{"url_path":"/sec/ocg/10-k/2026/item-5","section_key":"item-5","section_title":"Item 5 OPERATING AND FINANCIAL REVIEW AND","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-14","source_url":"https://www.sec.gov/Archives/edgar/data/1776067/0001213900-26-056688-index.html","accession_number":"0001213900-26-056688","cik":"0001776067","ticker":"OCG","issuer_name":"Oriental Culture Holding LTD","edgar_url":"https://www.sec.gov/Archives/edgar/data/1776067/0001213900-26-056688-index.html","primary_entity_key":"0001776067","primary_entity_name":"Oriental Culture Holding LTD"},"word_count":7872,"has_tables":true,"body_markdown":"**ITEM 5. OPERATING AND FINANCIAL REVIEW AND\nPROSPECTS**\n\n**   **\n\n*You should read the following discussion and\nanalysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related\nnotes included elsewhere in this annual report on Form 20-F. This discussion may contain forward-looking statements based upon\ncurrent expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking\nstatements as a result of various factors, including those set forth under “Item 3. Key Information—D. Risk Factors”\nor in other parts of this annual report on Form 20-F.*\n\n** **\n\n**5A. Operating Results**\n\n** **\n\n**Overview**\n\n \n\nWe are an online provider of collectibles and\nartwork e-commerce services, which allow collectors, artists and art dealers and owners to access a much bigger collectable and art trading\nmarket where they can engage with a wider range of collectibles and artwork investors than they could likely encounter without our platforms.\nWe commenced our operations in March 2018. We currently facilitate trading by individual and institutional customers of all kinds of collectibles\nand artwork and certain commodities on our online platform owned by our subsidiaries in Hong Kong, namely the China International Assets\nand Equity of Artworks Exchange Limited. We also provide online and offline integrated marketing, storage and technical maintenance services\nto our customers in China.\n\n \n\nAccording to the “Report on the Development\nof E-commerce in China in 2025” released by the Ministry of Commerce of the People's Republic of China, China's e-commerce sector\nexperienced steady growth in 2025. Data from the National Bureau of Statistics of China shows that the national e-commerce transaction\nvolume reached RMB 46.73 trillion in 2025, representing a year-on-year increase of 2.5%; national online retail sales reached RMB 15.97\ntrillion, up 8.6% year-on-year.\n\n \n\nOn many mainstream e-commerce platforms, sales\nof cultural products such as arts and crafts have flourished and developed rapidly, and art and collectibles related e-commerce business\nis gradually growing. Online trading has become a major trend of the global art and collectibles trade. As a comprehensive service provider\nwith rich cultural and art collection and collectibles market operations and marketing experience, we seized development opportunities\nand provide online and offline supporting services for domestic and international art and collectibles e-commerce business.\n\n \n\nWe provide customers of our online platform with\ncomprehensive services, including account opening, art investment education, market information, research, real-time customer support,\nand artwork and collectibles warehousing services. Most services are delivered online through our proprietary client software and call\ncenter. Our client software provides not only market information and analysis, but also interactive functions including live discussion\nboards and instant messaging with customer service representatives, which we believe enhances our customers’ engagement. Internally,\nwe legally collect and analyze customer behavior and communications data from our client software, customer relationship management system\nand the exchanges, which allow us to better understand, attract and serve our customers. \n\n \n\nWe provide industry solutions and related software\nproducts, system development and technical support services for our cooperation with e-commerce platform customers.\n\n \n\nWe strive to minimize conflicts of interest with\nour customers, which we believe is essential for our long-term success. Under the trading rules of the exchange platform we operate on,\nwe do not set, quote or influence the trading prices, and cannot access our customers’ money.\n\n \n\n71\n\n \n\n \n\n**Termination and Dismantle of VIE Structure**\n\n \n\nOn October 16, 2025, the Board of Directors of\nthe Company approved to terminate the variable interest entity (“VIE”) structure of the Company due to the change of its business\nstrategy. Jiangsu Yanggu, the variable interest entity of the Company, will transfer all the equity interests of its wholly owned subsidiaries,\nnamely Nanjing Yanqing and Nanjing Yanyu to WOFE and the Company will terminate the Equity Pledge Agreement by and among the WFOE, Jiangsu\nYanggu and Jiangsu Yanggu’s shareholders to release the pledged shares of Jiangsu Yanggu to its shareholders.\n\n \n\nOn October 20, 2025, the Company, Jiangsu Yanggu,\nNanjing Rongke, Nanjing Yanqing, Nanjing Yanyu and shareholders of Jiangsu Yanggu entered into an Equity Restructuring for VIE Structure\nDissolution and Termination Agreement of VIE Agreement (“VIE Termination Agreement”). Pursuant to the VIE Termination Agreement,\nthe parties agreed: (i) Jiangsu Yanggu will transfer all the equity interests of Nanjing Yanqing and Nanjing Yanyu to WOFE for RMB 0 (the\n“Equity Transfer”) and (ii) all VIE-related agreements, namely the Technical Consultation and Service Agreement, the Equity\nPledge Agreement, as amended, the Equity Option Agreement, as amended and the Voting Rights Proxy and Financial Supporting Agreements,\nshall be immediately terminated, with all rights and obligations permanently extinguished, effective from the date of Equity Transfer\nwhich is the date of completion of business registration change for such Equity Transfer (the “Termination”). On November\n11, 2025, Jiangsu Yanggu completed the Equity Transfer of 100% ownership of Nanjing Yanyu and Nanjing Yanqing to WOFE. Upon completion\nof the Equity Transfer and the Termination, the Company owns the equity interests in its operating entities in China through direct ownership\ninstead of through the VIE structure.\n\n \n\n**Impact of investigation and charge against\nour shareholders and related party**\n\n \n\nOn July 1, 2022, Mr. Huajun Gao and Mr. Aiming\nKong, each was a major shareholder of the Company, were detained by Nan County Public Safety Bureau of Yiyang City, Hunan Province, China.\nOn July 26, 2022, Nan County People’s Procuratorate (“NCPP”) approved the arrest of Mr. Gao and Mr. Kong, charging them\nwith assisting in illegal online business operation of Nanjing Jinwang Art Purchase E-commerce Co., Ltd. (“Nanjing Jinwang”)\nand prosecuted them to Nan County People’s Court (the “Court”) in August 2023.\n\n \n\nOn July 1, 2022, the bank accounts of Nanjing\nJinwang were frozen by Nan County Public Safety Bureau, including a trust account into which the customers of the Company deposit their\nsecurity deposits in order to trade on the Company’s online trading platforms which the Company has entrusted Nanjing Jinwang for\nescrow.\n\n \n\nAlso, on July 1, 2022, Nan County Public Safety\nBureau froze certain bank accounts of Kashi Longrui, Kashi Dongfang, and Nanjing Yanyu, all subsidiaries of Jiangsu Yanggu Culture Development\nCo., Ltd., the former VIE because they, each had business relationship with Nanjing Jinwang.\n\n \n\nNeither the Company nor its subsidiaries have\nreceived any notification for enforcement charges from Nan County Public Safety Bureau, other than cash and short-term investment in the\nfrozen bank accounts relating to the Nanjing Jinwang investigation as described above. Mr. Gao and Mr. Kong are not officers, directors\nor employees of the Company, its VIE or subsidiaries of the VIE until January 23, 2025 when Mr. Kong was appointed as Chief Operating\nOfficer of the Company.\n\n \n\nThe Court had the hearing in August 2023 and trial\nin January 2024 and both of Mr. Kong and Mr. Gao were released on bail waiting for the judgement of the Court since February 2024. On\nMay 5, 2025, NCPP filed with the Court to withdraw the charges against Nanjing Jinwang, Mr. Aimin Kong and Mr. Huajun Gao due to lack\nof evidence to press the charges. On May 8, 2025, the Court ordered to grant the withdrawal of charges against Nanjing Jinwang, Mr. Kong\nand Mr. Gao by NCCP. On May 15, 2025, Nan County Public Safety Bureau unfroze the bank accounts of Nanjing Jinwang, a related party of\nthe Company. On May 15, 2025, Nan County Public Safety Bureau unfroze the bank accounts of Kashi Longrui, Kashi Dongfang and Nanjing Yanyu.\nOn May 28, 2025, NCCP determined it would not seek to file any charges against Nanjing Jinwang, Mr. Aimin Kong and Mr. Huajun Gao. The\ninvestigation and case have been officially closed according to the PRC counsel of the Company, Tahota (Nanjing) Law Firm. All customers\ncan freely transfer their deposits and make their withdrawals based on their actual needs.\n\n \n\nAlthough the Company’s business operations\nand active customer base were materially and adversely affected by the Nanjing Jinwang case between July 2022 and May 2025, as frozen\nbank accounts caused customer concerns over fund safety and withdrawal difficulties, the Company has been proactively developing new businesses.\nThe Company has established a stable revenue model and sustained cash flow generation capability. In particular, the newly implemented\nwarehousing fee and account management fee policies have provided a solid financial foundation for the Company’s core daily operations. \n\n \n\n72\n\n \n\n \n\n**Key Factors Affecting Our Results**\n\n \n\nWe believe the key factors affecting our financial\ncondition and results of operations include the following: \n\n \n\n**Number of Active Traders**\n\n** **\n\nOur results of operations are dependent on the\nnumber of active traders using our platform. Active traders are defined as the total number of individuals who placed trades and traded\ncollectibles, artwork and commodities on our platforms during the relevant period. We had approximately 13,600, 19,000 and 35,000 traders\nthat participated in trading collectibles, artwork and commodities on our platforms for the years ended December 31, 2025, 2024 and 2023,\nrespectively. The number of traders decreased due to the investigation and impact of the frozen bank accounts.\n\n** **\n\n**Number of Transactions**\n\n \n\nDuring the years ended December 31, 2025, 2024\nand 2023, our platforms facilitated and completed approximately 2.2 million, 7 million and 19 million transactions, respectively. The\nchange in the number of transactions was due to the change in the number of active traders and trading activities due to reason mentioned\nabove.\n\n** **\n\n**Transaction Value**\n\n** **\n\nTransaction value is defined as the dollar amount\nof the purchase and sale of the ownership units of the collectibles, artwork and commodities after they are listed on our platforms. During\nthe years ended December 31, 2025, 2024 and 2023, total transaction value amounted to approximately $0.19 billion, $0.1 billion and $0.5\nbillion, respectively. The change in total transaction value was due to the change in number of products listed, number of transactions,\nand value of the units for the year ended December 31, 2025, 2024 and 2023. The numbers of new collectibles/artwork and commodities that\nwere successfully listed on our platforms decreased from 7 for the year ended December 31, 2024 to nil for the year ended December 31,\n2025. The increase in transaction value despite no new collectibles being listed was mainly attributable to the value recovery of certain\ncollectibles, which resulted in higher transaction amounts.\n\n** **\n\n**Average Transaction Value Per Trader**\n\n** **\n\nAverage transaction value per trader is calculated\nby dividing the total number of active traders from total transaction value during the relevant period. During the years ended December\n31, 2025, 2024, and 2023, our average transaction value per client was approximately $13,000, $6,000 and $10,000. The change of average\ntransaction value is due to the reasons stated above.   \n\n** **\n\n**Results of Operations**\n\n** **\n\nThe tables in the following discussion summarize\nour consolidated statements of income and comprehensive income for the periods indicated. This information should be read together with\nour consolidated financial statements and related notes included elsewhere in this annual report. The operating results in any period\nare not necessarily of the results that may be expected for any future period. \n\n \n\n**Years Ended December 31, 2025 vs. December 31, 2024**\n\n** **\n\n  \nFor the Years Ended\nDecember 31,  \nVariance \n\n  \n2025  \n2024  \nAmount  \n% \n\nNet revenues \n$1,360,549  \n$568,057  \n$792,492  \n 139.5 \n\nNet revenues – related parties \n 528,299  \n 54,633  \n 473,666  \n 867.0 \n\nTotal operating revenues \n 1,888,848  \n 622,690  \n 1,266,158  \n 203.3 \n\nLess: cost of revenues \n (270,828) \n (182,181) \n (88,647) \n 48.7 \n\nGross profit \n 1,618,020  \n 440,509  \n 1,177,511  \n 267.3 \n\nOperating expenses \n (5,461,383) \n (3,637,707) \n (1,823,676) \n 50.1 \n\nLoss from operations \n (3,843,363) \n (3,197,198) \n (646,165) \n 20.2 \n\nOther (expense) income, net \n (124,638) \n 763,755  \n (888,393) \n (116.3)\n\nLoss before income taxes \n (3,968,001) \n (2,433,443) \n (1,534,558) \n 63.1 \n\nIncome tax (benefit) expense \n (110,031) \n 93  \n (110,124) \n 118,412.9 \n\nNet loss \n (3,857,970) \n (2,433,536) \n (1,424,434) \n 58.5 \n\nForeign currency translation adjustment \n 741,523  \n (479,801) \n 1,221,324  \n (254.5)\n\nComprehensive loss \n$(3,116,447) \n$(2,913,337) \n$(203,110) \n 7.0 \n\nWeighted average number of ordinary shares outstanding – basic and diluted \n 35,968  \n 20,039  \n    \n   \n\n  \n    \n    \n    \n   \n\nBasic and diluted loss per share \n$(107.26) \n$(121.44) \n    \n   \n\n \n\n*\nThe shares data are presented on a retroactive basis to reflect the 220 to 1 share consolidation and 3 to 1 share consolidation (Note 15).\n\n \n\n73\n\n \n\n \n\n**Revenues:**\n\n** **\n\nThe following table sets forth the principal components\nof our net revenues by amounts and percentages of our net revenues for the periods indicated:\n\n \n\n  \nFor the Years Ended December 31,  \n  \n\n  \n2025  \n2024  \nVariance \n\n  \nRevenue  \n%  \nRevenue  \n%  \n**Amount**** **** **\n**%** \n\nListing services fees(1) \n$17,204  \n 0.9  \n$103,807  \n 16.7  \n$(86,603) \n (83.4)\n\nTransaction fees(2) \n 184,701  \n 9.8  \n 296,379  \n 47.6  \n (111,678) \n (37.7)\n\nMarketing services fees(3) \n 87,331  \n 4.6  \n 156,995  \n 25.2  \n (69,664) \n (44.4)\n\nAccount Management fees(4) \n 861,347  \n 45.6  \n -  \n -  \n 861,347  \n NA \n\nWarehousing Service fees(5) \n 209,966  \n 11.1  \n -  \n -  \n 209,966  \n NA \n\nSystem\nMaintenance and Technical Support Service fees(6) *\n\n \n 528,299  \n 28.0  \n 65,509  \n 10.5  \n 462,790  \n 706.5 \n\nTotal operating revenues \n$1,888,848  \n 100.0  \n$622,690  \n 100.0  \n$1,266,158  \n 203.3 \n\n \n\n*\nIncluding $ 528,299 and $54,633 from related parties for the years ended December 31, 2025 and 2024, respectively.\n\n \n\n*(1) Listing service fees:*Our\nperformance obligation is to provide listings on our platform. Listing service fees are calculated based on a percentage of the\nlisting value of collectibles, artwork and commodities. Listing value is the total offering price of the collectible, artwork and\ncommodities when the ownership of the units are initially listed on our trading platforms. We utilize an appraised value as a basis\nto determine the appropriate listing value for each collectible, artwork or commodities, or portfolio of collectibles, artwork or\ncommodities. We recognize the related revenue upon our completion of our performance obligation to the customer and its item is\nsuccessfully listed for trading on our platforms.\n\n* *\n\nTotal listing service fees decreased by $86,603\nor 83.4% from $103,807 for the year ended December 31, 2024 to $17,204 for the same period in 2025. Our listing service fees are calculated\nbased on a percentage of the listing value of collectibles, artwork and commodities of new products. The decrease in the value generated\nby new product listings was mainly due to the decrease of the numbers of new products which caused by the negative impact from the freezing\nof bank accounts due to the ongoing case against our related party starting in the second half of 2022 as we had a hard time to retain\nnew clients with the case ongoing.\n\n* *\n\n*(2) Transaction fee revenue:* Transaction\nfee revenue is generally calculated based on the transaction value of collectibles, artwork or commodities per transaction for our services\nto facilitate the trading transactions. Transaction value is the dollar amount of the purchase and sale of the collectibles, artwork or\ncommodities after it is listed on our platform.\n\n* *\n\nTotal transaction fee revenue decreased by $111,678 or 37.7% from $296,379\nfor the year ended December 31, 2024 to $184,701 for the same period in 2025. The decrease was mainly due to negative impact from the\nfreezing of bank accounts due to the ongoing case against our related party that started in second half of 2022 which reduced overall\ncustomers transactions.\n\n* *\n\n*(3) Marketing service fees:*Marketing service\nfees are what we charge for promoting and marketing our customers’ collectible or artwork. The services include assisting our customers\nin connection with his/her listing and trading of his/her collectible/artwork on our platform, which mainly includes consulting and supporting\nservices of the marketability for the collectible/artwork; assessing its market value and market acceptance for the collectible/artwork;\nand assisting in the application and legal protection required for the customer’s collectible/artwork to be approved for listing\non our platform. For marketing service contracts in which the related performance obligations can be completed within a short period of\ntime, the Company recognizes the related revenue upon the completion of its performance obligations.\n\n* *\n\nMarketing service fees decreased by $69,664 or\n44.4% from $156,995 for the year ended December 31, 2024 to $87,331 for the same period in 2025. The decrease was due to the decrease\nin demand for marketing services from customers to promote their listed items.\n\n* *\n\n*(4) Account management fees:*Account management\nfees are charged as a fixed monthly fee per customer account for providing continuous account maintenance and management services. The\ntransaction price is a fixed monthly amount per account as stipulated in the customer agreement, with no variable consideration. Account\nmanagement fee revenue is recognized over time on a straight-line monthly basis as the performance obligation is satisfied.\n\n \n\nAccount management fees were $861,347 for the year ended December 31,\n2025. As a newly added revenue derived from the development of the Company’s existing business, it reflects the Company’s\nability to diversify its revenue mix and enhance sustainable profitability while further tapping into the value of its existing customer\nbase.\n\n \n\n74\n\n \n\n \n\n*(5) Warehousing service fees:*Warehousing\nservice fees are charged for providing professional storage and preservation services for customers’ collectibles listed on the\nplatform. The fee is calculated daily based on the listed reference price of the collectible, a fixed daily rate, and the quantity of\ncollectibles held by the customer. Warehousing service fee revenue is recognized over time on a daily basis as the performance obligation\nis satisfied, as the customer receives and consumes the benefits of the warehousing services simultaneously as the Company performs them.\n\n \n\nWarehousing service fees amounted to $209,966\nfor the year ended December 31, 2025, representing a new revenue stream generated from the Company’s existing business development.\n\n \n\n*(6) System maintenance and technical support\nservices:* System maintenance and technical support services primarily consist of system development and maintenance, platform\noperation technical support, IT infrastructure support and data processing and data services. Such fees are mainly fixed monthly charges.\nService fees are mainly fixed monthly charges, and the related revenue is recognized evenly on a straight-line basis over the service\nperiod.\n\n \n\nSystem maintenance and technical support services increased by $462,790\nor 706.5% from $65,509, which included $54,633 from providing technical services to our related parties for the year ended December 31,\n2024 to $528,299, which included $528,299 from providing technical services to our related parties for the same period in 2025. The increase\nwas mainly due to the Company’s expanded engagement with existing clients and the exploration of a diversified revenue mix.\n\n  \n\n*Cost of Revenues*\n\n \n\nCost of revenues increased by $88,647 or 48.7%\nfrom $182,181 for the year ended December 31, 2024 to $ 270,828 in 2025. The significant increase was mainly driven by the growth of operating\nrevenue as well as higher labor costs.\n\n \n\n*Gross Profit *\n\n \n\nGross profit increased by $1,177,511 or 267.3%\nfrom $440,509 for the year ended December 31, 2024 to $ 1,618,020 for the year ended December 31, 2025. Gross margin for the years ended\nDecember 31, 2025 and 2024 were 85.7% and 70.7%, respectively. The increase in gross profit was mainly attributable to the change in\nrevenue mix. Revenue for the year ended December 31, 2025 was primarily derived from account management fee income of newly added business\nlines with lower system maintenance costs, leading to improved gross margin.\n\n \n\n*Operating Expenses  *\n\n \n\nThe following table sets forth our operating\nexpenses by amounts and percentages for the periods indicated: \n\n \n\n  \nFor the Years Ended December 31,  \n  \n\n  \n2025  \n2024  \nVariance \n\n  \nExpense  \n%  \nExpense  \n%  \nAmount  \n% \n\nSelling and marketing \n$(326,575) \n 6.0% \n$(207,842) \n 5.7% \n$(118,733) \n 57.1 \n\nGeneral and administrative \n (4,590,896) \n 84.0% \n (3,325,474) \n 91.4% \n (1,265,422) \n 38.1 \n\nGeneral and administrative – related parties \n -  \n -  \n (104,391) \n 2.9% \n 104,391  \n (100.0)\n\nProvision for expected credit losses \n (543,912) \n 10.0% \n    \n    \n (543,912) \n NA \n\nTotal operating expenses \n$(5,461,383) \n 100.0% \n$(3,637,707) \n 100.0% \n$(1,823,676) \n 50.1 \n\n \n\n*Selling and marketing Expenses*\n\n \n\nSelling and marketing expenses consist primarily\nof commissions and payroll and benefits for employees involved in the sales team. Selling and marketing expenses increased by $118,733,\nor 57.1%, from $207,842 for the year ended December 31, 2024 to $326,575 for the same period in 2025. The increase in selling expenses\nwas mainly attributable to a rise in the sales team’s payroll and employee benefit costs, representing an increase of approximately\n$186,000 in labor expenses.\n\n \n\n75\n\n \n\n \n\n*General and Administrative Expenses*\n\n \n\nGeneral and administrative expenses (“G&A expenses”)\nconsist primarily of payroll and related costs for employees involved in general corporate functions, including accounting, finance, tax,\nlegal and human resources, professional fees and other general corporate expenses as well as costs associated with the use by these functions\nof facilities and equipment, such as depreciation and rental expenses. Our G&A expenses increased by $1,161,031, or 33.9% from $3,429,865\nfor the year ended December 31, 2024 to $4,590,896 for the same period in 2025. The increase was primarily due to increased stock compensation\nexpense of $2,686,600 for Chief Operating Officer and management as a result of the stock awards in 2025, partially offset by\nstaff structure optimization and office cost savings, including the decrease in employee expenses of $299,276, depreciation and amortization\nexpense of $287,898, professional fees including audit fees, system and security service fees of $541,492, office and rental fees of $180,034.\n\n \n\n*Provision for expected credit losses*\n\n \n\nOur provision for expected credit losses was\n$543,912 for the year December 31, 2025, an increase of $543,912 from nil for fiscal year 2024. The increase was primarily due to certain\ncustomers in the liquor business postponing payments due to capital constraints, which led to higher accounts receivable and an increase\nin expected credit loss provisions. Based on the profile and operating conditions of these customers, the Company believes these outstanding\nreceivables will be recovered in the second half of 2026.\n\n \n\n*Other Income*\n\n \n\nOther income was as follows:\n\n \n\n  \nFor the Years Ended December 31,  \n  \n\n  \n2025  \n2024  \nVariance \n\n  \nExpense  \n%  \nExpense  \n%  \nAmount  \n% \n\nGain from short-term investment \n$164,784  \n (132.2) \n$109,964  \n 14.4  \n$54,820  \n 49.9 \n\nInterest income \n 672,697  \n (539.7) \n 763,190  \n 99.9  \n (90,493) \n (11.9)\n\nImpairment loss on intangible assets \n (1,350,000) \n 1,083.1  \n (356,676) \n (46.7) \n 993,324  \n 278.5 \n\nGain on VIE deconsolidation \n 63,056  \n (50.6) \n -  \n -  \n 63,056  \n NA \n\nOther income,net \n 324,825  \n (260.6) \n 247,277  \n 32.4  \n 77,548  \n 31.4 \n\nTotal operating expenses \n$(124,638) \n 100.0  \n$763,755  \n 100.0  \n$(888,393) \n (116.3)\n\n \n\nTotal other expense increased by $888,393, or 116.3%, from other income\nof $763,755 for the year ended December 31, 2024 to other expense of $124,638 for the same period in 2025. The increase in other expense\nwas mainly due to the increase of impairment loss on a digital currency software as the government upheld its prohibitionist policy toward\ncryptocurrencies in China.\n\n \n\n*Income tax (benefit) expense*\n\n \n\nIncome tax benefit was $110,031 for the year ended\nDecember 31, 2025, as compared to income tax expense of $93 for 2024. The income tax benefit in 2025 was due primarily to the utilization\nof prior-year net operating losses (“NOLs”) to offset current-year taxable income. \n\n \n\n*Net Loss*\n\n  \n\nOur net loss increased by $1,424,434, or 58.5%,\nfrom $2,433,536 for the year ended December 31, 2024 to $3,857,970 for the same period in 2025. Such change was the result of the combination\nof the changes as discussed above. \n\n \n\n*Foreign Currency Translation Adjustment*\n\n \n\nChanges in foreign currency translation adjustment\nare mainly due to the fluctuation of foreign exchange rates between RMB/HKD (the functional currency of our operating entities) and the\nUSD dollar (reporting currency).\n\n \n\n*Basic and diluted loss per share *\n\n \n\nBasic and diluted loss per share were $107.26\nand $121.44 for the year ended December 31, 2025 and 2024, respectively. The basic and diluted shares are considered the same.\n\n \n\n**Results of Operations**\n\n \n\nThe tables in the following discussion summarize\nour consolidated statements of income and comprehensive income for the periods indicated. This information should be read together with\nour consolidated financial statements and related notes included elsewhere in this annual report. The operating results in any period\nare not necessarily of the results that may be expected for any future period.\n\n \n\n76\n\n \n\n \n\n**Years Ended December 31, 2024 vs. December 31, 2023**\n\n \n\n  \nFor the Years Ended\nDecember 31,  \nVariance \n\n  \n2024  \n2023  \nAmount  \n% \n\nNet revenues \n$568,057  \n$1,435,449  \n$(867,392) \n (60.4)\n\nNet revenues – related parties \n 54,633  \n 144,609  \n (89,976) \n (62.2)\n\nTotal operating revenues \n 622,690  \n 1,580,058  \n (957,368) \n (60.6)\n\nLess: cost of revenues \n (182,181) \n (405,628) \n 223,447  \n (55.1)\n\nGross profit \n 440,509  \n 1,174,430  \n (733,921) \n (62.5)\n\nOperating expenses \n (3,637,707) \n (5,509,838) \n 1,872,131  \n (34.0)\n\nLoss from operations \n (3,197,198) \n (4,335,408) \n 1,138,210  \n (26.3)\n\nOther income, net \n 763,755  \n 751,761  \n 11,994  \n 1.6 \n\nLoss before income taxes \n (2,433,443) \n (3,583,647) \n 1,150,204  \n (32.1)\n\nProvision for income taxes \n 93  \n 14,833  \n (14,740) \n (99.4)\n\nNet loss \n (2,433,536) \n (3,598,480) \n 1,164,944  \n (32.4)\n\nForeign currency translation adjustment \n (479,801) \n (560,679) \n 80,878  \n (14.4)\n\nComprehensive income \n$(2,913,337) \n$(4,159,159) \n 1,245,822  \n (30.0)\n\nWeighted average number of ordinary shares outstanding – basic and diluted \n 13,225,669  \n 4,269,340  \n 8,956,329  \n 209.8 \n\nBasic and diluted earnings per share \n$(0.18) \n$(0.84) \n$(0.66) \n (78.2)\n\n \n\n**Revenues: **\n\n \n\nThe following table sets forth the principal\ncomponents of our net revenues by amounts and percentages of our net revenues for the periods indicated: \n\n \n\n  \nFor the Years Ended December 31,  \n  \n\n  \n2024  \n2023  \nVariance \n\n  \nRevenue  \n%  \nRevenue  \n%  \n**Amount**** **** **\n**%** \n\nListing services fees(1) \n$103,807  \n 16.7  \n$457,176  \n 28.9  \n$(353,369) \n (77.3)\n\nTransaction fees(2) \n 296,379  \n 47.6  \n 806,794  \n 51.1  \n (510,415) \n (63.3)\n\nMarketing services fees(3) \n 156,995  \n 25.2  \n 166,444  \n 10.5  \n (9,449) \n (5.7)\n\nOther revenues(4)* \n 65,509  \n 10.5  \n 149,644  \n 9.5  \n (84,135) \n (56.2)\n\nTotal operating revenues \n$622,690  \n 100.0  \n$1,580,058  \n 100.0  \n$(957,368) \n (60.6)\n\n \n\n*\nIncluding $54,633 and $144,609 from related parties for the years ended December 31, 2024 and 2023, respectively.\n\n \n\n*(1) Listing service fees:* Our performance\nobligation is to provide listings on our platform. Listing service fees are calculated based on a percentage of the listing value of\ncollectibles, artwork and commodities. Listing value is the total offering price of the collectible, artwork and commodities when the\nownership of the units are initially listed on our trading platforms. We utilize an appraised value as a basis to determine the appropriate\nlisting value for each collectible, artwork or commodities, or portfolio of collectibles, artwork or commodities. We recognize the related\nrevenue upon our completion of our performance obligation to the customer and its item is successfully listed for trading on our platforms.\nOur standard listing fees for artwork and collectibles range from 3% to 8% for each of the years ended December 31, 2024 and 2023 and\nstandard listing fees for commodities was 3% to 8% of the initial listing value for each of 2024 and 2023. The rate is dependent on the\ntype of listings and is negotiated on a case-by-case basis.\n\n \n\nTotal listing service fees decreased by approximately\n$0.4 million or 77.3% from approximately $0.5 million for the year ended December 31, 2023 to approximately $0.1 million for the same\nperiod in 2024. Our listing service fees are calculated based on a percentage of the listing value of collectibles, artwork and commodities\nof new products. In addition, there was a decrease in listing values of approximately $9.3 million for new products listings with approximately\n$25.0 million and $15.7 million for 2023 and 2024, respectively. The numbers of new collectibles/artwork and commodities that were successfully\nlisted on our platforms decreased from 135 for the year ended December 31, 2023 to 7 for the year ended December 31, 2024. The decrease\nin the value generated by new product listings was mainly due to the decrease of the numbers of new products which caused by the impact\nfrom the freezing of bank accounts caused by the ongoing case against our shareholders starting in the second half of 2022 as we had a\nhard time to retain clients with the case ongoing. \n\n \n\n77\n\n \n\n \n\n*(2) Transaction fee revenue:*Transaction\nfee revenue is generally calculated based on the transaction value of collectibles, artwork or commodities per transaction for our services\nto facilitate the trading transactions. Transaction value is the dollar amount of the purchase and sale of the collectibles, artwork or\ncommodities after it is listed on our platform. We typically charge from 0.15% to 0.3% of the transaction value per transaction from both\nthe purchase and sale side of the transaction resulting in an aggregate of 0.3% to 0.6% of total transaction value. Sometimes, we charge\na predetermined transaction rate, which is negotiated on a case-by-case basis, for selected traders with specific large transactions.\nTransaction fee revenue also includes predetermined monthly transaction fees, which are negotiated on a case-by-case basis for selected\ntraders with high trading volume, and is recognized and earned over the specified service period. * *\n\n* *\n\nIn 2018, the Company started a customer reward\npoints program, pursuant to which reward points were issued for opening a new account or referring customers to open accounts with us\nduring our promotion period. In that regard, customers are required to redeem certain reward points for new listings in addition to the\nregular listing services fees. If a customer does not own any reward points, he/she can purchase them from other customers on our platform.\nWe do not record revenue when customers redeem any points as it is considered as a prerequisite for a new listing in addition to the regular\nservices fees. The points are traded by and among our customers on the platform and we charge a transaction fee from such points trading.\nTransaction fee revenue from the trading of points amounted to approximately $61 and $1,800 for the years ended December 31, 2024 and\n2023, respectively.\n\n \n\nTotal transaction fee revenue decreased by approximately\n$0.5 million or 63.3% from approximately $0.8 million for the year ended December 31, 2023 to approximately $0.3 million for the same\nperiod in 2024. The decrease was due to the decrease in total transaction value. Transaction fee revenue is calculated based on a certain\npercentage of the transaction value per transaction. Our total transaction value decreased from approximately $0.5 billion the year ended\nDecember 31, 2023 to approximately $0.1 billion for the same period in 2024. The decrease in our transaction was mainly due to negative\nimpact from the freezing of bank accounts caused by the ongoing investigation of our related party that started in second half of 2022\nwhich reduced overall customers transactions.\n\n* *\n\n*(3) Marketing service fees:* Marketing service\nfees are what we charge for promoting and marketing our customers’ collectible or artwork. The services include assisting our customers\nin connection with his/her listing and trading of his/her collectible/artwork on our platform, which mainly includes consulting and supporting\nservices of the marketability for the collectible/artwork; assessing its market value and market acceptance for the collectible/artwork;\nand assisting in the application and legal protection required for the customer’s collectible/artwork to be approved for listing\non our platform. For marketing service contracts in which the related performance obligations can be completed within a short period of\ntime, the Company recognizes the related revenue upon the completion of its performance obligations.\n\n* *\n\nMarketing service agreements also include providing\npromotion services for customers’ items as where to place ads on well-known cultural or art exchange websites in China, to provide\nonline and offline marketing services including cooperation with auction houses and participate in industry-related exhibitions and fairs.\nThe marketing service fees are charged on a negotiated fixed fee basis, which is based on the type of the listing session that the customer\napplies for and whether the customer has listed and sold its collectibles on other platforms before, and they were not based on   the\nvalue of the underlying collectible, artwork and commodities. Marketing service contracts and fees are recognized upon the completion\nof all performance obligations.\n\n  \n\nMarketing service fees decreased by approximately\n$10,000 or 5.7% from approximately $170,000 for the year ended December 31, 2023 to approximately $160,000 for the same period in 2024.\nThe decrease was due to the decrease in demand for marketing services from customers to promote their listed items.\n\n* *\n\n78\n\n \n\n \n\n*(4) Other revenues:*Other revenues primarily\ninclude services fees for IT technical support and agency recommendation fees. IT technical support fees are negotiated on a case-by-case\nbasis and are recognized when the related services have been performed based on the specific terms of the contract. Agency recommendation\nfees are mainly revenue generated from providing consulting and training services to certain traders/agents. Upon completion of the training\nand consulting, these qualified traders/agents may introduce our platform and services to potential customers to list their collectibles\nand artwork with us for a fee or promote their own products on our platform. Total other revenues decreased by $84,135 or 56.2% from $149,644,\nwhich included $144,609 from providing technical services to our related parties for the same period in 2023 to $65,509, which included\n$54,633 from providing technical services to our related parties for the same period in 2024. The decrease was primarily because we provided\nless technical services for the year ended December 31, 2024.\n\n* *\n\n*Cost of Revenues*\n\n \n\nCost of revenues decreased by approximately $0.2\nmillion or 55.1% from approximately $0.4 million including approximately $0.06 million from a related party for the year ended December\n31, 2023 to approximately $0.2 million including $0.02 million from a related party for the same period in 2024. The decrease in cost\nof revenues was primarily due to the decrease in employee salaries of approximately $79,000, decrease in system fees of approximately\n$79,000, and decrease in warehouse storage of approximately $43,000. The warehouse storage fees were charged based on certain percentage\nof listing value of commodities, decrease in warehouse storage fee was due to decrease in overall listing value of products.\n\n \n\n*Gross Profit*\n\n* *\n\nGross profit decreased by approximately $0.7 million\nor 62.5% from approximately $1.2 million for the year ended December 31, 2023 to approximately $0.5 million for the year ended December\n31, 2024. Gross margin for the years ended December 31, 2024 and 2023 were approximately 70.7% and approximately 74.3%, respectively.\n\n* *\n\n*Selling and Marketing Expenses*\n\n* *\n\nThe following table sets forth our operating expenses\nby amounts and percentages for the periods indicated:\n\n* *\n\n  \nFor the Years Ended December 31,  \n  \n\n  \n2024  \n2023  \nVariance \n\n  \nExpense  \n%  \nExpense  \n%  \nAmount  \n% \n\nSelling and marketing \n$(207,842) \n 5.7  \n$(618,111) \n 11.2  \n$410,269  \n (66.4)\n\nGeneral and administrative \n (3,325,474) \n 91.4  \n (4,657,438) \n 84.5  \n 1,331,964  \n (28.6)\n\nGeneral and administrative – related parties \n (104,391) \n 2.9  \n (234,289) \n 4.3  \n 129,898  \n (55.4)\n\nTotal operating expenses \n$(3,637,707) \n 100.0  \n$(5,509,838) \n 100.0  \n$1,872,131  \n (34.0)\n\n \n\nSelling expenses decreased by approximately $0.4\nmillion, or 66.4%, from approximately $0.6 million for the year ended December 31, 2023 to approximately $0.2 million for the same period\nin 2024. The decrease was primarily due to the decrease in marketing expenses of approximately $0.2 million as we paid less commissions\ndue to less new listings and traders introduced by third parties. The Company has two types of reward program, one is to rebate directly\nto customers while the other is to reward third party sales agents. Rebates to customers are considered as a reduction in sales price,\nso the rebate is instantaneous while rebates to third party sales agents are usually paid in one to three months in arrears. \n\n \n\n79\n\n \n\n \n\n*General and Administrative Expenses*\n\n \n\nOur general and administrative expenses decreased\nby approximately $1.5 million, or 29.9% from approximately $4.9 million including approximately $0.2 million to a related party for the\nyear ended December 31, 2023 to approximately $3.4 million including approximately $0.1 million to a related party for the same period\nin 2024. The decrease in our general and administrative expenses was primarily due to decreased tech service fee of approximately $0.9\nmillion, decreased professional fees of approximately $0.5 million, decreased office expenses of approximately $0.1 million, decreased\ndepreciation and amortization expenses of approximately $0.1 million, and decreased travel and meeting related fees of approximately $0.1\nmillion and as we incurred less professional services and management needs due to less business and revenues in 2024, offset by increased\nstock compensation expenses of approximately $0.5 million due to the granted stock awards pursuant to the 2021 Omnibus Equity Plan\nand increased research and development fees for the improvement of platform to explore other business lines on our platform of approximately\n$0.1 million.\n\n \n\n*Other Income*\n\n \n\nTotal other income increased by approximately\n$12,000, or 1.6%, from approximately $752,000 for the year ended December 31, 2023 to approximately $764,000 for the same period in 2024.\nThe increase was mainly due to the increase of approximately $0.4 million of interest and investment income due to the increase of short-term\ninvestment, increase of approximately $20,000 of gain from short-term investment due to the increased short-term investment, the increase\nof approximately $111,000 of rental income from the lease of office building, and the increase of approximately $25,000 gain from the\ndisposal of HKDAEx, offset by the decrease of approximately $0.4 million of impairment loss on intangible assets due to the ceased operation\nof HKDAEx’s trading platform, decrease of approximately $0.1 million in currency exchange gain, and decrease of approximately $68,000\nof the loss from disposal of two vehicles.\n\n \n\n*Provision for Income Taxes*\n\n* *\n\nOur provision for income taxes amounted to $93\nand $14,833 for the year ended December 31, 2024 and 2023, respectively. We generated most of our income from the subsidiaries of our\nVIE that had preferential tax treatment which are formed and registered in Kashi in Xinjiang Provence, China. We also have provided 100%\nallowance on net operating losses from our VIE which incurred losses. \n\n \n\n*Net Loss*\n\n  \n\nOur net loss decreased by approximately $1.2 million,\nor 32.4%, from $3.6 million for the year ended December 31, 2023 to approximately $2.4 million for the same period in 2024. Such change\nwas the result of the combination of the changes as discussed above. \n\n \n\n*Foreign Currency Translation Adjustment*\n\n \n\nChanges in foreign currency translation adjustment\nare mainly due to the fluctuation of foreign exchange rates between RMB/HKD (the functional currency of our operating entities) and the\nUSD dollar (reporting currency).\n\n** **\n\n**5B. Liquidity and Capital Resources  **\n\n** **\n\n**Liquidity and Capital Resources**\n\n** **\n\nWe had approximately $35.3 million of cash and\nshort-term investments, including approximately $3.0 million short term investments. We had approximately $55.1 million of working capital\nas of December 31, 2025. In assessing our liquidity, we monitor and analyze our cash on-hand and our operating and capital expenditure\ncommitments. To date, we have financed our operations primarily through cash flows from operations, short-term investment, private placement\nand public offering.  \n\n \n\nOn December 11, 2025, the Company entered into\na sales agreement with A.G.P./Alliance Global Partners (“AGP”), with respect to an at the market offering program (“ATM\nProgram”), under which the Company may, from time to time in its sole discretion, issue and sell through the agent, acting as sales\nagent or principal, up to $200 million of ordinary shares of the Company, par value $0.00025 per share. As of April 17, 2026, the Company\nhas sold approximately 1,888,895 Ordinary Shares under the ATM program pursuant to the Sales Agreement and the aggregate gross proceeds\nfrom the ATM program were approximately $32,923,807. Share numbers are retroactively adjusted to reflect the two share consolidations\nof the ordinary shares of the Company in January 2026 and April 2026. Based on the Company’s current operating activities, management\nbelieves the operating activities and existing funds can provide sufficient liquidity for the Company to meet its working capital requirement\nfor at least 12 months through December 31, 2026.\n\n \n\n80\n\n \n\n \n\nAll of our revenue is denominated in RMB. Under\nexisting PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade\nand service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval as long as certain routine\nprocedural requirements are fulfilled. Therefore, our PRC subsidiary is allowed to pay dividends in foreign currencies to us without\nprior SAFE approval by following certain routine procedural requirements. However, current PRC regulations permit our PRC subsidiary\nto pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations.\nOur PRC subsidiary are required to set aside at least 10% of their after-tax profits after making up previous years’ accumulated\nlosses each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of their registered capital. These\nreserves are not distributable as cash dividends. Furthermore, capital account transactions, which include foreign direct investment\nand loans, must be approved by and/or registered with SAFE and its local branches. See “*Risk Factors -Risks Relating to Doing\nBusiness in China*.” We rely on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and\nfinancing requirements we may have, and any limitation on the ability of our PRC subsidiary to make payments to us could have a material\nadverse effect on our ability to conduct our business. \n\n** **\n\n**Cash Flows**\n\n \n\nAs of December 31, 2025, we had cash of $32,323,209.\nThe table below sets forth a summary of our cash flows for the periods indicated:\n\n \n\n  \nFor the\nYear Ended\nDecember 31,\n2025  \nFor the\nYear Ended\nDecember 31,\n2024  \nFor the\nYear Ended\nDecember 31,\n2023 \n\nNet cash provided by (used in) operating activities \n$77,103  \n$(3,896,411) \n$3,714,064 \n\nNet cash used in investing activities \n$(5,172,565) \n$(11,666,315) \n$(600,722)\n\nNet cash provided by financing activities \n$13,755,817  \n$6,998,517  \n$600,000 \n\n \n\n*Operating Activities*\n\n \n\nNet cash used in operating activities was $0.1 million for the year\nended December 31, 2025 which was attributable primarily to the net loss of approximately $3.9 million, increase of approximately $0.9\nmillion in accounts receivable, due to service revenue and liquor sales revenue recognition, decrease of approximately $0.7 million in\ninventory due to liquor sales, decrease of approximately $0.9 million in other receivables and prepaid expenses due to the collection\nof other receivables, increase of approximately $2.4 million in amounts due from related parties, due to related party Jiangsu Yanggu’s\nreceipts and payments on behalf of the Company, decrease of approximately $0.4 million in accounts payable due to settlement of payables\nto suppliers. Our cash outflow was offset by approximately $3.8 million of stock-based compensation due to granted stock awards to the\nChief Operating Officer and management, approximately $1.4 million of impairment loss on intangible assets due to the digital currency\nsoftware impairment recognition. approximately $0.5 million of provision for expected credit losses, and approximately $0.3million of\ndepreciation and amortization.\n\n \n\nNet cash used in operating activities was approximately $4.0 million\nfor the year ended December 31, 2024 which was attributable primarily to the net loss of approximately $2.6 million, the increase of approximately\n$1.2 million in inventory due to the one-time purchase of liquor for sale, decrease of approximately $1.1 million in accounts payable\naffected by restricted cash, increase of approximately $0.5 million in other receivables and prepaid expenses, including other receivables\nfrom related parties, due to prepaid VAT tax from the purchase of inventory. Our cash outflow was offset by approximately $0.6 million\nof stock compensation due to the granted stock awards, approximately $0.5 million of depreciation and amortization, and approximately\n$0.4 million of impairment loss on intangible assets due to the ceased operation of HKDAEx’s trading platform.\n\n \n\nNet cash provided operating activities was approximately\n$3.6 million for the year ended December 31, 2023 which was attributable primarily to the decrease in other receivable from related parties\nof approximately $3.0 million which are funds deposited in trust account of our related party Nanjing Jinwang that we can withdraw anytime,\nand decrease in other receivables and prepaid expenses of approximately $4.2 million primarily due to $2.7 million advance to third parties,\nwhich was short term, non-interest bearing, due on demand and has been collected by March 22, 2023. Our cash outflow was mainly from net\nloss of approximately $3.6 million and decrease of approximately $0.3 million in accounts payable affected by restricted cash.\n\n \n\n81\n\n \n\n \n\n*Investing Activities*\n\n \n\nNet cash used in investing activities was approximately $5.2 million\nfor the year ended December 31, 2025, which was primarily attributable to the purchase of short-term investments of approximately $142.5\nmillion offset by the proceed from sale of short-term investments of approximately $138.2 million, and the purchase of intangible assets\nof $1.0 million.\n\n \n\nNet cash used in investing activities was approximately\n$11.6 million for the year ended December 31, 2024, which was primarily attributable to the purchase of short-term investments of approximately\n$45.6 million offset by the proceed from sale of short-term investments of approximately $34.5 million, and the purchase of intangible\nassets of $0.5 million.\n\n \n\nNet cash used in investing activities was approximately\n$0.5 million for the year ended December 31, 2023, which was primarily attributable to the purchase of short-term investments of approximately\n$14.6 million offset by the proceed from sale of short-term investments of approximately $14.3 million. We paid approximately $0.2 million\nfor construction in progress and intangible assets in our VIE and in Beijing Jiu Yu Ling Jing Technology Co., Ltd. (“JYLJ”),\nin which we currently hold approximately 10.15% equity interest.\n\n \n\n*Financing Activities*\n\n \n\nNet cash provided by financing activities was\napproximately $14.0 million for the year ended December 31, 2025, which was primarily attributable to proceeds from private placement.\n\n \n\nNet cash provided by financing activities was\napproximately $7.0 million for the year ended December 31, 2024, which was primarily attributable to proceeds from private placement.\n\n \n\nNet cash provided by financing activities was\napproximately $0.6 million for the year ended December 31, 2023, which was primarily attributable to proceeds released from escrow.\n\n \n\n**5C. Research and Development, Patents and Licenses,\netc.**\n\n** **\n\nSee “Item 4. Information on the Company—B.\nBusiness Overview—Intellectual Property.”\n\n** **\n\n**D. Trend Information**\n\n** **\n\nOther than as disclosed elsewhere in this annual\nreport, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2025 that are\nreasonably likely to have a material effect on our net revenues, income, profitability, liquidity or capital resources, or that would\ncause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.\n\n** **\n\n**E. Critical Accounting Policies and Estimates**\n\n** **\n\nOur management’s discussion and analysis of our financial condition\nand results of operations are based on our consolidated financial statements that have been prepared in accordance with accounting principles\ngenerally accepted in the United States (“U.S. GAAP”). The preparation of financial statements requires us to make estimates\nand assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at\nthe date of the financial statements as well as the reported net sales and expenses during the reporting periods. On an ongoing basis,\nwe evaluate our estimates and assumptions. We base our estimates on historical experience and on various other factors that we believe\nare reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and\nliabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions\nor conditions. \n\n \n\nWhile our significant accounting policies\nand estimates are described in Note 3 to our consolidated financial statements included elsewhere in this annual report, we believe\nthat the following accounting estimate is the most critical to aid you in fully understanding and evaluating our management’s\ndiscussion and analysis:\n\n \n\nExpected credit losses \n\n \n\nOn January 1, 2023, the Company adopted ASC 326,\nCredit Losses (“ASC 326”), which replaced previously issued guidance regarding the impairment of financial instruments with\nan expected loss methodology that will result in more timely recognition of credit losses. The Company used a modified retrospective approach\nand did not restate the comparable prior periods. The adoption did not have a material impact on the Company’s CFS.\n\n \n\nThe Company maintains an allowance for expected\ncredit losses in accordance with ASC 326 and records the allowance for credit losses, if warranted, as an offset to assets such as accounts\nreceivable, and the estimated credit losses charged to the allowance are classified as general and administrative expenses in the consolidated\nstatements of operations and comprehensive loss. The Company assesses collectability by reviewing receivables on a collective basis where\nsimilar characteristics exist, primarily based on the size and nature of specific customers’ receivables. In determining the amount\nof the allowance for credit losses, the Company considers historical collectability based on past due status, the age of the receivable\nbalances, credit quality of the Company’s customers based on ongoing credit evaluations, current economic conditions, reasonable\nand supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from\ncustomers. Bad debts are written off as incurred.\n\n \n\nOur estimate of the key assumptions did not change\nsignificantly throughout the periods presented.\n\n \n\n82"}