents~~

~~COSMOS GROUP HOLDINGS INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021~~

~~(Currency expressed in United States Dollars (“US$”), except for number of shares)~~Hong Kong

~~Hong Kong~~

The Company and subsidiaries operating in Hong Kong is subject to the Hong Kong Profits Tax at the two-tiered profits tax rates from 8.25% to 16.5% on the estimated assessable profits arising in Hong Kong during the current year, after deducting a tax concession for the tax year. The reconciliation of income tax rate to the effective income tax rate for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021 is as follows:

Three months ended
March 31,

2022

2021

Income before income taxes

$ 490,775

$ 214,971

Statutory income tax rate

16.5 %

16.5 %
Income tax expense at statutory rate

80,978

35,470

Tax effect of non-deductible items

129,407

0

Tax effect of non-taxable items

(3,176
)

(29,414 )
Net operating loss

3,946

0

Income tax expense

$ 211,155

$ 6,056

	Six months ended June 30,
	2022			2021
Income before income taxes	$	566,971		$	899,633
Statutory income tax rate		16.5	%		16.5	%
Income tax expense at statutory rate		93,550			148,439
Tax effect of non-deductible items		260,441			65,490
Tax effect of non-taxable items		(8,178	)		-
Net operating loss		11,455			-

Income tax expense	$	357,268		$	213,929

COSMOS GROUP HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

The following table sets forth the significant components of the deferred tax assets and liabilities of the Company as of ~~March 31,~~June 30, 2022 and December 31, 2021:

March 31,
2022

December 31,
2021

Deferred tax assets:

Net operating loss carryforward, from

US tax regime

$ 81,056

$ 68,955

Singapore tax regime

13,632,064

3,153,877

Hong Kong tax regime

24,132

20,186

Less: valuation allowance

(13,737,252 )

(3,243,018 )
Deferred tax assets, net

$ 0

$ 0

	June 30, 2022			December 31, 2021
Deferred tax assets:
Net operating loss carryforward, from
US tax regime	$	109,778		$	68,955
Singapore tax regime		16,889,417			3,153,877
Hong Kong tax regime		31,641			20,186
Less: valuation allowance		(17,030,836	)		(3,243,018	)
Deferred tax assets, net	$	-		$	-

As of ~~March 31,~~June 30, 2022, the operations in the United States of America incurred ~~$385,980~~$522,749 of cumulative net operating losses which can be carried forward indefinitely to offset future taxable income. The Company has provided for a full valuation allowance against the deferred tax assets of ~~$81,056~~$109,778 on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.

As of ~~March 31,~~June 30, 2022, the operations in Singapore incurred ~~$80,188,612~~$99,349,512 of cumulative net operating losses which can be carried forward to offset future taxable income. There is no expiry in net operating loss carryforwards under Singapore tax regime. the Company has provided for a full valuation allowance against the deferred tax assets of ~~$13,632,064~~$16,889,417 on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.

As of June 30, 2022, the operations in Hong Kong incurred $191,764 of cumulative net operating losses which can be carried forward indefinitely to offset future taxable income. The Company has provided for a full valuation allowance against the deferred tax assets of $31,641 on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.

The Company filed income tax returns in the United States federal tax jurisdiction and several state tax jurisdictions. Since the Company is in a loss carryforward position, it is generally subject to examination by federal and state tax authorities for all tax years in which a loss carryforward is available.

NOTE 1718 - RELATED PARTY TRANSACTIONS

From time to time, the directors of the Company advanced funds to the Company for working capital purpose. Those advances were unsecured, non-interest bearing and had no fixed terms of repayment.

During the three months ended ~~March 31,~~June 30, 2022, the Company paid the management service fee of ~~$1,000,000,~~$815,852, to a company controlled by its director, Dr. Lee.

During the three months ended ~~March 31,~~June 30, 2022, the Company paid the director fee of $30,000 to Mr. Tan, a director of the Company, for his service to the Company’s subsidiary.

During the six months ended June 30, 2022, the Company paid the management service fee of $1,815,852, to a company controlled by its director, Dr. Lee.

During the six months ended June 30, 2022, the Company paid the director fee of $60,000 to Mr. Tan, a director of the Company, for his service to the Company’s subsidiary.

Apart from the transactions and balances detailed elsewhere in these accompanying condensed consolidated financial statements, the Company has no other significant or material related party transactions during the periods presented.

~~F-25~~

~~Table Of Contents~~

COSMOS GROUP HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

~~(Unaudited)~~

NOTE 1819 - CONCENTRATIONS OF RISK

The Company is exposed to the following concentrations of risk:

(a)	Major customers

For the three and six months ended ~~March 31,~~June 30, 2022 and 2021, there was no single customer whose revenue exceeded 10% of the revenue.

(b)	Economic and political risk

The Company’s major operations are conducted in Singapore and Hong Kong. Accordingly, the political, economic, and legal environments in Singapore and Hong Kong, as well as the general state of Singapore and Hong Kong’s economy may influence the Company’s business, financial condition, and results of operations.

(c)	Exchange rate risk

The Company cannot guarantee that the current exchange rate will remain steady; therefore there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HKD converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.

(d)	Market price risk of crypto (“digital”) assets

The Company generated certain level of its revenue from the sale and distribution of licensed media token products on its platform by the means of crypto assets by the customers, while revenue from these products have not been relatively significant to date when compared to other sources of income, most of this revenue will also fluctuate based on the price of crypto assets. Accordingly, crypto asset price risk could adversely affect its operating results. In particular, the future profitability may depend upon the market price of BNB, ETH, as well as other crypto assets. Crypto asset prices, along with the operating results, have fluctuated significantly from quarter to quarter. There is no assurance that crypto asset prices will reflect historical trends. A decline in the market price of BTC, ETH and Other crypto assets could have a material and adverse effect on our earnings, the carrying value of the crypto assets, and the future cash flows. This may also affect the liquidity and the ability to meet our ongoing obligations. As of ~~March 31,~~June 30, 2022, the Company recorded an impairment charge on the crypto assets held when crypto asset prices decrease below their carrying value of these crypto assets.

NOTE 1920 - COMMITMENTS AND CONTINGENCIES

As of ~~March 31,~~June 30, 2022, the Company is committed to the below contractual arrangements.

In May 2021, The Company, through its subsidiary, 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, the Company issued 10,256,409 shares and 5,128,204 shares to the shareholders of E-on and 8M respectively, during 2021.

COSMOS GROUP HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

The Company 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.

In May and June 2021, the Company, through its subsidiary, Massive Treasure entered into a Share Swap Letter Agreement (the “51% Share Swap Letter”) with the shareholders of Healthy Finance Limited, Dragon Group Mortgage Limited, Lee Kee Finance Limited, Rich Finance (Hong Kong) Limited, Long Journey Finance Limited, Vaav Limited and Star Credit Limited (collectively “the entities”), to acquire each of the entities 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, the Company 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.

On December 31, 2021, the Company entered into an Equity Purchase Agreement with Williamsburg Venture Holdings, LLC, a Nevada limited liability company (“Investor”), pursuant to which the Investor agreed to invest up to Thirty Million Dollars ($30,000,000) over a 36-month period in accordance with the terms and conditions of that certain Equity Purchase Agreement, dated as of December 31, 2021, by and between the Company and the Investor (the “Equity Purchase Agreement”). During the term, the Company shall be entitled to put to the Investor, and the Investor shall be obligated to purchase, such number of shares of the Company’s common stock and at such price as are determined in accordance with the Equity Purchase Agreement. The per share purchase price for the Williamsburg Put Shares will be equal to 88% the lowest traded price of the Common Stock on the principal market during the five (5) consecutive trading days immediately preceding the date which Williamsburg received the Williamsburg Put Shares as DWAC Shares in its brokerage account (as reported by Bloomberg Finance L.P., Quotestream, or other reputable source). In connection with the Equity Purchase Agreement, both parties also entered into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which the Company agreed to register with the SEC the common stock issuable under the Equity Purchase Agreement, among other securities. As of ~~March 31,2022,~~June 30,2022, the remaining balance for Equity Purchase from the Investor was $30,000,000.

NOTE 2021 - SUBSEQUENT EVENTS

In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after ~~March 31,~~June 30, 2022, up through the date the Company issued the unaudited condensed consolidated financial statements. ~~The Company had no material recognizable subsequent events:~~

On August 2, 2022, the Company entered into a Sale and Purchase Agreement with CHAN Hin Yip, pursuant to which the Company agreed to purchase approximately 58 collectible items from Mr. Chan for a purchase price of HKD 1,305,000 (approximately USD $167,308) (the “Purchase Price”), through its subsidiaries holds approximately 80% of the issued and outstanding securities of Grand Gallery Limited (“CGL”), and Mr. Chan is a director and 5% equity owner of CGL.

~~F-26~~

~~Table Of Contents~~

On August 2, 2022, the Company and Mr. Chan entered into a Note Purchase Agreement pursuant to which the Company agreed to pay the Purchase Price via a promissory note that will be converted into shares of the Company’s common stock at a conversion price equal to 90% of the volume weighted average closing price of the Company’s common stock for the ten days immediately prior to February 2, 2023.

ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our Company’s financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in the report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors. See “Cautionary Note Concerning Forward-Looking Statements” on page 8.7.

Unless otherwise noted, all currency figures quoted as “U.S. dollars”, “dollars” or “$” refer to the legal currency of the United States. Throughout this report, assets and liabilities of the Company’s subsidiaries are translated into U.S. dollars using the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.

Overview

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.

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”).

DOT is an integrated, best in class, smart contract for art and collectible pieces. We use blockchain technology to help resolve the issues of provenance, authenticity and ownership in the arts and collectibles market. For each art or collectible piece, we create an individual DOT that includes an independent appraisal, a 3D rendering of the piece, high-definition photo of the piece, AI recognition file of the piece and a set of legal documents to provide proof of ownership and provenance of the piece to the blockchain. Our DOTs are intended to provide assurance on the authenticity of art or collectible pieces as well as act as a record of ownership transfers using blockchain technology to establish provenance of the piece. As the owner of a DOT, the buyer will be able to take the necessary legal action against those who breach the digital ownership rights. We initially intend to focus on customers located in Hong Kong and expand throughout Asia and the rest of the world.

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.

We conduct our financing/money lending business through our Hong Kong subsidiaries which are licensed under Hong Kong’s Money Lenders Ordinance. We primarily provide unsecured personal loan financings to private individuals. We also have a small portfolio of mortgage loans. Revenue is generated from interest received from the provision of loans to private individual customers.

~~Table Of Contents~~

There may be prominent risks associated with our operations being in Hong Kong. We may be subject to the risks of uncertainty of any future actions of the PRC government including the risk that the PRC government could disallow our holding company structure, which may result in a material change in our operations, including our ability to continue our existing holding company structure, carry on our current business, accept foreign investments, and offer or continue to offer securities to our investors. These adverse actions could change the value of our common stock to significantly decline or become worthless. We may also be subject to penalties and sanctions imposed by the PRC regulatory agencies, including the Chinese Securities Regulatory Commission, if we fail to comply with such rules and regulations, which could adversely affect the ability of the Company’s securities to continue to trade on the Over-the-Counter Bulletin Board, which may cause the value of our securities to significantly decline or become worthless.

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 10 filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 15, 2022 (the “Form 10-K”).

Our corporate chart is below:

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.

~~Table Of Contents~~

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.

Commentary on our Revenue – an overview

In this quarter, we have seen strong and continued revenue growth. The total revenue for 2022 Q2 was approximately US$4.7 million consisting of approximately $3.05 million from the DOT business segment and $1.65 million from the lending segment. Our DOT revenue are primarily attributable to: (i) our MetaMall/Resale transactions of approximately US$3.04 million; (ii) primary DOT sales (revenue from sales of new collectible DOTs) of approximately US$198,000; and (iii) Coinllectibles Sports of approximately US$35,000.

Commentary on DOT Revenue – our key growth driver

As a whole, the 2022 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.

Commentary on finance revenue – providing stability to the business

The lending segment is providing a stable revenue to the Group, and we generated approximately US$1.65 million and US$1.63 million for the three months ended June 30, 2022 and 2021 respectively. Our finance companies are licensed to originate personal loans, company loans and mortgage loans in Hong Kong, and generate interest income from these loans. In contrast to the significant growth in DOT revenue, our finance companies have long been established in Hong Kong and thus, the growth of the business is relatively steady. Despite the global economic situation and consequences caused by the pandemic, we believe that there is always a need for borrowing, and anticipate our lending segment to continue to provide stable revenue in the near future.

Other Activities

On December 31, 2021, the Company entered into an Equity Purchase Agreement with Williamsburg Venture Holdings, LLC, a Nevada limited liability company (“Investor”), pursuant to which the Investor agreed to invest up to Thirty Million Dollars ($30,000,000) over a 36-months period in accordance with the terms and conditions of that certain Equity Purchase Agreement, dated as of December 31, 2021, by and between the Company and the Investor (the “Equity Purchase Agreement”). During the term, the Company shall be entitled to put to the Investor, and the Investor shall be obligated to purchase, such number of shares of the Company’s common stock and at such price as are determined in accordance with the Equity Purchase Agreement. The per share purchase price for the Williamsburg Put Shares will be equal to 88% the lowest traded price of the Common Stock on the principal market during the five (5) consecutive trading days immediately preceding the date which Williamsburg received the Williamsburg Put Shares as DWAC Shares in its brokerage account (as reported by Bloomberg Finance L.P., Quotestream, or other reputable source). In connection with the Equity Purchase Agreement, both parties also entered into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which the Company agreed to register with the SEC the common stock issuable under the Equity Purchase Agreement, among other securities. As of ~~March 31,~~June 30, 2022, the remaining balance for Equity Purchase from the Investor was $30,000,000.

In connection with the Equity Purchase Agreement, the parties also entered into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which the Company agreed to register with the SEC the common stock issuable under the Equity Purchase Agreement, among other securities.

The foregoing descriptions of the Equity Purchase Agreement and the Registration Rights Agreement are qualified in their entirety by reference to the Equity Purchase Agreement and the Registration Rights Agreement, which are filed as Exhibits 10.3 and 10.4 to this Quarterly Report and incorporated herein by reference.

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.

Results of Operations.

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.

~~Table Of Contents~~

As of ~~March 31,~~June 30, 2022, we had a working capital ~~deficit~~ of ~~$59,879,362~~$3,416,218 and accumulated deficit of ~~$88,828,230.~~$109,488,080. As a result, our continuation as a going concern is 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.

Stock Based Compensation

The Company recognized a one-time USD 80 million non-cash item payment to the following three unaffiliated vendors for services provided ~~during the~~from January 1 to April 30, 2022, with USD 60 million expensed in the first quarter of 2022 and USD 20 million ~~to be~~ expensed in the second quarter of 2022.

Name	No. of Common Shares
LUNG Yuen		6,000,000
CHAN Chi Keung		6,000,000
FU Wah		8,000,000
TOTAL		20,000,000

The consultancy fee expenses of USD 80 million resulted from the relevant accounting treatment of the 20,000,000 shares of Common Stock of the Company, issuable at $4 per share, being committed in the service agreements. ~~As of the date of this report, no~~On May 18, all shares of common stock of the Company have been issued. There was no cash compensation for services. The services composed of the following:

	1)	Technology services which include IT infrastructure setup, item storage management and metaverse consultation.
	2)
	2)	Business development which includes introduction of new artist and sourcing of new inventory to be made available onto the platform.

The services were procured and the fees agreed upon in mid of 2021 for the fundamental set up of the arts and collectibles business for both the technology platform architectural design and development management to support the new arts and collectibles DOT business, and also the sourcing and management of the initial arts and collectibles items to be contributed for starting up the business, including the coverage of setting up the authentication and verification standards and process for the business. These services build up the core IT and business development operations of the arts and collectibles business for the Company, allowing the Company to continue to move forward towards its DOT business initiative.

The foregoing description of the Consultancy Agreements with each of LUNG Yuen, CHAN Chi Keung and FU Wah are qualified in their entirety by reference to the such Consultancy Agreements, which are filed as Exhibits 10.5, 10.6 and 10.7 to this Quarterly Report and incorporated herein by reference.

Comparison of the three months ended ~~March 31,~~June 30, 2022 and ~~March 31,~~June 30, 2021

The following table sets forth certain operational data for the three months ended ~~March 31,~~June 30, 2022, compared to the three months ended ~~March 31,~~June 30, 2021:

Three months ended
March 31,

2022

2021

Revenue:

Lending segment

$ 1,666,141

$ 1,601,622

Arts and collectibles technology (“ACT”) segment

2,514,806

-

Total revenue

4,180,947

1,601,622

Cost of revenue:

Lending segment

(46,906 )

(503,947 )
ACT segment

(665,759 )

-

Gross profit

3,468,282

1,097,675

Operating expenses:

Sales and marketing

(19,364,656 )

(29,263 )
Corporate development

(18,988,606 )

-

Technology and support

(24,353,672 )

-

General and administrative

(2,729,002 )

(855,739 )
(Loss) income from operations

(61,967,654 )

212,673

Total other income (expense), net

(216,335 )

2,298

(Loss) income before income taxes

(62,183,989 )

214,971

Income tax expense

(211,155 )

(6,056 )

NET (LOSS) INCOME

$ (62,395,144 )

$ 208,915

	Three months ended June 30,
	2022			2021
Revenue:
Lending segment	$	1,649,528		$	1,626,323
Arts and collectibles technology (“ACT”) segment		3,043,530			-
Total revenue		4,693,058			1,626,323
Cost of revenue:
Lending segment		(293,385	)		(272,999	)
ACT segment		(141,376	)		-
Gross profit		4,258,297			1,353,324
Operating expenses:
Sales and marketing		(6,892,199	)		(13,091	)
Corporate development		(6,743,525	)		-
Technology and development		(8,204,895	)		-
General and administrative		(2,669,294	)		(793,985	)
(Loss) income from operations		(20,251,616	)		546,248
Total other income (expense), net		(216,149	)		138,414
(Loss) income before income taxes		(20,467,765	)		684,662
Income tax expense		(146,113	)		(207,873	)

NET (LOSS) INCOME	$	(20,613,878	)	$	476,789
Non-cash consultancy expenses		21,408,671			-

ADJUSTED INCOME	$	794,793		$	476,789

Revenue. Revenue for the three months ended ~~March 31,~~June 30, 2022 and 2021 was ~~$4,180,947~~$4,693,058 and ~~$1,601,622.~~$1,626,323. The increase in revenue of approximately ~~$2,579,325~~$3,066,735 is primarily due to the increase from the loan interest income received and sales of collectibles. During the three months ended ~~March 31,~~June 30, 2022 and 2021, revenues were mainly attributable to the lending segment representing ~~39.85%~~35.1% and 100%, and ACT segment representing ~~60.15%~~64.9% and 0%, respectively.

~~Table Of Contents~~

Cost of ~~Revenue~~.Revenue. Cost of revenue of approximately ~~$712,665~~$434,761 for the three months ended ~~March 31,~~June 30, 2022 consisted primarily of interest expense and cost of collectibles. The increase in cost of revenues of approximately ~~$208,718~~$161,762 from the comparable period in 2021 was mainly due to the increase in sales in ACT segment which ~~lead~~led to the increase in cost of collectibles.

Gross Profit. We achieved a gross profit of ~~$3,468,282~~$4,258,297 and ~~$1,097,675~~$1,353,324 for the three months ended ~~March 31,~~June 30, 2022, and 2021, respectively. The increase in gross profit for the three months ended ~~March 31,~~June 30, 2022 was approximately ~~$2,370,607,~~$2,904,973, which was mainly due to the increase in gross profit is primarily attributable to an increase in our ACT segment volume.

Sales and marketing. We incurred sales and marketing expenses of ~~$19,364,656~~$6,892,199 and ~~$29,263~~$13,091 for the three months ended ~~March 31,~~June 30, 2022, and 2021, respectively. Sales and marketing expenses consist primarily of costs related to public relations, consultancy fee, advertising and marketing programs, and personnel-related expenses. Sales and marketing expense increased by approximately ~~$19,335,393~~$6,879,108 in the three months ended ~~March 31,~~June 30, 2022 from ~~$29,263~~$13,091 in the same period of 2021. The increase was primarily due to the increase in non-cash consultancy ~~fee~~expenses charged by consultants for marketing events for ACT ~~segment.~~segment amounted to $6,483,470.

Corporate development. We incurred corporate development expenses of ~~$18,988,606~~$6,743,525 and $0 for the three months ended ~~March 31,~~June 30, 2022, and 2021, respectively. Corporate development expenses consist primarily of personnel-related expenses incurred to support our corporate development. Corporate development expenses increased by approximately ~~$18,988,606~~$6,743,525 in the ~~three~~six months ended ~~March 31,~~June 30, 2022 from $0 in the same period of 2021. The increase was primarily due to the increase in non-cash consultancy ~~fee~~expense charged by consultants for corporate and community development for ACT ~~segment.~~segment amounted to $6,563,701.

Technology and ~~support~~. development. We incurred technology and ~~support~~development expenses of ~~$24,353,672~~$8,204,895 and $0 for the three months ended ~~March 31,~~June 30, 2022, and 2021, respectively. Technology and support expenses consist primarily of (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. Technology and ~~support~~development expenses increased by approximately ~~$24,353,672~~$8,204,895 in the three months ended ~~March 31,~~June 30, 2022 from $0 in the same period of 2021. The increase was primarily due to the increase in non-cash consultancy fee charged by 3D technology consultants for ACT segment amounted to $8,030,000.

General and administrative. We incurred general and administrative expenses of ~~$2,729,002~~$2,669,294 and ~~$855,739~~$793,985 for the three months ended ~~March 31,~~June 30, 2022, and 2021, respectively. General and administrative expenses consist primarily of 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. General and administrative expenses increased by approximately ~~$1,873,263~~$1,875,309 in the three months ended ~~March 31,~~June 30, 2022 from ~~$855,739~~$793,985 in the same period of 2021. The increase was primarily due to the increase in non-cash consultancy ~~fee,~~expense amounted to $331,500, directors’ remuneration, and management fee charged by a related company owned by the director of the Company.

Other Income (expense),net. We incurred net other income of ($~~216,335)~~216,149) and ~~$2,298~~$138,414 for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively.

Income Tax Expense. Our income tax expense for the three months ended ~~March 31,~~June 30, 2022 and 2021 was ~~$211,155~~$146,113 and ~~$6,056,~~$207,873, respectively.

Net (Loss) ~~Income~~. Income. During the three months ended ~~March 31,~~June 30, 2022 and 2021, we incurred a net (loss) income of ($~~62,395,144)~~20,613,878) and ~~$208,915,~~$476,789, respectively. The decrease in net income for the three months ended ~~March 31,~~June 30, 2022 of ~~$62,604,059~~$21,090,667 was mainly attributed from the increase in operating expenses.

~~Table Of Contents~~

Comparison of the six months ended June 30, 2022 and June 30, 2021

The following table sets forth certain operational data for the six months ended June 30, 2022, compared to the six months ended June 30, 2021:

Six months ended
June 30,

2022 2021
Revenue:
Lending segment $ 3,315,669 $ 3,227,945
Arts and collectibles technology (“ACT”) segment 5,558,336 -
Total revenue 8,874,005 3,227,945
Cost of revenue:
Lending segment (340,291 ) (776,946 )
ACT segment (807,135 ) -
Gross profit 7,726,579 2,450,999
Operating expenses:
Sales and marketing (26,256,855 ) (42,354 )
Corporate development (25,732,131 ) -
Technology and support (32,558,567 ) -
General and administrative (5,398,296 ) (1,649,724 )
(Loss) income from operations (82,219,270 ) 758,921
Total other income (expense), net (432,484 ) 140,712
(Loss) income before income taxes (82,651,754 ) 899,633
Income tax expense (357,268 ) (213,929 )

NET (LOSS) INCOME $ (83,009,022 ) $ 685,704
Non-cash consultancy expenses 83,776,171 -

ADJUSTED INCOME $ 767,149 $ 685,704
Revenue. Revenue for the six months ended June 30, 2022 and 2021 was $8,874,005 and $3,227,945. The increase in revenue of approximately $5,646,060 is primarily due to the increase from the loan interest income received and sales of collectibles. During the six months ended June 30, 2022 and 2021, revenues were mainly attributable to the lending segment representing 37.4% and 100%, and ACT segment representing 62.6% and 0%, respectively.

Cost of Revenue. Cost of revenue of approximately $1,147,426 for the six months ended June 30, 2022 consisted primarily of interest expense and cost of collectibles. The increase in cost of revenues of approximately $370,480 from the comparable period in 2021 was mainly due to the increase in sales in ACT segment which led to the increase in cost of collectibles.
Gross Profit. We achieved a gross profit of $7,726,579 and $2,450,999 for the six months ended June 30, 2022, and 2021, respectively. The increase in gross profit for the six months ended June 30, 2022 was approximately $5,275,580, which was mainly due to the increase in gross profit is primarily attributable to an increase in our ACT segment volume.
Sales and marketing. We incurred sales and marketing expenses of $26,256,855 and $42,354 for the six months ended June 30, 2022, and 2021, respectively. Sales and marketing expenses consist primarily of costs related to public relations, consultancy fee, advertising and marketing programs, and personnel-related expenses. Sales and marketing expense increased by approximately $26,214,501 in the six months ended June 30, 2022 from $42,354 in the same period of 2021. The increase was primarily due to the increase in non-cash consultancy expense charged by consultants for marketing events for ACT segment amounted to $25,763,470.
Corporate development. We incurred corporate development expenses of $25,732,131 and $0 for the six months ended June 30, 2022, and 2021, respectively. Corporate development expenses consist primarily of personnel-related expenses incurred to support our corporate development. Corporate development expenses increased by approximately $25,732,131 in the six months ended June 30, 2022 from $0 in the same period of 2021. The increase was primarily due to the increase in non-cash consultancy expense charged by consultants for corporate and community development for ACT segment amounted to $25,313,701.
Technology and development. We incurred technology and development expenses of $32,558,567 and $0 for the six months ended June 30, 2022, and 2021, respectively. Technology and support expenses consist primarily of (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. Technology and development expenses increased by approximately $32,558,567 in the six months ended June 30, 2022 from $0 in the same period of 2021. The increase was primarily due to the increase in non-cash consultancy expense charged by 3D technology consultants for ACT segment amounted to $32,060,000.
General and administrative. We incurred general and administrative expenses of $5,398,296 and $1,649,724 for the six months ended June 30, 2022, and 2021, respectively. General and administrative expenses consist primarily of 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. General and administrative expenses increased by approximately $3,748,572 in the six months ended June 30, 2022 from $1,649,724 in the same period of 2021. The increase was primarily due to the increase in non-cash consultancy expense amounted to $639,000, directors’ remuneration, and management fee charged by a related company owned by the director of the Company.
Other Income (expense), net. We incurred net other income of ($432,484) and $140,712 for the six months ended June 30, 2022 and 2021, respectively.
Income Tax expense. Our income tax expense for the six months ended June 30, 2022 and 2021 was $357,268 and $213,929, respectively.
Net (Loss) Income. During the six months ended June 30, 2022 and 2021, we incurred a net (loss) income of ($83,009,022) and $685,704, respectively. The decrease in net income for the six months ended June 30, 2022 of ($83,694,726) was mainly attributed from the increase in operating expenses.

Liquidity and Capital Resources

As of ~~March 31,~~June 30, 2022 and December 31, 2021, we had cash and cash equivalents of ~~$1,698,505~~$1,772,287 and $1,131,128.

We expect to incur significantly greater expenses in the near future as we develop our ~~artificial intelligence education~~arts and collectibles technology business 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 have never paid dividends on our Common Stock. Our present policy is to apply cash to investments in product development, acquisitions or expansion; consequently, we do not expect to pay dividends on Common Stock in the foreseeable future.

Going Concern Uncertainties

Our continuation as a going concern is dependent upon improving our profitability and the continuing financial support from our stockholders. Our sources of capital in the past have included the sale of equity securities, which include common stock sold in private transactions and public offerings, lease liability and short-term and long-term debts. In addition, with respect to the ongoing and evolving coronavirus (COVID-19) outbreak, which was designated as a pandemic by the 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.

Three Months Ended
March 31,

2022

2021

Net cash provided by (used in) operating activities

$ 959,805

$ (596,661 )
Net cash provided by investing activities

34,125

159,443

Net cash provided by (used in) financing activities

$ (406,311 )

$ 588,756

	Six Months Ended June 30,
	2022			2021
Net cash provided by (used in) operating activities	$	2,992,746		$	(5,120,530	)
Net cash provided by investing activities		28,601			164,172
Net cash provided by (used in) financing activities	$	(2,366,830	)	$	5,738,557

Net Cash Provided by (Used In) Operating Activities.

For the ~~three~~six months ended ~~March 31,~~June 30, 2022, net cash provided by operating activities was ~~$959,805~~$2,992,746 which consisted primarily of a net loss of ~~$62,395,144,~~$83,009,022, imputed interest expense of ~~$237,114,~~$479,491, amortization of ~~$993,249,~~$1,986,506, digital assets paid for expense of ~~$2,542,912, increase in accrued consulting and service fee~~$5,584,209, shares issued for services rendered of ~~$62,367,500,~~$82,656,800, a decrease in loan interest and fee receivables of ~~$177,245,~~$199,527, a decrease in inventory of ~~$665,392~~$773,917, an increase in accrued consulting and service fee of $1,089,371, an increase in accounts payables of $135,300 and an increase in income tax payable of ~~$211,155;~~$357,268; offset by digital assets received of ~~$2,514,806,~~$5,746,724 and an increase in loan receivables of ~~$1,287,346 and a decrease in other payable and accruals of $47,432.~~$1,600,347.

~~Table Of Contents~~

For the ~~three~~six months ended ~~March 31,~~June 30, 2021, net cash used in operating activities was ~~$596,661,~~$5,120,530, which consisted primarily of a net income of ~~$208,915,~~$685,704, an increase in accrued liabilities and other payables of $43,302, an increase in income tax payable of $213,821; offset by gain from forgiveness of related party debts of $138,414, an increase in loan receivables of ~~$721,832,~~$5,039,086, an increase in loan interest and fee receivables of $266,290 and an increase in repayment and other ~~payable and accruals~~receivables of ~~$101,673.~~$629,627.

We expect to continue to rely on cash generated through financing from our existing shareholders and private placements of our securities, however, to finance our operations and future acquisitions.

Net Cash Provided by (Used in) Investing Activities.

For the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, net cash provided by investment activities was ~~$34,125~~$28,601 and ~~$159,443,~~$164,172, respectively. The net cash used in investing activities for the ~~three~~six months ended ~~March 31,~~June 30, 2022 mainly consisted of cash from acquisition of a subsidiary of $33,336; offset by acquisition of property and equipment of $2,861 and purchase of intangible assets of $1,874. The net cash provided by investing activities for the six months ended June 30, 2021 consisted of disposal of property and equipment of $2,599 and cash from acquisition of a subsidiary of $33,404; offset by purchase of intangible assets of $1,878. The net cash used in investing activities for the three months ended March 31, 2021 mainly consisted of disposal of property and equipment of $159,443.$164,172.

Net Cash Provided By (Used In) Financing Activities.

For the ~~three~~six months ended ~~March 31,~~June 30, 2022, net cash used in financing activities was ~~$406,311~~$2,366,830 consisting of repayment of advance from related parties of ~~$827,715;~~$2,947,618; offset by proceeds offrom loan payables of ~~$421,404.~~$580,788.

For the ~~three~~six months ended ~~March 31,~~June 30, 2021, net cash provided by financing activities was ~~$588,756~~$5,738,557 consisting primarily of advances from related parties of ~~$294,485 and proceeds from~~$8,141,550; offset by repayment of loan payables of ~~$294,271.~~$2,402,993.

Material Cash Requirements

We have not achieved profitability since our inception, and we expect to continue to incur net losses for the foreseeable future. We expect net cash expended in 2022 to be significantly higher than 2021. As of ~~March 31,~~June 30, 2022, we had an accumulated deficit of ~~$88,828,230.~~$109,488,080. Our material cash requirements are highly dependent upon the additional financial support from our major shareholders in the next 12 - 18 months.

We had the following contractual obligations and commercial commitments as of ~~March 31,~~June 30, 2022:

Contractual Obligations

Total

Less than
1 year

1-3 Years

3-5 Years

More than 5
Years

$

$

$

$

$

Amounts due to related parties

20,105,289

20,105,289

–

–

–

Tax obligation

629,296

629,296

–

–

–

Accounts payable

239,358

239,358

–

–

–

Loan payable

911,240

911,240

–

–

–

Other contractual liabilities (1)

62,724,289

62,724,289

–

–

–

Commercial commitments

–

–

–

–

–

Bank loan repayment

–

–

–

–

–

Total obligations

84,609,472

84,609,472

–

–

–

Contractual Obligations

Total

Less than

1 year

1-3 Years

3-5 Years

More
than 5

Years

Amounts due to related parties

17,985,430

–

Tax obligation

773,904

–

Accounts payable

374,510

–

Loan payable

1,070,624

–

Operating lease liabilities

214,793

Other contractual liabilities (1)

1,544,722

–

Commercial commitments

–

Bank loan repayment

–

Total obligations

21,963,983

–

(1) Includes all obligations included in “Accrued liabilities and other payables” and “Accrued consulting and service fee” in current liabilities in the “Unaudited Condensed Consolidated Balance Sheets” that are contractually fixed as to timing and amount.

(1)	Includes all obligations included in “Accrued liabilities and other payables” and “Accrued consulting and service fee” in current liabilities in the “Unaudited Condensed Consolidated Balance Sheets” that are contractually fixed as to timing and amount.

Off-Balance Sheet Arrangements

We have no outstanding off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.

Contractual Obligations and Commercial Commitments

We have contractual obligations and commercial commitments as of ~~March 31,~~June 30, 2022.

~~Table Of Contents~~

As of ~~March 31,~~June 30, 2022, the Company had ~~806,321,356~~800,000,000 shares of its common stock to be issued.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the presentation of our financial condition and results of operations and require management’s subjective or complex judgment, often asFor a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following accounting policies are critical in the preparation of our financial statements.

☐

~~Use of estimates and assumptions~~

☐

~~Basis of consolidation~~

~~Table Of Contents~~

☐

~~Digital assets~~

The Company’s digital assets mainly represent the cryptocurrencies held in its e-wallet. The Company accounts for its digital assets in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 350, “~~General Intangibles Other Than Goodwill~~” (“ASC 350”). ASC 350 requires assets to be measured based on the fair value of the consideration given or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measurable. Accordingly, if the fair market value at any point during the reporting period is lower than the carrying value an impairment loss equal to the difference will be recognized in the consolidated statement of operations. If the fair market value at any point during the reporting period is higher than the carrying value, the basis of the digital assets will not be adjusted to account for this increase. Gains on digital assets, if any, will be recognized upon sale or disposal of the assets.

~~The Company’s cryptocurrencies are deemed to have an indefinite useful life, therefore amounts are not amortized, but rather are assessed for impairment.~~

☐

~~Loan receivables, net~~

☐

~~Allowance for loan losses (“ALL”)~~

The adequacy of the Company’s ALL is determined, in accordance with ASC Topics 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.

~~Table Of Contents~~

☐

~~Revenue recognition~~

~~The Company adopted Accounting Standards Update (“ASU”) No. 2014-09,~~ ~~Revenue from Contracts with Customers~~ (Topic 606) (“ASU 2014-09”) using the full retrospective transition method. The Company’s adoption of ASU 2014-09 did not have a material impact on the amount and timing of revenue recognized in its consolidated financial statements.

Under ASU 2014-09, the Company recognizes revenue when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

~~The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:~~

·	~~identify the contract with a customer;~~
·	~~identify the performance obligations in the contract;~~
·	~~determine the transaction price;~~
·	~~allocate the transaction price to performance obligations in the contract; and~~
·	~~recognize revenue as the performance obligation is satisfied.~~

~~Lending Business~~

The Company is licensed to originate personal loan, company loan and mortgage loan in Hong Kong. During the three months ended March 31, 2022 and 2021, 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~~

Commencing from October 1, 2021, the Company launched its online platform in the sale and distribution of arts and collectibles, with the use of blockchain technologies and minting tokens. The item of arts and collectibles is individually monetized as non-interchangeable unit of data stored on a blockchain, which is a form of digital ledger that can be sold, in the form of a minting token on the online platform. The Company involves with the following activities to earn its revenue in this segment:

Sale of arts and collectibles products: The Company recognizes revenue derived from the sales of the arts and collectibles when the Company has transferred the risks and rewards to the customers. The minted item of the individual art or collectibles which are sold in crypto asset transaction is the only performance obligation under the fixed-fee arrangements. The corresponding fees received upon each sale transaction is recognized as revenue, is recognized when the designated token, minted with the corresponding art and collectibles is delivered to the end user, together with the transfer of both digital and official title.

~~Table Of Contents~~

Transaction fee income: The Company also generates revenue through transaction fees transacted on its platform or other marketplaces. The Company charges a fee to individual customer at the secondary transaction level, which is allocated to the single performance obligation. The transaction fee is collected from the customer in digital assets, with revenue measured based on a certain percentage of the value of digital assets at the time the transaction is executed. The Company’s service is comprised of a single performance obligation to provide a platform facilitating the transfer of its DOTs. The Company considers its performance obligation satisfied, and recognizes revenue, at the point in time the transaction is processed.

~~Expenses associated with operating the Arts and Collectibles Technology Business, such as minting cost and purchase cost of collectibles and artworks are also recorded as cost of revenues.~~

☐

~~Related parties~~

~~The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.~~

The condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) adetailed description of the ~~transactions, including transactions to which no amounts or nominal amounts were ascribed, for each~~Critical Accounting Policies and Estimates of the ~~periods for which income statements are presented, and such other information deemed necessary~~Company, please refer to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change Part II, ITEM 7 “MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

~~Table Of Contents~~

☐

~~Fair value of financial instruments~~

~~Level 1~~	~~Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.~~

~~Level 2~~	~~Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.~~

~~Level 3~~	~~Pricing inputs that are generally observable inputs and not corroborated by market data.~~

☐

~~Recent accounting pronouncements~~

In January 2017, the Financial Accounting Standard Board (“FASB”) issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This standard, which will be effectiveour Annual Report Form 10-K for the ~~Company beginning in the first quarter of fiscal~~ year 2020, is required to be applied prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

In June 2020, the FASB issued ASU 2020-07, Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2020-07”), which supersedes ASC 505-50 and expands the scope of ASC 718 to include all share-based payments arrangements related to the acquisition of goods and services from both employees and nonemployees. For public companies, the amendments are effective for annual reporting periods beginning afterended December 15, 2020, including interim periods within those annual periods. Early adoption is permitted, but no earlier than a company’s adoption date of ASC 606. The Company does not believe that the adoption of ASU 2020-07 will have a material impact on the Company’s consolidated financial statements.

In August 2020, the FASB issued ASU No. 2020-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, which amended its guidance for costs of implementing a cloud computing service arrangement to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract31, 2021 filed with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This new standard also requires customers to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. This new standard becomes effective for the Company in the first quarter of fiscal year 2020, with early adoption permitted. This new standard can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is evaluating the impact of adopting this amendment to its consolidated financial statements.SEC on April 15, 2022.

~~Table Of Contents~~

ITEM 3 Quantitative and Qualitative Disclosures about Market Risk

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.

ITEM 4 Controls and Procedure

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), under the supervision of and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures, subject to limitations as noted below, as of ~~March 31,~~June 30, 2022, and during the period prior to and including the date of this report, were effective to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rule and forms; and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Inherent Limitations

Because of its inherent limitations, our disclosure controls and procedures may not prevent or detect misstatements. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Changes in Internal Control over Financial Reporting

Subject to the foregoing disclosure, there were no changes in our internal control over financial reporting that occurred during our fiscal quarter ended ~~March 31,~~June 30, 2022, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Table Of Contents~~

PART II OTHER INFORMATION

ITEM 1 Legal Proceedings

We are not a party to any legal or administrative proceedings that we believe, individually or in the aggregate, would be likely to have a material adverse effect on our financial condition or results of operations.

ITEM 1A 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.

ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM 3 Defaults upon Senior Securities

None.

ITEM 4 Mine Safety Disclosures

Not applicable.

ITEM 5 Other Information

None.

~~Table Of Contents~~

ITEM 6 Exhibits

Exhibit No.		Description
3.1		Articles of Incorporation and Certificate of Amendment to Articles of Incorporation (1)
3.2		Amended and Restated Bylaws (2)
4.1		Specimen certificate evidencing shares of Common Stock ~~(*)~~(6)
4.2		Description of Securities (3)
10.1		Technical Knowhow License & Servicing Agreement, dated July 1, 2021, by and between Coinllectibles Limited and Marvel Digital Group Limited (4)
10.2		Services Agreement, dated July 1, 2021, by and between Coinllectibles Limited and Marvel Digital Group Limited (4)
10.3		Equity Purchase Agreement, dated December 31, 2021, by and between Cosmos Group Holdings Inc. and Williamsburg Venture Holdings, LLC, a Nevada limited liability company (5)
10.4		Registration Rights Agreement, dated December 31, 2021, by and between Cosmos Group Holdings Inc., and Williamsburg Venture Holdings, LLC (5)
10.5		Consultancy Agreement, dated February 2, 2022, by and between First Technology Development Limited, a Hong Kong limited liability company, and Coinllectibles Limited, a British Virgin Islands limited liability company*company (6)
10.6		Consultancy Agreement, dated February 2, 2022, by and between Silver Bloom Properties Limited, a Hong Kong and Coinllectibles Limited, a British Virgin Islands limited liability company*company (6)
10.7		Consultancy Agreement, dated February 2, 2022, by and between Grace Time International Holdings Limited, a Hong Kong limited liability company, and Coinllectibles Limited, a British Virgin Islands limited liability company*company (6)
21		Subsidiaries (4)
31.1		Certification of Chief Executive Officer and Chief Financial Officer required under Rule 13a-14(a)/15d-14(a) under the Exchange Act.*
32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS		Inline XBRL Instance Document* Document.*
101.SCH		Inline XBRL Taxonomy Extension Schema Document* Document.*
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document* Document.*
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document* Document.*
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document* Document.*
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document*

~~_________~~

Document.*	~~Filed herewith~~
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*	Filed herewith
~~(1)~~
(1)	Incorporated by reference from our Form 10 filed with the Securities and Exchange Commission on May 23, 2017.
(2)	Incorporated by reference from our Form 10-SB filed with the Securities and Exchange Commission on January 19, 2000, under the name Interactive Marketing Technology, Inc.
(3)	Incorporated by reference to Exhibit 4.2 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 25, 2021.
(4)	Incorporated by reference to the Exhibits to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 15, 2022.
(5)	Incorporated by reference to the Exhibits to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 6, 2022.


25(6)	Incorporated by reference to the Exhibits to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 16, 2022.

~~Table Of Contents~~

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	COSMOS GROUP HOLDINGS INC.

	By:	/s/ Man Chung Chan
		Man Chung Chan
		Chief Executive Officer, Chief Financial Officer, Secretary

~~Date: May 16, 2022~~


26Date: August 15, 2022

0001706509 cosg:LendingSegmentMember 2021-04-01 2021-06-30 iso4217:USD xbrli:shares

Title of each Class		Trading Symbol		Name of each exchange on which registered
None.		N/A		N/A

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☐

	March 31,			December 31,
	2022			2021
ASSETS				(Audited)
Current asset:
Cash and cash equivalents	$	1,698,505		$	1,131,128
Digital assets		4,146			35,451
Loan receivables, net		20,339,940			19,052,594
Loan interest and fee receivables, net		306,126			483,371
Inventories		1,437,646			2,103,038
Prepayment and other receivables		882,852			877,802
Right-of-use assets, net		295,491			298,317

Total current assets		24,964,706			23,981,701

Non-current assets:
Property and equipment, net		58,623			59,270
Intangible assets, net		17,562,861			18,554,389
Goodwill		554,098			0

TOTAL ASSETS	$	43,140,288		$	42,595,360

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	239,358		$	240,156
Accrued liabilities and other payables		356,789			399,968
Accrued consulting and service fee		62,367,500			0
Loan payables		911,240			489,836
Amounts due to related parties		20,105,289			20,954,836
Income tax payable		629,296			431,463
Operating lease liabilities		234,596			231,816

Total current liabilities		84,844,068			22,748,075

Non-current liabilities
Operating lease liabilities:		71,195			78,216

TOTAL LIABILITIES		84,915,263			22,826,291

Commitments and contingencies		0			0

STOCKHOLDERS’ (DEFICIT) EQUITY
Common stock, $0.001 par value; 500,000,000 shares authorized; 358,320,541 and 358,067,481 issued and outstanding as of March 31, 2022 and December 31, 2021		358,321			358,067
Common stock to be issued		806,321			806,321
Additional paid-in capital		45,778,659			44,930,337
Accumulated other comprehensive loss		(18,030	)		(7,588	)
Accumulated deficit		(88,828,230	)		(26,436,477	)
		(41,902,959	)		19,650,660
Noncontrolling interest		127,984			118,409

Stockholders’ (deficit) equity		(41,774,975	)		19,769,069

TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY	$	43,140,288		$	42,595,360

	Three months ended March 31,
	2022			2021
Revenue, net				(Restated)

Interest income	$	1,666,141		$	1,601,622
Arts and collectibles technology income		2,514,806			0
		4,180,947			1,601,622

Cost of revenue
Interest expense		(46,906	)		(503,947	)
Arts and collectibles technology expense		(665,759	)		0
		(712,665	)		(503,947	)

Gross profit		3,468,282			1,097,675

Operating expenses:
Sales and marketing expenses		(19,364,656	)		(29,263	)
Corporate development expense		(18,988,606	)		0
Technology and development expense		(24,353,672	)		0
General and administrative expenses		(2,729,002	)		(855,739	)
Total operating expenses		(65,435,936	)		(885,002	)

(LOSS) INCOME FROM OPERATION		(61,967,654	)		212,673

Other (expense) income:
Interest income		39			16
Impairment loss on digital assets		(3,199	)		0
Imputed interest expense		(237,114	)		0
Sundry income		23,939			2,282
Total other income (expense), net		(216,335	)		2,298

(LOSS) INCOME BEFORE INCOME TAXES		(62,183,989	)		214,971

Income tax expense		(211,155	)		(6,056	)

NET (LOSS) INCOME		(62,395,144	)		208,915

Net loss attributable to noncontrolling interest		(3,391	)		(139,945	)

Net (loss) income attributable to common shareholders		(62,391,753	)		348,860

Other comprehensive income:
Foreign currency adjustment loss		(10,442	)		(292	)

COMPREHENSIVE (LOSS) INCOME	$	(62,402,195	)	$	348,568

Net (loss) income per share:
– Basic	$	(0.19	)	$	0.00#
– Diluted	$	(0.05	)	$	0.00#

Weighted average common shares outstanding:
– Basic		334,072,705			333,910,484
– Diluted		1,140,394,061			1,133,910,484

	Common stock				Common stock			Additional paid-			Accumulated other			(Accumulated losses)			Non-			Total stockholders’
	No. of shares		Amount		to be issued		��	in capital			comprehensive loss			retained earnings			controlling interest			(deficit) equity

Balance as of January 1, 2021 (restated)		333,910,484	$	333,911	$	800,000			0		$	(5,374	)	$	(1,379,358	)	$	237,590		$	(13,231	)

Foreign currency translation adjustment		-		0		0			0			(292	)		0			0			(292	)
Net income for the period		-		0		0			0			0			348,860			(139,945	)		208,915

Balance as of March 31, 2021		333,910,484	$	333,911	$	800,000			0		$	(5,666	)	$	(1,030,498	)	$	97,645		$	195,392

Balance as of January 1, 2022		358,067,481	$	358,067	$	806,321			44,930,337		$	(7,588	)	$	(26,436,477	)	$	118,409		$	19,769,069

Foreign currency translation adjustment		-		0		0			0			(10,442	)		0			0			(10,442	)
Imputed interest on related party loans		-		0		0		236,336				0			0			0		236,336
Commitment Share issued for private placement		100,000		100		0			(100	)		0			0			0			0
Share issued for acquired subsidiary		153,060		154		0			612,086			0			0			12,966			625,206
Net loss for the period		-		0		0			0			0			(62,391,753	)		(3,391	)		(62,395,144	)

Balance as of March 31, 2022		358,320,541	$	358,321	$	806,321		$	45,778,659		$	(18,030	)	$	(88,828,230	)	$	127,984		$	(41,774,975	)

	Common stock				Common stock			Additional			Accumulated other			(Accumulated losses)			Non-			Total stockholders’
	No. of shares		Amount		to be issued			paid- in capital			comprehensive loss			retained earnings			controlling interest			(deficit) equity

Balance as of January 1, 2021 (restated)		333,910,484	$	333,911	$	800,000			-		$	(5,374	)	$	(1,379,358	)	$	237,590		$	(13,231	)

Foreign currency translation adjustment		-		-		-			-			(292	)		-			-			(292	)
Net income for the period		-		-		-			-			-			348,860			(139,945	)		208,915

Balance as of March 31, 2021		333,910,484	$	333,911	$	800,000			-		$	(5,666	)	$	(1,030,498	)	$	97,645		$	195,392

Foreign currency translation adjustment		-		-		-			-			(43	)		-			-			(43	)
Net income for the period		-		-		-			-			-			7,068			469,721			476,789

Balance as of June 30, 2021		333,910,484	$	333,911	$	800,000			-		$	(5,709	)	$	(1,023,430	)	$	567,366		$	672,138

Balance as of January 1, 2022		358,067,481	$	358,067	$	806,321		$	44,930,337		$	(7,588	)	$	(26,436,477	)	$	118,409		$	19,769,069

Foreign currency translation adjustment		-		-		-			-			(10,442	)		-			-			(10,442	)
Imputed interest on related party loans		-		-		-			236,336			-			-			-			236,336
Commitment Share issued for private placement		100,000		100		-			(100	)		-			-			-			-
Share issued for acquired subsidiary		153,060		154		-			612,086			-			-			12,966			625,206
Net loss for the period		-		-		-			-			-			(62,391,753	)		(3,391	)		(62,395,144	)

Balance as of March 31, 2022		358,320,541	$	358,321	$	806,321		$	45,778,659		$	(18,030	)	$	(88,828,230	)	$	127,984		$	(41,774,975	)

Foreign currency translation adjustment		-		-		-			-			5,922			-			-			5,922
Imputed interest on related party loans		-		-		-			241,872			-			-			-			241,872
Share issued for service rendered		26,985,556		26,985		(6,321	)		82,636,136												82,656,800
Net loss for the period		-		-		-			-			-			(20,659,850	)		45,972			(20,613,878	)

Balance as of June 30, 2022		385,306,097	$	385,306	$	800,000		$	128,656,667		$	(12,108	)	$	(109,488,080	)	$	173,956		$	20,515,741

Acquired assets:
Property and equipment	$	2,599
Cash and cash equivalents		33,404
Deposit, prepayment and other receivables		11,247
Amounts due from related parties		21,832
		69,082
Less: Assumed liabilities
Accrued liabilities and other payables		(4,253	)
		(4,253	)
Fair value of net assets acquired		64,829
Noncontrolling interest		(12,966	)
Foreign translation adjustment		6,279
Goodwill recorded		554,098
Consideration allocated, payable by the Company’s common stock	$	612,240

	Three months ended March 31,
	2022		2021

Interest income	$	1,666,141	$	1,601,622
ACT income:
- Sale of arts and collectibles products		1,208,146		0
- Transaction fee income and others		1,306,660		0
		2,514,806		0

	$	4,180,947	$	1,601,622

	Three months ended March 31, 2022
	Lending Segment			ACT Segment			Total
Revenue from external customers:
Interest income	$	1,666,141		$	0		$	1,666,141
Arts and collectibles technology income		0			2,514,806			2,514,806
Total revenue, net		1,666,141			2,514,806			4,180,947

Cost of revenue:
Interest expense		(46,906	)		0			(46,906	)
Arts and collectibles technology expense		0			(665,759	)		(665,759	)
Total cost of revenue		(46,906	)		(665,759	)		(712,665	)

Gross profit		1,619,235			1,849,047			3,468,282

Operating Expenses
Sales and marketing		(6,684	)		(19,357,972	)		(19,364,656	)
Corporate development		0			(18,988,606	)		(18,988,606	)
Technology and development		0			(24,353,672	)		(24,353,672	)
General and administrative		(1,009,521	)		(1,719,481	)		(2,729,002	)
Total operating expenses		(1,016,205	)		(64,419,731	)		(65,435,936	)

Income (loss) from operations		603,030			(62,570,684	)		(61,967,654	)

Other income (loss):
Interest income		36			3			39
Impairment loss on digital assets		0			(3,199	)		(3,199	)
Imputed interest expense		(237,114	)		0			(237,114	)
Sundry income		23,939			0			23,939
Total other loss, net		(213,139	)		(3,196	)		(216,335	)

Segment income (loss)	$	389,891		$	(62,573,880	)	$	(62,183,989	)

	Three months ended March 31,
	2022		2021

Hong Kong	$	1,666,141	$	1,601,622
Around the world		2,514,806		0

	$	4,180,947	$	1,601,622

		March 31, 2022		December 31, 2021

Personal loans	$	17,913,525		$	17,352,856
Commercial loans		1,545,024			1,186,339
Mortgage loans		2,219,997			1,294,601
Total loans		21,678,546			19,833,796
Less: Allowance for loan losses		(1,338,606	)		(781,202	)
Loans receivables, net	$	20,339,940		$	19,052,594

Reclassifying as:
Current portion	$	20,339,940		$	19,052,594
Non-current portion		0			0

Total loans receivables	$	20,339,940		$	19,052,594

	March 31, 2022			March 31, 2021

Balance at January 1	$	35,451		$	0

Received as revenue		2,514,806			0
Paid as expense		(2,542,912	)		0
Impairment loss		(3,199	)		0
Balance at March 31	$	4,146		$	0

	Estimated useful life	March 31, 2022			December 31, 2021
At cost:
Acquired technology software	5 years	$	17,344,690		$	17,344,690
Licensed technology knowhow	4 years		2,000,000			2,000,000
Trademarks and trade name	10 years		41,148			39,270
Less: accumulated amortization			(1,822,825	)		(829,575	)
Foreign translation adjustment			(152	)		4
		$	17,562,861		$	18,554,389

Period ending March 31:
2023	$	3,973,050
2024		3,973,050
2025		3,973,050
2026		3,598,050
2027		2,027,659
Thereafter		18,002
	$	17,562,861

Period Ending March 31,
2023	$	193,957
2024		107,305
2025		15,884

Total		317,146
Less: interest	$	(11,355	)
Present value of lease liabilities – current liability		234,596
Present value of lease liabilities – non-current liability	$	71,195

	Three months ended March 31,
	2022			2021
Loss before income taxes	$	(61,636,397	)	$	0
Statutory income tax rate		17	%	17		%
Income tax expense at statutory rate		(10,478,187	)		0
Net operating loss		10,478,187			0
Income tax expense	$	0		$	0