Attached files
file | filename |
---|---|
EX-32.2 - EX-32.2 - Cosmos Group Holdings Inc. | cosmos_ex322.htm |
EX-32.1 - EX-32.1 - Cosmos Group Holdings Inc. | cosmos_ex321.htm |
EX-31.2 - EX-31.2 - Cosmos Group Holdings Inc. | cosmos_ex312.htm |
EX-31.1 - EX-31.1 - Cosmos Group Holdings Inc. | cosmos_ex311.htm |
EX-21 - EX-21 - Cosmos Group Holdings Inc. | cosmos_ex21.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 000-55793
COSMOS GROUP HOLDINGS INC. |
(Exact Name of Registrant as Specified in Its Charter) |
Nevada |
| 22-3617931 |
(State or Other Jurisdiction |
| (I.R.S. Employer |
of Incorporation or Organization) |
| Identification No.) |
Rooms 1309-11, 13th Floor, Tai Yau Building,
No. 181 Johnston Road
Wanchai, Hong Kong
+852 3188 9363
(Address of Principal Executive Offices and Issuer’s
Telephone Number, including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class | Trading Symbol | Name of each exchange on which registered |
Common Stock, par value US$0.001 | COSG | N/A |
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 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.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☒ |
Emerging growth company | ☐ |
|
|
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 5, 2021, the issuer had outstanding 21,536,933 shares of common stock.
2 |
Table of Contents |
COSMOS GROUP HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||
|
| (Unaudited) |
|
|
| |||
ASSETS |
|
|
|
|
|
| ||
Current assets |
|
|
|
|
|
| ||
Accounts receivable (including related party), net |
| $ | - |
|
| $ | - |
|
Non-current assets: |
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
| 30,226 |
|
|
| 33,808 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ | 30,226 |
|
| $ | 33,808 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| $ | 173,775 |
|
| $ | 151,173 |
|
Due to related parties |
|
| 534,258 |
|
|
| 512,537 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
| 708,033 |
|
|
| 663,710 |
|
|
|
|
|
|
|
|
|
|
Non-current liabilities: |
|
|
|
|
|
|
|
|
Deferred tax liabilities |
|
| 7,864 |
|
|
| 7,886 |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
| 715,897 |
|
|
| 671,596 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
| – |
|
|
| – |
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit: |
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; 500,000,000 shares authorized; 21,536,933 and 21,536,933 shares issued and outstanding as of March 31, 2021 and December 31, 2020 |
|
| 21,536 |
|
|
| 21,536 |
|
Additional paid-in capital |
|
| 395,516 |
|
|
| 395,516 |
|
Accumulated deficit |
|
| (1,102,276 | ) |
|
| (1,052,582 | ) |
Accumulated other comprehensive loss |
|
| (447 | ) |
|
| (2,258 | ) |
|
|
|
|
|
|
|
|
|
Total stockholders’ deficit |
|
| (685,671 | ) |
|
| (637,788 | ) |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT |
| $ | 30,226 |
|
| $ | 33,808 |
|
See accompanying notes to condensed consolidated financial statements.
3 |
Table of Contents |
COSMOS GROUP HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
|
| Three months ended March 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Revenue |
| $ | – |
|
| $ | 90,388 |
|
Revenue-related party |
|
| – |
|
|
| 72,912 |
|
Total revenues, net |
|
| – |
|
|
| 163,300 |
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
| – |
|
|
| (112,966 | ) |
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
| – |
|
|
| 50,334 |
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
General and administrative |
|
| (49,694 | ) |
|
| (56,153 | ) |
Total operating expenses |
|
| (49,694 | ) |
|
| (56,153 | ) |
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
| (49,694 | ) |
|
| (5,819 | ) |
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
Interest income |
|
| – |
|
|
| 1 |
|
Interest expense |
|
| – |
|
|
| (565 | ) |
|
|
|
|
|
|
|
|
|
Total other (expense) income |
|
| – |
|
|
| (564 | ) |
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES |
|
| (49,694 | ) |
|
| (6,383 | ) |
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| – |
|
|
| – |
|
|
|
|
|
|
|
|
|
|
Loss from continuing operation |
|
| (49,694 | ) |
|
| (6,383 | ) |
Loss from discontinued operations, net of tax |
|
| – |
|
|
| (6,286 | ) |
|
|
|
|
|
|
|
|
|
NET LOSS |
| $ | (49,694 | ) |
| $ | (12,669 | ) |
|
|
|
|
|
|
|
|
|
NET LOSS |
|
| (49,694 | ) |
|
| (12,669 | ) |
Foreign currency translation gain (loss) |
|
| 1,811 |
|
|
| (2,636 | ) |
COMPREHENSIVE LOSS |
| $ | (47,883 | ) |
| $ | (15,305 | ) |
|
|
|
|
|
|
|
|
|
Net loss per share: |
|
|
|
|
|
|
|
|
Continuing operations – basic and diluted |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
Discontinued operations – basic and diluted |
|
| - |
|
|
| (0.00 | ) |
Net loss per share - basic and diluted |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
– Basic and diluted |
|
| 21,536,933 |
|
|
| 21,536,933 |
|
See accompanying notes to condensed consolidated financial statements.
4 |
Table of Contents |
COSMOS GROUP HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
| Three months ended March 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net loss |
| $ | (49,694 | ) |
| $ | (12,669 | ) |
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
|
|
Depreciation |
|
| 3,495 |
|
|
| 3,062 |
|
Deferred tax |
|
| – |
|
|
| 48 |
|
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| – |
|
|
| (12,635 | ) |
Accounts payable and accrued liabilities |
|
| 22,996 |
|
|
| (9,743 | ) |
Income tax payable |
|
| – |
|
|
| (3,603 | ) |
Net cash provided by operating activities from discontinued operations |
|
| – |
|
|
| 1,043 |
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
| (23,203 | ) |
|
| (34,497 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Advances from related parties |
|
| 23,203 |
|
|
| 14,107 |
|
Repayment of lease liability |
|
| – |
|
|
| (4,980 | ) |
Net cash provided by financing activities from discontinued operations |
|
| – |
|
|
| 5,328 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
| 23,203 |
|
|
| 14,455 |
|
|
|
|
|
|
|
|
|
|
Effect on exchange rate change on cash and cash equivalents |
|
| – |
|
|
| – |
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH EQUIVALENTS |
|
| – |
|
|
| (20,042 | ) |
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
|
| – |
|
|
| 28,816 |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD |
| $ | – |
|
| $ | 8,774 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | – |
|
| $ | 565 |
|
Cash paid for tax |
| $ | – |
|
| $ | 3,603 |
|
See accompanying notes to condensed consolidated financial statements.
5 |
Table of Contents |
COSMOS GROUP HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(UNAUDITED)
|
| Common stock |
|
| Additional paid-in |
|
| Accumulated other comprehensive |
|
| Accumulated |
|
| Total stockholders’ |
| |||||||||
|
| No. of shares |
|
| Amount |
|
| capital |
|
| income (loss) |
|
| deficit |
|
| deficit |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance as of December 31, 2020 |
|
| 21,536,933 |
|
| $ | 21,536 |
|
| $ | 395,516 |
|
| $ | (2,258 | ) |
| $ | (1,052,582 | ) |
| $ | (637,788 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
| – |
|
|
| – |
|
|
| – |
|
|
| 1,811 |
|
|
| – |
|
|
| 1,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| – |
|
|
| – |
|
|
| – |
|
|
| – |
|
|
| (49,694 | ) |
|
| (49,694 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2021 |
|
| 21,536,933 |
|
| $ | 21,536 |
|
| $ | 395,516 |
|
| $ | (447 | ) |
| $ | (1,102,276 | ) |
| $ | (685,671 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock |
|
| Additional paid-in |
|
| Accumulated other comprehensive |
|
| Accumulated |
|
| Total stockholders’ |
| |||||||||
|
| No. of shares |
|
| Amount |
|
| capital |
|
| income (loss) |
|
| losses |
|
| deficit |
| ||||||
Balance as of December 31, 2019 |
|
| 21,536,933 |
|
| $ | 21,536 |
|
| $ | 395,516 |
|
| $ | – |
|
| $ | (806,842 | ) |
| $ | (389,790 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
| – |
|
|
| – |
|
|
| – |
|
|
| (2,636 | ) |
|
| – |
|
|
| (2,636 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| – |
|
|
| – |
|
|
| – |
|
|
| – |
|
|
| (12,669 | ) |
|
| (12,669 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2020 |
|
| 21,536,933 |
|
| $ | 21,536 |
|
| $ | 395,516 |
|
| $ | (2,636 | ) |
| $ | (819,511 | ) |
| $ | (405,095 | ) |
See accompanying notes to condensed consolidated financial statements.
6 |
Table of Contents |
COSMOS GROUP HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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, 2020 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, 2021 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2021 or for any future period.
These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Management’s Discussion and the audited financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2020.
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, through its subsidiaries, mainly engaged in the provision of truckload transportation service in Hong Kong, in which the Company utilized its owned trucks or independent contractor owned trucks for the pickup and delivery of freight from port to the designated destination, upon the customers’ request. Starting March 2020, the Company generates most of its revenues from referring truckload transportation service business to one of its related party Lee Tat Logistic Holdings Limited, a company owned by one director of the Company, and charges a fixed rate of commission fee.
Description of subsidiaries
Name |
| Place of incorporation |
| Principal activities of operation |
| Particulars of issued/ share |
| Effective interest held |
| |
|
|
|
|
|
|
|
|
|
| |
Lee Tat International Holdings Limited |
| British Virgin Islands |
| Investment holding |
| 50,000 shares at US$1 each |
|
| 100 | % |
|
|
|
|
|
|
|
|
|
|
|
Lee Tat Transportation International Limited |
| Hong Kong |
| Logistic and delivery |
| 10,000 ordinary shares for HK$10,000 |
|
| 100 | % |
COSG and its subsidiaries are hereinafter referred to as (the “Company”).
7 |
Table of Contents |
COSMOS GROUP HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - 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.
· | Use of estimates |
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.
· | Basis of consolidation |
The condensed consolidated financial statements include the financial statements of COSG and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
· | Reclassification |
Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. The reclassification had no impact on previously reported net loss or accumulated deficit.
· | Discontinued operations |
On March 16, 2020, the Company approved to discontinue and exit its AI Education business. On May 4, 2020, the Company completed a stock transfer agreement with each of the three purchasers (the “Purchasers”), pursuant to which the Company agreed to transfer its 100% interest in Cosmos Robotor Holdings Limited (“Cosmos Robotor”) to the three Purchasers for $50 in aggregate, and the Purchasers agreed to assume all the assets and liabilities of Cosmos Robotor.
· | Cash and cash equivalents |
Cash and cash equivalents consist primarily of cash in readily available checking and saving accounts. Cash equivalents consist of highly liquid investments that are readily convertible to cash and that mature within three months or less from the date of purchase. The carrying amounts approximate fair value due to the short maturities of these instruments.
· | Accounts receivable |
Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit is extended based on evaluation of a customer’s financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. At the end of fiscal year, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of March 31, 2021 and December 31, 2020, the allowance for doubtful accounts was $48,784 and $48,920, respectively, based on management’s assessment.
8 |
Table of Contents |
COSMOS GROUP HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
· | Property, plant and equipment |
Property, plant 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 |
|
Service vehicle |
| 8 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 three months ended March 31, 2021 and 2020 were $3,495 and $3,062, respectively.
· | 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, plant and equipment held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment charge for the three months ended March 31, 2021 and 2020.
· | 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 condensed 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.
9 |
Table of Contents |
COSMOS GROUP HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Company derives its revenues from the rendering of transportation services and recognizes in full upon completion of delivery to the receiver’s location. 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. |
· | 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 condensed consolidated statement of 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.
· | Income taxes |
Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
For the three months ended March 31, 2021 and 2020, the Company did not have any interest and penalties associated with tax positions. As of March 31, 2021, the Company did not have any significant unrecognized uncertain tax positions.
The Company conducts the majority of its businesses in Hong Kong and is subject to tax in this jurisdiction. As a result of its business activities, the Company files tax returns that are subject to examination by a foreign tax authority.
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COSMOS GROUP HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
· | Lease |
The Company adopted Topic 842, Leases (“ASC 842”), using the modified retrospective approach through a cumulative-effect adjustment and utilizing the effective date of January 1, 2019 as its date of initial application, with prior periods unchanged and presented in accordance with the previous guidance in Topic 840, Leases (“ASC 840”).
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 asset 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 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.
· | 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.
· | 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 statement of operations.
The reporting currency of the Company is the United States Dollar (“US$”). The Company’s subsidiaries in Hong Kong and the PRC maintain their books and records in their local currency, Hong Kong Dollars (“HK$”) and Renminbi Yuan (“RMB”), which is the functional currency as being the primary currency of the economic environment in which these entities operate.
In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not the US$ 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 subsidiaries are recorded as a separate component of accumulated other comprehensive income within the condensed consolidated statement of stockholders’ deficit.
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COSMOS GROUP HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
· | Related parties |
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
· | Segment reporting |
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 financial statements. For the three months ended March 31, 2021 and 2020, the Company operates in one reportable operating segment in Hong Kong.
· | Fair value of financial instruments |
The carrying value of the Company’s financial instruments (excluding short-term bank borrowing and note payable): cash and cash equivalents, accounts and retention receivable, prepayments and other receivables, accounts payable, income tax payable, amount due to a related party, other payables and accrued liabilities approximate at their fair values because of the short-term nature of these financial instruments.
Management believes, based on the current market prices or interest rates for similar debt instruments, the fair value of short-term bank borrowings and note payable approximate the carrying amount.
The Company also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
· | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
|
|
· | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
|
|
· | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
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COSMOS GROUP HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
· | Recent accounting pronouncements |
Recently Adopted Accounting Standards
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020, with early adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. This adoption on January 1, 2021 did not have a material impact on the Company’s consolidated financial statements.
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 experienced a net loss of $49,694 and negative operating cash flows of $23,203, for the period ended March 31, 2021. Also, at March 31, 2021, the Company has incurred an accumulated deficit of $1,102,276.
The continuation of the Company as a going concern through March 31, 2022 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.
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.
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COSMOS GROUP HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 - INCOME TAXES
The Company generated an operating loss for the three months ended March 31, 2021 and 2019 and did not record income tax expense. The Company has operations in various countries and is subject to tax in the jurisdictions in which they operate, as follows:
United States of America
COSG is registered in the State of Nevada and is subject to the tax laws of United States of America
As of March 31, 2021, the operation in the United States of America incurred $2,710,001 of cumulative net operating losses which can be carried forward to offset future taxable income. The net operating loss carryforwards begin to expire in 2039, if unutilized. The Company has provided for a full valuation allowance against the deferred tax assets of $569,100 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.
Hong Kong
The Company’s subsidiaries operating in Hong Kong are subject to the Hong Kong Profits Tax at the two-tiered income tax rate from 8.25% to 16.5% on the assessable income arising in Hong Kong during its tax year.
The following is a reconciliation of the statutory tax rate to the effective tax rate:
|
| For the Three Months |
| |||||
|
| Ended March 31, |
| |||||
|
| 2020 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
U.S. statutory tax (benefit) |
|
| (21.0 | )% |
|
| (21.0 | )% |
Hong Kong statutory tax (benefit) |
|
| (8.25 | )% |
|
| 8.25 | % |
Permanent and temporary differences |
|
| 0 | % |
|
| (8.25 | )% |
Change in deferred tax asset valuation allowance |
|
| 29.25 | % |
|
| 21.0 | % |
Effective income tax rate |
|
| 0 | % |
|
| 0 | % |
NOTE 7 - 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
As of March 31, 2021 and December 31, 2020, the Company had a total of 21,536,933 shares of its common stock issued and outstanding, respectively.
NOTE 8 - RELATED PARTY TRANSACTIONS
Sales to related party
Starting March 2020, the Company generates its revenue mostly from referring truckload transportation service business to one of its related party Lee Tat Logistic Holdings Limited, a Company owned by one the director of the Company, and charges a fixed rate of commission fee. Revenue from Lee Tat Logistic Holding Limited amounted to $0 and $72,912 for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021 and December 31, 2020, accounts receivable from Lee Tat Logistic Holding Limited was $44,672 and $44,797, respectively, of which $44,672 and $44,797 was recorded as allowance for doubtful accounts as of March 31, 2021 and December 31, 2020, respectively.
Due to related parties
As of March 31, 2021 and December 31, 2020, the Company had $85,389 and $85,628 due to Cosmos Links International Holding Limited, respectively. Cosmos Links International Holding Limited is an entity controlled by Miky Wan, President, Chief Executive Officer and director of the Company. Those loans are unsecured, bear no interest, and are due on demand.
As of March 31, 2021 and December 31, 2020, the Company had $368,002 and $370,167 due to Asia Cosmos Group Limited, respectively. Asia Cosmos Group Limited is an entity controlled by Miky Wan, President, Chief Executive Officer and director of the Company. Those loans are unsecured, bear no interest, and are due on demand.
The Company has advanced funds from Koon Wing Cheung, a shareholder of the Company and director of Lee Tat International Holdings limited, for working capital purposes. As of March 31, 2021 and December 31, 2020, there were $80,867 and $56,742 advances outstanding, respectively. Those advances are unsecured, bear no interest, and are due on demand.
Lease
On July 1, 2020, the Company entered into a lease agreement with Koon Wing Cheung, a shareholder of the Company and director of Lee Tat International Holdings limited, pursuant to which the Company agreed to lease a real property located in Hong Kong from July 1, 2020 to March 31, 2021, with a monthly rent of $7,740 (HK$ 60,000), payable in advance on the 1st day of each month.
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COSMOS GROUP HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9 - CONCENTRATIONS OF RISK
The Company is exposed to the following concentrations of risk:
(a) Major customer
For the three months ended March 31, 2021, the Company generated no revenue, whilst, for the three months ended March 31, 2020, the customers who accounts for 10% or more of the Company’s revenues and its outstanding receivable balances as at year-end dates, are presented as follows:
|
| Three months ended |
|
|
|
| March 31, 2020 |
| ||||||
Customers |
| Revenues |
|
| Percentage |
|
|
|
| Accounts |
| |||
|
|
|
|
|
|
|
|
|
|
|
| |||
Customer A – related party |
| $ | 72,912 |
|
|
| 45 | % |
|
|
| $ | 73,082 |
|
Customer B |
|
| 61,188 |
|
|
| 37 | % |
|
|
|
| 3,969 |
|
Customer C |
|
| 26,436 |
|
|
| 16 | % |
|
|
|
| – |
|
Total: |
| $ | 160,536 |
|
|
| 98 | % |
| Total: |
| $ | 77,051 |
|
15 |
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COSMOS GROUP HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
All customers are located in the Hong Kong.
(b) Credit risk
Financial instruments that are potentially subject to credit risk consist principally of trade receivables. The Company believes the concentration of credit risk in its trade receivables is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.
(c) Interest rate risk
As the Company has no significant interest-bearing assets, the Company’s income and operating cash flows are substantially independent of changes in market interest rates.
The Company’s interest-rate risk arises from borrowing under finance lease. The Company manages interest rate risk by varying the issuance and maturity dates variable rate debt, limiting the amount of variable rate debt, and continually monitoring the effects of market changes in interest rates.
(d) Exchange rate risk
The reporting currency of the Company is US$, to date the majority of the revenues and costs are denominated in HKD and a significant portion of the assets and liabilities are denominated in HKD. As a result, the Company is exposed to foreign exchange risk as its revenues and results of operations may be affected by fluctuations in the exchange rate between US$ and HKD. If HKD depreciates against US$, the value of HKD revenues and assets as expressed in US$ financial statements will decline. The Company does not hold any derivative or other financial instruments that expose to substantial market risk.
NOTE 10 - SUBSEQUENT EVENTS
On June 17, 2021, the Company entered into a Share Acquisition Agreement (the “Share Acquisition Agreement”), by and among the Company, Massive Treasure Limited, a British Virgin Islands corporation (“Massive Treasure”), and the holders of common shares of Massive Treasure.
Under the terms and conditions of the Share Acquisition Agreement, the Company offered to issue 1,078,269,470 shares of common stock of the Company, in consideration for all the issued and outstanding shares in Massive Treasure. Herbert Lee, expected to be appointed as a Company director, is the beneficial holder of 47,500 common shares, or 95%, of the issued and outstanding shares of Massive Treasure.
The Company will also issue 55,641,014 shares to complete the acquisitions of 12 business entities which Massive Treasure has signed with and remain outstanding.
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 financial statements are issued, the Company has evaluated all events or transactions that occurred March 31, 2021, up through the date, the Company issued the condensed consolidated financial statements.
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ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-looking statements
The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this quarterly report on Form 10-Q. This quarterly report on Form 10-Q contains certain forward-looking statements and our future operating results could differ materially from those discussed herein. Certain statements contained in this discussion, including, without limitation, statements containing the words “believes,” “anticipates,” “expects” and the like, constitute “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 (the “Exchange Act”). However, as we issue “penny stock,” as such term is defined in Rule 3a51-1 promulgated under the Exchange Act, we are ineligible to rely on these safe harbor provisions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We disclaim any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained herein to reflect future events or developments.
Currency and exchange rate
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
The Company, through its subsidiaries, currently engaged in the provision of truckload transportation service in Hong Kong, in which the Company utilized its owned trucks or independent contractor owned trucks for the pickup and delivery of freight from port to the designated destination, upon the customers’ request. Starting March 2020, the Company generates most of its revenues from referring truckload transportation service business to one of its related party Lee Tat Logistic Holdings Limited, a company owned by one director of the Company, and charges a fixed rate of commission fee.
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Table of Contents |
Results of Operations
Comparison of the three months ended March 31, 2021 and March 31, 2020
As of March 31, 2021, we suffered from a working capital deficit of $708,033. As a result, our continuation as a going concern is dependent upon improving our profitability and the continuing financial support from our stockholders or other capital sources. Management believes that the continuing financial support from the existing shareholders and external financing will provide the additional cash 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.
The following table sets forth certain operational data for the three months ended March 31, 2021, compared to the three months ended March 31, 2020:
|
| Three months ended March 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Revenue |
| $ | – |
|
| $ | 163,300 |
|
Cost of revenue |
|
| – |
|
|
| (112,966 | ) |
Gross profit |
|
| – |
|
|
| 50,334 |
|
Operating Expenses |
|
| (49,694 | ) |
|
| (56,153 | ) |
Loss from operations |
|
| (49,694 | ) |
|
| (5,819 | ) |
Total other expense |
|
| – |
|
|
| (564 | ) |
Income tax expense |
|
| – |
|
|
| – |
|
Loss from discontinued operation |
|
| – |
|
|
| (6,286 | ) |
NET LOSS |
| $ | (49,694 | ) |
| $ | (12,669 | ) |
During the three months ended March 31, 2021, we generated no revenue, whilst, during the three months ended March 31, 2020, the following customers accounted for 10% or more of our total net revenues:
|
| Three Months ended |
|
| March 30, |
| ||||||
|
| Revenues |
|
| Percentage |
|
| Accounts |
| |||
|
|
|
|
|
|
|
|
|
| |||
Lee Tat Logistic Holding Limited |
| $ | 72,912 |
|
|
| 45 | % |
| $ | 73,082 |
|
Hip Tung Cables Company Limited |
|
| 61,188 |
|
|
| 37 | % |
|
| 3,969 |
|
Peaceman Cable Engineering Limited |
|
| 26,436 |
|
|
| 16 | % |
|
| – |
|
Total |
| $ | 160,536 |
|
|
| 98 | % |
| $ | 77,051 |
|
All of our major customers are located in Hong Kong.
Revenue. Revenue for the three months ended March 31, 2021 and 2020 was $0 and $163,300. Revenue decreased primarily as a result of the decrease in our business volume.
Cost of Revenue. Cost of revenue for the three months ended March 31, 2021 and 2020 was $0 and $112,966. Cost of revenue decreased primarily as a result of the decrease in our business volume.
Gross Profit. We achieved a gross profit of $0 and $50,334 for the three months ended March 31, 2021, and 2020, respectively. The decrease in gross profit is primarily attributable to the logistic business slow down.
Operating Expenses. We incurred G&A expenses of $49,694 and $56,153 for the three months ended March 31, 2021, and 2020, respectively.
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Other Expenses, net. We incurred net other expenses of $0 and $564 for the three months ended March 31, 2021 and 2020, respectively.
Income Tax Expense. Our income tax expenses for the three months ended March 31, 2021 and 2020 was $0 and $0, respectively.
Net Loss. During the three months ended March 31, 2021 and 2020, we incurred a net loss of $49,694 and $12,669, respectively. The increase in net loss is primarily attributable to sales reduction during this fiscal quarter.
Liquidity and Capital Resources
As of March 31, 2021 and December 31, 2020, we had cash and cash equivalents of $0 and accounts receivable of $0.
We expect to incur significantly greater expenses in the near future as we develop our artificial intelligence education 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, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Net cash used in operating activities |
| $ | (23,203 | ) |
| $ | 34,497 |
|
Net cash used in investing activities |
|
| – |
|
|
| – |
|
Net cash provided by financing activities |
| $ | 23,203 |
|
| $ | 14,455 |
|
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Net Cash Used In Operating Activities.
For the three months ended March 31, 2021, net cash used in operating activities was $23,203 which consisted primarily of a net loss of $49,694, an increase in accounts payable and accrued liabilities of $22,996 and depreciation of property, plant and equipment of $3,495.
For the three months ended March 31, 2020, net cash used in operating activities was $34,497, which consisted primarily of a net loss of $12,669, an increase in account receivable of $12,635, net cash provided by operating activities of discontinued operation of $1,043, a decrease in accounts payable and accrued liabilities of $9,743, a decrease in income tax payable of $3,603, depreciation of property, plant and equipment of $3,062 and deferred tax of $48.
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 Used In Investing Activities.
For the three months ended March 31, 2021 and 2020, net cash used in investment activities was $0.
Net Cash Provided By Financing Activities.
For the three months ended March 31, 2021, net cash provided by financing activities was $23,203 consisting primarily of advances from related parties of $23,203.
For the three months ended March 31, 2020, net cash provided by financing activities was $14,455 consisting primarily of advances from related parties of $14,107 and net cash provided by financing activities of discontinued operation $5,328, offset by repayments on a finance lease of $4,980.
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 had the following contractual obligations and commercial commitments as of March 31, 2021:
Contractual Obligations |
| Total |
|
| Less than 1 |
|
| 1-3 Years |
|
| 3-5 Years |
|
| More than 5 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Amounts due to related parties |
| $ | 534,258 |
|
| $ | 534,258 |
|
| $ | – |
|
| $ | – |
|
| $ | – |
|
Total obligations |
| $ | 534,258 |
|
| $ | 534,258 |
|
| $ | – |
|
| $ | – |
|
| $ | – |
|
20 |
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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.
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 as 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.
· | Basis of consolidation |
The condensed consolidated financial statements include the financial statements of COSG and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
· | Accounts receivable |
Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit is extended based on evaluation of a customer’s financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. At the end of fiscal year, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers.
· | Property, plant and equipment |
Property, plant 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 |
Service vehicle |
| 8 years |
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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.
· | 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, plant and equipment held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.
· | Revenue recognition |
Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company derives its revenues from the rendering of transportation services and recognizes in full upon completion of delivery to the receiver’s location. 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. |
· | Income taxes |
Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
The Company conducts major businesses in Hong Kong and is subject to tax in this jurisdiction. As a result of its business activities, the Company files tax returns that are subject to examination by the foreign tax authority.
· | 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 statement of operations.
The reporting currency of the Company is the United States Dollar (“US$”). The Company’s subsidiaries in Hong Kong and the PRC maintain their books and records in their local currency, Hong Kong Dollars (“HK$”) and Renminbi Yuan (“RMB”), which is the functional currency as being the primary currency of the economic environment in which these entities operate.
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In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not the 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 subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.
· | Related parties |
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
· | Fair value of financial instruments |
The carrying value of the Company’s financial instruments (excluding short-term bank borrowing and finance lease): cash and cash equivalents, accounts and retention receivable, prepayments and other receivables, accounts payable, income tax payable, amount due to a related party, other payables and accrued liabilities approximate at their fair values because of the short-term nature of these financial instruments.
Management believes, based on the current market prices or interest rates for similar debt instruments, the fair value of short-term bank borrowings and note payable approximate the carrying amount.
The Company also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
· | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
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· | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
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· | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
· | Recent accounting pronouncements |
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.
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.
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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, 2021, 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, 2021, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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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.
None.
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.
None.
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Exhibit No. |
| Description |
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| Articles of Incorporation and Certificate of Amendment to Articles of Incorporation (1) | |
3.2 |
| Amended and Restated Bylaws (2) |
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101.INS |
| XBRL Instance Document* |
101.SCH |
| XBRL Schema Document* |
101.CAL |
| XBRL Calculation Linkbase Document* |
101.DEF |
| XBRL Definition Linkbase Document* |
101.LAB |
| XBRL Label Linkbase Document* |
101.PRE |
| XBRL Presentation Linkbase Document* |
* Filed herewith
(1) Incorporated by reference from our Registration Statement on 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.
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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. |
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| By: | /s/ Miky Y.C. Wan |
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| Miky Y.C. Wan |
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| Chief Executive Officer, President |
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Date: June 28, 2021 |
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