UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark one)

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

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

For the fiscal year ended December 31, 2021

OR

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

OR

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

for the transition period from ____________to ____________

Commission file number 001-38766

MMTEC, INC.

(Exact name of Registrant as specified in its charter)

British Virgin Islands

(Jurisdiction of incorporation or organization)

c/o Gujia (Beijing) Technology Co., Ltd.,

AF, 16/F, Block B, Jiacheng Plaza,

18 Xiaguangli, Chaoyang District, Beijing, 100027

People’s Republic of China

Tel: +86 10 5617 2312

(Address of principal executive offices)

Xiangdong Wen, Chief Executive Officer

c/o Gujia (Beijing) Technology Co., Ltd.,

AF, 16/F, Block B, Jiacheng Plaza,

18 Xiaguangli, Chaoyang District, Beijing, 100027

People’s Republic of China

Tel: +86 10 5617 2312

(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Shares, par value $0.001 |  | MTC |  | The NASDAQ Stock Market LLC

Securities registered or to be registered pursuant to Section 12(g) of the Act: None.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None.

On April 22, 2022, the issuer had 31,370,000 shares issued and outstanding.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ☐ No ☒

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, or an emerging growth company. See definition of “large accelerated filer, “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act..

☐ Large Accelerated filer | ☐ Accelerated filer | ☒ Non-accelerated filer

Emerging growth company ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

☒ US GAAP | ☐ | International Financial Reporting Standards as issued by the International Accounting Standards Board | ☐ Other

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Table of Contents

|  | Page
PART I |  |
ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS | 1
ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE | 1
ITEM 3. | KEY INFORMATION | 1
ITEM 4. | INFORMATION ON THE COMPANY | 16
ITEM 4A. | UNRESOLVED STAFF COMMENTS | 28
ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECT | 28
ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES | 38
ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS | 44
ITEM 8. | FINANCIAL INFORMATION | 46
ITEM 9. | THE OFFER AND LISTING | 46
ITEM 10. | ADDITIONAL INFORMATION | 47
ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK | 55
ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES | 55
PART II |  |
ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES | 56
ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 56
ITEM 15. | CONTROLS AND PROCEDURES | 56
ITEM 16. | RESERVED | 57
ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT. | 57
ITEM 16B. | CODE OF ETHICS. | 57
ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. | 57
ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES. | 58
ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS. | 58
ITEM 16F. | CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT. | 58
ITEM 16G. | CORPORATE GOVERNANCE | 58
ITEM 16H. | MINE SAFETY DISCLOSURE | 58
ITEM 16I. | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. | 58
PART III |  |
ITEM 17. | FINANCIAL STATEMENTS | 59
ITEM 18. | FINANCIAL STATEMENTS | 59
ITEM 19. | EXHIBITS | 59

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CERTAIN INFORMATION

Unless otherwise indicated, numerical figures included in this Annual Report on Form 20-F (the “Annual Report”) have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them.

For the sake of clarity, this Annual Report follows the English naming convention of first name followed by last name, regardless of whether an individual’s name is Chinese or English. Numerical figures included in this Annual Report have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them. Certain market data and other statistical information contained in this Annual Report are based on information from independent industry organizations, publications, surveys and forecasts. Some market data and statistical information contained in this Annual Report are also based on management’s estimates and calculations, which are derived from our review and interpretation of the independent sources listed above, our internal research and our knowledge of the PRC information technology industry. While we believe such information is reliable, we have not independently verified any third-party information and our internal data has not been verified by any independent source.

Except where the context otherwise requires and for purposes of this Annual Report only:

Depending on the context, the terms “we,” “us,” “our company,” and “our” refer to MMTEC, INC., a BVI company, and its consolidated subsidiaries:

| ● | MM Future Technology Ltd. (“MM Future”), a Hong Kong incorporated limited company.
| ● | MM Fund Services Limited (“MM Fund”), a Cayman Islands incorporated limited company.
| ● | MM Capital Management Limited (“MM Capital”), a Cayman Islands incorporated limited company.
| ● | MM Fund SPC (“MM SPC”), a Cayman Islands incorporated segregated portfolio company.
| ● | Gujia (Beijing) Technology Co., Ltd (“Gujia”), a PRC incorporated limited company.
| ● | Meimei Zhengtong (Beijing) Technology Co., Ltd., a PRC incorporated entity (dissolved effective as of June 8, 2018).
| ● | MMBD Trading Limited (“MMBD Trading”), a British Virgin Islands incorporated limited company.
| ● | MM Global Securities, INC. (“MM Global”), a State of Illinois incorporated limited company.
| ● | HC Securities (HK) Limited (“HC Securities”), formerly known as MM Global Capital Limited, a Hong Kong incorporated limited company.
| ● | MMBD Investment Advisory Company Limited (“MMBD Advisory”), a State of New York incorporated limited company.
| ● | Fundex SPC (“Fundex SPC”), a Cayman Islands incorporated segregated portfolio company.
| ● | “common shares” refer to our common shares, $0.001 par value per share,

| ● | “China” and “PRC” refer to the People’s Republic of China, excluding, for the purposes of this report only, Macau, Taiwan and Hong Kong, and

| ● | all references to “RMB,” “yuan” and “Renminbi” are to the legal currency of China, and all references to “USD,” “$”, and “U.S. dollars” are to the legal currency of the United States.

Unless otherwise noted, all currency figures in this filing are in U.S. dollars. Any discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding

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FORWARD-LOOKING STATEMENTS

This Annual Report contains “forward-looking statements” that represent our beliefs, projections and predictions about future events. All statements other than statements of historical fact are “forward-looking statements” including any projections of earnings, revenue or other financial items, any statements of the plans, strategies and objectives of management for future operations, any statements concerning proposed new projects or other developments, any statements regarding future economic conditions or performance, any statements of management’s beliefs, goals, strategies, intentions and objectives, and any statements of assumptions underlying any of the foregoing. Words such as “may”, “will”, “should”, “could”, “would”, “predicts”, “potential”, “continue”, “expects”, “anticipates”, “future”, “intends”, “plans”, “believes”, “estimates” and similar expressions, as well as statements in the future tense, identify forward-looking statements.

These statements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievements described in or implied by such statements. Actual results may differ materially from expected results described in our forward-looking statements, including with respect to correct measurement and identification of factors affecting our business or the extent of their likely impact, the accuracy and completeness of the publicly available information with respect to the factors upon which our business strategy is based on the success of our business.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of whether, or the times by which, our performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and management’s belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to, those factors discussed under the headings “Risk Factors”, “Operating and Financial Review and Prospects,” “Information on the Company” and elsewhere in this Annual Report.

This Annual Report should be read in conjunction with our audited financial statements and the accompanying notes thereto, which are included in Item 18 of this Annual Report.

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PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not required.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not required.

ITEM 3. KEY INFORMATION

| A. | [Reserved]

| B. | Capitalization and Indebtedness

Not required.

| C. | Reasons for the Offer and Use of Proceeds

Not required.

| D. | Risk factors

You should carefully consider the following risk factors, together with all of the other information included in this Annual Report. Investment in our securities involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included in this Annual Report before making an investment decision. The risks and uncertainties described below represent our known material risks to our business. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, you may lose all or part of your investment.

Risks Related to Our Business and Industry

We have incurred substantial losses in recent periods and may incur losses in the future.

We have incurred substantial losses in several recent periods as we have sought to expand our operations. We recorded net losses of $7,050,755, $3,181,596 and $2,243,234 for the years ended December 31, 2021, 2020 and 2019, respectively. We may incur losses in future periods. If our future revenues do not increase sufficiently, or even if our future revenues increase but we are unable to manage our expenses, we may not achieve and maintain profitability in the future periods.

Our ability to protect the confidential information of our users may be adversely affected by cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions.

Our platform processes certain personal and other sensitive data from our users, which makes it an attractive target and potentially vulnerable to cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions. While we have taken steps to protect the confidential information that we have access to, our security measures could be breached. Because techniques used to sabotage or obtain unauthorized access to systems change frequently and generally are not recognized until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any accidental or willful security breaches or other unauthorized access to our platform could cause confidential user information to be stolen and used for criminal purposes. Security breaches or unauthorized access to confidential information could also expose us to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity. If security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in our technology infrastructure are exposed and exploited, our relationships with borrowers and investors could be severely damaged, we could incur significant liability and our business and operations could be adversely affected. In addition, we expect the secure transmission of confidential information over public networks to be a critical element of our operations. Our networks, those of our third-party service vendors, and associated clearing corporations, and our customers may be vulnerable to unauthorized access, computer viruses and other security problems. Persons who circumvent security measures could wrongfully use our information or cause interruptions or malfunctions in our operations, which could make our customers hesitant to use our electronic marketplaces. We may be required to expend significant resources to protect against the threat of security breaches or to alleviate problems, including reputational harm and litigation, caused by any breaches.

We may pursue strategic alliances, acquisitions or joint ventures, which could present unforeseen integration obstacles.

These acquisitions may be necessary in order for us to enter into or develop new product areas. Strategic alliances, acquisitions, joint ventures involve a number of risks and present financial, managerial and operational challenges, including:

| ● | potential disruption of our ongoing business and product development and distraction of management,

| ● | difficulty retaining and integrating personnel and integrating financial and other systems,

| ● | the necessity of hiring additional management and other critical personnel and integrating them into our current operations,

| ● | increasing the scope, geographic diversity and complexity of our operations,

| ● | potential dependence upon, and exposure to liability, losses or reputational damage relating to systems, controls and personnel that are not under our control,

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| ● | potential unfavorable reaction to our strategic alliance, acquisition or joint venture strategy by our customers,

| ● | to the extent that we pursue business opportunities outside the U.S., exposure to political, economic, legal, operational and other risks that are inherent in operating in a foreign country, including risks of possible nationalization, expropriation, price controls, capital controls, exchange controls and other restrictive governmental actions, as well as the outbreak of hostilities,

| ● | conflicts or disagreements between any strategic alliance or joint venture partners and us, and

| ● | exposure to additional liabilities of any acquired business, strategic alliance or joint venture.

As a result of these risks and challenges, we may not realize any anticipated benefits from strategic alliances, acquisitions or joint ventures, and such strategic alliances, acquisitions or joint ventures may in fact materially adversely affect our business, financial condition and results of operations.

If we are unable to continue to identify and exploit new market opportunities, our future revenues may decline and as a result our business, financial condition and results of operations could be materially adversely affected.

As more participants enter our markets, the resulting competition often leads to lower commissions. This may result in a decrease in future revenues in a particular market even if the volume of trades we handle in that market increases. We may not be able to attract new customers or successfully enter new markets. If we are unable to continue to identify and exploit new market opportunities on a timely and cost-effective basis, our future revenues may decline and as a result our business, financial condition and results of operations could be materially adversely affected.

Our ability to retain our key employees and the ability of certain key employees to devote adequate time to us is critical to the success of our business, and failure to do so may adversely affect our future revenues and as a result could materially adversely affect our business, financial condition and results of operations.

Our people are our most important resource and our success depends on the efforts and talent of our employees, including risk management, software engineering, financial and marketing personnel. We must retain the services of our key employees and strategically recruit and hire new talented employees to obtain customer transactions that generate substantially all our revenues. If any of our key employees, including Xiangdong Wen and Min Kong, were to join an existing competitor, form a competing company, or otherwise leave us, some of our customers could choose to use the services of that competitor or another competitor instead of our services, which could adversely affect our future revenues and as a result could materially adversely affect our business, financial condition and results of operations. Our future success depends on our continued ability to attract, develop, motivate and retain qualified and skilled employees. Competition for highly skilled technical, risk management and financial personnel is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Some of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment. In addition, we invest significant time and expenses in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements, and the quality of our services and our ability to serve borrowers and investors could diminish, resulting in a material adverse effect to our business.

Difficult market conditions, economic conditions and geopolitical uncertainties could adversely affect our business in many ways by negatively impacting our future revenues in the financial markets in which we offer services, which could have a material adverse effect on our business, financial condition and results of operations.

Difficult market conditions, economic conditions and geopolitical uncertainties have in the past adversely affected and may in the future adversely affect our business and profitability. Our business and financial services industry in general are directly affected by national and international economic and political conditions, broad trends in business and finance, the level and volatility of interest rates, changes in and uncertainty regarding tax laws and substantial fluctuations in the volume and price levels of securities transactions. The financial markets and the global financial services business are, by their nature, risky and volatile and are directly affected by many national and international factors that are beyond our control. Any one of these factors may cause a substantial decline in the U.S. and global financial services markets, resulting in reduced trading volume. These events could have a material adverse effect on our results and profitability. These factors include:

| ● | economic and political conditions in China, the U.S., Europe and elsewhere in the world,

| ● | concerns about terrorism, war and other armed hostilities,

| ● | concerns over inflation and wavering institutional and consumer confidence levels,

| ● | the availability of cash for investment by our dealer customers and their customers,

| ● | the level and volatility of interest rates and foreign currency exchange rates,

| ● | the level and volatility of trading in certain equity and commodity markets, and

| ● | currency values.

In addition, any prolonged slowdown in the Chinese or global economy may have a negative impact on our business, results of operations and financial condition. Economic conditions in China are sensitive to global economic conditions. The global financial markets have experienced significant disruptions since 2008 and the United States, Europe and other economies have experienced periods of recession. The recovery from the lows of 2008 and 2009 has been uneven and there are new challenges, including the escalation of the European sovereign debt crisis from 2011 and the slowdown of China’s economic growth since 2012 which may continue. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China. There have also been concerns about the economic effect of the tensions in the relationship between China and surrounding Asian countries. Adverse economic conditions could have negative adverse effects on our business and financial conditions. Additionally, continued turbulence in the international markets may adversely affect our ability to access the capital markets to meet liquidity needs.

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Employee misconduct or error could harm us by impairing our ability to attract and retain customers and subjecting us to significant legal liability and reputational harm; moreover, this type of misconduct is difficult to detect and deter and error is difficult to prevent.

Employee misconduct or error could subject us to financial losses and regulatory sanctions and could seriously harm our reputation and negatively affect our business. It is not always possible to deter employee misconduct, and the precautions taken to prevent and detect employee misconduct may not always be effective. Misconduct by employees could include engaging in improper or unauthorized transactions or activities, failing to properly supervise other employees, or improperly using confidential information. Employee errors, including mistakes in executing, recording or processing transactions for customers, could cause us to enter into transactions that customers may disavow and refuse to settle, which could expose us to the risk of material losses even if the errors are detected and the transactions are unwound or reversed. If our customers are not able to settle their transactions on a timely basis, the time in which employee errors are detected may be increased and our risk of material loss could be increased. The risk of employee error or miscommunication may be greater for products that are new or have non-standardized terms. It is not always possible to deter employee misconduct or error, and the precautions we take to detect and prevent this activity may not be effective in all cases.

Financial services firms are highly regulated, and the increased regulatory scrutiny over the last several years may increase the risk of financial liability and reputational harm resulting from adverse regulatory actions

In April 2019, the Company acquired the remaining 75.1% of outstanding securities of MMBD Trading Ltd., a British Virgin Islands company (“MMBD”). The acquisition closed on October 18, 2019, following the receipt by the Company of requisite corporate and regulatory approvals, including, without limitation, FINRA CMA application approval, and the Company’s Audit Committee’s review and approval of the terms and provisions of this transaction involving related parties. Following and as a result of this acquisition, MMBD has become a wholly-owned subsidiary of the Company. In March 23, 2020, the Company acquired all outstanding securities of MMBD Investment Advisory Company Limited (“MMBD Advisory”) for a consideration of $1,000. Prior to this transaction, all outstanding securities of MMBD Advisory were owned by Hinman Au, a director, and 1.7% shareholder of the Company. MMBD Advisory was formed in January 2018 in the U.S. and is registered as an investment advisor firm under the laws of the State of New York on May 7, 2018. Over the last several years, financial services firms have been operating in an evolving regulatory environment. The industry has experienced an extended period of significant change in laws and regulations governing the financial services industry, as well as increased scrutiny from various regulators. Penalties and fines imposed by regulatory authorities have increased substantially in recent years. We may be adversely affected by changes in the interpretation or enforcement of existing laws, rules, and regulations. There is also increased regulatory scrutiny (and related compliance costs) as we continue to grow and surpass certain consolidated asset thresholds established under the Dodd-Frank Act, which have the effect of imposing enhanced standards and requirements on larger institutions. Broker-dealers and investment advisers are subject to regulations covering all aspects of the securities business, including, but not limited to: sales and trading methods; trade practices among broker-dealers; use and safekeeping of clients’ funds and securities; capital structure of securities firms; anti-money laundering efforts; recordkeeping; and the conduct of directors, officers and employees. Any violation of these laws or regulations could subject us to the following events, any of which could have a material adverse effect on our business, financial condition and prospects: civil and criminal liability; sanctions, which could include the revocation of our subsidiaries’ registrations as investment advisers or broker-dealers; the revocation of the licenses of our financial advisors; censures; fines; or a temporary suspension or permanent bar from conducting business. Failure to comply with regulatory capital requirements primarily applicable to our company, our bank subsidiaries, or our broker-dealer subsidiaries would significantly harm our business.

Growth of our business could increase costs and regulatory and integration risks

Integrating acquired businesses, providing a platform for new businesses, and partnering with other firms involve risks and present financial, managerial, and operational challenges. We may incur significant expense in connection with expanding our existing businesses, recruiting financial advisors, or making strategic acquisitions or investments. Our overall profitability would be negatively affected if investments and expenses associated with such growth are not matched or exceeded by the revenues derived from such investments or growth. Expansion may also create a need for additional compliance, documentation, risk management, and internal control procedures, and often involves hiring additional personnel to address these procedures. To the extent such procedures are not adequate or not adhered to with respect to our expanded business or any new business, we could be exposed to a material loss or regulatory sanction. Financial services firms are subject to numerous actual or perceived conflicts of interest, which are routinely examined by U.S. federal and state regulators and SROs such as FINRA. Our risk management processes include addressing potential conflicts of interest that arise in our business. Management of potential conflicts of interest has become increasingly complex as we expand our business activities. A perceived or actual failure to address conflicts of interest adequately could affect our reputation, the willingness of clients to transact business with us or give rise to litigation or regulatory actions. Therefore, there can be no assurance that conflicts of interest will not arise in the future that could cause result in material harm to our business and financial condition.

We are generally subject to risks inherent in doing business in the financial markets, and any failure to develop effective compliance and reporting systems could result in regulatory penalties in the applicable jurisdiction and our business could be adversely affected.

There are certain additional political, economic, legal, regulatory, operational and other risks inherent in doing business in international financial markets. These risks include:

| ● | less developed automation in exchanges, depositories and national clearing systems,

| ● | additional or unexpected changes in regulatory and capital requirements,

| ● | the impact of the laws and regulations of foreign governmental and regulatory authorities of each country in which we conduct business,

| ● | possible nationalization, expropriation and regulatory, political and price controls,

| ● | difficulties in staffing and managing international operations,

| ● | capital controls and other restrictive governmental actions,

| ● | any failure to develop effective compliance and reporting systems, which could result in regulatory penalties in the applicable jurisdiction,

| ● | fluctuations in currency exchange rates,

| ● | reduced protections for intellectual property rights,

3

| ● | adverse labor laws,

| ● | outbreak of hostilities, and

| ● | potentially adverse tax consequences arising from compliance with foreign laws and regulations to which our international subsidiaries are subject.

In many countries, the laws and regulations applicable to the securities and financial services industries are uncertain and evolving, and it may be difficult for us to determine the exact requirements of local laws in every market. Our inability to remain in compliance with local laws and regulations in a particular foreign market could have a significant and negative effect not only on our businesses in that market but also on our reputation generally. If we are unable to manage any of these risks effectively, our business could be adversely affected.

If the value of the U.S. dollar against RMB in which we pay expenses continues to decline or if the value of the U.S. dollar against RMB in which we earn revenues improves dramatically, our financial results could suffer.

Significant exchange rate fluctuations can impact our results. Significant movements in the U.S. dollar against RMB, in which we pay expenses or earn profits may have an adverse effect on our financial results. Potential movements in the U.S. dollar against RMB in which we earn revenues could also adversely affect our financial results.

We may not be able to obtain additional financing, if needed, on terms that are acceptable, which could prevent us from developing or enhancing our business, taking advantage of future opportunities or responding to competitive pressure or unanticipated requirements.

Our business is dependent upon the availability of adequate funding and sufficient capital. If for any reason we need to raise additional funds, we may not be able to obtain additional financing when needed. If we cannot raise additional funds on acceptable terms, we may not be able to develop or enhance our business, take advantage of future opportunities or respond to competitive pressure or unanticipated requirements.

We may not be able to protect our intellectual property rights or may be prevented from using intellectual property necessary for our business.

Our success is dependent, in part, upon our intellectual property. We generally rely primarily on trade secret, contract, copyright and trademark laws to establish and protect our rights to our proprietary technology, methods and products. It is possible that third parties may copy or otherwise obtain and use our proprietary technology without authorization or otherwise infringe on our rights. We cannot assure you that any of the rights granted under any patent, copyright or trademark that we may obtain will protect our competitive advantages. In addition, the laws of some foreign countries may not protect our proprietary rights to the same extent as the laws in the U.S. We may also face claims of infringement that could interfere with our ability to use technology that is material to our business operations. This may limit the comprehensiveness and quality of the data we are able to distribute or sell. In the future, we may have to rely on litigation to enforce our intellectual property rights, protect our trade secrets, determine the validity and scope of the proprietary rights of others or defend against claims of infringement or invalidity. Any such claims or litigation, whether successful or unsuccessful, could result in substantial costs and the diversion of resources and the attention of management, any of which could negatively affect our business. Responding to these claims could also require us to enter into royalty or licensing agreements with the third parties claiming infringement. Such royalty or licensing agreements, if available, may not be available on terms acceptable to us.

We may experience technology failures while developing and enhancing our software.

In order to maintain our competitive advantage, our software is under continuous development. There is risk that software failures may occur and result in service interruptions and have other unintended consequences, which could have a material adverse effect on our business, financial condition and results of operations.

Our operations depend on the performance of the Internet infrastructure and fixed telecommunications networks in China.

Almost all access to the Internet in China is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the Ministry of Industry and Information Technology, or the MIIT. We primarily rely on a limited number of telecommunication service providers to provide us with data communications capacity through local telecommunications lines and Internet data centers to host our servers. We have limited access to alternative networks or services in the event of disruptions, failures or other problems with China’s Internet infrastructure or the fixed telecommunications networks provided by telecommunication service providers. With the expansion of our business, we may be required to upgrade our technology and infrastructure to keep up with the increasing traffic on our platform. We cannot assure you that the Internet infrastructure and the fixed telecommunications networks in China will be able to support the demands associated with the continued growth in Internet usage. In addition, we have no control over the costs of the services provided by telecommunication service providers. If the prices we pay for telecommunications and Internet services rise significantly, our results of operations may be adversely affected. Furthermore, if Internet access fees or other charges to Internet users increase, our user traffic may decline, and our business may be harmed.

Any significant disruption in service on our platform or in our computer systems, including events beyond our control, could prevent us from processing or posting transactions on our platform, reduce the attractiveness of our platform and result in a loss of borrowers or investors.

In the event of a platform outage and physical data loss, our ability to perform our servicing obligations, process applications or make trades available on our platform would be materially and adversely affected. The satisfactory performance, reliability and availability of our platform and our underlying network infrastructure are critical to our operations, customer service, reputation and our ability to retain existing and attract new borrowers and investors. Our operations depend on our ability to protect our systems against damage or interruption from natural disasters, power or telecommunications failures, air quality issues, environmental conditions, computer viruses or attempts to harm our systems, criminal acts and similar events. If there is a lapse in service or damage to our facilities, we could experience interruptions in our service as well as delays and additional expense in arranging new facilities. Any interruptions or delays in our service, whether as a result of third-party error, our error, natural disasters or security breaches, whether accidental or willful, could harm our relationships with our borrowers and investors and our reputation. Additionally, in the event of damage or interruption, our insurance policies currently in place may not adequately compensate us for any losses that we may incur.

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Our platform and internal systems rely on software that is highly technical, and if it contains undetected errors, our business could be adversely affected.

Our platform and internal systems rely on software that is highly technical and complex. In addition, our platform and internal systems depend on the ability of such software to store, retrieve, process and manage immense amounts of data. The software on which we rely has contained, and may now or in the future contain, undetected errors or bugs. Some errors may only be discovered after the code has been released for external or internal use. Errors or other design defects within the software on which we rely may result in a negative experience for our users, delay introductions of new features or enhancements, result in errors or compromise our ability to protect user data or our intellectual property. Any errors, bugs or defects discovered in the software on which we rely could result in harm to our reputation, loss of user or liability for damages, any of which could adversely affect our business, results of operations and financial conditions.

The financial markets in which we operate are generally affected by seasonality which could have a material adverse effect on our financial performance in a given period.

Traditionally, the financial markets around the world experience lower volume during the summer and at the end of the year due to a general slowdown in the business environment and, therefore, our transaction volume levels may decrease during those periods. The timing of the holidays also affects transaction volume. These factors could have a material adverse effect on our financial performance in a given period.

We operate in a rapidly evolving business environment. If we are unable to adapt our business effectively to keep pace with these changes, our ability to succeed will be adversely affected, which could have a material adverse effect on our business, financial condition and results of operations.

The pace of change in our industry is extremely rapid. Operating in such a rapidly changing business environment involves a high degree of risk. Our ability to succeed will depend on our ability to adapt effectively to these changing market conditions. If we are unable to keep up with rapid technological changes, we may not be able to compete effectively. To remain competitive, we must continue to enhance and improve the responsiveness, functionality, accessibility and features of our proprietary software, network distribution systems and technologies. Our business environment is characterized by rapid technological changes, changes in use and customer requirements and preferences, frequent product and service introductions embodying new technologies and the emergence of new industry standards and practices that could render our existing proprietary technology and systems obsolete. Our success will depend, in part, on our ability to:

| ● | develop, license and defend intellectual property useful in our business,

| ● | enhance our existing services,

| ● | develop new services and technologies that address the increasingly sophisticated and varied needs of our prospective customers,

| ● | respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis,

| ● | respond to the demand for new services, products and technologies on a cost-effective and timely basis, and

| ● | adapt to technological advancements and changing standards to address the increasingly sophisticated requirements and varied needs of our prospective customers.

We cannot assure you that we will be able to respond in a timely manner to changing market conditions or customer requirements. The development of proprietary electronic trading technology entails significant technical, financial and business risks. Further, the adoption of new Internet, networking or telecommunications technologies may require us to devote substantial resources to modify, adapt and defend our technology. We cannot assure you that we will successfully implement new technologies or adapt our proprietary technology and transaction-processing systems to customer requirements or emerging industry standards, or that we will be able to successfully defend any challenges to any technology we develop. Any failure on our part to anticipate or respond adequately to technological advancements, customer requirements or changing industry standards, or any significant delays in the development, introduction or availability of new services, products or enhancements, could have a material adverse effect on our business, financial condition and results of operations.

Lack of liquidity or access to capital could impair our business and financial condition.

Liquidity, or ready access to funds, is essential to our business. We expend significant resources investing in our business, particularly with respect to our technology and service platforms. As a result, reduced levels of liquidity could have a significant negative effect on us. Some potential conditions that could negatively affect our liquidity include:

| ● | illiquid or volatile markets,

| ● | diminished access to debt or capital markets,

| ● | unforeseen cash or capital requirements, or

| ● | regulatory penalties or fines, or adverse legal settlements or judgments.

The capital and credit markets continue to experience varying degrees of volatility and disruption. In some cases, the markets have exerted downward pressure on availability of liquidity and credit capacity for businesses similar to ours. Without sufficient liquidity, we could be required to limit or curtail our operations or growth plans, and our business would suffer. Notwithstanding the self-funding nature of our operations, we may sometimes be required to fund timing differences arising from the delayed receipt of client funds associated with the settlement of client transactions in securities markets. These timing differences are funded either with internally generated cash flow or, if needed, with funds drawn under our revolving credit facility. We may also need access to capital in connection with the growth of our business, through acquisitions or otherwise. In the event current resources are insufficient to satisfy our needs, we may need to rely on financing sources such as bank debt. The availability of additional financing will depend on a variety of factors such as:

| ● | market conditions,

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| ● | the general availability of credit,

| ● | the volume of trading activities,

| ● | the overall availability of credit to the financial services industry,

| ● | our credit ratings and credit capacity, and

| ● | the possibility that our lenders could develop a negative perception of our long- or short-term financial prospects is a result of industry- or company-specific considerations. Similarly, our access to funds may be impaired if regulatory authorities or rating organizations take negative actions against us.

Disruptions, uncertainty or volatility in the capital and credit markets may also limit our access to capital required to operate our business. Such market conditions may limit our ability to satisfy statutory capital requirements, generate commission, fee and other market-related revenue to meet liquidity needs and access the capital necessary to grow our business. As such, we may be forced to delay raising capital, issue different types of capital than we would otherwise, less effectively deploy such capital, or bear an unattractive cost of capital, which could decrease our profitability and significantly reduce our financial flexibility.

Our business could be materially adversely affected as a result of the risks associated with acquisitions and investments.

We may pursue further acquisitions and investments in the future. These transactions are accompanied by risks. For instance, an acquisition could have a negative effect on our financial and strategic position and reputation or the acquired business could fail to further our strategic goals. Moreover, we may not be able to successfully integrate acquired businesses into ours, and therefore we may not be able to realize the intended benefits from an acquisition. We may have a lack of experience in new markets, products or technologies brought on by the acquisition and we may have an initial dependence on unfamiliar supply or distribution partners. An acquisition may create an impairment of relationships with customers or suppliers of the acquired business or our advisors or suppliers. All of these and other potential risks may serve as a diversion of our management’s attention from other business concerns, and any of these factors could have a material adverse effect on our business.

We operate in an intensely competitive industry, which could cause us to lose advisors and their assets.

Many of our competitors have substantially greater resources than we do and may offer a broader range of products and services across more markets. Some operate in a different regulatory environment than we do, which may give them certain competitive advantages in the services they offer. For example, certain of our competitors only provide clearing services and consequently would not have any supervision or oversight liability relating to actions of their financial advisors. We believe that competition within our industry will intensify as a result of consolidation and acquisition activity and because new competitors face few barriers to entry, which could adversely affect our ability to recruit new advisors and retain existing advisors. If current or potential clients decide to use our competitors, we could face a significant decline in market share, future fee revenues and future net income.

We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.

We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks, patents, copyrights, know-how or other intellectual property rights held by third parties. We may be from time to time in the future subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be third-party trademarks, patents, copyrights, know-how or other intellectual property rights that are infringed by our products, services or other aspects of our business without our awareness. Holders of such intellectual property rights may seek to enforce such intellectual property rights against us in China, the United States or other jurisdictions. If any third-party infringement claims are brought against us, we may be forced to divert management’s time and other resources from our business and operations to defend against these claims, regardless of their merits. Additionally, the application and interpretation of China’s intellectual property right laws and the procedures and standards for granting trademarks, patents, copyrights, know-how or other intellectual property rights in China are still evolving and are uncertain, and we cannot assure you that PRC courts or regulatory authorities would agree with our analysis. If we were found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our own. As a result, our business and results of operations may be materially and adversely affected.

Increases in labor costs in the PRC may adversely affect our business and results of operations.

The economy in China has experienced increases in inflation and labor costs in recent years. As a result, average wages in the PRC are expected to continue to increase. In addition, we are required by PRC laws and regulations to pay various statutory employee benefits, including pension, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of our employees. The relevant government agencies may examine whether an employer has made adequate payments to the statutory employee benefits, and those employers who fail to make adequate payments may be subject to late payment fees, fines and/or other penalties. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless we are able to control our labor costs or pass on these increased labor costs to our users by increasing the fees of our services, our financial condition and results of operations may be adversely affected.

The laws and regulations governing the financial industry in China are developing and evolving rapidly. If any of our business practices is deemed to violate any PRC laws or regulations, our business, financial condition and results of operations would be materially and adversely affected.

Due to the relatively short history of the finance industry in China, the PRC government has yet to establish a comprehensive regulatory framework governing our industry. To comply with existing laws, regulations, rules and governmental policies relating to the online finance industry, we have implemented various policies and procedures to conduct our business and operations. However, due to the lack of detailed rules and the fact that the relevant laws, regulations and rules are expected to continue to evolve, we cannot be certain that our existing practices would not be deemed to violate any existing or future rules, laws and regulations. As of the date of this report, we have never been subject to any material fines or other penalties under any PRC laws or regulations, including those governing our industry in China. However, to the extent that we are not able to fully comply with any existing or new regulations when they are promulgated, our business, financial condition and results of operations may be materially and adversely affected. We are unable to predict with certainty the impact, if any, that future legislation, judicial precedents or regulations relating to the online consumer finance industry will have on our business, financial condition and results of operations. Furthermore, the growth in the popularity of online consumer finance increases the likelihood that the PRC government will seek to further regulate this industry.

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Our operations may be adversely affected by international communication failures, which may affect trade executions and data updates.

Any significant disruption in service on our platforms, our computer systems or third-party service providers’ systems, including events beyond our control, could reduce the attractiveness of our platforms and result in a loss of customers or investors. In the event of a platform outage and physical data loss, our ability to perform our servicing obligations, and process loan applications would be materially and adversely affected. The satisfactory performance, reliability and availability of our platforms and our underlying network infrastructure are critical to our operations, customer service, reputation, and ability to retain existing and attract new customers, investors and institutional funding partners. Our operations depend on our ability to protect our systems against damage or interruption from natural disasters, power or telecommunications failures, air quality issues, environmental conditions, computer viruses, or attempts to harm our systems, criminal acts and similar events. Any interruptions or delays in our service, whether as a result of third-party or our error, natural disasters or security breaches, whether accidental or willful, could harm our relationships with our customers, investors and institutional funding partners and our reputation. Our disaster recovery plan has not been tested under actual disaster conditions, and we may not have sufficient capacity to recover all data and services in the event of an outage. These factors could prevent us from processing loans, damage our brand and reputation, divert our employees’ attention, subject us to liability and cause customers, investors and institutional funding partners to abandon our platforms, any of which could adversely affect our business, financial condition and results of operations.

Our platforms and internal systems rely on software that is highly technical, and if it contains undetected errors, our business could be adversely affected.

Our platforms and internal systems rely on software that is highly technical and complex. In addition, our platform and internal systems depend on the ability of such software to store, retrieve, process and manage immense amounts of data. The software on which we rely has contained, and may now or in the future contain, undetected errors or bugs. Errors or other design defects within the software on which we rely may result in a negative experience for customers and funding sources, delay introductions of new features or enhancements, result in errors or compromise our ability to protect customer or investor data or our intellectual property. Any errors, bugs or defects discovered in the software on which we rely could result in harm to our reputation, loss of customers or investors or liability for damages, any of which could adversely affect our business, results of operations and financial condition.

Uncertainties relating to the growth and profitability of the e-commerce industry in China could adversely affect our operating revenue and business prospects.

Our future results of operations will depend on numerous factors affecting the development of the e-commerce industry in China, which may be beyond our control. These factors include:

| ● | the growth of Internet, broadband, personal computer and mobile penetration and usage in China, and the rate of any such growth,

| ● | the level of trust and confidence of Chinese consumers in online trading, as well as changes in investor demographics and investor tastes and preferences,

| ● | whether alternative lending channels or business models that better address the needs of investor emerge in China, and

| ● | the development of fulfillment, payment and other ancillary services associated with online purchases.

Unfavorable developments in domestic and international politics, including military conflicts, political turmoil and social instability, may also adversely affect investor confidence and reduce investments, which could in turn materially and adversely affect our growth and profitability.

Any negative publicity or investor complaints with respect to us, investor and our service providers may materially and adversely affect our business and results of operations.

The reputation of our brands is critical to our business and competitiveness. Any malicious or negative publicity or any publicized incidents in connection with the use of our services, whether or not we are negligent or at fault, including but not limited to those relating to our management, business, compliance with the law, financial conditions or prospects, whether with or without merit, could severely compromise our reputation and harm our business and operating results.

As China’s online investing industry is new and the regulatory framework for this industry is also evolving, negative publicity about this industry and the market segment in which we operate may arise from time to time. Negative publicity about China’s online investing industry in general may also have a negative impact on our reputation, regardless of whether or not we have engaged in any inappropriate activities. The PRC government has recently instituted specific rules, including the Guidelines, Interim Measures and the CBRC Circular 26, to develop a more transparent regulatory environment for the online consumer finance industry. Any players in China’s online consumer finance industry who are not in compliance with these regulations may adversely impact the reputation of the industry as a whole. Furthermore, any negative development or perception of the consumer finance industry as a whole, including campus lending, even if factually incorrect or based on isolated incidents or as result of conduct by other market players, could compromise our image, undermine our trust and credibility, and negatively impact our ability to attract new customers, investors and institutional funding partners. Negative developments in the consumer finance industry, such as widespread customer defaults, fraudulent behavior, the closure of other online consumer finance platforms, or incidents indirectly resulting from the accumulation of large amounts of debt and inability to repay by any particular customer, may also lead to tightened regulatory scrutiny of the sector and limit the scope of permissible business activities that may be conducted by market players in the consumer finance industry. For instance, since 2015, there has been a number of reports of business failures of, or accusations of fraud and unfair dealing against, certain companies in the consumer finance industry in China. If customers, investors or institutional funding partners associate our company with these companies, they may be less willing to engage in borrowing or funding activities on our platform. If any of the foregoing takes place, our business and results of operations could be materially and adversely affected.

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Our business is dependent on our ability to maintain relationships with our business partners and other third parties, and at the same time, we are subject to risks associated with our business partners and other third parties.

We currently rely on a number of business partners and other third parties in various aspects of our business. In addition, we cooperate with a number of business partners and other third parties to deliver our services to our customers. Furthermore, if third-party service providers fail to function properly, we cannot assure you that we would be able to find an alternative in a timely and cost-efficient manner, or at all. Pursuing, establishing and maintaining relationships with business partners and other third parties, as well as integrating their data and services with our system, require significant time and resources.

The smooth operation of our business also depends on the compliance by our business partners and other third parties with applicable laws and regulations. Any negative publicity about business partners and other third parties, such as negative publicity about their loan collection practices and any failure by them to adequately protect the information of our customers and investors, to comply with applicable laws and regulations or to otherwise meet required quality and service standards, could harm our reputation. If any of the foregoing were to occur, our business and results of operations could be materially and adversely affected. Our reputation is associated with these business partners and other third parties, and if any of the foregoing were to occur, our reputation may suffer.

Any lack of requisite approvals, licenses or permits applicable to our business may have a material and adverse impact on our business, financial condition and results of operations.

Our business is subject to governmental supervision and regulation by the relevant PRC governmental authorities. Together, these government authorities promulgate and enforce regulations that cover many aspects of the operation of the online retail and the online finance industries. The PRC government extensively regulates the Internet industry. As a result, in certain circumstances it may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations.

We have made efforts to obtain all the applicable licenses and permits. We cannot assure you that we have obtained all the permits or licenses required for conducting our business in China or will be able to maintain our existing licenses or obtain new ones. If the PRC government determines that we are operating without the proper approvals, licenses or permits or promulgates new laws and regulations that require additional approvals or licenses or imposes additional restrictions on the operation of any part of our business, it has the power, among other things, to levy fines, confiscate our income, revoke our business licenses, and require us to discontinue the relevant parts of our business or to impose restrictions on the affected portion of our business. Any of these actions by the PRC government may have a material adverse effect on our business and results of operations.

Risks Relating to Our Corporate Structure

We will likely not pay dividends in the foreseeable future.

Dividend policy is subject to the discretion of our Board of Directors and will depend on, among other things, our earnings, financial condition, capital requirements and other factors. There is no assurance that our Board of Directors will declare dividends even if we are profitable. The payment of dividends by entities organized in China is subject to limitations as described herein. Under BVI law, we may only pay dividends from profits of our company, or credits standing in our Company’s share premium account, and we must be solvent before and after the dividend payment in the sense that we will be able to satisfy our liabilities as they become due in the ordinary course of business; and the realizable value of assets of our Company will not be less than the sum of our total liabilities, other than deferred taxes as shown on our books of account, and our capital. Pursuant to the Chinese enterprise income tax law, dividends payable by a foreign investment entity to its foreign investors are subject to a withholding tax of 10%. Similarly, dividends payable by a foreign investment entity to its Hong Kong investor who owns 25% or more of the equity of the foreign investment entity is subject to a withholding tax of 5%. The payment of dividends by entities organized in China is subject to limitations, procedures and formalities. Regulations in China currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China. The transfer to this reserve must be made before distribution of any dividend to shareholders.

Our business may be materially and adversely affected if any of our Chinese subsidiaries declare bankruptcy or become subject to a dissolution or liquidation proceeding.

The Enterprise Bankruptcy Law of China provides that an enterprise may be liquidated if the enterprise fails to settle its debts as and when they fall due and if the enterprise’s assets are, or are demonstrably, insufficient to clear such debts. Our Chinese subsidiaries hold certain assets that are important to our business operations. If any of our Chinese subsidiaries undergoes a voluntary or involuntary liquidation proceeding, unrelated third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.

Wholly Owned Foreign Entity (WOFE) is required to allocate a portion of its after-tax profits, to the statutory reserve fund, and as determined by its Board of Directors, to the staff welfare and bonus funds, which may not be distributed to equity owners.

Pursuant to Company Law of P.R. China (2013 Revision), Wholly Foreign-Owned Enterprise Law of the P.R. China (2000 Revision) and Implementing Rules for the Law of the People’s Republic of China on Wholly Foreign Owned Enterprises (2014 Revision), our WOFE entity is required to allocate a portion of its after-tax profits, to the statutory reserve fund, and in its discretion, to the staff welfare and bonus funds. No lower than 10% of an enterprise’s after tax-profits should be allocated to the statutory reserve fund. When the statutory reserve fund account balance is equal to or greater than 50% of the WOFE’s registered capital, no further allocation to the statutory reserve fund account is required. WOFE determines, in its own discretion, the amount contributed to the staff welfare and bonus funds. These reserves represent appropriations of retained earnings determined according to Chinese law.

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Our failure to obtain prior approval of the China Securities Regulatory Commission for the listing and trading of our common shares on a foreign stock exchange could have a material adverse effect upon our business, operating results, reputation and trading price of our common shares.

On August 8, 2006, six Chinese regulatory agencies, including the Ministry of Commerce of the People’s Republic of China (“MOFCOM”), jointly issued the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “M&A Rule”), which was amended on June 22, 2009. The M&A Rule contains provisions that require that an offshore special purpose vehicle (“SPV”) formed for listing purposes and controlled directly or indirectly by Chinese companies or individuals shall obtain the approval of the CSRC prior to the listing and trading of such SPV’s securities on an overseas stock exchange. On September 21, 2006, the CSRC published procedures specifying documents and materials required to be submitted to it by an SPV seeking CSRC approval of overseas listings. However, the application of the M&A Rule remains unclear with no consensus currently existing among leading Chinese law firms regarding the scope and applicability of the CSRC approval requirement. The CSRC has not issued any such definitive rule or interpretation, and we have not chosen to voluntarily request approval under the M&A Rule.

If we fail to maintain continuing compliance with the PRC state regulatory rules, policies and procedures applicable to our industry, we may risk losing certain preferential tax and other treatments which may adversely affect the viability of our current corporate structure, corporate governance and business operations.

According to the Guidelines on Foreign Investment issued by the State Council in 2002 and the Catalog on Foreign Invested Industries (2017 Revision) issued by the National Development and Reform Commission and MOFCOM, IT services fall into the category of industries in which foreign investment is encouraged. The State Council has promulgated several notices since 2000 to launch favorable policies for IT services, such as preferential tax treatments and credit support. Under rules and regulations promulgated by various Chinese government agencies, enterprises that have met specified criteria and are recognized as software enterprises by the relevant government authorities in China are entitled to preferential treatment, including financing support, preferential tax rates, export incentives, discretion and flexibility in determining employees’ welfare benefits and remuneration. Software enterprise qualifications are subject to annual examination. Enterprises that fail to meet the annual examination standards will lose the favorable enterprise income tax treatment. Enterprises exporting software or producing software products that are registered with the relevant government authorities are also entitled to preferential treatment including governmental financial support, preferential import, export policies and preferential tax rates. If and to the extent we fail to maintain compliance with such applicable rules and regulations, our operations and financial results may be adversely affected.

Risks Related to Doing Business in China

Adverse changes in political, economic and other policies of the Chinese government could have a material adverse effect on the overall economic growth of China, which could materially and adversely affect the growth of our business and our competitive position.

Our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in China. Although the PRC economy has been transitioning from a planned economy to a more market-oriented economy since the late 1970s, the PRC government continues to exercise significant control over China’s economic growth through direct allocation of resources, monetary and tax policies, and a host of other government policies such as those that encourage or restrict investment in certain industries by foreign investors, control the exchange between the Renminbi and foreign currencies, and regulate the growth of the general or specific market. While the Chinese economy has experienced significant growth in the past 30 years, growth has been uneven, both geographically and among various sectors of the economy. Furthermore, the current global economic crisis is adversely affecting economies throughout the world. As the PRC economy has become increasingly linked with the global economy, China is affected in various respects by downturns and recessions of major economies around the world. The various economic and policy measures enacted by the PRC government to forestall economic downturns or bolster China’s economic growth could materially affect our business. Any adverse change in the economic conditions in China, in policies of the PRC government or in laws and regulations in China could have a material adverse effect on the overall economic growth of China and market demand for our outsourcing services. Such developments could adversely affect our businesses, lead to reduction in demand for our services and adversely affect our competitive position.

Uncertainties with respect to the PRC legal system could have a material adverse effect on us.

The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since the late 1970s, the PRC government has been building a comprehensive system of laws and regulations governing economic matters in general. The overall effect has been to significantly enhance the protections afforded to various forms of foreign investments in China. We conduct our business primarily through our subsidiaries established in China. These subsidiaries are generally subject to laws and regulations applicable to foreign investment in China. However, since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties, which may limit legal protections available to us. In addition, some regulatory requirements issued by certain PRC government authorities may not be consistently applied by other government authorities (including local government authorities), thus making strict compliance with all regulatory requirements impractical, or in some circumstances impossible. For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law or contract. However, since PRC administrative and court authorities have discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to predict the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. These uncertainties may impede our ability to enforce the contracts we plan to enter into with our business partners, clients and suppliers. In addition, such uncertainties, including any inability to enforce our contracts, together with any development or interpretation of PRC law that is adverse to us, could materially and adversely affect our business and operations. Furthermore, intellectual property rights and confidentiality protections in China may not be as effective as in the United States or other more developed countries. We cannot predict the effect of future developments in the PRC legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the legal protections available to us and other foreign investors, including you. In addition, any litigation in China may be protracted and result in substantial costs and diversion of our resources and management attention.

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U.S. regulators’ ability to conduct investigations or enforce rules in China is limited.

The majority of our operations conducted outside of the U.S. As a result, it may not be possible for the U.S. regulators to conduct investigations or inspections, or to effect service of process within the U.S. or elsewhere outside China on us, our subsidiaries, officers, directors and shareholders, and others, including with respect to matters arising under BVI or U.S. federal or state securities laws. China does not have treaties providing for reciprocal recognition and enforcement of judgments of courts with the U.S. and many other countries. As a result, recognition and enforcement in China of these judgments in relation to any matter, including U.S. securities laws and the laws of the BVI, may be difficult or impossible.

The Holding Foreign Companies Accountable Act requires the Public Company Accounting Oversight Board (PCAOB) to be permitted to inspect the issuer’s public accounting firm within three years. This three-year period will be shortened to two years if the Accelerating Holding Foreign Companies Accountable Act is enacted. There are uncertainties under the PRC Securities Law relating to the procedures and requisite timing for the U.S. securities regulatory agencies to conduct investigations and collect evidence within the territory of the PRC. If the U.S. securities regulatory agencies are unable to conduct such investigations, they may suspend or de-register our registration with the SEC and delist our securities from applicable trading market within the US.

The Holding Foreign Companies Accountable Act was signed into law on December 18, 2020, and requires Auditors of publicly traded companies to submit to regular inspections every three years to assess such auditors’ compliance with applicable professional standards. On June 22, 2021, the U.S. Senate passed the Accelerating Holdings Foreign Companies Accountable Act which, if passed by the U.S. House of Representatives and signed into law, would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two, thus reducing the time before our securities may be prohibited from trading or delisted. As a result, the time period before our securities may be prohibited from trading or delisted will be reduced. If the U.S. securities regulatory agencies are unable to conduct such investigations, there exists a risk that they may determine to suspend or de-register our registration with the SEC and may also delist our securities from applicable trading market within the US. On December 2, 2021, the SEC adopted final amendments implementing congressionally mandated submission and disclosure requirements of the Holding Foreign Companies Accountable Act. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions.

According to Article 177 of the Securities Law of the PRC (“Article 177”), overseas securities regulatory authorities are prohibited from engaging in activities pertaining to investigations or evidence collection directly conducted within the territories of the PRC, and Chinese entities or individuals are further prohibited from providing documents and information in connection with securities business activities to any organizations and/or persons abroad without the prior consent of the securities regulatory authority of the State Council and the competent departments of the State Council. As of the date of this document, we are not aware of any implementing rules or regulations which have been published regarding application of Article 177.

We believe Article 177 is only applicable where the activities of overseas authorities constitute a direct investigation or evidence collection by such authorities within the territory of the PRC. In the event that the U.S. securities regulatory agencies carry out an investigation on us such as an enforcement action by the Department of Justice, the SEC or other authorities, such agencies’ activities will constitute conducting an investigation or collecting evidence directly within the territory of the PRC and accordingly fall within the scope of Article 177. In that case, the U.S. securities regulatory agencies may have to consider establishing cross-border cooperation with the securities regulatory authority of the PRC by way of judicial assistance, diplomatic channels or establishing a regulatory cooperation mechanism with the securities regulatory authority of the PRC. However, there is no assurance that the U.S. securities regulatory agencies will succeed in establishing such cross-border cooperation in this particular case and/or establish such cooperation in a timely manner.

Furthermore, it remains unclear as to how Article 177 will be interpreted, implemented or applied by the Chinese Securities Regulatory Commission or other relevant government authorities. As such, there are uncertainties as to the procedures and requisite timing for the U.S. securities regulatory agencies to conduct investigations and collect evidence within the territory of the PRC. The Holding Foreign Companies Accountable Act requires the Public Company Accounting Oversight Board (PCAOB) be permitted to inspect the issuer’s public accounting firm within three years. This three-year period will be shortened to two years if the Accelerating Holding Foreign Companies Accountable Act is enacted. If the U.S. securities regulatory agencies are unable to conduct such investigations, there exists a risk that they may determine to suspend or de-register our registration with the SEC and may also delist our securities from applicable trading market within the US.

Our financial statements contained in the annual report on Form 20-F for the year ended December 31, 2021 have been audited by MaloneBailey, LLP, an independent registered public accounting firm that is headquartered in the United States with offices in Beijing and Shenzhen. MaloneBailey, LLP is a firm registered with the PCAOB, and is required by the laws of the U.S. to undergo regular inspections by the PCAOB to assess its compliance with the laws of the U.S. and professional standards. MaloneBailey, LLP has been subject to PCAOB inspections, and is not among the PCAOB-registered public accounting firms headquartered in the PRC or Hong Kong that are subject to PCAOB’s determination on December 16, 2021 of having been unable to inspect or investigate completely.

However, our audit work was carried out by MaloneBailey, LLP with the collaboration of its China-based offices. According to Article 177 of the PRC Securities Law (last amended in March 2020), no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities in China. Accordingly, without the consent of the competent PRC securities regulators and relevant authorities, no organization or individual may provide the documents and materials relating to securities business activities to overseas parties. Therefore, the audit working papers of our financial statements may not be fully inspected by the PCAOB without the approval of the PRC authorities. Our common stock could still be delisted and prohibited from being traded over-the-counter under the HFCA Act determines in the future that it is unable to fully inspect or investigate our auditor which has a presence in China.

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Furthermore, due to the recent developments in connection with the implementation of the Holding Foreign Companies Accountable Act, we cannot assure you whether the SEC or other regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements. The requirement in the HFCA Act that the PCAOB be permitted to inspect the issuer’s public accounting firm within two or three years, may result in the delisting of our securities from applicable trading markets in the U.S., in the future if the PCAOB is unable to inspect our accounting firm at such future time.

We face uncertainty regarding the PRC tax reporting obligations and consequences for certain indirect transfers of the stock of our operating company.

Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises issued by the PRC State Administration of Taxation on December 10, 2009, or Circular 698, where a foreign investor transfers the equity interests of a PRC resident enterprise indirectly by way of the sale of equity interests of an overseas holding company, or an Indirect Transfer, and such overseas holding company is located in a tax jurisdiction that: (i) has an effective tax rate less than 12.5% or (ii) does not tax foreign income of its residents, the foreign investor should report such Indirect Transfer to the competent tax authority of the PRC resident enterprise. The PRC tax authority will examine the true nature of the Indirect Transfer, and if the tax authority considers that the foreign investor has adopted an abusive arrangement in order to avoid PRC tax, they will disregard the existence of the overseas holding company and re-characterize the Indirect Transfer and as a result, gains derived from such Indirect Transfer may be subject to PRC withholding tax at the rate of up to 10%. In addition, the PRC resident enterprise is supposed to provide necessary assistance to support the enforcement of Circular 698. At present, the PRC tax authorities will neither confirm nor deny that they would enforce Circular 698, in conjunction with other tax collection and tax withholding rules, to make claims against our PRC subsidiaries as being indirectly liable for unpaid taxes, if any, arising from Indirect Transfers by shareholders who did not obtain their common shares in the public offering of our common shares.

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

On July 4, 2014, the PRC State Administration of Foreign Exchange (“SAFE”) promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, which replaced the former Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents to Engage in Financing and Inbound Investment via Overseas Special Purpose Vehicles (generally known as SAFE Circular 75) promulgated by SAFE on October 21, 2005. On February 13, 2015, SAFE further promulgated the Circular on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or SAFE Circular 13, which took effect on June 1, 2015. This SAFE Circular 13 has amended SAFE Circular 37 by requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.

These circulars require PRC residents to register with qualified banks in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, which is referred to in SAFE Circular 37 as a “special purpose vehicle.” These circulars further require amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as an increase or decrease of capital contributed by PRC residents, share transfer or exchange, merger, division or other material events. In the event that a PRC resident holding interests in a special purpose vehicle fails to complete the required SAFE registration, the PRC subsidiary of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Furthermore, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls.

We cannot provide any assurances that all such registration will be completed in a timely manner. Failure by such shareholder or beneficial owners of our company to comply with Circular 37 could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our PRC subsidiary’s ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from making loans or additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

As an offshore holding company of our PRC subsidiary, we may make loans to our PRC subsidiary, or we may make additional capital contributions to our PRC subsidiary. Any loans to our PRC subsidiary are subject to PRC regulations and approvals. For example, loans by us to our PRC subsidiary in China, each of which is a foreign-invested enterprise, to finance their activities cannot exceed statutory limits and must be registered with SAFE or its local counterpart.

We may also decide to finance our PRC subsidiary through capital contributions. These capital contributions must be approved by MOFCOM or its local counterpart. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, if at all, with respect to future loans by us to our PRC subsidiary or controlled PRC affiliate or capital contributions by us to our subsidiaries or any of their respective subsidiaries. If we fail to receive such registrations or approvals, our ability to capitalize our PRC operations may be negatively affected, which could adversely and materially affect our liquidity and our ability to fund and expand our business.

On June 15, 2016, SAFE promulgated the Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or SAFE Circular No.16. SAFE Circular No. 16 stipulates that the use of capital by foreign-invested enterprises, or FIEs shall follow “the principle of authenticity and self-use” within the business scope of such FIEs. The capital of an FIE and capital in Renminbi obtained by the FIE from foreign exchange settlement shall not be used for the following purposes: (i) directly or indirectly used for payment beyond the business scope of the enterprises or the payment prohibited by relevant laws and regulations; (ii) directly or indirectly used for investment in securities or investments other than banks’ principal-secured products unless otherwise provided by relevant laws and regulations; (iii) the granting of loans to non-affiliated enterprises, except where it is expressly permitted in the business license; and (iv) paying the expenses related to the purchase of real estate that is not for self-use (except for the foreign-invested real estate enterprises).

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We cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans by us to our PRC subsidiary or controlled PRC affiliate or with respect to future capital contributions by us to our PRC subsidiary. If we fail to complete such registrations or obtain such approvals, our ability to capitalize or otherwise fund our PRC operations may be negatively affected, which could adversely and materially affect our liquidity and our ability to fund and expand our business.

Governmental control of currency conversion may limit our ability to use our future revenues effectively and the ability of our PRC subsidiary to obtain financing.

The PRC government imposes control on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. Restrictions on currency conversion imposed by the PRC government may limit our ability to use our future revenues generated in Renminbi to fund our expenditures denominated in foreign currencies or our business activities outside China. Under China’s existing foreign exchange regulations, Renminbi may be freely converted into foreign currency for payments relating to current account transactions, which include among other things dividend payments and payments for the import of goods and services, by complying with certain procedural requirements. Our PRC subsidiary is able to pay dividends in foreign currencies to us without prior approval from SAFE, by complying with certain procedural requirements. Our PRC subsidiary may also retain foreign currency in their respective current account bank accounts for use in payment of international current account transactions. However, we cannot assure you that the PRC government will not take measures in the future to restrict access to foreign currencies for current account transactions. Conversion of Renminbi into foreign currencies, and of foreign currencies into Renminbi, for payments relating to capital account transactions, which principally includes investments and loans, generally requires the approval of SAFE and other relevant PRC governmental authorities. Restrictions on the convertibility of the Renminbi for capital account transactions could affect the ability of our PRC subsidiary to make investments overseas or to obtain foreign currency through debt or equity financing, including by means of loans or capital contributions from us. We cannot assure you that the registration process will not delay or prevent our conversion of Renminbi for use outside of China.

We may be classified as a “resident enterprise” for PRC enterprise income tax purposes; such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.

The Enterprise Income Tax Law provides that enterprises established outside of China whose “de facto management bodies” are located in China are considered PRC tax resident enterprises and will generally be subject to the uniform 25% PRC enterprise income tax rate on their global income. In addition, a tax circular issued by the State Administration of Taxation on April 22, 2009 regarding the standards used to classify certain Chinese-invested enterprises established outside of China as resident enterprises clarified that dividends and other income paid by such resident enterprises will be considered to be PRC source income, subject to PRC withholding tax, currently at a rate of 10%, when recognized by non-PRC enterprise shareholders. This recent circular also subjects such resident enterprises to various reporting requirements with the PRC tax authorities. Under the implementation rules to the Enterprise Income Tax Law, a de facto management body is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and other assets of an enterprise. In addition, the tax circular mentioned above details that certain Chinese-invested enterprises will be classified as resident enterprises if the following are located or resident in China: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties, accounting books, company seal, and minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors having voting rights.

Currently, there are no detailed rules or precedents governing the procedures and specific criteria for determining de facto management bodies which are applicable to our company or our overseas subsidiary. If our company or any of our overseas subsidiaries is considered a PRC tax resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, our company or our overseas subsidiary will be subject to the uniform 25% enterprise income tax rate as to our global income as well as PRC enterprise income tax reporting obligations. Second, although under the Enterprise Income Tax Law and its implementing rules dividends paid to us from our PRC subsidiary would qualify as tax-exempted income, we cannot assure you that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. Finally, dividends payable by us to our investors and gain on the sale of our common shares may become subject to PRC withholding tax. It is possible that future guidance issued with respect to the new resident enterprise classification could result in a situation in which a withholding tax of 10% for our non-PRC enterprise investors or a potential withholding tax of 20% for individual investors is imposed on dividends we pay to them and with respect to gains derived by such investors from transferring our common shares. In addition to the uncertainty in how the new resident enterprise classification could apply, it is also possible that the rules may change in the future, possibly with retroactive effect. If we are required under the Enterprise Income Tax law to withhold PRC income tax on our dividends payable to our foreign shareholders, or if you are required to pay PRC income tax on the transfer of our common shares under the circumstances mentioned above, the value of your investment in our common shares may be materially and adversely affected. It is unclear whether, if we are considered a PRC resident enterprise, holders of our common shares would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas.

We may rely on dividends paid by our subsidiaries for our cash needs, and any limitation on the ability of our subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.

As a holding company, we conduct substantially all of our business through our consolidated subsidiaries incorporated in China. We may rely on dividends paid by our PRC subsidiary for our cash needs, including the funds necessary to pay any dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our operating expenses. The payment of dividends by entities established in China is subject to limitations. Regulations in China currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China. Our PRC subsidiary is required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its general reserves or statutory capital reserve fund until the aggregate amount of such reserves reaches 50% of its respective registered capital. As a result, our PRC subsidiary is restricted in their ability to transfer a portion of their net assets to us in the form of dividends. In addition, if our PRC subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. Any limitations on the ability of our PRC subsidiary to transfer funds to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends and otherwise fund and conduct our business.

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Our current employment practices may be restricted under the PRC Labor Contract Law and our labor costs may increase as a result.

The PRC Labor Contract Law and its implementing rules impose requirements concerning contracts entered into between an employer and its employees and establishes time limits for probationary periods and for how long an employee can be placed in a fixed-term labor contract. Because the Labor Contract Law and its implementing rules have not been in effect very long and because there is lack of clarity with respect to their implementation and potential penalties and fines, it is uncertain how it will impact our current employment policies and practices. We cannot assure you that our employment policies and practices do not, or will not, violate the Labor Contract Law or its implementing rules and that we will not be subject to related penalties, fines or legal fees. If we are subject to large penalties or fees related to the Labor Contract Law or its implementing rules, our business, financial condition and results of operations may be materially and adversely affected. In addition, according to the Labor Contract Law and its implementing rules, if we intend to enforce the non-compete provision with an employee in a labor contract or non-competition agreement, we have to compensate the employee on a monthly basis during the term of the restriction period after the termination or ending of the labor contract, which may cause extra expenses to us. Furthermore, the Labor Contract Law and its implementation rules require certain terminations to be based upon seniority rather than merit, which significantly affects the cost of reducing workforce for employers. In the event we decide to significantly change or decrease our workforce in the PRC, the Labor Contract Law could adversely affect our ability to enact such changes in a manner that is most advantageous to our circumstances or in a timely and cost-effective manner, thus our results of operations could be adversely affected.

Risks Related to Ownership of our Common Shares

We are not in compliance with Nasdaq Listing Rule 5550(a)(2), the bid price rule. If we are unable to cure the failure within the prescribed time period, our common stock will be subject to delisting. A delisting would materially reduce the liquidity of our common stock and have an adverse effect on our market price.

On January 26, 2022, the Nasdaq Listing Qualifications Department notified us that that minimum closing bid price per share for our common stock was below $1.00 for a period of 30 consecutive business days and that the Company did not meet the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2). Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company has a compliance period of 180 calendar days, or until July 25, 2022 (the “Compliance Period”), to regain compliance with Nasdaq’s minimum bid price requirement. If at any time during the Compliance Period, the closing bid price per share of the Company’s common stock is at least $1.00 for a minimum of 10 consecutive business days, Nasdaq will provide the Company a written confirmation of compliance and the matter will be closed. In the event the Company does not regain compliance by July 25, 2022, the Company may be eligible for an additional 180 calendar day period to regain compliance. To qualify, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the bid price requirement, and will need to provide written notice of its intention to cure the deficiency during the second compliance period, including by effecting a reverse stock split, if necessary. If the Company chooses to implement a reverse stock split, it must complete the split no later than ten business days prior to the expiration of the second compliance period.

A delisting would materially reduce the liquidity of our common stock and have an adverse effect on our market price. A delisting would also likely make it more difficult for us to obtain financing through the sale of our equity. Any such sale of equity would likely be more dilutive to our current stockholders than would be the case if our shares were listed.

If our financial condition deteriorates as a NASDAQ listed company, we may not meet continued listing standards on the NASDAQ Capital Market.

Our securities are currently listed for trading on the NASDAQ Capital Market. The NASDAQ Capital Market requires companies to fulfill specific requirements in order for their securities to continue to be listed. If our common shares are delisted from the NASDAQ Capital Market at some later date, our shareholders could find it difficult to sell our common shares. In addition, if our common shares are delisted from the NASDAQ Capital Market at some later date, we may apply to have our common shares quoted on the Bulletin Board or in the “pink sheets” maintained by the National Quotation Bureau, Inc. The Bulletin Board and the “pink sheets” are generally considered to be less efficient markets than the NASDAQ Capital Market. In addition, if our common shares are delisted at some later date, our common shares may be subject to the “penny stock” regulations. These rules impose additional sales practice requirements on broker-dealers that sell low-priced securities to persons other than established customers and institutional accredited investors and require the delivery of a disclosure schedule explaining the nature and risks of the penny stock market. As a result, the ability or willingness of broker-dealers to sell or make a market in our common shares might decline. If our common shares are delisted from the NASDAQ Capital Market at some later date or become subject to the penny stock regulations, it is likely that the price of our common shares would decline and that our shareholders would find it difficult to sell their common shares. In addition, we have relied on an exemption to the blue-sky registration requirements afforded to “covered securities.” Securities listed on the NASDAQ Capital Market are “covered securities.”

We are a “foreign private issuer,” and our disclosure obligations differ from those of U.S. domestic reporting companies. As a result, we may not provide you the same information as U.S. domestic reporting companies or we may provide information at different times, which may make it more difficult for you to evaluate our performance and prospects.

We are a foreign private issuer and, as a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we will be subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxy statements. We will not be required to disclose detailed individual executive compensation information. Furthermore, our directors and executive officers will not be required to report equity holdings under Section 16 of the Exchange Act and will not be subject to the insider short-swing profit disclosure and recovery regime. As a foreign private issuer, we will also be exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not privy to specific information about an issuer before other investors. However, we will still be subject to the anti-fraud and anti-manipulation rules of the SEC, such as Rule 10b-5 under the Exchange Act. Since many of the disclosure obligations imposed on us as a foreign private issuer differ from those imposed on U.S. domestic reporting companies, you should not expect to receive the same information about us and at the same time as the information provided by U.S. domestic reporting companies.

Common shares eligible for future sale may adversely affect the market price of our common shares, as the future sale of a substantial amount of outstanding common shares in the public marketplace could reduce the price of our common shares.

The market price of our common shares could decline as a result of sales of substantial amounts of our common shares in the public market, or the perception that these sales could occur. In addition, these factors could make it more difficult for us to raise funds through future offerings of our common shares.

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Our officers, directors and principal shareholders own a significant percentage of our common shares and will be able to exert significant control over matters subject to shareholder approval.

Our officers, directors and 5% or greater shareholders, in the aggregate, beneficially own approximately 42.0% of our outstanding common shares. Specifically, our chief executive officer and Chairman, in the aggregate, beneficially own 10.4%, which, in turn, will allow such shareholders to exert substantial influence over matters such as electing directors and approving mergers or other business combination transactions. As a result, our officers, directors and 5% or greater shareholders possess substantial ability to impact our management and affairs and the outcome of matters submitted to shareholders for approval. This concentration of ownership and voting power may also discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their common shares as part of a sale of our company and might reduce the price of our common shares. These actions may be taken even if they are opposed by our other shareholders. See “Major Shareholders.”

We will incur increased costs and become subject to additional regulations and requirements as a result of becoming a newly public company, and our management will be required to devote substantial time to new compliance matters, which could lower our profits or make it more difficult to run our business.

As a newly public company, we will incur significant legal, accounting and other expenses that we have not incurred as a private company, including costs associated with public company reporting requirements and costs of recruiting and retaining non-executive directors. We also have incurred and will incur costs associated with the Sarbanes-Oxley Act and related rules implemented by the Securities and Exchange Commission, or the SEC, and NASDAQ. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. Our management will need to devote a substantial amount of time to ensure that we comply with all of these requirements. These laws and regulations also could make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors, our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common shares, fines, sanctions and other regulatory action and potentially civil litigation.

The market price of common shares may be volatile, which could cause the value of your investment to decline.

The market price of our common shares may be highly volatile and could be subject to wide fluctuations. Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could reduce the market price of our common shares in spite of our operating performance. In addition, our results of operations could be below the expectations of public market analysts and investors due to a number of potential factors, including variations in our quarterly results of operations, additions or departures of key management personnel, failure to meet analysts’ earnings estimates, publication of research reports about our industry, litigation and government investigations, changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies or speculation in the press or investment community, announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments, adverse publicity about our industry in or individual scandals, and in response the market price of our common shares could decrease significantly. You may be unable to resell your common shares of at or above the initial public offering price. In the past few years, stock markets have experienced extreme price and volume fluctuations. In the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources, or at all.

Future sales, or the perception of future sales, by us or our existing shareholders in the public market could cause the market price for our common shares to decline.

The sale of substantial amounts of common shares in the public market, or the perception that such sales could occur could harm the prevailing market price of our common shares. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. If any existing shareholders sell a substantial amount of common shares, the prevailing market price for our common shares could be adversely affected. Our executive officers, directors and certain of our existing shareholders will sign lock-up agreements with the underwriters that will, subject to certain customary exceptions, restrict the sale of our common shares and certain other securities held by them for 180 days following the date of this report. The underwriters may, in their sole discretion and at any time without notice, release all or any portion of the common shares subject to any such lock-up agreements. As restrictions on resale end, the market price of our common shares could drop significantly if the holders of our restricted shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our common shares or other securities.

As the rights of shareholders under BVI law differ from those under U.S. law, you may have fewer protections as a shareholder.

Our corporate affairs will be governed by our Memorandum and Articles of Association, the BVI Business Companies Act, 2004, as amended (the “BVI Act”), and the common law of the BVI. The rights of shareholders to take legal action against our directors, actions by minority shareholders and the fiduciary responsibilities of our directors under BVI law are governed by the BVI Act and the common law of the BVI. The common law of the BVI is derived in part from comparatively limited judicial precedent in the British Virgin Islands as well as from the common law of England and the wider Commonwealth, which has persuasive, but not binding, authority on a court in the BVI. The rights of our shareholders and the fiduciary responsibilities of our directors under BVI law are largely codified in the BVI Act but are potentially not as clearly established as they would be under statutes or judicial precedents in some jurisdictions in the United States. In particular, the BVI has a less developed body of securities laws as compared to the United States, and some states (such as Delaware) have more fully developed and judicially interpreted bodies of corporate law. As a result of all of the above, holders of our common shares may have more difficulty in protecting their interests through actions against our management, directors or major shareholders than they would as shareholders of a U.S. company.

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BVI companies may not be able to initiate shareholder derivative actions, thereby depriving shareholders of the ability to protect their interests.

Shareholders of BVI companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. Shareholders of a BVI company could, however, bring a derivative action in the BVI courts, and there is a clear statutory right to commence such derivative claims under Section 184C of the BVI Act. The circumstances in which any such action may be brought, and the procedures and defenses that may be available in respect to any such action, may result in the rights of shareholders of a BVI company being more limited than those of shareholders of a company organized in the United States. Accordingly, shareholders may have fewer alternatives available to them if they believe that corporate wrongdoing has occurred. The BVI courts are also unlikely to recognize or enforce against us judgments of courts in the United States based on certain liability provisions of U.S. securities law; and to impose liabilities against us, in original actions brought in the BVI, based on certain liability provisions of U.S. securities laws that are penal in nature. There is no statutory recognition in the BVI of judgments obtained in the United States, although the courts of the BVI will generally recognize and enforce the non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. The BVI Act offers some limited protection of minority shareholders. The principal protection under statutory law is that shareholders may apply to the BVI court for an order directing the company or its director(s) to comply with, or restraining the company or a director from engaging in conduct that contravenes, the BVI Act or the company’s Memorandum and Articles of Association. Under the BVI Act, the minority shareholders have a statutory right to bring a derivative action in the name of and on behalf of the company in circumstances where a company has a cause of action against its directors. This remedy is available at the discretion of the BVI court. A shareholder may also bring an action against the company for breach of duty owed to him as a member. A shareholder who considers that the affairs of the company have been, are being or likely to be, conducted in a manner that is, or any act or acts of the company have been, or are, likely to be oppressive, unfairly discriminatory, or unfairly prejudicial to him in that capacity, may apply to the BVI court for an order to remedy the situation.

There are common law rights for the protection of shareholders that may be invoked, largely dependent on English company law. Under the general rule pursuant to English company law known as the rule in Foss v. Harbottle, a court will generally refuse to interfere with the management of a company at the insistence of a minority of its shareholders who express dissatisfaction with the conduct of the company’s affairs by the majority or the Board of Directors. However, every shareholder is entitled to have the affairs of the company conducted properly according to BVI law and the constituent documents of the company. As such, if those who control the company have persistently disregarded the requirements of company law or the provisions of the company’s Memorandum and Articles of Association, then the courts may grant relief. Generally, the areas in which the courts will intervene are the following: (1) an act complained of which is outside the scope of the authorized business or is illegal or not capable of ratification by the majority; (2) acts that constitute fraud on the minority where the wrongdoers control the company; (3) acts that infringe or are about to infringe on the personal rights of the shareholders, such as the right to vote; and (4) where the company has not complied with provisions requiring approval of a special or extraordinary majority of shareholders. This means that even if shareholders were to sue us successfully, they may not be able to recover anything to make up for the losses suffered.

The laws of the BVI may provide less protection for minority shareholders than those under U.S. law, so minority shareholders may have less recourse than they would under U.S. law if the shareholders are dissatisfied with the conduct of our affairs.

Under the laws of the BVI, the rights of minority shareholders are protected by provisions of the BVI Act dealing with shareholder remedies and other remedies available under common law (in tort or contractual remedies). The principal protection under statutory law is that shareholders may bring an action to enforce the constitutional documents of the company (i.e. the Memorandum and Articles of Association) as shareholders are entitled to have the affairs of the company conducted in accordance with the BVI Act and the Memorandum and Articles of Association of the company. A shareholder may also bring an action under statute if he feels that the affairs of the company have been or will be carried out in a manner that is unfairly prejudicial or discriminating or oppressive to him. The BVI Act also provides for certain other protections for minority shareholders, including in respect of investigation of the company and inspection of the company books and records. There are also common law rights for the protection of shareholders that may be invoked, largely dependent on English common law, since the common law of the BVI for business companies is limited.

We may not be able to pay any dividends on our common shares in the future due to BVI law.

Under BVI law, we may only pay dividends to our shareholders if the value of our assets exceeds our liabilities and we are able to pay our debts as they become due. We cannot give any assurance that we will declare dividends of any amounts, at any rate or at all in the future. Future dividends, if any, will be at the discretion of our Board of Directors, and will depend upon our results of operations, cash flows, financial condition, payment to us of cash dividends by our subsidiaries, capital needs, future prospects and other factors that our directors may deem appropriate.

We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to “emerging growth companies” will make our common shares less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions and relief from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” In particular, while we are an “emerging growth company” (1) we will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, (2) we will be exempt from any rules that may be adopted by the PCAOB requiring mandatory audit firm rotations or a supplement to the auditor’s report on financial statements, (3) we will be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (4) we will not be required to hold nonbinding advisory votes on executive compensation or shareholder approval of any golden parachute payments not previously approved. We currently intend to take advantage of the reduced disclosure requirements regarding executive compensation. If we remain an “emerging growth company” after fiscal 2018, we may take advantage of other exemptions, including the exemptions from the advisory vote requirements and executive compensation disclosures under the Dodd-Frank Wall Street Reform and Customer Protection Act, or the Dodd-Frank Act, and the exemption from the provisions of Section 404(b) of the Sarbanes-Oxley Act. In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards, meaning that the company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We may remain an “emerging growth company” until the fiscal year-end following the fifth anniversary of the completion of this initial public offering, though we may cease to be an “emerging growth company” earlier under certain circumstances, including (1) if we become a large accelerated filer, (2) if our gross revenue exceeds $1.07 billion in any fiscal year or (3) if we issue more than $1.0 billion in non-convertible notes in any three-year period. The exact implications of the JOBS Act are still subject to interpretations and guidance by the SEC and other regulatory agencies, and we cannot assure you that we will be able to take advantage of all of the benefits of the JOBS Act. In addition, investors may find our common shares less attractive if we rely on the exemptions and relief granted by the JOBS Act. If some investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and our stock price may decline and/or become more volatile.

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ITEM 4. INFORMATION ON THE COMPANY

| A. | History and Development of the Company

MMTEC, INC. (“MMTEC”) was founded on January 4, 2018 under the laws of the British Virgin Islands (the “BVI”). Our main operations are conducted through and by the People’s Republic of China (“PRC”) based operating entity, Gujia (Beijing) Technology Co., Ltd. (“Gujia”), based in Beijing, China. On April 20, 2018, we incorporated MM Fund Services Limited (“MM Fund”) for the purpose of providing administration services to the private equity funds industry. On May 28, 2018 and August 8, 2018, we incorporated MM Capital Management Limited (“MM Capital”) and MM Fund SPC (“MM SPC”), respectively, for the purpose of providing assets management and investment services to clients. On March 19, 2018, MMTEC acquired a wholly owned subsidiary, MM Future Technology Limited (“MM Future”). MM Future was incorporated in Hong Kong on October 31, 2017 for the purpose of being a holding company for the equity interest in Gujia. In addition, our company acquired 24.9% of the outstanding securities of MMBD Trading Limited (“MMBD Trading”) on March 28, 2018 and acquired the remaining 75.1% on April 25, 2019. The acquisition was closed on October 18, 2019. MMBD Trading acquired a wholly owned subsidiary, MM Global Securities, INC. (“MM Global”) on August 16, 2017. MM Global located in New York, NY. MM Global changed its corporate name from “MM IGlobal, INC” to “MM Global Securities, Inc.” effective as of February 25, 2019. On March 15, 2019, the Company incorporated HC Securities (HK) limited (“HC Securities”), a Hong Kong company, for the purpose of providing assets management and investment services to clients. HC Securities is a wholly-owned subsidiary of MMTEC. HC Securities changed its corporate name from “MM Global Capital Limited” to “HC Securities (HK) limited”, effective on December 22, 2021. HC Securities applied license to SFC and was approved on December 21, 2021. HC Securities is licensed on dealing in securities, advising on securities and asset management. On July 9, 2019, we acquired 49% of a Newly-Formed Entity called Xchain Fintech PTE.LTD., (“Xchain”), a Singapore company, for the purpose of providing technical support for the construction and development of a new solutions for the existing problems of the traditional financial industry, the difficulty experienced by investors in investing and allocating investment assets globally, and the protection of funds and investments by using advanced technologies, such as artificial intelligence, big data analysis and blockchain. On March 23, 2020, we acquired all outstanding securities of MMBD Investment Advisory Company Limited (“MMBD Advisory”), MMBD Advisory was formed in January 2018 in the U.S. and is registered as an investment advisor firm under the laws of the State of New York on May 7, 2018. The firm intends to offer non-discretionary investment advisory services to individuals and advisory services to private fund managers. We have developed and deployed a series of platforms which comprise a business chain that enables PRC-based hedge funds, mutual funds, registered investment advisors, proprietary trading groups, and brokerage firms to engage in securities market transactions and settlements globally. Fundex SPC was incorporated on September 13, 2021, as a wholly-owned subsidiary of MM Capital Management Limited, for the purpose of providing asset management services to clients.

We conduct our business through and based on distinct yet integrated business systems designed to provide support for our (i) Securities Dealers Trading System (securities registration and clearing, account management, risk management, quick trading and execution, and third party access middleware), (ii) Private Fund Investment Management System (multi-account management, fund valuation, risk management, quantitative trading access, liquidation and requisition management) and (iii) Mobile Transaction Individual Client System and PC Client System (Apple IOS, Android, PC, Web). We assist PRC-based financial institutions taking part in the overseas securities trading markets by providing them comprehensive Internet-based securities solutions. These PRC financial institutions, along with Hong Kong broker-dealer customers, may “white label” our trading interface (i.e., put their logos on it, make our trading interface available to their customers without referencing our name, as if it was developed by them in-house), or they can select from among our modular functionalities, such as order routing, trade reporting or clearing on specific products or exchanges where they may not have up-to-date technology to offer their customers a comprehensive range of services and products. We also help PRC-based hedge funds, mutual funds, proprietary trading groups to speed up their integration into the overseas market and offer them additional services, such as fund establishment, issuance, custody, transaction and settlement. We also provide a series of IR solutions service for China Concepts Stock companies, help maintain the relationship between listed companies and the company’s equity, debt investors or potential investors. We provide our clients across all industries, sectors, and regions with strategic actionable intelligence and visibility into the capital markets for the long term. We used internally designed and built system with the US brokerage license and the Cayman fund management qualification to form a series of MOM funds, with the main goal of discovering small and medium-sized institutional investors and helping them set up the fund to issue securities fund products.

The Initial Public Offering

On January 7, 2019, we completed our initial public offering (“IPO”) on the NASDAQ Capital Market under the symbol of “MTC”. We offered 1,800,000 common shares at $4 per share. Net proceeds raised by us from the initial public offering amounted to approximately $6,478,801 after deducting underwriting discounts and commissions and other offering expenses. Out of the $6.5 million net proceeds, $500,000 was deposited into an escrow account to satisfy the initial $500,000 in potential indemnification obligations arising during an escrow period of two years following the IPO closing date of January 7, 2019. On January 7, 2019, we sold additional 270,000 common shares at $4 per share. Net proceeds raised by us amounted to $993,600 after deducting underwriting discounts. As a result, we raised a total of $7,472,401 from the issuance of 2,070,000 shares of common stock in the January 2019 IPO.

Registered Direct Offering and Private Placement

On February 22, 2021 we entered into a Securities Purchase Agreement with certain institutional investors in connection with a registered direct offering of 4,300,000 of the Company’s common shares, at a purchase price of $3.70 per share. The Company sold the common shares for aggregate gross proceeds of $15,910,000. The net proceeds from the transactions were $14,637,200, after deducting certain fees due to the placement agent and the Company’s transaction expenses, and will be used for working capital and general corporate purposes.

On December 20, 2021 we entered into a Securities Purchase Agreement with a single investor pursuant to which the investor will make a $2,000,000 investment in the Company in a Regulation S private placement. Under the terms of the Purchase Agreement, the investor will purchase 5,000,000 common shares of the Company at a purchase price of $0.40 per share. The gross proceeds of the transaction were $2,000,000 before deducting fees and other expenses. The Company currently intends to use the net proceeds from the transaction for growth capital and general working capital purposes.

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The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC and can be accessed at www.sec.gov. We maintain a corporate website at www.haisc.com. The information contained in, or accessible from, our website or any other website does not constitute a part of this Annual Report on Form 20-F.

| B. | Business Overview

We provide comprehensive, Internet-based technology services and solutions to the Chinese language speaking hedge funds, mutual funds, registered investment advisors, proprietary trading groups, and brokerage firms engaging in securities market transactions and settlements globally. We help these financial institutions to accelerate their integration into the overseas market by offering complete suite trading solutions, including services such as fund establishment, issuance, custody, transaction and settlement. These financial institutions may “white label” our trading interface (i.e., put their logos on it, make our trading interface available to their customers without referencing our name), or they can select from among our modular functionalities, such as order routing, trade reporting or clearing on specific products or exchanges to offer their customers a comprehensive range of services and products.

Our Company was founded on January 4, 2018. We have developed and deployed a series of platforms, including the ETN Counter Business System, the PTN Private Fund Investment Management System, the Personal Mobile Transaction Client System, the PC Transaction Client System, the Individual and Institutional Integrated Account Management System, and the Quantitative Investment Transaction Platform, which comprise a business chain that enables Chinese language speaking hedge funds, mutual funds, registered investment advisors, proprietary trading groups, and brokerage firms to engage in securities market transactions and settlements globally.

We conduct our business through and based on distinct yet integrated business systems designed to provide support for (i) Securities Dealers Trading System (securities registration and clearing, account management, risk management, quick trading and execution, and third party access middleware), (ii) Private Fund Investment Management System (multi-account management, fund valuation, risk management, quantitative trading access, liquidation and requisition management) and (iii) Mobile Transaction Individual Client System and PC Client System (Apple IOS, Android, PC, Web). We assist PRC-based financial institutions in taking part in the overseas securities trading markets by providing them with comprehensive Internet-based securities solutions. These PRC financial institutions, along with Hong Kong broker-dealer customers may “white label” our trading interface (i.e., put their logos on it, make our trading interface available to their customers without referencing our name, as if it were their in house product), or they can select services from among our modular functionalities, such as order routing, trade reporting or clearing on specific products or exchanges where they may not have up-to-date technology to offer their customers a comprehensive range of services and products. We also help Chinese language speaking hedge funds, mutual funds, proprietary trading groups to speed up their integration with the overseas market and offer them additional services, such as fund establishment, issuance, custody, transaction and settlement.

In 2019, our company added financial advisory and investment banking business line to the roster of services it offers to its customers. Under this new business line, the Company anticipates providing financial advising and investment banking services, including, among others, investments, restructuring, IPO and secondary offering guidance, and venture funding advice, for PRC-based small and medium-sized enterprises from various industries that seek access to the US capital markets. Specifically, the Company intends to assist its customers in financings and capital formation at different stages of their growth and development.

In 2020, our company used internally designed and built system with the US brokerage license and the Cayman fund management qualification to form a series of MOM funds, with the main goal of discovering small and medium-sized institutional investors and helping them set up the fund to issue securities fund products.

In 2021, our company applied for a license for dealing in securities, advising on securities and asset management in Hong Kong and continued to increase our sales force in the fund management services business, market data services business and broker-dealer business. In turn, our company reduce retail business gradually because of the Chinese government’s requirements for cross-border data security supervision.

Our System and Solutions

Securities Dealers Trading Support System

The Electric Trading Network Counter Management System (“ETN”) supports our institutional customers. The system consists of the following business modules:

| ● | Our account management system that provides customers with a highly adaptable multi-account management system that systematically manages multiple accounts, executes simultaneous transactions among the accounts and guarantees efficiency and fairness in transactions.

| ● | Our risk control system conducts comprehensive monitoring in the transaction execution process from initial position, decision-making to execution by setting the warning line and open line. It evaluates dynamic control of risks presented by scanning all asset units every 30 minutes. The system provides one-click opening and one-click query functions to facilitate operations by the risk control personnel, so that risks are controlled in a more timely and efficient manner. It supports multi-dimensional risk control and eliminates the transaction of highly risky stocks by setting up a stock pool in which such highly risky stocks are stored.

| ● | Our fast transaction system features in one-click booking, fast transaction and combined booking to rapidly and efficiently integrate the centralized transaction system to ensure efficiency and accuracy of transactions.

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Private Fund Investment Management System

The Private Fund Trading Network Management System (“PTN”) is an in-house developed system that supports institutional customers. The system consists of the following modules:

| ● | Our account management system - the PTN investment management system sets up account management functions such as risk control, clearing, accounting, reporting, and trading, etc. for fund operating and investment.

| ● | Our fund valuation system - this system provides a package of valuation services, including valuation validation, investment monitoring, and information disclosure, with general and grouped valuation options provided to users upon demands.

| ● | Our fund risk management platform - this system provides all-round risk control management for users in the entire process from transaction, compliance to risk control on three dimensions: transaction risk control, process risk control and risk control setting.

| ● | Our quantitative transaction access – this system provides the user with efficient and fast quantitative transaction access modes including the standardized API and customized H5, SDK, APP, PC, to ensure rapid development and operation.

Mobile Transaction Individual Client System and PC Client System - As a result of our internal research and development efforts and upgrades, we have developed a mobile application for business transaction and social networking for our broker-dealer customers, and an efficient and fast transaction-only PC client system for their individual investor customers. This system provides the end users with real time comprehensive market information (bid/ask price, volume, breaking news, etc.) access through dedicated cross-border lines. We utilize dedicated Sino-US cross-border lines to provide end users with high-speed and stable market data, help them to apply for market licenses, and provide integrated market information-related solutions to the users, who may choose to pay monthly or yearly. We also provide end users with testing and debugging services.

Our Financial Technology Solutions

One-stop broker technology system solution - we provide the following solutions to our broker customers:

| ● | modular website building, online account opening system.

| ● | modular PC-based trading clients and mobile APP trading clients for retail customers.

| ● | market data center to help them apply for exchange quotations.

| ● | ETN investment management system, backstage ERP system and commission clearing and settlement system.

| ● | assistance to deployment system and undertaking operation and maintenance services.

One-stop private fund investment management fund solution – for small and medium-sized private funds with a management scale of more than $1 million and less than $100 million, we provide the following one-stop establishment and investment trading solutions to assist with:

| ● | establishing private equity funds, registration, administration and management of such funds.

| ● | building PTN investment management system, deployment of investment transaction, fund management, risk control, ERP and other modules.

| ● | opening trading accounts, handling valuation, liquidation and investment redemptions.

| ● | marketing.

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Corporate History and Background

| ● | MMTEC, INC. –We formed MMTEC, INC., our BVI holding company on January 4, 2018.

| ● | MM Future Technology Limited – Our wholly-owned Hong Kong subsidiary, was incorporated on October 31, 2017.

| ● | Gujia (Beijing) Technology Co., Ltd – Our operating company in China and a wholly-owned subsidiary of MM Future Technology Limited.

| ● | Meimei Zhengtong (Beijing) Technology Co., Ltd., – A PRC incorporated entity (dissolved effective as of June 8, 2018).

| ● | MM Fund Services Limited – Our wholly-owned Cayman Islands subsidiary, which was incorporated on April 20, 2018 and dormant as of December 31, 2020.
| ● | MM Capital Management Limited – Our wholly-owned Cayman Islands subsidiary, was incorporated on May 28, 2018 and dormant as of December 31, 2020.
| ● | HC Securities (HK) Limited – Formerly known as MM Global Capital Limited, a wholly-owned Hong Kong subsidiary, was incorporated on March 15, 2019.
| ● | MM Fund SPC – MM Fund SPC was incorporated on August 8, 2018, as a wholly-owned subsidiary of MM Capital Management Limited.
| ● | MMBD Trading Limited – Our wholly-owned subsidiary of MMTEC, acquired in October 2019.
| ● | MM Global Securities, INC. – Our operating company in New York and a wholly-owned subsidiary of MMBD Trading Limited.
| ● | MMBD Investment Advisory Company Limited – Our wholly-owned subsidiary of MMTEC, acquired in March 2020.
| ● | Fundex SPC – Fundex SPC was incorporated on September 13, 2021, as a wholly-owned subsidiary of MM Capital Management Limited.

Gujia (Beijing) Technology Co., Ltd was established on June 9, 2015 under the laws of China with registered capital of RMB 10 million (approximately $1.51 million). Its original shareholders were Xiangdong Wen, who owned 75% and Peng Dong, which owned 25%. On January 29, 2016, Gujia increased its registered capital to RMB20.83 million (approximately $3.15 million). As result of the capital contribution, Xiangdong Wen decreased his equity ownership to 48%, Peng Dong decreased his equity ownership to 12%, added an individual shareholder Zhen Fan, who owned 40%. On June 6, 2016, Gujia increased its registered capital to RMB 26.04 million (approximately $3.94 million). As result of the capital contribution, Xiangdong Wen decreased his equity ownership to 38.4%, Peng Dong decreased his equity ownership to 9.6%, and Zhen Fan decreased his equity ownership to 32%. New shareholders Beijing Yiyi Angel Investment Management Co. Ltd. owned 6.7%, Zhoushan Xianhe Investment Partnership (Limited Partnership) owned 10% and Shanghai Lanhong Investment Management Center (Limited Partnership) owned 3.3%. On November 30, 2017, Peng Dong transferred its 9.6% equity ownership to Xiangdong Wen; Beijing Yiyi Angel Investment Management Co. Ltd. transferred its 6.7% equity ownership to Zhen Fan; Shanghai Lanhong Investment Management Center (Limited Partnership) transferred its 3.3% equity ownership to Zhen Fan, and Zhoushan Xianhe Investment Partnership (Limited Partnership) kept the same equity ownership as before. On January 29, 2018, Xiangdong Wen transferred his 48% equity ownership to MM Future Technology Limited, Zhen Fan transferred his 42% equity ownership to MM Future Technology Limited, Zhoushan Xianhe Investment Partnership (Limited Partnership) transferred its 10% equity ownership to MM Future Technology Limited. MM Future Technology Limited became the sole shareholder of Gujia (Beijing) Technology Co. Ltd.

Pursuant to the Securities Purchase Agreement dated as of April 25, 2019, the Company agreed to purchase the remaining 75.1% of outstanding securities of MMBD Trading Ltd., a British Virgin Islands company (“MMBD”). Prior to the consummation of this acquisition, (i) the Company held 24.9% of outstanding securities of MMBD, and (ii) each of Xiangdong Wen (the Chairman of the Board and Chief Executive Officer) and Zhen Fan (the former Chief Executive Officer) beneficially owned 37.55% of outstanding securities of MMBD, respectively. The Company has agreed to pay the aggregate purchase price of $185,000 for such securities to be equally divided between the two shareholders of MMBD. The acquisition closed on October 18, 2019, following the receipt by the Company of requisite corporate and regulatory approvals, including, without limitation, FINRA CMA application approval, and the Company’s Audit Committee’s review and approval of the terms and provisions of this transaction involving related parties. Following and as a result of this acquisition, MMBD has become a wholly-owned subsidiary of the Company.

Pursuant to the investment agreement dated as of March 23, 2020, the Company acquired all outstanding securities of MMBD Investment Advisory Company Limited (“MMBD Advisory”) for a consideration of $1,000, which was subsequently given up by the Hinman Au. Prior to this transaction, all outstanding securities of MMBD Advisory were owned by Hinman Au, a director, and 1.7% shareholder of the Company. MMBD Advisory was formed in January 2018 in the U.S. and is registered as an investment advisor firm under the laws of the State of New York on May 7, 2018. The firm intends to offer non-discretionary investment advisory services to individuals and advisory services to private fund managers.

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Industry and Market Background

Over the past several years, China has seen a steady increase in the rate of individual net worth and investment appetite for domestic and overseas equity investments, including an increase in investment demand of private equity funds.

There are two main channels which can currently be utilized by Chinese investors to invest in the U.S. securities markets:

Ways to invest from within the PRC:

| ● | Qualified Domestic Institutional Investor (“QDII”): this status allows domestic investors to invest in publicly trading securities on foreign securities markets (excluding venture capital and private equity funds securities) via certain fund management institutions, insurance companies, securities companies and other assets management institutions which have been approved by China Securities Regulatory Commission (“CSRC”). These entities, in turn, offer investment opportunities to individual investors to invest in overseas stocks and fixed return securities.
| ● | Qualified Domestic Limited Partner: this status allows qualified domestic limited partners to invest in overseas private funds and private equities. Only a few companies have obtained this status to date.
| ● | Qualified Domestic Investment Enterprise: this platform allows mainland PRC investors to tap into a wider variety of foreign asset classes compared to the QDII by accessing offshore private equity, hedge funds and real assets, in addition to listed equities and debt securities that are already covered by the existing QDII. This platform is generally viewed as broad in scope, administration and lacking regulatory clarity.
| ● | Outbound Direct Investment – Chinese companies headquartered in the Shanghai Free Trade Zone may conduct almost all equity investments via this platform as it is not subject to any investment quotas. However, this platform is ill-suited for small scale operations as it only contemplates investments by institutional/corporate investors, not individuals.
| ● | Qualified Domestic Individual Investor is a new investment channel promoted by the Chinese government. It is expected to give PRC based individual investors who have at least RMB1 million of net assets more freedom to invest their money in overseas assets. It is expected that the PRC investors will be able to put money directly into overseas shares, bonds, mutual funds, insurance products, financial derivatives and property through this initiative. It is also expected to allow them to make direct investments in companies through mergers and acquisitions. No official date has been given for the launch of the scheme as of yet.

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Ways to invest from outside of the PRC:

Many Chinese already have their assets in bank accounts outside China such as in Hong Kong, Singapore, Taiwan, U.S., or other countries. These investors may invest these funds in any available investment. We believe that these investors will benefit from a trading platform and service based in Mandarin Chinese.

Growth of Chinese private fund markets

There are several notable aspects of development of Chinese private fund industry in recent years:

| ● | Rapid rate of growth. According to Asset Management Association of China, by the end of December 2021, the number of registered private fund managers has reached 24,610, with a total dollar amount of RMB 19.76 trillion. The number of registered private funds has reached 124,117.

| ● | Substantial number of QDII funds under management and amount of QDII quota. As of the end of 2021, the number of funds has reached 174, with a total cumulative amount of $157.519 billion. Among them, fund companies in the securities category rank first among various institutions with a quota of US$84.58 billion, accounting for 54%.

Competition

The development of financial information technology and the emergence of Internet securities brokers, such as Tigerbroker and Futu Securities, through an innovative Internet product development model, have changed the experience of the Internet trading platforms, by optimizing the account opening process, improving the market response rate, and impacting the traditional retail brokers. Traditional brokers mainly rely on conventional financial system providers for solutions. Financial technology companies provide various financial transaction solutions for their customers, including financial transactions such as online trading, front desk transactions and backstage clearing systems, which charge different costs according to different technical solutions.

There are several types of entities that provide investment system support in the U.S. securities markets for domestic (PRC) brokers and private funds.

| ● | The traditional retail brokerage system development company in USA. At present, there are no U.S. securities technology suppliers specialized in providing services for the Chinese market, most of U.S. securities technology suppliers have focus on domestic market, and there is no entire indigenous overseas investment system suit for Chinese market.

| ● | The traditional retail brokerage system development company in Hong Kong. At present, there are four mainstream technology suppliers in Hong Kong, which are Hundsun technology (HongKong) Inc., Ayers Solutions Limited, Ebroker Systems LTD and iAsia Online Systems Limited. Among these, Hundsun technology has a shareholding in Ayers Solutions Limited. Hundsun and iAsia are public companies.

| ● | The traditional private funds management system development company. Most of the large private funds use Bloomberg system, but we focus on the private equity funds with assets management amount between $1 million to $200 million, our main competitor in this field is Hundsun Technologies.

For the private funds’ administrator service, there are two types of companies that provide the service:

| ● | Traditional Hong Kong securities dealers, including Galaxy Securities (Hong Kong), Haitong International Securities, CITIC International Securities, BOC International, Guosen Securities (Hong Kong), engage in trades of Hong Kong as well as U.S. securities. These dealers mainly conduct their business through offline business departments of domestic (PRC) dealers. These dealers generally buy a system or use the U.S. broker system, offer a total solution for the private funds.

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| ● | The traditional private funds fund administrator service, including Apex Fund Services, Citco Fund Services, etc.

The Hong Kong market mainly relies on the following four securities system development service companies providing services for traditional securities firms and financial institutions: Hundsun.com Co., Limited, Ayers Solutions Limited, eBroker Systems Limited, and iAsia Online Systems Limited:

| ● | Hundsun.com Co., Limited is a Hong Kong holding subsidiary of Hundsun Technologies Inc., located in Hong Kong, mainly providing integrated accounts, securities and futures solutions for the Hong Kong financial industry.

| ● | Ayers Solutions Limited is a member of the Shanghai DZH Group. Ayers was incorporated in 2001 and specialized in developing securities and futures trading systems and settlement system for local and global financial institutions. Our company has developed a comprehensive system that supports trading in multi-market, multi-currency, feature-rich sets of tools in an integrated platform with flexible application settings. Ayers has built an extensive network of global exchange connectivity, risk management solutions and API and FIX technology support. Ayers also specializes in providing trading systems and settlement system solutions for securities companies and futures companies in Hong Kong and its surrounding countries and regions.

| ● | iAsia Online Systems Limited is a financial software developer that supplies flexible and cost-effective applications, ranging from online trading, front-end trading and back-office settlement systems for various financial products to retail solutions. This company offers a wide range of financial products including securities, futures, commodities, options, unit trust, saving plan, leveraged FX and bullion systems. iAsia systems handle transaction settlement, monitor risk exposure, offer front end trading and inquiry to its users. All products are being used by market participants or financial houses.

| ● | eBroker Systems Limited is a financial technology solution provider focusing on the provision of financial software solutions services to financial institutions. Its solutions are engineered to perform a variety of functions for both front office and back office.

In addition to the above-referenced companies, we compete with the following entities for providing services to the private equity/fund industry:

| ● | OP Investment Management Ltd. is a leading asset management company based in Hong Kong, and a member of the Oriental Patron Financial Group. Our company manages both global and Asian-based fund vehicles with expertise across every major regional market from China, Korea, India to the Middle East. OPIM is a fully licensed holder of Hong Kong SFC Type 4 & Type 9 licenses.

| ● | AssetMark Financial Holdings, Inc. is a U.S. turnkey asset management platform, purchased by a Chinese listed brokerage. It has provided professional and serial investment solutions to U.S. investment advisers over the past 20 years. As of March 31, 2016, the total assets under management on the AssetMark platform were about $28.5 billion, serving more than 6,700 investment advisers and over 87,000 investors.

Our Strategies

Our key market strategies include:

| ● | Providing free, flexible and open securities technology services - we provide one-stop integrated solutions to small and medium-sized broker customers, by replacing a technical fee model with a free technical system featuring open system underlay access, standardized access interface and module products. The purpose is to build a more open technical platform that provides a wide variety of financial products and more open technical services for Internet securities.

Specifically, as we face increased competition, we also innovate when it comes to attracting new users. The general approach is to, by use of free platform, attract traffic and customers early on in the process, and then establish and maintain an environment connecting various users for which we can then charge our users. In this effort, we:

| ● | Aim, when we compete with traditional technology developers, to provide free technical base platforms for securities business, which meet the traditional securities business in terms of functionality, security, etc., so as to attract more traditional securities companies to switch to our technical products,

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| ● | Develop better, more innovative products and offer functionalities and user experience beyond of what traditional technology developers may offer; we accomplish that by providing incentive to switch to our services for free,

| ● | Provide, in addition to our basic set of technical products, value-added technical products, such as intelligent investment customers service, intelligent trading service, AI user analysis tools, etc., to help securities companies expand their business lines. We intend to charge for these product offerings in the future, but only if our users fully or partially use these free products first,

| ● | Provide fund products, intelligent investment products or other types of financial products through MM Fund Services Limited. We intend to become a channel distributor to help small and medium-sized securities firms to provide competitive financial products on free platforms. As more securities brokers use our free products, we will put these products directly in the securities business platform for free as a part of our standard module. As wholesalers of these products, we anticipate deriving revenue from this approach in the future, and

| ● | Establish an internal system where are able to connect different securities firms from one technical platform, so that their structured financial products and fixed income products can be circulated on one (our) platform.

Many small and medium-sized brokers do not have the capacity for research and development and are unwilling to bear high development costs. A licensed broker wishing to develop its own products and to builds a comprehensive research and development team will need teams of engineers, developers of IOS and Android applications, of PC applications, and websites and online account set-up system. Most small- and medium-sized brokers are reluctant to invest in incur such costs.

We (i) make most technical systems free, open part of the core code, in an effort to build a more open technical platform to help admit more small and medium sized brokers; (ii) modularize products to help small and medium-sized broker customers to carry out development, lower the technical threshold, and facilitate customization; (iii) help small and medium-sized broker customers to deploy the system within one to four weeks to commence business immediately and provide system security solutions and post-maintenance; (iv) provide technical support in Chinese by offering solutions for technical interface with major U.S. exchanges and clearing banks; (v) deliver rapidly iterative products by providing multiple modules of personalized portfolio solutions and a better Internet experience for small and medium-sized broker customers; and (vi) use cloud technology to provide services with more varieties of financial products, to help small and medium-sized brokers to gain competitive advantages in attracting their customers.

Focus on serving small and medium sized private equity funds by lowering the setting up threshold, we believe that we can help our fund customers overcome the entry barrier, and make it possible to bring such funds to overseas stock markets. According to our analysis, we believe that small and medium sized private equity funds with assets under management (“AUM”) between $1 million and $100 million, especially those with AUM between $2 million and $20 million, will become the bulk of our customers.

Large equity funds tend to set up their accounts through well-known brokers, and choose the services of fund administrators that are highly ranked across the globe. In contrast, small and medium sized private equity funds, especially those at the early stage with assets under management below $20 million, are faced with the following challenges: (i) limited capacity for fundraising at the early stage, typically small AUM of initial fund; (ii) small AUM equity funds makes it hard to cover the initial cost for attorneys and administrators; (iii) unfamiliar with the process for setting up overseas equity funds, lack of related laws and regulations, difficult to open bank accounts and brokerage trading accounts; (iv) loss of oversea growth opportunity. Many fund managers’ domestic customers have already had their own personal investments overseas. It will be easier for these fund managers to attract their investors’ overseas assets and invest in their oversea funds; (v) need tools for marketing and promotion, including brand promotion, as well as further information about overseas market; and vi) failure of overseas investment platform and system support to meet their needs, especially the needs of financial accounting and risk management.

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For such funds, we will provide (i) a package solution will optimize the set-up process and reduces the set-up cost to help them to invest in overseas markets; (ii) personal service to help them to solve issues related to the regulations and supervision of overseas funds and account set-up; (iii) completely Chinese language based PTN investment management system, free of charge to provide fund valuation, redemption management, and risk-control financial management system, free estimate of fund value, and a system for risk control and financial management that is customized for China’s private equity funds; (iv) assistance in brand promotion and marketing, by providing additional market information, and organizing industry gatherings to promote their development; and (v) providing quantitative interface and open data to meet needs for access to small scale funds by localizing the U.S. financial industry standards so that more local quantitative funds can be interfaced with the U.S. stock market according to native technical standards.

| ● | Minimize technical barriers to securities trading – We aim to assist small- to medium-sized securities dealers, online financial management enterprises, Internet traffic platforms and individuals in their efforts to expand their respective businesses and lower the threshold for participation of the traditional securities industry.

| ● | Utilize cloud computing technologies, open financial platforms, and more diversified financial product - We help small and medium- sized securities brokerage firms build system on the cloud, we focus on providing backstage support for institutional clients, and develop a wide variety of technical and financial products for them.

| ● | Support PRC private equity funds to participate in overseas markets –We strive to minimize and possibly eliminate the cost of setting up the private equity funds, allowing our customers to use and rely on our technologies. We focus on small private funds with assets under management ranging from $1 million to $200 million.

| ● | Focus on the Chinese market, and all the markets that use Chinese as the native language- The U.S. securities market is the largest securities market in the world. We want to rely on financial technology to lower transaction threshold for all Chinese speaking investors to invest in U.S. securities market, and make it more convenient for them to invest.

Our Competitive Strengths

We believe that the following competitive strengths distinguish us from our competitors:

| ● | Product advantages and technology accumulation – by means of our technological advantages, better Internet experience and one-stop securities dealers solutions, we simplify the process of overseas investment transactions and lower the threshold of securities trading, making it easier for Chinese investors to get involved in global investment. We also provide (i) a complete product line from ENT, PTN to mobile end trading platform and PC-side trading platform, thus covering most of the operating systems required by broker-dealers and private equity funds; (ii) a stable market, trading system tested and relied for a period of time; (iii) rapid product development and iteration - we can develop products which meet the customer’s latest demands; and (iv) understanding of financial markets and information technology development.
| ● | Sound marketing strategies - We follow the same rules for both brokerage firms and private equity customers: we provide free technical systems yet charge a fee for post financial or additional premium services to encourage more brokers-dealers and private equity funds to use our technical products and services. (i) through free technical system services that change the delivery mode of the securities industry developers, we reduce the operating costs of small and medium-sized brokerage firms, (ii) with more choices for small and medium-sized brokerage firms, to help their customers respond to changes in the Internet, we provide better tools and platforms that enable customers choose and customize their services, and (iii) by helping private equity funds overcome the set-up threshold issue, we enable more private equity funds step into the overseas stock market and grow with them.

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| ● | Innovative and open Internet idea - By using cloud technology, we help traditional financial institutions cope with the changes in traditional online securities trading. Based on cloud technology that helps more brokerage firms minimize the access threshold of technology, we stick to the user-centered product development model, and use faster deployment systems to meet customers’ demand and reduce their technical service costs. We maintain an open technical environment and provide an open platform for all users who want to access overseas investment transactions. We are also able to provide customized product service for users. We believe that the new generation of Chinese investors has a more sophisticated understanding of financial transactions, which requires a better user experience and more innovative products and service.

We will (i) be more open minded, make accessible most of the bottom core code, make accessible the bottom system interface, and complete the most challenging task so as to help customers use simple tools for development on our platform; (ii) quickly develop and update products so as to be in better preparation for changes in the online securities trading industry; (iii) provide more tools for our customers to help them become business partners and help them grow.

| ● | A professional team with diversified backgrounds - Our team members are from Internet companies, financial enterprises and traditional securities information system development companies. They are familiar with the financial market, and have expertise in the development of securities information technology. Members of this diverse backgrounds teamwork in their respective areas with efficiency and professionalism.
| ● | Better ecology and environment - With the acquisition of MMBD Trading and MM Global in the United States, we are able to provide better services to non-U.S. small and medium-sized brokerage firms to access the U.S. market, and also to the small and medium-sized private equity funds with deeper understanding of their needs.
| ● | Market opportunities - Traditional financial markets rely more and more on information technology. In dealing with the overseas market, under the barrier of language, market mechanism and cultural background, we rely on technology to change the relationship between brokerage firms and traditional information technology developers. As the earliest participants in this model, we enjoy favorable market opportunities. At the same time, there has been an increasing demand for China’s small and medium-sized private equity funds to go overseas, as well as more Chinese investors investing outside of China. At the early stage development of this industry, we will actively participate in the development of industry service standards and service system, and make good use of this market opportunity.
| ● | Localized service - 24/7 customer service in complete Chinese language. From trading API document to technology support, we strive to create a more user-friendly environment for our customers. We also provide more pleasant user trading experience for Chinese customers. They will get more localized trading experience, without trial and error, and easier and more pleasant investment in overseas markets. Back on the Chinese market, we understand the rules of the United States. We also understand better the needs of Chinese investors. And we provide more localized private fund services and more financial products and services support. With the system support of MM Fund Services Limited and PTN, we will provide a more localized private fund administration service to our clients. We will respond to their request in a timely manner, being more attentive to their needs and requests.

Individual investors and private equity funds coming from China and Hong Kong markets are increasingly relying on financial systems developed by traditional system developing companies. Our competitive strengths are primarily in the following areas:

| ● | Reliance on our technological advantages, rich Internet experience and one-stop securities dealer solutions: We make overseas investment transactions more convenient by lowering the trading threshold, making it easier for Chinese investors to get involved in global investment. We also provide smoother user trading experience for Chinese customers. They will get more localized trading experience, without trial and error, becoming easier and smoother investing in overseas markets. Back on the Chinese market, we understand the rules of the United States, we also have a better understanding of needs of Chinese investors.

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| ● | More localized private equity fund services. Based on the system support from MM Fund Service Limited and PTN, we will provide more localized private fund administrator service for our clients.

| ● | Reducing the technical access threshold of the securities industry. Rely on cloud technology to help more brokerage firms to minimize the access threshold of technology. We insist in user-centered product development model, faster deployment systems to meet customers’ demand and reduce their technical service costs. We adhere to an open technical environment and provide an open platform for all users who want to access overseas investment transactions. We also provide customized product service for users. The new generation of Chinese investors has an updated understanding of the transactions, which requires a better user experience and more innovative products and service.

| ● | Localized user experience. 24/7 customer support in complete Chinese language service. From trading API document to technology support, we make our customers more competitive in trading space by providing service in their native language.

Marketing

We aim to offer these and other similarly situated financial services providers with a full spectrum of technical system solutions. Specifically, we intend to open an office in Hong Kong for such future customers and retain local sales force to promote our services in the market and increase our brand exposure. In addition, we intend to increase our sales and marketing teams in Shanghai and Beijing to offer our technical solutions to the PRC private fund industry participants. We also intend to hold conference, educational and other events to promote our brand recognition.

Research and Development

Our technology is critical to our operations. The following are some of our technology development milestones:

| ● | In October 2015, our Shanghai Branch was founded; the Shanghai Technical Research and Development Center started operation.
| ● | In December 2015, the ETN Counter Business System was launched for trial operation.
| ● | In August 2016, the PTN Private Fund Investment Management System was launched for operation.
| ● | In December 2016, the 4th version of the ETN Investment Management System was successfully employed. The Sino-US Special Line was completed and the Market and Quantitative Transaction Platform started operation.

We intend to maintain the research and development input in product design at no less than 35% of our company’s total input, and an incentive mechanism for research and development personnel should be formulated to achieve breakthrough in product design stability and security and personalization.

Employees

Our principal offices are located in Beijing, China; we also have a research and development center in Shanghai, China, and we also operate a broker-dealer in New York City. As of April 22, 2022, we employed 59 people on a full-time basis, comprised of 8 employees in management, 28 employees in sales and marketing, 15 employees in research and development, and 8 employees in administration.

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Intellectual Property Rights

We rely on our technology copyright to protect our domestic business interests and ensure our competitive position in our industry. We have placed a high priority on the management of our intellectual property. Some products that are material to our operating results incorporate technology copyright. Although technology copyright is important to the continued success of our products, we do not believe that our business, as a whole, is dependent on, or that its profitability would be materially affected by the revocation, termination, expiration or infringement upon any particular patent or copyright. We have applied for software copyright protection in China covering our software technology. We applied to National Copyright Administration of the P.R.C. for 12 software copyrights, which was approved on June 28, 2018 and March 14, 2019.

Properties

Our headquarters is located at AF, 16/F, Block B, Jiacheng Plaza, 18 Xiaguangli, Chaoyang District, Beijing. Our research and development center is located in Shanghai. All of the facilities are leased. We believe our facilities are adequate for our current needs and we do not believe we will encounter any difficulty in extending the terms of the leases by which we occupy our respective premises. A summary description of our facilities locations follows:

Office |  | Address |  | Rental Term |  | Space
Headquarters |  | AF, 16/F, Block B, Jiacheng Plaza, 18 Xiaguangli, Chaoyang District, Beijing 100027 |  | October 10, 2019 – November 30, 2022 |  | 6920.66. sq. ft.
New York Center |  | 110 Wall Street, Unit 5070, New York, NY 10005 |  | August 1, 2021 – July 31, 2022 |  | Approximately 200 sq. ft.
Beijing Marketing Center |  | Room 1903, Block A, Yuanyangxinganxian Building, Xiaguangli, Chaoyang District, Beijing 100027 |  | September 9, 2021 – September 8, 2022 |  | 1674.33 sq. Ft.
Shenzhen Marketing Center |  | Room 701, Building 2, Qianhai Danhua Garden, Shekou, Nanshan District, Shenzhen, Guangdong |  | December 1, 2021 – November 30, 2022 |  | 2 sq. Ft.
Hong Kong Center |  | Room 2302, 23/F, FWD Financial Center, 308 DES Voeux Road Central, Hong Kong |  | October 25, 2021 – October 24, 2024 |  | 969 sq. Ft.
Chengdu Center |  | 14/F, East tower, Lingdi Center, 3 Xiyu Street, Qingyang District, Chengdu, Sichuan |  | April 6, 2022 – September 30, 2022 |  | 2 sq. Ft.
Shanghai Center |  | 3/A, Jiali Building, 1155 Fandian Street, Pudong District, Shanghai |  | March 8, 2022 – April 30, 2022 |  | 2 sq. Ft.

Legal Proceedings

In the normal course of business, MM Global is engaged in various trading and brokerage activities on a principal and agency basis through a clearing broker. As a regulated FINRA broker-dealer MM Global is subject to regulatory trading inquiries and investigations to determine whether any violations of federal securities or FINRA rules may have occurred. As such, MM Global has responded to FINRA inquires and continues to be subject to an open matter. The open matter could result in censures fines or other sanctions. The potential loss on contingent liability is probable but the amount of the loss cannot be reasonably estimated by the Company. Consequently, no accruals have been recorded with respect to the FINRA inquiries as of December 31, 2021.

Other than MM Global, we are currently not involved in any legal proceedings; nor are we aware of any claims that could have a material adverse effect on our business, financial condition, results of operations or cash flows.

Government Regulation

Regulation of Foreign Currency Exchange and Dividend Distribution

Foreign Currency Exchange. The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations (1996), as amended on August 5, 2008, the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996) and the Interim Measures on Administration on Foreign Debts (2003). Under these regulations, Renminbi are freely convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for most capital account items, such as direct investment, loans, repatriation of investment and investment in securities outside China, unless the prior approval of SAFE or its local counterparts is obtained. In addition, any loans to an operating subsidiary in China that is a foreign invested enterprise, cannot, in the aggregate, exceed the difference between its respective approved total investment amount and its respective approved registered capital amount. Furthermore, any foreign loan must be registered with SAFE or its local counterparts for the loan to be effective. Any increase in the amount of the total investment and registered capital must be approved by the MOFCOM or its local counterpart. We may not be able to obtain these government approvals or registrations on a timely basis, if at all, which could result in a delay in the process of making these loans.

The dividends paid by the subsidiary to its shareholder are deemed shareholder income and are taxable in China. Pursuant to the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), foreign-invested enterprises in China may purchase or remit foreign exchange, subject to a cap approved by SAFE, for settlement of current account transactions without the approval of SAFE. Foreign exchange transactions under the capital account are still subject to limitations and require approvals from, or registration with, SAFE and other relevant Chinese governmental authorities.

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Dividend Distribution. The principal regulations governing the distribution of dividends by foreign holding companies include the Company Law of China (1993), as amended in 2013, the Foreign Investment Enterprise Law (1986), as amended in 2000, and the Administrative Rules under the Foreign Investment Enterprise Law (1990), as amended respectively in 2001 and 2014.

Under these regulations, wholly foreign-owned investment enterprises in China may pay dividends only out of their retained profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, wholly foreign-owned investment enterprises in China are required to allocate at least 10% of their respective retained profits each year, if any, to fund certain reserve funds unless these reserves have reached 50% of the registered capital of the enterprises. These reserves are not distributable as cash dividends, and a wholly foreign-owned enterprise is not permitted to distribute any profits until losses from prior fiscal years have been offset.

Circular 37. On July 4, 2014, SAFE issued Circular 37, which became effective as of July 4, 2014. According to Circular 37, Chinese residents shall apply to SAFE and its branches for going through the procedures for foreign exchange registration of overseas investments before contributing the domestic assets or interests to a SPV. An amendment to registration or filing with the local SAFE branch by such Chinese resident is also required if the registered overseas SPV’s basic information such as domestic individual resident shareholder, name, operating period, or major events such as domestic individual resident capital increase, capital reduction, share transfer or exchange, merger or division has changed. Although the change of overseas funds raised by overseas SPV, overseas investment exercised by overseas SPV and non-cross-border capital flow are not included in Circular 37, we may be required to make foreign exchange registration if required by SAFE and its branches.

Moreover, Circular 37 applies retroactively. As a result, Chinese residents who have contributed domestic assets or interests to a SPV, but failed to complete foreign exchange registration of overseas investments as required prior to implementation of Circular 37, are required to send a letter to SAFE and its branches for explanation. Under the relevant rules, failure to comply with the registration procedures set forth in Circular 37 may result in receiving a warning from SAFE and its branches, and may result in a fine of up to RMB 300,000 for an organization or up to RMB 50,000 for an individual. In the event of failing to register, if capital outflow occurred, a fine up to 30% of the illegal amount may be assessed.

Chinese residents who control our Company are required to register with SAFE in connection with their investments in us. If we use our equity interest to purchase the assets or equity interest of a Chinese company owned by Chinese residents in the future, such Chinese residents will be subject to the registration procedures described in Circular 37.

| C. | Organizational Structure

The following chart illustrates MMTec’s organizational structure as of April 22, 2022:

| D. | Property, Plant and Equipment

For a listing of our properties, see “Item 4.B. Business Overview - Properties.”

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis of our financial condition and results of operations for the years ended December 31, 2021, 2020 and 2019 should be read in conjunction with our consolidated financial statements and related notes to those consolidated financial statements that are included elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this report.

Unless otherwise indicated, references to the “Company”, “us” or “we” refer to MMTEC, Inc. and its consolidated subsidiaries.

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Special Note Regarding Forward-looking Statements

All statements other than statements of historical fact included in this report including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of a number of factors, including those set forth under the risk factors and business sections in this report.

| A. | Operating Results

Overview

Our Company develops and deploys a series of platforms, including the ETN Counter Business System, the PTN Private Fund Investment Management System, the Personal Mobile Transaction Client System, the PC Transaction Client System, the Individual and Institutional Integrated Account Management System, and the Quantitative Investment Transaction Platform, which comprise a business chain that enables Chinese language speaking hedge funds, mutual funds, registered investment advisors, proprietary trading groups, and brokerage firms to engage in securities market transactions and settlements globally.

In 2019, our company added financial advisory and investment banking business line to the roster of services it offers to its customers. Under this new business line, the Company anticipates providing financial advising and investment banking services, including, among others, investments, restructuring, IPO and secondary offering guidance, and venture funding advice, for PRC-based small and medium-sized enterprises from various industries that seek access to the US capital markets. Specifically, the Company intends to assist its customers in financings and capital formation at different stages of their growth and development.

Our company used internally designed and built system with the US brokerage license and the Cayman fund management qualification to form a series of MOM funds, with the main goal of discovering small and medium-sized institutional investors and helping them set up the fund to issue securities fund products.

The value of the Renminbi (“RMB”), the main currency used in China, fluctuates and is affected by, among other things, changes in China’s political and economic conditions. The conversion of RMB into foreign currencies such as the U.S. dollar have generally been based on rates set by the People’s Bank of China, which are set daily based on the previous day’s interbank foreign exchange market rates and current exchange rates on the world financial markets.

Basis of Presentation

The accompanying consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and with the rules and regulations of the U.S. Securities and Exchange Commission for financial information.

The Company’s consolidated financial statements include the accounts of MMTEC and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Comparison of Results of Operations for the Years Ended December 31, 2021 and 2020.

Revenue

The following table sets forth the components of our net revenues by amounts and percentages of our total net revenues for the periods presented:

|  | For the Year Ended December 31, |
|  | 2021 |  |  | 2020 |
|  | US$ |  |  | % |  |  | US$ |  |  | % |
Net revenues: |  |  |  |  |  |  |  |  |  |  |  |
Market data services |  |  | 107,184 |  |  |  | 16.4 | % |  |  | 73,524 |  |  |  | 9.9 | %
Investor relations management services |  |  | - |  |  |  | - | % |  |  | 21,113 |  |  |  | 2.8 | %
Commissions |  |  | 390,569 |  |  |  | 59.8 | % |  |  | 643,145 |  |  |  | 86.7 | %
Fund management services |  |  | 153,494 |  |  |  | 23.5 | % |  |  | - |  |  |  | - | %
Other revenue |  |  | 1,789 |  |  |  | 0.3 | % |  |  | 4,343 |  |  |  | 0.6 | %
Total net revenues |  |  | 653,036 |  |  |  | 100.0 | % |  |  | 742,125 |  |  |  | 100.0 | %

For the years ended December 31, 2021 and 2020, we had revenue from performing market data services for our customer of $107,184 and $73,524, respectively. As a result of strategy adjustment, our Company had investor relations management services revenue of nil and $21,113 for the years ended December 31, 2021 and 2020 respectively. MMBD Advisory is the administrator and investment advisor of MM Fund Growth SP. MM Fund Growth SP will pay the investment advisor a management fee, out of the assets of the Portfolio. We had revenue from fund management services of MM Fund Growth SP of $153,494 and nil for the years ended December 31, 2021 and 2020. As a result of our acquisition of MMBD Trading, which has a fully owned subsidiary, MM Global, that engages in a single line of business as a securities broker-dealer, our Company also had commissions revenue of $390,569 and $643,145, and other related revenue of $1,789 and $4,343, for the years ended December 31, 2021 and 2020 respectively.

Cost of Revenue

Cost of revenue consists primarily of internal labor cost and related benefits, and other overhead costs that are directly attributable to services provided.

For the years ended December 31, 2021 and 2020, cost of revenue was $141,302 and $7,405, respectively.

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Gross Profit and Gross Margin

Our gross profit was $511,734 for the year ended December 31, 2021, representing gross margin of 78.4%. Gross profit was $734,720 for the year ended December 31, 2020, representing gross margin of 99.0%. Our gross margin decreased was primarily attributable to the decrease in commissions revenue and the increase in labor costs.

Operating Expenses

During the years ended December 31, 2021 and 2020, operating expenses included selling and marketing, payroll and related benefits, professional fees, and other general and administrative expenses.

Selling and Marketing Expenses

Selling and marketing expenses totaled $303,079 for the year ended December 31, 2021, as compared to $244,163 for the year ended December 31, 2020, an increase of $58,916 or 24.1%. During the year ended December 31, 2021, the increase was primarily attributable to the increase in selling staff.

Payroll and Related Benefits

Payroll and related benefits totaled $2,446,019 for the year ended December 31, 2021, as compared to $1,024,565 for the year ended December 31, 2020, an increase of $1,421,454 or 138.7%. As a result of the expansion of the Company's overall business scale, the Company increased the size of and level of spending on support team for investment banking business, fund management services business and market data services business.

Professional Fees

For the years ended December 31, 2021 and 2020, Professional Fees consisted of the following:

|  | Year Ended |  |  | Year Ended |
|  | December 31, |  |  | December 31, |
|  | 2021 |  |  | 2020 |
Audit fees |  | $ | 231,120 |  |  | $ | 260,000 |
Legal fees |  |  | 479,126 |  |  |  | 91,106 |
Financial consulting fees |  |  | 664,916 |  |  |  | 1,005,000 |
Industry and consulting fees |  |  | - |  |  |  | 111,667 |
Advisory fees |  |  | 319,820 |  |  |  | 46,667 |
Others |  |  | 388,037 |  |  |  | 229,955 |
|  | $ | 2,083,019 |  |  | $ | 1,744,395 |

| ● | For the year ended December 31, 2021, Audit fee decreased by $28,880, or 11.1%, as compared to the year ended December 31, 2020. The decrease was primarily attributable to the decreasing audit fee charged by MaloneBailey, LLP.

| ● | For the year ended December 31, 2021, Legal fee increased by $388,020, or 425.9%. The increase was primarily attributable to the legal fee of legal service for offering shares, application license to SFC, establishment of new fund portfolio, Fundex SPC, in Cayman, fund management for MM Fund Growth SP and responding to FINRA’s inquiries and investigation in 2021.

| ● | For the year ended December 31, 2021, Financial consulting fee decreased by $340,084, or 33.8%. The decrease was primarily attributable to the fact that the company paid 750,000 shares to Tony Wayne Network Technology Co., Limited as compensation of a consulting program based in Hong Kong in 2020.

| ● | For the year ended December 31, 2021, Industry and consulting fees decreased by $111,667, or 100.0%. The decrease was primarily attributable to less demand for specific industries consulting in 2021.

| ● | For the year ended December 31, 2021, Advisory fees increased by $273,153, or 585.3%. The increase was primarily attributable to the fact that the company paid 426,200 shares to Fortune Fintech Limited as compensation of an investor relationship consulting program in 2021.

| ● | For the year ended December 31, 2021, other miscellaneous items increased by $158,082, or 68.7%. The increase was primarily attributable to our business expansion.

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Other General and Administrative Expenses

For the years ended December 31, 2021 and 2020, other general and administrative expenses consisted of the following:

|  | Year Ended |  |  | Year Ended |
|  | December 31, |  |  | December 31, |
|  | 2021 |  |  | 2020 |
Rent and related utilities |  | $ | 398,449 |  |  | $ | 381,611 |
ETC clearing cost |  |  | 153,179 |  |  |  | 143,908 |
Technical service fee |  |  | 279,859 |  |  |  | - |
Referral fee |  |  | 120,000 |  |  |  | - |
NASDAQ application and listing fee |  |  | 32,672 |  |  |  | 56,500 |
Travel and entertainment |  |  | 109,337 |  |  |  | 9,389 |
ATS execution fee |  |  | 55,524 |  |  |  | 79,648 |
Fund SPC service fee |  |  | 83,964 |  |  |  | 15,043 |
Training fee |  |  | 84,833 |  |  |  | - |
Bad debt expense |  |  | 550,000 |  |  |  | - |
Others |  |  | 294,984 |  |  |  | 219,649 |
|  | $ | 2,162,801 |  |  | $ | 905,748 |

| ● | For the year ended December 31, 2021, rent and related utilities increased by $16,838, or 4.4%, as compared to the year ended December 31, 2020. The increase was primarily attributable to the increase in our office space resulting from our business expansion.

| ● | For the year ended December 31, 2021, ETC clearing cost for broke dealer increased by $9,271, or 6.4%, as compared to the year ended December 31, 2020. The increase was primarily attributable to the increasing clearing fee charged by ETC.

| ● | For the year ended December 31, 2021, we incurred technical service fee of $279,859 and did not incur corresponding expenses in the year ended December 31, 2020. The increase was primarily attributable to demand for technical service in 2021.

| ● | For the year ended December 31, 2021, referral fee increased by $120,000, and did not incur corresponding expenses in the year ended December 31, 2020. The increase was primarily attributable to referral of investor and promotion of financing related to the private placement.

| ● | For the year ended December 31, 2021, NASDAQ application and listing fees decreased by $23,828, or 42.2%, as compared to the year ended December 31, 2020. The NASDAQ application and listing fees decrease was primarily attributable to decreasing listing fee charged by NASDAQ.

| ● | For the year ended December 31, 2021, travel and entertainment expenses increased by $99,948, or 1,064.5%, as compared to the year ended December 31, 2020, which was mainly attributable to reduced impact of COVID-19 on travel and business expansion requirement of investing business line and fund management business line.

| ● | For the year ended December 31, 2021, ATS execution fee for broker-dealer decreased by $24,124, or 30.3%, as compared to the year ended December 31, 2020. The decrease was primarily attributable to broker-dealer MM Global trading activity fell in 2021.

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| ● | For the year ended December 31, 2021, Fund SPC service fee increased by $68,921, or 458.2%, as compared to the year ended December 31, 2020. We managed MOM Fund - MM Fund Growth SP and formed a new fund Fundex SPC in the year ended December 31, 2021.

| ● | For the year ended December 31, 2021, training fee increased by $84,833, and did not incur corresponding expenses in the year ended December 31, 2020, which was mainly attributable to a training program for employee in 2021.
| ● | For the year ended December 31, 2021, bad debt expense increased by $550,000, and did not incur corresponding expenses in the year ended December 31, 2020. The Company fully recorded allowance for bad debts of loan receivable from HuaMei Trading Management Limited due to its poor performance.
| ● | Other general and administrative expenses were primarily comprised of office supplies, internet service fee, and depreciation. For the year ended December 31, 2021, other general and administrative expenses increased by $75,335, or 34.3%, as compared to the year ended December 31, 2020, which was mainly due to our business expansion.

Loss from Operations

As a result of the foregoing, for the year ended December 31, 2021, loss from operations amounted to $6,483,184, as compared to $3,184,151 for the year ended December 31, 2020, an increase of $3,299,033, or 103.6%.

Other Income (Expense)

Other income (expense) mainly includes interest income from bank deposits, other income (expense), government subsidies, foreign currency transaction loss, loss on equity method investment and impairment loss on long-term investment. Other expense, net, totaled $567,571 for the year ended December 31, 2021, as compared to other income of $2,555 for the year ended December 31, 2020, a change of $570,126, which was mainly attributable to a decrease in interest income from bank deposits of $28,820, a decrease in loss on equity method investment of $46,105, an increase on impairment loss on long-term investment of $585,333, an increase in foreign currency transaction loss of $3,206, and an increase in other income of $1,128.

Income Taxes

We did not have any income taxes expense for the years ended December 31, 2021 and 2020 since we did not generate any taxable income in these two fiscal years.

Net Loss

As a result of the factors described above, our net loss was $7,050,755, or $0.29 per share (basic and diluted), for the year ended December 31, 2021. Our net loss was $3,181,596, or $0.16 per share (basic and diluted), for the year ended December 31, 2020.

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Foreign Currency Translation Adjustment

Our reporting currency is the U.S. dollar. The functional currency of our parent company - MMTEC, MM Future, MM Fund, MM Capital, HC Securities, MMBD Trading, MM Global, MMBD Advisory, Fundex SPC and MM SPC, is the U.S. dollar and the functional currency of Gujia, is the Chinese Renminbi (“RMB”). The financial statements of our subsidiaries whose functional currency is the RMB are translated to U.S. dollars using period end rates of exchange for assets and liabilities, average rate of exchange for revenue and expenses and cash flows, and at historical exchange rates for equity. As a result of foreign currency translations, which are a non-cash adjustment, we reported a foreign currency translation gain of $45,115 and $117,687 for the years ended December 31, 2021 and 2020 respectively. This non-cash gain had the effect of decreasing our reported comprehensive loss.

Comprehensive Loss

As a result of our foreign currency translation adjustment, we had comprehensive loss of $7,005,640 and $3,063,909 for the years ended December 31, 2021 and 2020, respectively.

Comparison of Results of Operations for the Years Ended December 31, 2020 and 2019

For a discussion of our results of operations for the fiscal year ended December 31, 2020 compared with the fiscal year ended December 31, 2019, see “Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS — RESULTS OF OPERATIONS— Comparison of Results of Operations for the Years Ended December 31, 2020 and 2019” of our annual report on Form 20-F for the fiscal year ended December 31, 2020, filed with the SEC on April 23, 2021.

Foreign Currency Exchange Rate Risk

Our operations are in China. Thus, our revenues and operating results may be impacted by exchange rate fluctuations between RMB and US dollars. For the years ended December 31, 2021, 2020 and 2019, we had unrealized foreign currency translation loss of approximately $39,000, unrealized foreign currency translation gain of approximately $118,000 and unrealized foreign currency translation loss of approximately $30,000, respectively, because of changes in the exchange rate.

Inflation

The effect of inflation on our revenue and operating results was not significant.

| B. | Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis. As of December 31, 2021 and 2020, we had cash balance of approximately $11,206,000 and $1,426,000, respectively. Cash balance increased by $9,780,000, or 685.8%, as compared to December 31, 2020. The increase was primarily attributable to our registered direct offering and private placement in 2021. A portion of these funds are kept in financial institutions located in China.

Under applicable PRC regulations, foreign invested enterprises, or FIEs, in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, a foreign invested enterprise in China is required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its general reserves until the cumulative amount of such reserves reach 50% of its registered capital. These reserves are not distributable as cash dividends.

In addition, a majority of our businesses and assets are denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts. These currency exchange control procedures imposed by the PRC government authorities may restrict the ability of our PRC subsidiary to transfer its net assets to the Parent Company through loans, advances or cash dividends.

The current PRC Enterprise Income Tax (“EIT”) Law and its implementing rules generally provide that a 10% withholding tax applies to China-sourced income derived by non-resident enterprises for PRC enterprise income tax purposes unless the jurisdiction of incorporation of such enterprises’ shareholder has a tax treaty with China that provides for a different withholding arrangement.

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The following table sets forth a summary of changes in our working capital from December 31, 2020 to December 31, 2021:

|  |  |  |  |  |  |  | December 31, 2020 to December 31, 2021 |
|  | December 31, 2021 |  |  | December 31, 2020 |  |  | Change |  |  | Percentage Change |
Working capital: |  |  |  |  |  |  |  |  |  |  |  |
Total current assets |  | $ | 13,848,423 |  |  | $ | 2,253,141 |  |  | $ | 11,595,282 |  |  |  | 514.6 | %
Total current liabilities |  |  | 1,128,232 |  |  |  | 658,029 |  |  |  | 470,203 |  |  |  | 71.5 | %
Working capital |  | $ | 12,720,191 |  |  | $ | 1,595,112 |  |  | $ | 11,125,079 |  |  |  | 697.4 | %

Our working capital increased by $11,125,079 to working capital of $12,720,191 as of December 31, 2021 from working capital of $1,595,112 as of December 31, 2020. The increase in working capital was primarily attributable to an increase in cash and cash equivalents of approximately $9,780,000, an increase in accounts receivable of approximately $148,000, an increase in loan receivable of approximately $2,100,000, an increase in prepaid expenses and other current assets of approximately $57,000, a decrease in due to related parties of approximately $1,000 and a decrease in lease liabilities - current portion of approximately $74,000, offset by a decrease in security deposits - current portion of approximately $397,000, a decrease in loan receivable - related party of approximately $93,000, an increase in deferred revenue of approximately $123,000, an increase in salary payable of approximately $145,000, an increase in accrued liabilities and other payables of approximately $277,000.

Because the exchange rate conversion is different for the consolidated balance sheets and the consolidated statements of cash flows, the changes in assets and liabilities reflected on the consolidated statements of cash flows are not necessarily identical with the comparable changes reflected on the consolidated balance sheets.

Cash Flows for the Years Ended December 31, 2021, 2020 and 2019

The following summarizes the key components of our cash flows for the years ended December 31, 2021, 2020 and 2019:

|  | Year Ended December 31, 2021 |  |  | Year Ended December 31, 2020 |  |  | Year Ended December 31, 2019 |
Net cash used in operating activities |  | $ | (4,096,506 | ) |  | $ | (1,982,847 | ) |  | $ | (2,139,156 | )
Net cash used in investing activities |  |  | (2,593,181 | ) |  |  | (331,944 | ) |  |  | (725,476 | )
Net cash provided by financing activities |  |  | 16,471,560 |  |  |  | 37,250 |  |  |  | 6,438,216 |
Effect of exchange rate on cash and cash equivalents |  |  | (1,579 | ) |  |  | 60,946 |  |  |  | (24,688 | )
Net increase (decrease) in cash and cash equivalents |  | $ | 9,780,294 |  |  | $ | (2,216,595 | ) |  | $ | 3,548,896 |

Net cash flow used in operating activities for the year ended December 31, 2021 was $4,096,506, which primarily reflected our net loss of approximately $7,051,000, and the changes in operating assets and liabilities primarily consisting of an increase in accrued liabilities and other payables of approximately $274,000, an increase in deferred revenue of approximately $122,000, and an increase in salary payable of approximately $143,000, an decrease in security deposits of approximately $466,000, offset by an increase in accounts receivable of approximately $148,000, an increase in prepaid expenses and other current assets of approximately $55,000, a decrease of operating lease liability of approximately $394,000, and the add-back of non-cash items consisting of noncash lease expense of approximately $353,000, depreciation of approximately $40,000, impairment loss on long-term investment of approximately $585,000, bad debt expense of $550,000, stock-based compensation of approximately $1,024,000, foreign currency transaction loss of approximately $39,000 and other noncash expenses of approximately $1,000, and the deduction of gain on extinguishment of debt of approximately $42,000, gain on lease termination of approximately $4,000.

Net cash flow used in operating activities for the year ended December 31, 2020 was $1,982,847, which primarily reflected our net loss of approximately $3,182,000, and the changes in operating assets and liabilities primarily consisting of an increase in accounts receivable of approximately $30,000, a decrease of operating lease liability of approximately $267,000, a decrease in accrued liabilities and other payables of approximately $124,000, a decrease in deferred revenue of approximately $64,000, and a decrease in salary payable of approximately $49,000, offset by a decrease in security deposits of approximately $47,000, a decrease in prepaid expenses and other current assets of approximately $207,000, and the add-back of non-cash items consisting of noncash lease expense of approximately $337,000, depreciation of approximately $55,000, loss on equity method investment of approximately $46,000, Stock-based compensation for non-employee of approximately $1,005,000, foreign currency transaction loss of approximately $35,000 and noncash other expense of approximately $1,000.

Net cash flow used in operating activities for the year ended December 31, 2019 was $2,139,156, which primarily reflected our net loss of approximately $2,243,000, and the changes in operating assets and liabilities primarily consisting of an increase in prepaid expenses and other current assets of approximately $82,000, an increase in security deposits of approximately $103,000 and a decrease of operating lease liability of approximately $231,000, a decrease in accrued liabilities and other payables of approximately $40,000, a decrease in deferred revenue of approximately $15,000, offset by an increase in salary payable of approximately $13,000, an decrease in accounts receivable of approximately $60,000, and the add-back of non-cash items consisting of noncash lease expense of approximately $340,000, depreciation of approximately $26,000, loss on equity method investment of approximately $49,000, and noncash other expense of approximately $85,000.

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Net cash flow used in investing activities was $2,593,181 for the year ended December 31, 2021 as compared to $331,944 for the year ended December 31, 2020 and $725,476 for the year ended December 31, 2019. During the year ended December 31, 2021, the Company made payments for purchase of property and equipment of approximately $37,000, and for purchase of long-term investments of $350,000, and loan to third parties of $2,300,000, offset by collection of loan to related party of approximately $94,000. During the year ended December 31, 2020, the Company made payments for purchase of property and equipment of $18,000, and for purchase of long-term investments of approximately $874,000, offset by collection of loan to related party of approximately $80,000, collection of loan to employee of approximately $174,000 and collection of investment refund of approximately $307,000. During the year ended December 31, 2019, the Company made payments for acquisition of subsidiaries, net of cash acquired of approximately $109,000, payments made for purchase of property and equipment of approximately $130,000, payments made for loan to employee of approximately $174,000, payments made for loan to related party of approximately $80,000 and payments for purchase of long-term investments of approximately $233,000.

Net cash flow provided by financing activities was $16,471,560 for the year ended December 31, 2021 as compared to $37,250 for the year ended December 31, 2020 and $6,438,216 for the year ended December 31, 2019. During the year ended December 31, 2021, we received proceeds from issuance of stocks of approximately $16,637,000, offset by payment on finance lease of approximately $163,000, repayments made to related parties of approximately $2,000. During the year ended December 31, 2020, we received proceeds from long-term loan of approximately $41,000, offset by repayments made to related parties of approximately $4,000. During the year ended December 31, 2019, the Company received advances from related parties of approximately $14,000, proceeds from issuance of stocks of approximately $6,851,000 in funding our operations, offset by repayments made to related parties of approximately $428,000.

Our capital requirements for the next twelve months primarily relate to working capital requirements, including salaries, fees related to third parties’ professional services, reduction of accrued liabilities, and the development of business opportunities. These uses of cash will depend on numerous factors including our future sales revenue and our ability to control costs. All funds received have been expended in the furtherance of growing the business. The following trends are reasonably likely to result in a material decrease in our liquidity over the near to long term:

| ● | An increase in working capital requirements to finance our current business;

| ● | The use of capital for the development of business opportunities;

| ● | Addition of administrative and sales personnel as the business grows; and

| ● | The cost of being a public company.

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Initial Public Offering

On January 7, 2019, we completed its initial public offering (the “IPO”) on the NASDAQ Capital Market under the symbol of “MTC”. We offered 1,800,000 common shares at $4 per share. Net proceeds raised by us from the initial public offering amounted to approximately $6,478,801 after deducting underwriting discounts and commissions and other offering expenses. Out of the $6.5 million net proceeds, $500,000 was deposited into an escrow account to satisfy the initial $500,000 in potential indemnification obligations arising during an escrow period of two years following the closing date of January 7, 2019. On January 7, 2019, we sold additional 270,000 common shares at $4 per share. Net proceeds raised by us amounted to $993,600 after deducting underwriting discounts. As a result, we raised a total of $7,472,401 from the issuance of 2,070,000 shares of common stock in January 2019.

Currently, we use our cash to support our operations and to provide working capital for our ongoing operations and obligations. Considering our available cash together with our cash inflow from the IPO, we believe that we will meet our anticipated cash requirements for the next twelve months.

Registered Direct Offering and Private Placement

On February 22, 2021 we entered into a Securities Purchase Agreement with certain institutional investors in connection with a registered direct offering of 4,300,000 of the Company’s common shares, at a purchase price of $3.70 per share. The Company sold the common shares for aggregate gross proceeds of $15,910,000. The net proceeds from the transactions were $14,637,200, after deducting certain fees due to the placement agent and the Company’s transaction expenses, and will be used for working capital and general corporate purposes.

On December 20, 2021 we entered into a Securities Purchase Agreement with a single investor pursuant to which the investor will make a $2,000,000 investment in the Company in a Regulation S private placement. Under the terms of the Purchase Agreement, the investor will purchase 5,000,000 common shares of the Company at a purchase price of $0.40 per share. The proceeds of the transaction were $2.0 million before deducting fees and other expenses. The Company currently intends to use the net proceeds from the transaction for growth capital and general working capital purposes.

| C. | Research and development, patents and licenses

Expenditures for research and product development costs are expensed as incurred.

For the years ended December 31, 2021, 2020 and 2019, research and development expenses were $744,422, $410,840, and $737,329, respectively.

| D. | Trend Information

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition or results of operations.

| E. | Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements. Please refer to NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES of our consolidated financial statements for details.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

| A. | Directors and senior management

The following table sets forth our executive officers and directors, their ages and the positions held by them:

Name |  | Age |  | Position
Xiangdong Wen (1) (2) |  | 37 |  | Chairman of the Board and Chief Executive Officer
Min Kong (1) |  | 33 |  | Chief Financial Officer
Qingshun Meng (1) (3) (5) (6) (7) |  | 62 |  | Independent Director
Hinman Au (1) (4) |  | 56 |  | Director
Dan Fu(1) (4) (5) (6) (7) |  | 35 |  | Independent Director
Shufang Lai(1) (3) (5) (6) (7) |  | 35 |  | Independent Director, Chairman of Audit Committee

(1) | The individual’s business address is c/o Gujia (Beijing) Technology Co., Ltd., AF, 16/F, Block B, Jiacheng Plaza, 18 Xiaguangli, Chaoyang District, Beijing, 100027 China.
(2) | Class C director whose term expires at the 2022 succeeding annual meeting of shareholders.
(3) | Class B director whose term expires at the 2024 succeeding annual meeting of shareholders.
(4) | Class A director whose term expires at the 2023 annual meeting of shareholders.
(5) | Member of audit committee.
(6) | Member of compensation committee.
(7) | Member of nominating committee.

Xiangdong Wen has served as the Chairman of the Board of MMTEC since January 2018 and has served as the Chief Executive Officer of MMTEC since June 2020. Mr. Wen founded Gujia in 2015 and was Gujia’s Chief Executive Officer between June 2015 and January 2016. Mr. Wen has also served as Gujia’s executive director since June 2015. Between May 2012 and May 2015, Mr. Wen served as Chief Executive Officer of Jiazi Investment Co., Ltd, an investment management company. Between February 2015 and June 2015, Mr. Wen served as Chief Operating Officer of Beijing Dongfangjuhe Technology Co., Ltd, providing technology solutions to the broker/dealer industry. Mr. Wen holds a Bachelor’s degree in business management from Communication University of China.

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Min Kong has served as the Chief Financial Officer of MMTEC since January 2018. Between June 2015 and January 2018, Mr. Kong served as the Institutional Business Director of Gujia (Beijing) Technology Co., Ltd. Between February 2014 and February 2015, Mr. Kong served as Data Analyst Manager of American Dental Solutions, LLC. Between April 2012 and January 2013, Mr. Kong served as Marketing Manager of Yiwu Yi Jue Trading Company. Mr. Kong received his MBA degree from Missouri State University.

Qingshun Meng has served as an Independent Director of MMTEC since April 2018. Mr. Meng has served as management professor at the Communication University of China since 2004. Mr. Meng holds a Bachelor of Science degree in Corporate Management from Shandong Institute of Mining and Technology, and a Bachelor of Science degree in Mining Engineering from Liaoning Technical University. Mr. Meng was member of the comprehensive brand management expert committee of China Association for Quality.

Hinman Au has served as a Director of MMTEC since October 2019. Since July 2016 Hinman Au served as Chief Executive Officer of MM iGlobal, Inc., a registered broker-dealer. From September 2012 to July 2016, he held the offices of Chief Executive Officer of Tradefield Securities, Inc., a registered broker-dealer. From August 2014 to August 2016, he held the position of Chief Executive Officer of American Education Center, a publicly traded company (OTCQB). Hinman Au holds a Bachelor of Science degree in Computer Science from Lehman College (CUNY, 1987), a Master of Science degree in Electrical Engineering from State University of New York at Stony Brook (1989), and a Master of Business Administration degree from Baruch College (CUNY, 1992).

Dan Fu has served as the Marketing Department Manager at Beijing Yingding Education Technology Co., Ltd. from July 2015 to July 2016. Ms. Fu then served as Brand Department Manager at Baoding Huazhong Group from August 2016 to March 2021. York at Stony Brook (1989), and a Master of Business Administration degree from Baruch College (CUNY, 1992).

Shufang Lai has served as an Independent Director of MMTEC since June, 2020. Mrs. Lai holds the title of Assistant Professor of Finance at Southern University of Science and Technology (PRC). Shufang Lai holds a Bachelor’s degree in Accounting from Communication University of China (2008) and a Ph.D degree in Accounting from The Chinese University of Hong Kong (2016). York at Stony Brook (1989), and a Master of Business Administration degree from Baruch College (CUNY, 1992).

None of the events listed in Item 401(f) of Regulation S-K has occurred during the past ten years that is material to the evaluation of the ability or integrity of any of our directors, director nominees or executive officers.

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Limitation on Liability and Other Indemnification Matters

The Companies Law does not limit the extent to which Memorandum and Articles of Association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our Memorandum and Articles of Association permit indemnification of officers and directors for losses, damages, costs and expenses incurred in their capacities as such unless such losses or damages arise from dishonesty of such directors or officers willful default of fraud. This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

| B. | Compensation

Executive Compensation

The following table shows the annual compensation paid by us for the years ended December 31, 2021, 2020 and 2019:

|  |  |  |  |  |  |  | Equity |  |  | All Other |  |  | Total |
Name/principal position |  | Year |  |  | Salary |  |  | Compensation |  |  | Compensation |  |  | Paid |
Xiangdong Wen, CEO |  |  | 2019 |  |  | $ | 35,204 |  |  | $ | - |  |  | $ | 1,433 |  |  | $ | 36,637 |
|  |  | 2020 |  |  | $ | 32,860 |  |  | $ | - |  |  | $ | 4,025 |  |  | $ | 36,885 |
|  |  | 2021 |  |  | $ | 170,724 |  |  | $ | - |  |  | $ | 2,564 |  |  | $ | 173,288 |
Min Kong, CFO |  |  | 2019 |  |  | $ | 48,936 |  |  | $ | - |  |  | $ | 5,148 |  |  | $ | 54,084 |
|  |  | 2020 |  |  | $ | 40,486 |  |  | $ | - |  |  | $ | 5,184 |  |  | $ | 45,670 |
|  |  | 2021 |  |  | $ | 99,206 |  |  | $ | 313,250 |  |  | $ | 5,503 |  |  | $ | 417,959 |

Under Chinese law, we may only terminate employment agreements without cause and without penalty by providing notice of non-renewal one month prior to the date on which the employment agreement is scheduled to expire. If we fail to provide this notice or if we wish to terminate an employment agreement in the absence of cause, then we are obligated to pay the employee one month’s salary for each year we have employed the employee. We are, however, permitted to terminate an employee for cause without penalty to our company, where the employee has committed a crime or the employee’s actions or inactions have resulted in a material adverse effect to us.

Director Compensation

All directors hold office until the next annual meeting of shareholders at which their respective class of directors is re-elected and until their successors have been duly elected and qualified. There are no family relationships among our directors or executive officers. Officers are elected by and serve at the discretion of the Board of Directors. Employee directors do not receive any compensation for their services. Non-employee directors are entitled to receive $10,000 per year for serving as directors and may receive option grants from our company. In addition, non-employee directors are entitled to receive compensation for their actual travel expenses for each Board of Directors meeting attended. We have entered into independent director agreements with our directors which agreements set forth the terms and provisions of their engagement.

None of our officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more officers serving as a member of our board of directors.

| C. | Board Practices

Composition of Board; Risk Oversight

Our Board of Directors presently consists of seven directors. Pursuant to our Memorandum and Articles of Association, our officers will be elected by and serve at the discretion of the board. A director will be removed from office automatically if, among other things, the director becomes bankrupt or makes any arrangement or composition with his creditors, or becomes physically or mentally incapable of acting as director. Except as noted above, there are no family relationships between any of our executive officers and directors. Officers are elected by, and serve at the discretion of, the Board of Directors. Our Board of Directors shall hold meetings on at least a quarterly basis.

As a smaller reporting company under the NASDAQ rules we are only required to maintain a Board of Directors comprised of at least 50% independent directors, and an audit committee of at least two members, comprised solely of independent directors who also meet the requirements of Rule 10A-3 under the Securities Exchange Act of 1934. There are no membership qualifications for directors. Further, there are no share ownership qualifications for directors unless so fixed by us in a general meeting. There are no other arrangements or understandings pursuant to which our directors are selected or nominated.

Our Board of Directors plays a significant role in our risk oversight. The board makes all relevant Company decisions. As such, it is important for us to have our Chief Executive Officer serve on the board as he plays key roles in the risk oversight of our company. As a smaller reporting company with a small Board of Directors, we believe it is appropriate to have the involvement and input of all of our directors in risk oversight matters.

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Duties of Directors

Under BVI law, our directors have a duty to act honestly, in good faith and with a view to our best interests. Our directors also have a duty to exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our Memorandum and Articles of Association. We have the right to seek damages if a duty owed by our directors is breached. A director is not required to hold shares as a qualification to office. The functions and powers of our Board of Directors include, among others:

| ● | appointing officers and determining the term of office of the officers,

| ● | authorizing the payment of donations to religious, charitable, public or other bodies, clubs, funds or associations as deemed advisable,

| ● | exercising the borrowing powers of the company and mortgaging the property of the company,

| ● | executing checks, promissory notes and other negotiable instruments on behalf of the company, and

| ● | maintaining or registering a register of mortgages, charges or other encumbrances of the company.

Director Independence

Our board has reviewed the independence of our directors, applying the NASDAQ independence standards. Based on this review, the board determined that each of Qingshun Meng, Dan Fu and Shufang Lai are “independent” within the meaning of the NASDAQ rules. In making this determination, our board considered the relationships that each of these non-employee directors has with us and all other facts and circumstances our board deemed relevant in determining their independence. As required under applicable NASDAQ rules, we anticipate that our independent directors will meet on a regular basis as often as necessary to fulfill their responsibilities, including at least annually in executive session without the presence of non-independent directors and management.

Board Committees

Currently, three committees have been established under the board: the Audit Committee, the Compensation Committee and the Nominating Committee.

The Audit Committee is responsible for overseeing the accounting and financial reporting processes of our company and audits of the financial statements of our company, including the appointment, compensation and oversight of the work of our independent auditors. The Compensation Committee of the Board of Directors reviews and makes recommendations to the board regarding our compensation policies for our officers and all forms of compensation, and also administers our incentive compensation plans and equity-based plans (but our board retains the authority to interpret those plans). The Nominating Committee of the board is responsible for the assessment of the performance of the Board, considering and making recommendations to the board with respect to the nominations or elections of directors and other governance issues. The nominating committee considers diversity of opinion and experience when nominating directors.

Audit Committee

The Audit Committee will be responsible for, among other matters:

| ● | appointing, compensating, retaining, evaluating, terminating, and overseeing our independent registered public accounting firm,

| ● | discussing with our independent registered public accounting firm the independence of its members from its management,

| ● | reviewing with our independent registered public accounting firm the scope and results of their audit,

| ● | approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm,

| ● | overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC,

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| ● | reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls, and compliance with legal and regulatory requirements,

| ● | coordinating the oversight by our Board of Directors of our code of business conduct and our disclosure controls and procedures,

| ● | establishing procedures for the confidential and or anonymous submission of concerns regarding accounting, internal controls or auditing matters, and

| ● | reviewing and approving related-party transactions.

Our Audit Committee consists of Shufang Lai (Chair), Qingshun Meng and Dan Fu Our board has affirmatively determined that each of the members of the Audit Committee meets the definition of “independent director” for purposes of serving on an Audit Committee under Rule 10A-3 of the Exchange Act and NASDAQ rules. In addition, our Board of Directors has determined that Mr. Shufang Lai qualifies as an “audit committee financial expert” as such term is currently defined in Item 407(d)(5) of Regulation S-K and meets the financial sophistication requirements of the NASDAQ rules.

Compensation Committee

The Compensation Committee will be responsible for, among other matters:

| ● | reviewing and approving, or recommending to the Board of Directors to approve the compensation of our CEO and other executive officers and directors,

| ● | reviewing key employee compensation goals, policies, plans and programs,

| ● | administering incentive and equity-based compensation,

| ● | reviewing and approving employment agreements and other similar arrangements between us and our executive officers, and

| ● | appointing and overseeing any compensation consultants or advisors.

Our Compensation Committee consists of Dan Fu (Chair), Shufang Lai and Qingshun Meng. Our board has affirmatively determined that each of the members of the Compensation Committee meets the definition of “independent director” for purposes of serving on Compensation Committee under NASDAQ rules.

Nominating Committee

The Nominating Committee will be responsible for, among other matters:

| ● | selecting or recommending for selection candidates for directorships,

| ● | evaluating the independence of directors and director nominees,

| ● | reviewing and making recommendations regarding the structure and composition of our Board of Directors and the Board of Directors committees,

| ● | developing and recommending to the Board of Directors corporate governance principles and practices;

| ● | reviewing and monitoring our company’s Code of Business Conduct and Ethics, and

| ● | overseeing the evaluation of our company’s management.

Our Nominating Committee consists of consists of Qingshun Meng (Chair), Dan Fu and Shufang Lai. Our board has affirmatively determined that each of the members of the Nominating Committee meets the definition of “independent director” for purposes of serving on a Nominating Committee under NASDAQ rules.

Code of Business Conduct and Ethics

Our Board of Directors has adopted a code of business conduct and ethics that applies to our directors, officers and employees. A copy of this code is available on our website. We intend to disclose on our website any amendments to the Code of Business Conduct and Ethics and any waivers of the Code of Business Conduct and Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions.

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Interested Transactions

A director may vote, attend a Board of Directors meeting or sign a document on our behalf with respect to any contract or transaction in which he or she is interested. A director must promptly disclose the interest to all other directors after becoming aware of the fact that he or she is interested in a transaction we have entered into or are to enter into. A general notice or disclosure to the Board of Directors or otherwise contained in the minutes of a meeting or a written resolution of the Board of Directors or any committee of the Board of Directors that a director is a shareholder, director, officer or trustee of any specified firm or company and is to be regarded as interested in any transaction with such firm or company will be sufficient disclosure, and, after such general notice, it will not be necessary to give special notice relating to any particular transaction.

Remuneration and Borrowing

The directors may receive such remuneration as our Board of Directors may determine from time to time. Each director is entitled to be repaid or prepaid for all traveling, hotel and incidental expenses reasonably incurred or expected to be incurred in attending meetings of our Board of Directors or committees of our Board of Directors or shareholder meetings or otherwise in connection with the discharge of his or her duties as a director. The compensation committee will assist the directors in reviewing and approving the compensation structure for the directors. Our Board of Directors may exercise all the powers of the company to borrow money and to mortgage or charge our undertakings and property or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the company or of any third party.

Qualification

A director is not required to hold shares as a qualification to office.

Limitation on Liability and Other Indemnification Matters

BVI law does not limit the extent to which a company’s Memorandum and Articles of Association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the BVI courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Under our Memorandum and Articles of Association, we may indemnify our directors, officers and liquidators against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with civil, criminal, administrative or investigative proceedings to which they are party or are threatened to be made a party by reason of their acting as our director, officer or liquidator. To be entitled to indemnification, these persons must have acted honestly and in good faith with a view to the best interest of the company and, in the case of criminal proceedings, they must have had no reasonable cause to believe their conduct was unlawful. Insofar as indemnification for liabilities arising under the Securities Act may be permitted for our directors or officers under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable as a matter of United States law.

| D. | Employees

The table below provides information as to the total number of employees at the end of the last three fiscal years. We have no contracts or collective bargaining agreements with labor unions and have never experienced work stoppages due to labor dispute. We consider our relations with our employees to be good.

|  | 2019 |  |  | 2020 |  |  | 2021 |
Number of Employees |  |  | 38 |  |  |  | 31 |  |  |  | 65 |

| E. | Share Ownership

See Item 7 below.

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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

| A. | Major shareholders

The following table sets forth certain information regarding beneficial ownership of our shares by each person who is known by us to beneficially own more than 5% of our shares. The table also identifies the share ownership of each of our directors, each of our named executive officers, and all directors and officers as a group. Except as otherwise indicated, the shareholders listed in the table have sole voting and investment powers with respect to the shares indicated. Our major shareholders do not have different voting rights than any other holder of our shares.

We have determined beneficial ownership in accordance with the rules of the SEC. Under such rules, beneficial ownership includes any shares over which the individual has sole or shared voting power or investment power as well as any shares that the individual has the right to subscribe for within 60 days of April 12, 2022. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power or the power to receive the economic benefit with respect to all common shares that they beneficially own, subject to applicable community property laws. None of the stockholders listed in the table are a broker-dealer or an affiliate of a broker dealer. None of the stockholders listed in the table are located in the United States and none of the common shares held by them are located in the United States. Applicable percentage ownership is based on 31,370,000 common shares outstanding as of April 12, 2022. Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Gujia (Beijing) Technology Co., Ltd., AF, 16/F, Block B, Jiacheng Plaza, 18 Xiaguangli, Chaoyang District, Beijing, 100027 China.

|  | Beneficial Ownership |
Name of Beneficial Owner |  | Common Shares |  |  | Percentage |
Xiangdong Wen * (1) |  |  | 3,275,985 |  |  |  | 10.4 | %
Min Kong * |  |  | 350,000 |  |  |  | 1.1 | %
Hinman Au * |  |  | - |  |  |  | ** |
Zhengfei Li * |  |  | 416,000 |  |  |  | 1.3 | %
Qingshun Meng * |  |  | - |  |  |  | ** |
Dan Fu * |  |  | - |  |  |  | ** |
Shufang Lai * |  |  | - |  |  |  | ** |
All officers and directors as a group (7 persons) |  |  | 4,041,985 |  |  |  | 12.8 | %
5% or greater beneficial owners |  |  |  |  |  |  |  |
Length Technology Limited(2) |  |  | 2,340,000 |  |  |  | 7.5 | %
Rate Technology Limited(3) |  |  | 1,800,000 |  |  |  | 5.7 | %
Betop Tech Limited(4) |  |  | 5,000,000 |  |  |  | 15.9 | %
5% or greater beneficial owners as a group |  |  | 9,140,000 |  |  |  | 29.1 | %

| * | Officer and/or director of our company

| ** | Less than 1%

(1) | Represent (i) 3,096,000 shares owned by Mr. Wen and (ii) 540,009 shares owned by MMBD Information Technology Limited, of which Mr. Wen holds 33.33%. MMBD Information Technology Limited, a Hong Kong corporation with the mailing address of Rm 18D 27/F Ho King Comm. Ctr., 2-16 Fayuen St. Mongkok, Hong Kong 999077 China.

(2) | A Hong Kong corporation with the mailing address of RMC, 13/F, Harvard Commercial Building, 105-111 Thomson Road, Wan Chai, Hong Kong, 999077 China, with Qingyi Luan as its sole owner and manager.

(3) | A Hong Kong corporation with the mailing address of 13/F, Ho Fu Commercial Building, 105-111 Thomson Road, Wanchai, Hong Kong, 999077 China, with Qian Ruan as its sole owner and manager.

(4) | A Hong Kong corporation with the mailing address of Unit 532A 5/F, Core Building 2, 1Whong Kong Science and Technology Park Shatin NT HKSAR CHINA, with Chao Qi as its sole owner and manager.

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As of April 22, 2022, there were 29 registered holders of record of our common shares, based upon information received from our stock transfer agent. However, this number does not include beneficial owners whose shares were held of record by nominees or broker dealers. The number of individual holders of record is based exclusively upon our share register and does not address whether a share or shares may be held by the holder of record on behalf of more than one person or institution who may be deemed to be the beneficial owner of a share or shares in our company. To our knowledge, no other shareholder beneficially owns more than 5% of our shares. Our company is not owned or controlled directly or indirectly by any government or by any corporation or by any other natural or legal person severally or jointly. Our major shareholders do not have any special voting rights.

| B. | Related Party Transactions

Due to Related Parties

As of December 31, 2021 and 2020, the due to related parties amount consisted of the following:

|  | December 31, 2021 |  |  | December 31, 2020 |
Advances from Xiangdong Wen (1) |  | $ | - |  |  | $ | 2,339 |
Advances to Zhen Fan (2) |  |  | - |  |  |  | (906 | )
|  | $ | - |  |  | $ | 1,433 |

(1) | Xiangdong Wen is the chairman of the board, chief executive officer and 10.4% shareholder of the Company.

(2) | Zhen Fan is the former chief executive officer and 9.4% shareholder of the Company.

From time to time, Xiangdong Wen, Zhen Fan and Hinman Au provided advances to the Company or made payment on behalf of the Company to supplement its working capital needs. Hinman Au is a director of the Company. Those advances are short-term in nature, non-interest bearing, unsecured and payable on demand.

Shareholders’ Contribution

During the years ended December 31, 2021, 2020 and 2019, there were no shareholder contributions to the Company for working capital needs.

| C. | Interests of Experts and Counsel

Not required.

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ITEM 8. FINANCIAL INFORMATION

| A. | Consolidated Statements and Other Financial Information.

See Item 18 for our audited consolidated financial statements.

Legal Proceedings

In the normal course of business, MM Global is engaged in various trading and brokerage activities on a principal and agency basis through a clearing broker. As a regulated FINRA broker-dealer, MM Global is subject to regulatory trading inquiries and investigations to determine whether any violations of federal securities or FINRA rules may have occurred. As such, MM Global has responded to FINRA inquires and continues to be subject to an open matter. The open matter could result in censures fines or other sanctions. The potential loss on contingent liability is probable but the amount of the loss cannot be reasonably estimated by the Company. Consequently, no accruals have been recorded with respect to the FINRA inquiries as of December 31, 2021.

Other than MM Global, we are currently not involved in any legal proceedings; nor are we aware of any claims that could have a material adverse effect on our business, financial condition, results of operations or cash flows.

Dividend Policy

The holders of shares of our common shares are entitled to dividends out of funds legally available when and as declared by our board of directors. Our board of directors has never declared a dividend and does not anticipate declaring a dividend in the foreseeable future. Should we decide in the future to pay dividends, as a holding company, our ability to do so and meet other obligations depends upon the receipt of dividends or other payments from our operating subsidiary and other holdings and investments. In addition, the operating companies may, from time to time, be subject to restrictions on their ability to make distributions to us, including as a result of restrictive covenants in loan agreements, restrictions on the conversion of local currency into U.S. dollars or other hard currency and other regulatory restrictions. In the event of our liquidation, dissolution or winding up, holders of our common shares are entitled to receive, ratably, the net assets available to shareholders after payment of all creditors.

| B. | Significant Changes

Except as disclosed elsewhere in this Annual Report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this Annual Report.

ITEM 9. THE OFFER AND LISTING

| A. | Offer and Listing Details

Our shares have been listed on the NASDAQ Stock Market under the symbol “MTC” since January 8, 2019 following the completion of our initial public offering.

| B. | Plan of Distribution

Not Applicable.

| C. | Markets

Our shares have been listed on the NASDAQ Stock Market under the symbol “MTC” since January 8, 2019 following the completion of our initial public offering.

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| D. | Selling Shareholders

Not Applicable.

| E. | Dilution

Not Applicable.

| F. | Expenses of the Issue

Not Applicable.

ITEM 10. ADDITIONAL INFORMATION

| A. | Share Capital

Not Applicable.

| B. | Memorandum and Articles of Association

The information required by Item 10.B of Form 20-F is included in the section titled “Description of Share Capital” in our Registration Statement on Form F-1 initially filed with the SEC on October 22, 2018, and subsequently updated (File No.: 333-227934), which section is incorporated herein by reference.

| C. | Material Contracts

The information required by Item 10.B of Form 20-F is included in the sections titled “Our Business,” “Directors and Executive Officers,” “Related Party Transactions,” and “Underwriting” in in our Registration Statement on Form F-1 initially filed with the SEC on October 22, 2018, and subsequently updated (File No.: 333-227934), which section is incorporated herein by reference.

On February 22, 2021 we entered into a Securities Purchase Agreement with certain institutional investors in connection with a registered direct offering of 4,300,000 of the Company’s common shares, at a purchase price of $3.70 per share. The Company sold the common shares for aggregate gross proceeds of $15,910,000. The net proceeds from the transactions were $14,637,200, after deducting certain fees due to the placement agent and the Company’s transaction expenses.

On December 20, 2021 we entered into a Securities Purchase Agreement with a single investor pursuant to which the investor will make a $2,000,000 investment in the Company in a Regulation S private placement. Under the terms of the Purchase Agreement, the investor will purchase 5,000,000 common shares of the Company at a purchase price of $0.40 per share. The gross proceeds of the transaction were $2,000,000 before deducting fees and other expenses.

| D. | Exchange controls

BVI Exchange Control

Under BVI law, there are currently no restrictions on the export or import of capital, including foreign exchange controls or restrictions that affect the remittance of dividends, interest or other payments to nonresident holders of our shares.

China Exchange Control

Foreign Currency Exchange

The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations (1996), as amended on August 5, 2008, the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996) and the Interim Measures on Administration on Foreign Debts (2003). Under these regulations, Renminbi are freely convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for most capital account items, such as direct investment, loans, repatriation of investment and investment in securities outside China, unless the prior approval of SAFE or its local counterparts is obtained. In addition, any loans to an operating subsidiary in China that is a foreign invested enterprise, cannot, in the aggregate, exceed the difference between its respective approved total investment amount and its respective approved registered capital amount. Furthermore, any foreign loan must be registered with SAFE or its local counterparts for the loan to be effective. Any increase in the amount of the total investment and registered capital must be approved by the China Ministry of Commerce or its local counterpart. We may not be able to obtain these government approvals or registrations on a timely basis, if at all, which could result in a delay in the process of making these loans.

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The dividends paid by the subsidiary to its shareholder are deemed shareholder income and are taxable in China. Pursuant to the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), foreign-invested enterprises in China may purchase or remit foreign exchange, subject to a cap approved by SAFE, for settlement of current account transactions without the approval of SAFE. Foreign exchange transactions under the capital account are still subject to limitations and require approvals from, or registration with, SAFE and other relevant Chinese governmental authorities.

Circular 37

On July 4, 2014, SAFE issued Circular 37, which became effective as of July 4, 2014. According to Circular 37, Chinese residents shall apply to SAFE and its branches for going through the procedures for foreign exchange registration of overseas investments before contributing the domestic assets or interests to a SPV. An amendment to registration or filing with the local SAFE branch by such Chinese resident is also required if the registered overseas SPV’s basic information such as domestic individual resident shareholder, name, operating period, or major events such as domestic individual resident capital increase, capital reduction, share transfer or exchange, merger or division has changed. Although the change of overseas funds raised by overseas SPV, overseas investment exercised by overseas SPV and non-cross-border capital flow are not included in Circular 37, we may be required to make foreign exchange registration if required by SAFE and its branches.

Moreover, Circular 37 applies retroactively. As a result, Chinese residents who have contributed domestic assets or interests to a SPV, but failed to complete foreign exchange registration of overseas investments as required prior to implementation of Circular 37, are required to send a letter to SAFE and its branches for explanation. Under the relevant rules, failure to comply with the registration procedures set forth in Circular 37 may result in receiving a warning from SAFE and its branches, and may result in a fine of up to RMB 300,000 for an organization or up to RMB 50,000 for an individual. In the event of failing to register, if capital outflow occurred, a fine up to 30% of the illegal amount may be assessed.

Chinese residents who control our Company are required to register with SAFE in connection with their investments in us. If we use our equity interest to purchase the assets or equity interest of a Chinese company owned by Chinese residents in the future, such Chinese residents will be subject to the registration procedures described in Circular 37.

Regulations on Offshore Parent Holding Companies’ Direct Investment in and Loans to Their PRC Subsidiaries

An offshore company may invest equity in a Chinese company, which will become the Chinese subsidiary of the offshore holding company after investment. Such equity investment is subject to a series of laws and regulations generally applicable to any foreign-invested enterprise in China, which include the Wholly Foreign-Owned Enterprise Law, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Contractual Joint Venture Enterprise Law, all as amended from time to time, and their respective implementing rules; the Administrative Provisions on Foreign Exchange in Domestic Direct Investment by Foreign Investors; and the Notice of the State Administration on Foreign Exchange on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment.

Under the aforesaid laws and regulations, the increase of the registered capital of a foreign-invested enterprise is subject to the prior approval by the original approval authority of its establishment. In addition, the increase of registered capital and total investment amount shall both be registered with SAIC, Ministry of Commerce and SAFE.

Shareholder loans made by offshore parent holding companies to their Chinese subsidiaries are regarded as foreign debts in China for regulatory purpose, which is subject to a number of Chinese laws and regulations, including the Chinese Foreign Exchange Administration Regulations, the Interim Measures on Administration on Foreign Debts, the Tentative Provisions on the Statistics Monitoring of Foreign Debts and its implementation rules, and the Administration Rules on the Settlement, Sale and Payment of Foreign Exchange.

Under these regulations, the shareholder loans made by offshore parent holding companies to their Chinese subsidiaries shall be registered with SAFE. Furthermore, the total amount of foreign debts that can be borrowed by such Chinese subsidiaries, including any shareholder loans, shall not exceed the difference between the total investment amount and the registered capital amount of the Chinese subsidiaries, both of which are subject to the governmental approval.

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Regulation of Dividend Distribution

The principal regulations governing the distribution of dividends by foreign holding companies include the Company Law of China (1993), as amended in 2013, the Foreign Investment Enterprise Law (1986), as amended in 2000, and the Administrative Rules under the Foreign Investment Enterprise Law (1990), as amended respectively in 2001 and 2014.

Under these regulations, wholly foreign-owned investment enterprises in China may pay dividends only out of their retained profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, wholly foreign-owned investment enterprises in China are required to allocate at least 10% of their respective retained profits each year, if any, to fund certain reserve funds unless these reserves have reached 50% of the registered capital of the enterprises. These reserves are not distributable as cash dividends, and a wholly foreign-owned enterprise is not permitted to distribute any profits until losses from prior fiscal years have been offset.

| E. | Taxation

The following sets forth the material BVI, Chinese and U.S. federal income tax matters related to an investment in our common shares. It is directed to U.S. Holders (as defined below) of our common shares and is based on laws and relevant interpretations thereof in effect as of the date of this report, all of which are subject to change. This description does not deal with all possible tax consequences relating to an investment in our common shares, such as the tax consequences under state, local and other tax laws. Ogier, our counsel as to the BVI law, advised us on the BVI taxation matters and their opinion is set forth in the discussion below. The following brief description applies only to U.S. Holders (defined below) that hold common shares as capital assets and that have the U.S. dollar as their functional currency. This brief description is based on the tax laws of the United States in effect as of the date of this report and on U.S. Treasury regulations in effect or, in some cases, proposed, as of the date of this report, as well as judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which change could apply retroactively and could affect the tax consequences described below. The brief description below of the U.S. federal income tax consequences to “U.S. Holders” will apply to you if you are a beneficial owner of common shares and you are, for U.S. federal income tax purposes:

| ● | an individual who is a citizen or resident of the United States,

| ● | a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized under the laws of the United States, any state thereof or the District of Columbia,

| ● | an estate whose income is subject to U.S. federal income taxation regardless of its source, or

| ● | a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

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PRC Enterprise Income Tax

According to the Enterprise Income Tax Law of PRC (the “EIT Law”), which was promulgated on March 16, 2007, last amended in February 2017 and became effective as of January 1, 2008, the income tax for both domestic and foreign-invested enterprises is at a uniform rate of 25%. The Regulation on the Implementation of Enterprise Income Tax Law of the PRC (the “EIT Rules”) was promulgated on December 6, 2007 and became effective on January 1, 2008. On April 14, 2008, the Chinese Ministry of Science and Technology, Ministry of Finance and State Administration of Taxation enacted the Administrative Measures for Certifying High and New Technology Enterprises (the “Certifying Measures”), which retroactively became effective on January 1, 2008 and was amended on January 29, 2016. In the years ended December 31, 2020 and 2019, Gujia was recognized as small low-profit enterprises and received a preferential income tax rate of 5%. Under the EIT Law, an enterprise established outside of China with a “de facto management body” within China is considered a “resident enterprise”, which means that it is treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. Although the implementation rules of the EIT Law define “de facto management body” as a managing body that exercises substantive and overall management and control over the production and business, personnel, accounting books and assets of an enterprise, the only official guidance for this definition currently available is set forth in Circular 82 issued by the State Administration of Taxation, at April 22, 2009 which provides that a foreign enterprise controlled by a PRC company or a PRC company group will be classified as a “resident enterprise” with its “de facto management bodies” located within China if the following criteria are satisfied:

| ● | the place where the senior management and core management departments that are in charge of its daily operations perform their duties is mainly located in the PRC,

| ● | its financial and human resources decisions are made by or are subject to approval by persons or bodies in the PRC,

| ● | its major assets, accounting books, company seals, and minutes and files of its board and shareholders’ meetings are located or kept in the PRC, and

| ● | more than half of the enterprise’s directors or senior management with voting rights frequently reside in the PRC.

We do not believe that we meet the conditions outlined in the preceding paragraph since we do not have a PRC enterprise or enterprise group as our primary controlling shareholder. In addition, we are not aware of any offshore holding companies with a corporate structure similar to our company that has been deemed a PRC “resident enterprise” by the PRC tax authorities.

If we are deemed a China resident enterprise, we may be subject to the EIT at the rate of 25% on our global income, except that the dividends we receive from our Chinese subsidiaries may be exempt from the EIT to the extent such dividends are deemed dividends among qualified resident enterprises. If we are considered a resident enterprise and earn income other than dividends from our Chinese subsidiaries, a 25% EIT on our global income could significantly increase our tax burden and materially and adversely affect our cash flow and profitability.

PRC Value Added Tax (“VAT”)

Pursuant to the Provisional Regulations on Value-added Tax (VAT) of the PRC last amended on February 6, 2016 and became effective from January 1, 2009 and the Detailed Rules for the Implementation of the Provisional Regulation of China on VAT last amended on October 28, 2011 and effective as of November 1, 2011, all entities or individuals in the PRC engaging in the sale of goods, the provision of processing services, repairs and replacement services, and the importation of goods are required to pay VAT.

According to the requirements of the Notice of the Ministry of Finance and the State Administration of Taxation on Implementing the Pilot Program of Replacing Business Tax with Value-Added Tax in an All-round Manner (Cai Shui [2016] Document No. 36) and the annexes thereto, namely The Measures for Implementing the Pilot Program of Replacing Business Tax with Value-Added Tax, the Provisions on Relevant Matters concerning the Pilot Program of Replacing Business Tax with Value-Added Tax, the Provisions on the Transitional Policies for the Pilot Program of Replacing Business Tax with Value-Added Tax, and the Provisions on the Application of VAT Zero Rate and VAT Exemption Policy to Cross-border Taxable Activities, effective from 1 May 2016, the pilot program of replacing business tax with value-added tax was implemented across the country, and the payment of business tax for taxpayers in the construction industry, the real estate industry, the financial industry, and the living service industry shall be replaced with the payment of value-added tax at 6% for general VAT payer, and 3% for small-scale VAT payer. Gujia was identified as a general VAT payer on December 1, 2021.

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BVI Taxation

The company and all distributions, interest and other amounts paid by the company in respect of the common shares of the company to persons who are not resident in the BVI are exempt from all provisions of the Income Tax Ordinance in the BVI.

No estate, inheritance, succession or gift tax, rate, duty, levy or other charge is payable by persons who are not resident in the BVI with respect to any common shares, debt obligations or other securities of the company.

All instruments relating to transactions in respect of the common shares, debt obligations or other securities of the company and all instruments relating to other transactions relating to the business of the company are exempt from payment of stamp duty in the BVI provided that they do not relate to real estate in the BVI.

There are currently no withholding taxes or exchange control regulations in the BVI applicable to the company or its shareholders.

United States Federal Income Taxation

The following does not address the tax consequences to any particular investor or to persons in special tax situations such as:

| ● | banks,

| ● | financial institutions,

| ● | insurance companies,

| ● | regulated investment companies,

| ● | real estate investment trusts,

| ● | broker-dealers,

| ● | traders that elect to mark to market,

| ● | U.S. expatriates,

| ● | tax-exempt entities,

| ● | persons liable for alternative minimum tax,

| ● | persons holding our common shares as part of a straddle, hedging, conversion or integrated transaction,

| ● | persons that actually or constructively own 10% or more of our common shares,

| ● | persons who acquired our common shares pursuant to the exercise of any employee common share option or otherwise as consideration, or

| ● | persons holding our common shares through partnerships or other pass-through entities.

Prospective purchasers are urged to consult their tax advisors about the application of the U.S. Federal tax rules to their particular circumstances as well as the state, local, foreign and other tax consequences to them of the purchase, ownership and disposition of our common shares.

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Taxation of Dividends and Other Distributions on our Common Shares

Subject to the passive foreign investment company rules discussed below, the gross amount of distributions made by us to you with respect to the common shares (including the amount of any taxes withheld therefrom) will generally be includable in your gross income as dividend income on the date of receipt by you, but only to the extent that the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). With respect to corporate U.S. Holders, to the extent that the amount of the distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles), it will be treated first as a tax-free return of your tax basis in your common shares, and to the extent the amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain. We do not intend to calculate our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above. The dividends will not be eligible for the dividends-received deduction allowed in respect of dividends received from other U.S. corporations.

With respect to non-corporate U.S. Holders, including individual U.S. Holders, dividends will be taxed at the lower capital gains rate applicable to qualified dividend income, provided that (1) the common shares are readily tradable on an established securities market in the United States, or we are eligible for the benefits of an approved qualifying income tax treaty with the United States that includes an exchange of information program, (2) we are not a passive foreign investment company (as discussed below) for either our taxable year in which the dividend is paid or the preceding taxable year, and (3) certain holding period requirements are met. Under U.S. Internal Revenue Service authority, our common shares will be considered for purpose of clause (1) above to be readily tradable on an established securities market in the United States if they are listed on the NASDAQ Capital Market. You are urged to consult your tax advisors regarding the availability of the lower rate for dividends paid with respect to our common shares, including the effects of any change in law after the date of this report.

Dividends on our common shares will constitute foreign source income for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividend income (as discussed above), the amount of the dividend considered for purposes of calculating the foreign tax credit limitation will be limited to the gross amount of the dividend, multiplied by the reduced rate divided by the highest rate of tax normally applicable to dividends. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by us with respect to our common shares will constitute “passive category income” but could, in the case of certain U.S. Holders, constitute “general category income.”

Taxation of Dispositions of Common Shares

Subject to the passive foreign investment company rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of common shares equal to the difference between the amount realized (in U.S. dollars) for the share and your tax basis (in U.S. dollars) in the common shares. The gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, who has held the common shares for more than one year, you will be eligible for the capital gains tax rate of 20% (or lower for individuals in lower tax brackets). The deductibility of capital losses is subject to limitations. Any such gain or loss that you recognize will generally be treated as United States source income or loss for foreign tax credit limitation purposes.

Passive Foreign Investment Company

Based on our current and anticipated operations and the composition of our assets, we do not expect to be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our current taxable year ending December 31, 2021. Our actual PFIC status for the current taxable years ending December 31, 2021 will not be determinable until after the close of such year and, accordingly, there is no guarantee that we will not be a PFIC for the current year. PFIC status is a factual determination for each taxable year which cannot be made until the close of the taxable year. A non-U.S. corporation is considered a PFIC for any taxable year if either:

| ● | at least 75% of its gross income is passive income, or

| ● | at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income (the “asset test”).

52

We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock. We must make a separate determination each year as to whether we are a PFIC. As a result, our PFIC status may change. In particular, because the value of our assets for purposes of the asset test will generally be determined based on the market price of our common shares, our PFIC status will depend in large part on the market price of our common shares. Accordingly, fluctuations in the market price of the common shares may cause us to become a PFIC. In addition, the application of the PFIC rules is subject to uncertainty in several respects and the composition of our income and assets will be affected by how, and how quickly, we spend the cash we raise in this offering. If we are a PFIC for any year during which you hold common shares, we will continue to be treated as a PFIC for all succeeding years during which you hold common shares. However, if we cease to be a PFIC, you may avoid some of the adverse effects of the PFIC regime by making a “deemed sale” election with respect to the common shares.

If we are a PFIC for any taxable year during which you hold common shares, you will be subject to special tax rules with respect to any “excess distribution” that you receive and any gain you realize from a sale or other disposition (including a pledge) of the common shares, unless you make a “mark-to-market” election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the common shares will be treated as an excess distribution. Under these special tax rules:

| ● | the excess distribution or gain will be allocated ratably over your holding period for the common shares,

| ● | the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and

| ● | the amount allocated to each other year will be subject to the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year. The tax liability for amounts allocated to such years cannot be offset by any net operating losses for such years, and gains realized on the sale of the common shares cannot be treated as capital, even if you hold the common shares as capital assets.

A U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the tax treatment discussed above. If you make a mark-to-market election for the common shares, you will include in income each year an amount equal to the excess, if any, of the fair market value of the common shares as of the close of your taxable year over your adjusted basis in such common shares. You are allowed a deduction for the excess, if any, of the adjusted basis of the common shares over their fair market value as of the close of the taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains on the common shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition of the common shares, are treated as ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on the common shares, as well as to any loss realized on the actual sale or disposition of the common shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such common shares. Your basis in the common shares will be adjusted to reflect any such income or loss amounts. If you make a valid mark-to-market election, the tax rules that apply to distributions by corporations that are not PFICs would apply to distributions by us, except that the lower applicable capital gains rate for qualified dividend income discussed above under “Taxation of Dividends and Other Distributions on our Common Shares” generally would not apply.

The mark-to-market election is available only for “marketable stock”, which is stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter (“regularly traded”) on a qualified exchange or other market (as defined in applicable U.S. Treasury regulations), including the NASDAQ Capital Market. If the common shares are regularly traded on the NASDAQ Capital Market and if you are a holder of common shares, the mark-to-market election would be available to you were we to be or become a PFIC.

53

Alternatively, a U.S. Holder of stock in a PFIC may make a “qualified electing fund” election with respect to such PFIC to elect out of the tax treatment discussed above. A U.S. Holder who makes a valid qualified electing fund election with respect to a PFIC will generally include in gross income for a taxable year such holder’s pro rata share of the corporation’s earnings and profits for the taxable year. However, the qualified electing fund election is available only if such PFIC provides such U.S. Holder with certain information regarding its earnings and profits as required under applicable U.S. Treasury regulations. We do not currently intend to prepare or provide the information that would enable you to make a qualified electing fund election. If you hold common shares in any year in which we are a PFIC, you will be required to file U.S. Internal Revenue Service Form 8621 regarding distributions received on the common shares and any gain realized on the disposition of the common shares.

You are urged to consult your tax advisors regarding the application of the PFIC rules to your investment in our common shares and the elections discussed above.

Information Reporting and Backup Withholding

Dividend payments with respect to our common shares and proceeds from the sale, exchange or redemption of our common shares may be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding at a current rate of 28%. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification on U.S. Internal Revenue Service Form W-9 or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on U.S. Internal Revenue Service Form W-9. U.S. Holders are urged to consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service and furnishing any required information.

| F. | Dividends and paying agents

Not required.

| G. | Statement by experts

Not required.

| H. | Documents on display

Documents concerning us that are referred to in this document may be inspected at AF, 16/F, Block B, Jiacheng Plaza,18 Xiaguangli, Chaoyang District, Beijing, 100027 China. In addition, we file annual reports and other information with the Securities and Exchange Commission. We file annual reports on Form 20-F and submit other information under cover of Form 6-K. As a foreign private issuer, we are exempt from the proxy requirements of Section 14 of the Exchange Act and our officers, directors and principal shareholders are exempt from the insider short-swing disclosure and profit recovery rules of Section 16 of the Exchange Act. Annual reports and other information we file with the Commission may be inspected at the public reference facilities maintained by the Commission at Room 1024, 100 F. Street, N.E., Washington, D.C. 20549, and copies of all or any part thereof may be obtained from such offices upon payment of the prescribed fees. You may call the Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms and you can request copies of the documents upon payment of a duplicating fee, by writing to the Commission. In addition, the Commission maintains a web site that contains reports and other information regarding registrants (including us) that file electronically with the Commission which can be assessed at http://www.sec.gov.

| I. | Subsidiary Information

Not required.

54

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Interest Rate Risk

As of December 31, 2021, we had no short-term borrowings and long-term borrowings. As of December 31, 2020, we had no short-term borrowings and had a long-term borrowings of $41,250. On April 22, 2020, the Company entered into a loan of $41,250 pursuant to the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) as administered by the U.S. Small Business Administration (the "SBA"). The loan proceeds were used to cover payroll costs, rent, interest, and utilities. The interest rate is 1.0% and has a maturity date of 2 years. The loan and interest was fully forgiven by SBA on January 12, 2021. Our exposure to market risk for changes in interest rates relates primarily to the interest income generated by our cash deposits with our banks. We have not been exposed, nor do we anticipate being exposed to material risks due to changes in interest rates. However, our future interest income may fall short of expectations due to changes in interest rates.

Credit Risk

As of December 31, 2021 and 2020, we had cash and cash equivalents of $11,206,220 and $1,425,926, respectively. Our cash and cash equivalents are invested primarily in savings and deposit accounts with original maturities of three months or less. Savings and deposit accounts generate a small amount of interest income.

Inflation Risk

Inflationary factors such as increases in the cost of our product may adversely affect our operating results. Although we do not believe that inflation has had a material effect on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross profit and selling and marketing, general and administrative expenses as a percentage of revenue if the selling prices of our products do not increase with these increased costs.

Foreign Exchange Risk

A majority of the Company’s expense transactions are denominated in RMB and a significant portion of the Company and its subsidiaries’ assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances in currencies other than RMB by the Company in China must be processed through the PBOC or other China foreign exchange regulatory bodies which require certain supporting documentation in order to affect the remittance.

Our functional currency is the RMB, and our financial statements are presented in U.S. dollars. The RMB appreciated by 2.4% in fiscal year 2020 and depreciated by 2.3% in fiscal 2021. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future. The change in the value of the RMB relative to the U.S. dollar may affect our financial results reported in the U.S. dollar terms without giving effect to any underlying changes in our business or results of operations. Currently, our assets, liabilities, revenues and costs are denominated in RMB.

To the extent that the Company needs to convert U.S. dollars into RMB for capital expenditures and working capital and other business purposes, appreciation of RMB against U.S. dollar would have an adverse effect on the RMB amount the Company would receive from the conversion. Conversely, if the Company decides to convert RMB into U.S. dollar for the purpose of making payments for dividends, strategic acquisition or investments or other business purposes, appreciation of U.S. dollar against RMB would have a negative effect on the U.S. dollar amount available to the Company.

Commodity Risk

We are not exposed to commodity price risk.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not required.

55

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

There has been no default of any indebtedness nor is there any arrearage in the payment of dividends.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

See “Item 10. Additional Information” for a description of the rights of securities holders, which remain unchanged.

The following “Use of Proceeds” information relates to the registration statement on Form F-1, as amended (File Number 333-227934), which was declared effective December 26, 2018, for our IPO in which we offered and sold an aggregate 1,800,000 common shares at $4 per share. Net proceeds raised by us from the IPO amounted to approximately $6,478,801 after deducting underwriting discounts and commissions and other offering expenses. Out of the $6.5 million net proceeds, $500,000 was deposited into an escrow account to satisfy the initial $500,000 in potential indemnification obligations arising during an escrow period of two years following the IPO closing date of January 7, 2019. On January 7, 2019, we sold additional 270,000 common shares at $4 per share. Net proceeds raised by us amounted to $993,600 after deducting underwriting discounts. As a result, we raised a total of $7,472,401 from the issuance of 2,070,000 shares of common stock in the January 2019 IPO. WestPark Capital, Inc. acted as representative for the underwriters in the IPO.

We have earmarked and have been using the proceeds of the initial public offering as follows: approximately $3.13 million for research and development and additional hiring, approximately $1.86 million for sales and marketing; and balance of approximately $2.48 million for additional working capital.

As of December 31, 2021, we have used all amounts of the net proceeds from our IPO.

ITEM 15. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2021. Based on that evaluation, management, including our Chief Executive Officer and Chief Financial Officer, has concluded that our disclosure controls and procedures as of December 31, 2021 were effective.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Management’s annual report on internal control over financial reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934. Our internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by our management and other personnel to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that in reasonable detail accurately reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with the authorization of our board of directors and management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatement. 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 our policies and procedures may deteriorate.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management has concluded that our internal control over financial reporting was effective as of December 31, 2021.

56

All internal control systems, no matter how well designed, have inherent limitations including the possibility of human error and the circumvention or overriding of controls. Further, because of changes in conditions, the effectiveness of internal controls may vary over time. 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 or procedures may deteriorate. Accordingly, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. We cannot be certain that these measures will successfully remediate the material weakness or that other material weaknesses will not be discovered in the future. If our efforts are not successful or other material weaknesses or control deficiencies occur in the future, we may be unable to report our financial results accurately on a timely basis or help prevent fraud, which could cause our reported financial results to be materially misstated and result in the loss of investor confidence or delisting and cause the market price of our common stock to decline. In addition, it could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our securities. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods. Because of our status as an emerging growth company, you will not be able to depend on any attestation from our independent registered public accountants as to our internal control over financial reporting for the foreseeable future.

Changes in Internal Controls over Financial Reporting

Except as discussed above, during the year ended December 31, 2021, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect our company’s internal control over financial reporting. It should be noted that while our management believes that our disclosure controls and procedures provide a reasonable level of assurance; our management does not expect that our disclosure controls and procedures or internal financial controls will prevent all errors or fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

ITEM 16. RESERVED

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT.

Our Board of Directors has determined that Ms. Shufang Lai qualifies as an “audit committee financial expert” as such term is currently defined in Item 407(d)(5) of Regulation S-K and meets the financial sophistication requirements of the NASDAQ rules.

ITEM 16B. CODE OF ETHICS.

Our Board of Directors has adopted a code of business conduct and ethics that applies to our directors, officers and employees. A copy of this code is available on our website at http://ir.haisc.com/corporate/governance. We intend to disclose on our website any amendments to the Code of Business Conduct and Ethics and any waivers of the Code of Business Conduct and Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Audit Fees

During 2021 and 2020, MaloneBailey, LLP’s fees for the annual audit of our financial statements and the periodic reviews of the financial statements were $230,025 and $260,000, respectively.

Audit-Related Fees

During 2021 and 2020, the Company did not incur audit-related services for services rendered in connection with financial due diligence of the company in connection with the company’s initial public offering.

57

Tax Fees

The company has not paid MaloneBailey, LLP for tax services in 2021 and 2020.

All Other Fees

The company has not paid MaloneBailey, LLP for any other services in 2021 and 2020.

Our Audit Committee evaluated and approved in advance the scope and cost of the engagement of an auditor before the auditor rendered its audit and non-audit services.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.

None.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

No purchase of our securities were made by us or our affiliates in the 2021 fiscal year.

ITEM 16F. CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT.

There were no changes to our certifying accountants for the year ended December 31, 2021.

ITEM 16G. CORPORATE GOVERNANCE

Pursuant to the home country rule exemption set forth under Nasdaq Listing Rule 5615, we elected to be exempt from the requirements of NASDAQ Listing Rule 5635, which requires shareholder approval for (i) certain acquisitions of stock or assets of another company; (ii) an issuance of shares that will result in a change of control of the company; (iii) the establishment or amendment of certain equity based compensation plans and arrangements; and (iv) certain transactions (other than a public offering) involving issuances of a 20% or more of our outstanding shares. Our shares are listed on the NASDAQ Capital Market (“NASDAQ”). As such, we are subject to corporate governance requirements imposed by NASDAQ. Under NASDAQ rules, listed non-US companies may, in general, follow their home country corporate governance practices in lieu of some of the NASDAQ corporate governance requirements. Except for the foregoing, we endeavor to comply with the NASDAQ corporate governance practices and except for the foregoing, there is no significant difference between our corporate governance practices and what the NASDAQ requires of domestic U.S. companies.

ITEM 16H. MINE SAFETY DISCLOSURE

Not applicable.

ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

58

PART III

ITEM 17. FINANCIAL STATEMENTS

We have elected to provide financial statements pursuant to Item 18.

ITEM 18. FINANCIAL STATEMENTS

The financial statements are filed as part of this Annual Report beginning on page F-1.

ITEM 19. EXHIBITS

Exhibit No. |  | Description
1.1 |  | Memorandum and Articles of Association (1).
2.1 |  | Specimen Share Certificate (1).
4.1 |  | Underwriting Agreement (1)
4.2 |  | Employment Agreement between the Company and CEO (1).
4.3 |  | Employment Agreement between the Company and CFO (1).
4.4 |  | Individual Loan Contract with Zhen Fan (1).
4.5 |  | Individual Loan Contract with Xiangdong Wen (1).
4.6 |  | Lease Agreement (1).
4.7 |  | Share Repurchase Agreement (1).
4.8 |  | Form of Securities Purchase Agreement entered into on February 22, 2021, by MMTec, Inc. and certain institutional investors (2).
4.9 |  | Form of Securities Purchase Agreement entered into on December 20, 2021, by MMTec, Inc. and an investor (3).
8.1 |  | List of Subsidiaries of the Registrant (1).
11.1 |  | Code of Conduct and Ethics (1).
12.1 |  | Certification of the Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act, as amended.
12.2 |  | Certification of the Chief Financial Officer (Principal Financial Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act, as amended.
13.1 |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13.2 |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
15.1 |  | Consent of Malone Bailey LLP.
99.1 |  | Charter of the Audit Committee (1).
99.2 |  | Charter of the Compensation Committee (1).
99.3 |  | Charter of the Nominating Committee (1).
101.INS |  | Inline XBRL Instance Document.
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document.
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 |  | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

(1) | Previously filed as part of the registration statement filed with the SEC on October 22, 2018 and incorporated by reference herein by reference.

(2) | Incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 6-K filed with the SEC on February 22, 2021 and incorporated by reference by reference.

(3) | Incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 6-K filed with the SEC on December 21, 2021 and incorporated by reference by reference.

59

SIGNATURES

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

| MMTec, Inc.
April 22, 2022 | By: | /s/ Xiangdong Wen
|  | Name: | Xiangdong Wen
|  | Title: | Chief Executive Officer (Principal Executive Officer)
April 22, 2022 | By: | /s/ Min Kong
|  | Name: | Min Kong
|  | Title: | Chief Financial Officer (Principal Financial and Accounting Officer)

60

MMTEC, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

MMTEC, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

CONTENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID 206) | F-2
Consolidated Financial Statements: |
Consolidated Balance Sheets - As of December 31, 2021 and 2020 | F-3
Consolidated Statements of Operations and Comprehensive Loss - For the Years Ended December 31, 2021, 2020 and 2019 | F-4
Consolidated Statements of Changes in Shareholders’ Equity (Deficit) - For the Years Ended December 31, 2021, 2020 and 2019 | F-5
Consolidated Statements of Cash Flows – For the Years Ended December 31, 2021, 2020 and 2019 | F-6
Notes to Consolidated Financial Statements | F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

MMTEC, INC. and subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of MMTEC, INC. and its subsidiaries (collectively, the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ MaloneBailey, LLP

www.malonebailey.com

We have served as the Company's auditor since 2018.

Houston, Texas

April 22, 2022

F-2

MMTEC, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN U.S. DOLLARS)

|  | As of |
|  | December 31, 2021 |  |  | December 31, 2020 |
ASSETS |  |  |  |  |  |  |  |
CURRENT ASSETS: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 11,206,220 |  |  | $ | 1,425,926 |
Accounts receivable, net |  |  | 194,856 |  |  |  | 46,390 |
Loan receivable, net |  |  | 2,100,000 |  |  |  | - |
Loan receivable - related party |  |  | - |  |  |  | 92,831 |
Security deposits - current portion |  |  | 102,326 |  |  |  | 500,000 |
Prepaid expenses and other current assets |  |  | 245,021 |  |  |  | 187,994 |
Total Current Assets |  |  | 13,848,423 |  |  |  | 2,253,141 |
NON-CURRENT ASSETS: |  |  |  |  |  |  |  |
Security deposit – non-current portion |  |  | 29,460 |  |  |  | 112,891 |
Property and equipment, net |  |  | 267,433 |  |  |  | 102,882 |
Operating lease right-of-use asset |  |  | 442,185 |  |  |  | 662,609 |
Long-term investment |  |  | - |  |  |  | 578,749 |
Total Non-current Assets |  |  | 739,078 |  |  |  | 1,457,131 |
Total Assets |  | $ | 14,587,501 |  |  | $ | 3,710,272 |
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY |  |  |  |  |  |  |  |
CURRENT LIABILITIES: |  |  |  |  |  |  |  |
Deferred revenue |  | $ | 123,434 |  |  | $ | - |
Salary payable |  |  | 276,356 |  |  |  | 131,445 |
Accrued liabilities and other payables |  |  | 372,168 |  |  |  | 94,799 |
Due to related parties |  |  | - |  |  |  | 1,433 |
Operating lease liabilities - current |  |  | 356,274 |  |  |  | 430,352 |
Total Current Liabilities |  |  | 1,128,232 |  |  |  | 658,029 |
NON-CURRENT LIABILITIES: |  |  |  |  |  |  |  |
Loan payable |  |  | - |  |  |  | 41,250 |
Operating lease liabilities – non-current |  |  | 107,545 |  |  |  | 315,190 |
Total Non-current Liabilities |  |  | 107,545 |  |  |  | 356,440 |
Total Liabilities |  |  | 1,235,777 |  |  |  | 1,014,469 |
Commitments and Contingencies |  |  |  |  |  |  |  |
SHAREHOLDERS' EQUITY: |  |  |  |  |  |  |  |
Common shares ($0.001 par value; 500,000,000 shares authorized; 31,370,000 shares issued and outstanding at December 31,2021, and 20,820,000 shares issued and outstanding at December 31,2020) |  |  | 31,370 |  |  |  | 20,820 |
Additional paid-in capital |  |  | 29,884,600 |  |  |  | 12,233,589 |
Accumulated deficit |  |  | (16,607,654 | ) |  |  | (9,556,899 | )
Accumulated other comprehensive income (loss) |  |  | 43,408 |  |  |  | (1,707 | )
Total Shareholders' Equity |  |  | 13,351,724 |  |  |  | 2,695,803 |
Total Liabilities and Shareholders' Equity |  | $ | 14,587,501 |  |  | $ | 3,710,272 |

The accompanying notes to consolidated financial statements are an integral part of these statements.

F-3

MMTEC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(IN U.S. DOLLARS)

|  | For the Year Ended |  |  | For the Year Ended |  |  | For the Year Ended |
|  | December 31, 2021 |  |  | December 31, 2020 |  |  | December 31, 2019 |
REVENUE |  | $ | 653,036 |  |  | $ | 742,125 |  |  | $ | 200,797 |
COST OF REVENUE |  |  | 141,302 |  |  |  | 7,405 |  |  |  | 90,890 |
GROSS PROFIT |  |  | 511,734 |  |  |  | 734,720 |  |  |  | 109,907 |
OPERATING EXPENSES: |  |  |  |  |  |  |  |  |  |  |  |
Selling and marketing |  |  | 303,079 |  |  |  | 244,163 |  |  |  | 389,750 |
General and administrative |  |  |  |  |  |  |  |  |  |  |  |
Payroll and related benefits |  |  | 2,446,019 |  |  |  | 1,024,565 |  |  |  | 1,091,065 |
Professional fees |  |  | 2,083,019 |  |  |  | 1,744,395 |  |  |  | 794,221 |
Other general and administrative expenses |  |  | 2,162,801 |  |  |  | 905,748 |  |  |  | 775,647 |
Total Operating Expenses |  |  | 6,994,918 |  |  |  | 3,918,871 |  |  |  | 3,050,683 |
LOSS FROM OPERATIONS |  |  | (6,483,184 | ) |  |  | (3,184,151 | ) |  |  | (2,940,776 | )
OTHER INCOME (EXPENSE): |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  | 1,658 |  |  |  | 30,478 |  |  |  | 37,370 |
Government subsidy |  |  | - |  |  |  | - |  |  |  | 724,795 |
Impairment loss on long-term investment |  |  | (585,333 | ) |  |  | - |  |  |  | - |
Other income (expense) |  |  | 54,774 |  |  |  | 53,646 |  |  |  | (14,994 | )
Foreign currency transaction loss |  |  | (38,670 | ) |  |  | (35,464 | ) |  |  | (216 | )
Loss on equity method investment |  |  | - |  |  |  | (46,105 | ) |  |  | (49,413 | )
Total Other Income (Expense) |  |  | (567,571 | ) |  |  | 2,555 |  |  |  | 697,542 |
LOSS BEFORE INCOME TAXES |  |  | (7,050,755 | ) |  |  | (3,181,596 | ) |  |  | (2,243,234 | )
INCOME TAXES |  |  | - |  |  |  | - |  |  |  | - |
NET LOSS |  | $ | (7,050,755 | ) |  | $ | (3,181,596 | ) |  | $ | (2,243,234 | )
COMPREHENSIVE LOSS: |  |  |  |  |  |  |  |  |  |  |  |
NET LOSS |  |  | (7,050,755 | ) |  |  | (3,181,596 | ) |  |  | (2,243,234 | )
OTHER COMPREHENSIVE (LOSS) INCOME |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency translation adjustments |  |  | 45,115 |  |  |  | 117,687 |  |  |  | (30,170 | )
TOTAL COMPREHENSIVE LOSS |  | $ | (7,005,640 | ) |  | $ | (3,063,909 | ) |  | $ | (2,273,404 | )
NET LOSS PER COMMON SHARE |  |  |  |  |  |  |  |  |  |  |  |
Basic and diluted |  | $ | (0.29 | ) |  | $ | (0.16 | ) |  | $ | (0.11 | )
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: |  |  |  |  |  |  |  |  |  |  |  |
Basic and diluted |  |  | 24,504,462 |  |  |  | 20,385,574 |  |  |  | 20,013,288 |

The accompanying notes to consolidated financial statements are an integral part of these statements.

F-4

MMTEC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019

(IN U.S. DOLLARS)

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Accumulated |  |  | Total |
|  | Common Shares |  |  | Additional |  |  | Treasury Stock |  |  |  |  |  | Other |  |  | Shareholders’ |
|  | Number of |  |  |  |  |  | Paid-in |  |  | Number of |  |  |  |  |  | Accumulated |  |  | Comprehensive |  |  | Equity |
|  | Shares |  |  | Amount |  |  | Capital |  |  | Shares |  |  | Amount |  |  | Deficit |  |  | Loss |  |  | (Deficit) |
Balance, December 31, 2018 |  |  | 54,000,000 |  |  | $ | 54,000 |  |  | $ | 3,759,008 |  |  |  | (36,000,000 | ) |  | $ | (36,000 | ) |  | $ | (4,132,069 | ) |  | $ | (89,224 | ) |  | $ | (444,285 | )
Issuance of common stock for cash |  |  | 2,070,000 |  |  | $ | 2,070 |  |  | $ | 7,470,331 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  | $ | 7,472,401 |
Net loss for the year ended December 31, 2019 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  | $ | (2,243,234 | ) |  |  | - |  |  | $ | (2,243,234 | )
Foreign currency translation adjustment |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  | $ | (30,170 | ) |  | $ | (30,170 | )
Balance, December 31, 2019 |  |  | 56,070,000 |  |  | $ | 56,070 |  |  | $ | 11,229,339 |  |  |  | (36,000,000 | ) |  | $ | (36,000 | ) |  | $ | (6,375,303 | ) |  | $ | (119,394 | ) |  | $ | 4,754,712 |
Issuance of common stock for service |  |  | 750,000 |  |  | $ | 750 |  |  | $ | 1,004,250 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  | $ | 1,005,000 |
Cancellation of treasury stock |  |  | (36,000,000 | ) |  | $ | (36,000 | ) |  |  | - |  |  |  | 36,000,000 |  |  | $ | 36,000 |  |  |  | - |  |  |  | - |  |  |  | - |
Net loss for the year ended December 31, 2020 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  | $ | (3,181,596 | ) |  |  | - |  |  | $ | (3,181,596 | )
Foreign currency translation adjustment |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  | $ | 117,687 |  |  | $ | 117,687 |
Balance, December 31, 2020 |  |  | 20,820,000 |  |  | $ | 20,820 |  |  | $ | 12,233,589 |  |  |  | - |  |  |  | - |  |  | $ | (9,556,899 | ) |  | $ | (1,707 | ) |  | $ | 2,695,803 |
Issuance of common stock for service |  |  | 1,250,000 |  |  | $ | 1,250 |  |  | $ | 1,023,111 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  | $ | 1,024,361 |
Issuance of common stock for cash |  |  | 9,300,000 |  |  | $ | 9,300 |  |  | $ | 16,627,900 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  | $ | 16,637,200 |
Net loss for the year ended December 31, 2021 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  | $ | (7,050,755 | ) |  |  | - |  |  | $ | (7,050,755 | )
Foreign currency translation adjustment |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  | $ | 45,115 |  |  | $ | 45,115 |
Balance, December 31, 2021 |  |  | 31,370,000 |  |  | $ | 31,370 |  |  | $ | 29,884,600 |  |  |  | - |  |  | $ | - |  |  | $ | (16,607, 654 | ) |  | $ | 43,408 |  |  | $ | 13,351,724 |

The accompanying notes to consolidated financial statements are an integral part of these statements.

F-5

MMTEC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN U.S. DOLLARS)

|  | For the Year Ended |  |  | For the Year Ended |  |  | For the Year Ended |
|  | December 31, 2021 |  |  | December 31, 2020 |  |  | December 31, 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |  |  |  |  |  |  |
Net loss |  | $ | (7,050,755 | ) |  | $ | (3,181,596 | ) |  | $ | (2,243,234 | )
Adjustments to reconcile net loss from operations to |  |  |  |  |  |  |  |  |  |  |  |
net cash used in operating activities: |  |  |  |  |  |  |  |  |  |  |  |
Depreciation expense |  |  | 40,130 |  |  |  | 54,576 |  |  |  | 25,839 |
Impairment loss on long-term investment |  |  | 585,333 |  |  |  | - |  |  |  | - |
Stock-based compensation |  |  | 1,024,361 |  |  |  | 1,005,000 |  |  |  | - |
Allowance for bad debts |  |  | 550,000 |  |  |  | - |  |  |  | - |
Loss on equity method investment |  |  | - |  |  |  | 46,105 |  |  |  | 49,413 |
Noncash lease expense |  |  | 353,419 |  |  |  | 337,221 |  |  |  | 340,132 |
Gain on lease termination |  |  | (4,437 | ) |  |  | - |  |  |  | - |
Gain on extinguishment of debt |  |  | (41,548 | ) |  |  | - |  |  |  | - |
Loss on disposal of property and equipment |  |  | - |  |  |  | - |  |  |  | 2,721 |
Foreign currency transaction loss |  |  | 38,670 |  |  |  | 35,464 |  |  |  | 216 |
Other noncash expense |  |  | 906 |  |  |  | 722 |  |  |  | 85,086 |
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Operating lease liabilities |  |  | (393,740 | ) |  |  | (266,637 | ) |  |  | (231,485 | )
Accounts receivable |  |  | (148,466 | ) |  |  | (30,360 | ) |  |  | 59,599 |
Security deposits |  |  | 465,843 |  |  |  | 47,042 |  |  |  | (102,967 | )
Prepaid expenses and other current assets |  |  | (54,782 | ) |  |  | 206,743 |  |  |  | (82,494 | )
Deferred revenue |  |  | 121,984 |  |  |  | (63,966 | ) |  |  | (14,819 | )
Salary payable |  |  | 142,758 |  |  |  | (49,024 | ) |  |  | 12,550 |
Accrued liabilities and other payables |  |  | 273,818 |  |  |  | (124,137 | ) |  |  | (39,713 | )
NET CASH USED IN OPERATING ACTIVITIES |  |  | (4,096,506 | ) |  |  | (1,982,847 | ) |  |  | (2,139,156 | )
CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |  |  |  |  |  |  |  |  |  |
Cash paid for acquisition of subsidiaries, net of cash acquired |  |  | - |  |  |  | - |  |  |  | (109,494 | )
Purchase of property and equipment |  |  | (37,068 | ) |  |  | (18,379 | ) |  |  | (129,800 | )
Loan to related party |  |  | - |  |  |  | - |  |  |  | (79,510 | )
Collection of loan to related party |  |  | 93,887 |  |  |  | 79,520 |  |  |  | - |
Loan to employee |  |  | - |  |  |  | - |  |  |  | (173,951 | )
Collection of loan to employee |  |  | - |  |  |  | 173,974 |  |  |  | - |
Cash received from return of investment |  |  | - |  |  |  | 306,518 |  |  |  | - |
Purchase of long-term investment |  |  | (350,000 | ) |  |  | (873,577 | ) |  |  | (232,721 | )
Loan to third parties |  |  | (2,300,000 | ) |  |  | - |  |  |  | - |
NET CASH USED IN BY INVESTING ACTIVITIES |  |  | (2,593,181 | ) |  |  | (331,944 | ) |  |  | (725,476 | )
CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from long-term loan |  |  | - |  |  |  | 41,250 |  |  |  | - |
Payment on finance lease |  |  | (163,301 | ) |  |  | - |  |  |  | - |
Advances from related parties |  |  | - |  |  |  | - |  |  |  | 14,496 |
Proceeds from issuance of stocks |  |  | 16,637,200 |  |  |  | - |  |  |  | 6,851,401 |
Repayments to related parties |  |  | (2,339 | ) |  |  | (4,000 | ) |  |  | (427,681 | )
NET CASH PROVIDED BY FINANCING ACTIVITIES |  |  | 16,471,560 |  |  |  | 37,250 |  |  |  | 6,438,216 |
EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS |  |  | (1,579 | ) |  |  | 60,946 |  |  |  | (24,688 | )
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |  |  | 9,780,294 |  |  |  | (2,216,595 | ) |  |  | 3,548,896 |
CASH AND CASH EQUIVALENTS - beginning of year |  |  | 1,425,926 |  |  |  | 3,642,521 |  |  |  | 93,625 |
CASH AND CASH EQUIVALENTS - end of year |  | $ | 11,206,220 |  |  | $ | 1,425,926 |  |  | $ | 3,642,521 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |  |  |  |  |  |  |  |  |  |  |  |
Cash paid for: |  |  |  |  |  |  |  |  |  |  |  |
Interest |  | $ | - |  |  | $ | - |  |  | $ | - |
Income taxes |  | $ | - |  |  | $ | - |  |  | $ | - |
NON-CASH INVESTING AND FINANCING ACTIVITIES: |  |  |  |  |  |  |  |  |  |  |  |
Cancellation of treasury stock |  | $ | - |  |  | $ | 36,000 |  |  | $ | - |
Proceeds from issuance of stocks deposited in escrow |  | $ | - |  |  | $ | - |  |  | $ | 500,000 |
Expenses paid by related parties on behalf of the Company |  | $ | - |  |  | $ | 4,000 |  |  | $ | 179,503 |
Acquisition consideration given up by a related party |  | $ | - |  |  | $ | 1,000 |  |  | $ | - |
Loan receivable from return of investment |  | $ | 350,000 |  |  | $ | 92,831 |  |  | $ | - |
Remeasurement of the lease liabilities and right-of-use assets due to lease modification |  | $ | - |  |  | $ | 32,227 |  |  | $ | - |
Operating lease right-of-use assets obtained in exchange for operating lease liabilities |  | $ | 170,112 |  |  | $ | - |  |  | $ | - |

The accompanying notes to consolidated financial statements are an integral part of these statements.

F-6

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS

MMTEC, INC. (“MMTEC”, the “Company”) was incorporated on January 4, 2018 under the laws of the British Virgin Islands (“BVI”). On March 19, 2018, MMTEC acquired a wholly owned subsidiary, MM Future Technology Limited (“MM Future”). MM Future was incorporated in Hong Kong on October 31, 2017 for the purpose of being a holding company for the equity interest in Gujia (Beijing) Technology Co., Ltd. (“Gujia”).

Other than the equity interest in MM Future, MMTEC does not conduct any operations or own any material assets or liabilities. MM Future does not conduct any operations or own any material assets or liabilities except for the 100% of the equity interest of Gujia which it acquired on January 29, 2018.

Gujia was incorporated in People’s Republic of China (“PRC”) on June 9, 2015. Gujia is a technology provider, operates as an internet business platform to support operations. Gujia provides investment services to the U.S. securities markets for PRC investors and provides technical services to Chinese financial institutions to help them be able to provide investment services in the U.S. securities markets for their clients.

On November 6, 2017, Gujia acquired a wholly-owned subsidiary Meimei Zhengtong (Beijing) Technology Ltd. (“Meimei Zhengtong”) which was dissolved in July 2018.

On March 28, 2018, the Company acquired 24.9% of MMBD Trading Limited. (“MMBD Trading”). MMBD Trading was incorporated on March 4, 2016 under the laws of the British Virgin Islands. The remaining 75.1% of MMBD Trading was owned by 32.7% shareholders of the Company. The Company agreed to purchase the remaining 75.1% of outstanding securities of MMBD Trading on April 25, 2019. The acquisition was closed on October 18, 2019. Following and as a result of this acquisition, MMBD has become a wholly-owned subsidiary of the Company. MMBD Trading acquired a wholly owned subsidiary, MM Global Securities, INC. (“MM Global”) on August 16, 2017. MMBD Trading does not conduct any operations or own any material assets or liabilities except for the 100% of the equity interest of MM Global. MM Global was incorporated in the State of Illinois on September 25, 1997 as Feil Daily Investment Co. which was changed to Whitewood Group Inc. in 2011. MM Global’s continuing membership application approved by FINRA as a broker-dealer in August 2017 and changed its name to MM IGlobal, INC. in November 2017 pursuant to the ownership change. MM IGlobal, INC. changed its name to MM Global Securities, INC. in March 2019. MM Global operates as a securities broker/dealer in New York City.

On April 20, 2018, the Company incorporated MM Fund Services Limited (“MM Fund”), a Cayman Islands company, for the purpose of providing administration services to the private equity funds industry. MM Fund is dormant as of December 31, 2021.

On May 28, 2018, the Company incorporated MM Capital Management Limited (“MM Capital”), a Cayman Islands company, for the purpose of providing assets management and investment services to clients. MM Capital is dormant as of December 31, 2021.

On August 8, 2018, the Company incorporated MM Fund SPC (“MM SPC”), a Cayman Islands company, for the purpose of providing asset management services to clients. MM SPC is a wholly-owned subsidiary of MM Capital and is dormant as of December 31, 2021.

On March 15, 2019, the Company incorporated MM Global Capital Limited, a Hong Kong company, for the purpose of providing assets management and investment services to clients, and subsequently changed its name to HC Securities (HK) limited (“HC Securities”) on December 22, 2021. HC Securities is a wholly-owned subsidiary of MMTEC. HC Securities applied license to SFC and was approved on December 21, 2021. HC Securities is licensed on dealing in securities, advising on securities and asset management.

On July 9, 2019, the Company acquired 49% of a newly-formed entity called Xchain Fintech PTE.LTD., (“Xchain”), a Singapore company, for the purpose of providing technical support for the construction and development of a new solutions for the existing problems of the traditional financial industry, the difficulty experienced by investors in investing and allocating investment assets globally, and the protection of funds and investments by using advanced technologies, such as artificial intelligence, big data analysis and blockchain. Xchain is dormant as of December 31, 2021.

On March 23, 2020, the Company acquired all outstanding securities of MMBD Investment Advisory Company Limited (“MMBD Advisory”) for a consideration of $1,000, which was subsequently given up by Hinman Au. Prior to this transaction, all outstanding securities of MMBD Advisory were owned by Hinman Au, a director and 1.4% shareholder of the Company. MMBD Advisory was formed in January 2018 in the U.S. and is registered as an investment advisor firm under the laws of the State of New York on May 7, 2018. Since May 23, 2020, MMBD Advisory was consolidated into the Company.

On September 13, 2021, the Company incorporated Fundex SPC, a Cayman Islands company, for the purpose of providing asset management services to clients, as a wholly-owned subsidiary of MM Capital Management Limited.

MMTEC and its consolidated subsidiaries are collectively referred to herein as the “Company”, “we” or “us”, unless specific reference is made to an entity.

F-7

NOTE 2 – BASIS OF PRESENTATION

The accompanying consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and with the rules and regulations of the U.S. Securities and Exchange Commission for financial information.

The Company’s consolidated financial statements include the accounts of MMTEC and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates during the years ended December 31, 2021, 2020 and 2019 include the allowance for doubtful accounts, impairment of long-term investment and valuation of deferred tax assets.

Fair Value of Financial Instruments and Fair Value Measurements

The Company adopted the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

| ● | Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

| ● | Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

| ● | Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, loan receivable, security deposits – current portion, prepaid expenses and other current assets, deferred revenue, salary payable, operating lease liabilities - current, accrued liabilities and other payables approximate their fair market value based on the short-term maturity of these instruments.

Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated. It is not, however, practical to determine the fair value of amounts due from or due to related parties due to their related party nature.

F-8

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and short-term highly liquid investments purchased with original maturities of three months or less. The Company maintains cash with various financial institutions in China. As of December 31, 2021 and 2020, cash balances in the PRC of $1,252,998 and $654,104, respectively, are uninsured. The Company has not experienced any losses in bank accounts and believes it is not exposed to any risks on its cash in PRC bank accounts. Cash equivalents are nil as of December 31, 2021 and 2020, respectively.

Loan Receivable

Loan receivable are carried at the amortized cost, net of an allowance for doubtful accounts. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Estimates are based on historical collection experience and current economic conditions.

Concentrations of Credit Risk

T he Company has operations carried out in China. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in China, and by the general state of China’s economy. The Company’s operations in China are subject to specific considerations and significant risks not typically associated with companies in North America. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Property and Equipment

Property and equipment, including assets acquired through finance leases, are stated at cost less accumulated depreciation, and depreciated on a straight-line basis over the estimated useful lives of the assets. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income/loss in the year of disposition. Estimated useful lives are as follows:

|  | Estimated useful life
Office equipment and furniture |  | 3 - 5 Years
Leasehold improvement |  | The lesser of remaining lease term or 2 - 3 Years
Software |  | 1 - 3 Years
Finance lease right-of-use asset |  | 4 Years

Goodwill

Goodwill represents the excess of the purchase consideration over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed from the acquired entity as a result of the Company’s acquisitions of interests in its subsidiaries. Goodwill is not depreciated or amortized but is tested for impairment at the reporting unit level on an annual basis, and between annual tests when an event or circumstances change occurs that indicate the asset might be impaired. On January 1, 2019, the Company early adopted ASU No. 2017-04, “Simplifying the Test for Goodwill Impairment” to simplify the test for goodwill impairment by removing Step 2, which was issued by the FASB in January 2017. The Company, therefore, performs the goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the fair value, not to exceed the total amount of goodwill allocated to the reporting unit. This adoption did not have a material impact on the consolidated financial statements. The acquired entity as a whole is determined to be one reporting unit for goodwill impairment testing. The Company recognized nil, nil, and $127,717 impairment loss on goodwill for the years ended December 31, 2021, 2020 and 2019, respectively, which are recorded as a part of the “other expenses” in the consolidated statement of operations and comprehensive loss.

F-9

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Impairment of Long-lived Assets Other Than Goodwill

In accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not record any impairment charge for the years ended December 31, 2021, 2020 and 2019.

Long-term Investments

The Company’s long-term investments consist of equity investments without readily determinable fair value which were accounted for using measurement alternative as of December 31, 2021 and 2020. It also had an equity investment accounted for using equity method prior to the return of investment on October 31, 2020.

Equity Investment Using Measurement Alternative

The Company uses the measurement alternative for those investments over which the company does not have significant influence, and without readily determinable fair value and do not qualify for the net asset value practical expedient in accordance with ASU 2016-01, “Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities” which was adopted on January 1, 2019. The adoption did not have a significant impact on the Company’s consolidated financial statements. The Company records these investments at cost, less impairment, and plus or minus subsequent adjustments for observable price changes. Under this measurement alternative, changes in the carrying value of the equity investments are required to be made whenever there are observable price changes in orderly transactions for the identical or similar investment of the same issuer.

The Company periodically reviews its equity investment for impairment. At each reporting date, an entity that uses the measurement alternative to measure an equity investment without a readily determinable fair value is required to make a qualitative assessment of whether the investment is impaired. The Company regularly evaluates the impairment of these investments based on performance and financial position of the investee as well as other evidence of market value. Such evaluation includes, but is not limited to, reviewing the investee’s cash position, recent financing, projected and historical financial performance, cash flow forecasts and financing needs. An impairment loss recognized equal to the excess of the investment cost over its fair value at the end of each reporting period for which the assessment is made. The fair value would then become the new cost basis of investment.

Equity Method Investment

The Company uses the equity method of accounting for its investment in, and earning or loss of, company that it does not control but over which it does exert significant influence. The Company initially records its investment at cost and the difference between the cost of the equity investee and the fair value of the underlying equity in the net assets of the equity investee is recognized as equity method goodwill, which is included in the equity method investment on the consolidated balance sheets. The Company subsequently adjusts the carrying amount of the investment to recognize the Company’s proportionate share of each equity investee’s net income or loss into earnings after the date of investment. If an equity investment no longer qualifies to be accounted for under the equity method, the investment’s initial basis for which subsequent changes in fair value are measured should be the previous carrying amount of the investment.

The Company periodically reviews its equity investment for impairment. Under the equity method of accounting, an impairment loss would be recorded whenever the fair value of an equity investment is determined to be below its carrying amount and the reduction is considered to be other than temporary. In judging “other than temporary,” the Company considers the length of time and extent to which the fair value of the investment has been less than the carrying amount of the equity investment, the near-term and long-term operating and financial prospects of the entity and the Company’s longer-term intent of retaining its investment in the entity. The Company considers whether the fair value of its equity method investment has declined below its carrying value whenever adverse events or changes in circumstances indicate that recorded value may not be recoverable. If the Company considers any decline to be other than temporary (based on various factors, including historical financial results and the overall health of the investee), then a write-down would be recorded to estimated fair value.

See NOTE 8 for discussion of long-term investments.

F-10

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Value Added Tax

Gujia is subject to value added tax (“VAT”) for services rendered at a rate of 6%. Gujia was identified as a general VAT payer on December 1, 2021. The amount of VAT liability is determined by applying the applicable tax rate to the invoiced amount of professional services provided. The Company reports revenue net of PRC’s value added tax for all the periods presented in the consolidated statements of operations and comprehensive loss. All Entities in China are also subject to surcharges on value-added tax payments in accordance with PRC law.

Revenue Recognition

The Company has adopted Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) effective January 1, 2018. Under ASC 606, the Company recognizes revenue when a customer obtains control of promised goods, in an amount that reflects the consideration which the Company expects to receive in exchange for the goods. To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: (1) identify the contracts with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when or as the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods it transfers to the customer.

The Company does not offer promotional payments, customer coupons, rebates or other cash redemption offers to its customers.

Market data services and investor relation management services revenue

The Company generate these revenues by providing services under written service contracts with its customers. Revenue related to its service offered is recognized over time as the services are performed when the performance obligation is satisfied.

Commissions

The Company generated revenue from commissions through customers’ transactions in stocks by providing brokerage service for its customers. Commission revenue is recognized at a point in time on the trade date when the performance obligation is satisfied.

Fund management services

Revenue from fund management services mainly includes management fees and performance-based fees, in a typical arrangement.

Management fees

Management fee arises from the asset management services provided to funds the Company manages. Management fees are computed as a percentage of daily asset value and are recognized as earned over the specified contract period.

Performance-based income

In a typical arrangement, the Company is entitled to a performance-based fee on the extent by which the fund's investment performance exceeds a certain threshold. Such performance-based fee is typically calculated and recognized at a point of time when the cumulative return of the fund can be determined, and is not subject to clawback provisions.

F-11

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The following table disaggregates the Company’s revenue by revenue type:

|  | For the Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | US$ |  |  | US$ |  |  | US$ |
Market data services |  | $ | 107,184 |  |  | $ | 73,524 |  |  | $ | 75,044 |
Investor relations management services |  |  | - |  |  |  | 21,113 |  |  |  | 86,788 |
Commissions |  |  | 390,569 |  |  |  | 643,145 |  |  |  | 33,680 |
Fund management services |  |  | 153,494 |  |  |  | - |  |  |  | - |
Other revenue |  |  | 1,789 |  |  |  | 4,343 |  |  |  | 5,285 |
Total revenues |  | $ | 653,036 |  |  | $ | 742,125 |  |  | $ | 200,797 |

The following table disaggregates the Company’s revenue by geographic area:

|  | For the Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | US$ |  |  | US$ |  |  | US$ |
China |  | $ | 176,262 |  |  | $ | 94,637 |  |  | $ | 161,832 |
United States |  |  | 476,774 |  |  |  | 647,488 |  |  |  | 38,965 |
Total revenues |  | $ | 653,036 |  |  | $ | 742,125 |  |  | $ | 200,797 |

Deferred revenue represents income collected but not earned as of the reporting date. As of December 31, 2021, deferred revenue was $123,434. As of December 31, 2020, deferred revenue was nil. As of December 31, 2019, deferred revenue was $63,246, of which $63,246 was recognized as revenue in the year ended December 31, 2020.

Cost of Revenue

Cost of revenue consists primarily of internal labor cost and related benefits, and other overhead costs that are directly attributable to service provided.

Research and Development

Expenditures for research and product development costs are expensed as incurred.

For the years ended December 31, 2021, 2020 and 2019, research and development expenses were $744,422, $410,840, and $737,329, respectively.

Selling and Marketing Costs

All costs related to selling and marketing are expensed as incurred. For the years ended December 31, 2021, 2020 and 2019, selling and marketing costs were $303,079, $244,163, and $389,750 respectively.

F-12

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Government Subsidy

The Company’s PRC based subsidiary received government subsidies according to related policy from local government. Government subsidies are recognized when received and all the conditions specified in the grant have been met. The Company did not receive government subsidies in 2021 and 2020. For the year ended December 31, 2019, the Company recognized government subsidy of RMB5,000,000 (approximately $725,000) for completing its initial public offering on the NASDAQ Capital Market upon receipt.

Leases

On January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842), as amended, which supersedes the lease accounting guidance under Topic 840, and generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements.

The Company elected to apply practical expedients permitted under the transition method that allow the Company to use the beginning of the period of adoption as the date of initial application, to not recognize lease assets and lease liabilities for leases with a term of twelve months or less, to not separate non-lease components from lease components, and to not reassess lease classification, treatment of initial direct costs, or whether an existing or expired contract contains a lease. The Company used modified retrospective method and did not adjust the prior comparative periods. Under the new lease standard, the Company determines if an arrangement is or contains a lease at inception. Right-of-use assets and liabilities are recognized at lease commencement date based on the present value of remaining lease payments over the lease terms. The Company considers only payments that are fixed and determinable at the time of lease commencement. See NOTE 7 for discussion of finance lease and see NOTE 16 for discussion of operating leases.

Segment Information

ASC 280 “Segment reporting” establishes standards for reporting information on operating segments in interim and annual financial statements. Operating segments are defined as the components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Our chief operating decision makers direct the allocation of resources to operating segments based on the profitability, cash flows, and growth opportunities of each respective segment.

The Company currently has two operating segments, Gujia, MM Future, MMBD Advisory and HC Securities, and MM Global. See NOTE 18 for details.

Income Taxes

The Company accounts for income taxes using the asset/liability method prescribed by ASC 740, “Income Taxes.” Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. For the years ended December 31, 2021, 2020 and 2019, the Company had no significant uncertain tax positions that qualify for either recognition or disclosure in the financial statements. Tax years that remain subject to examination are the years ended December 31, 2021, 2020 and 2019. The Company recognizes interest and penalties related to significant uncertain income tax positions in other expense. No such interest and penalties incurred for the years ended December 31, 2021, 2020 and 2019.

Foreign Currency Translation

The reporting currency of the Company is the U.S. dollar. The functional currency of the parent company, MMTEC, and MM Future, MM Fund, MM Capital, MM SPC, MMBD Trading, HC securities, MM Global, Fundex SPC and MMBD Advisory is the U.S. dollar and the functional currency of Gujia is the Chinese Renminbi (“RMB”). For the subsidiary whose functional currency is the RMB, result of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange rates. As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with the changes in the corresponding balances on the balance sheets. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income/loss.

F-13

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. All of the Company’s revenue and expense transactions are transacted in the functional currency of the operating subsidiaries. The Company does not enter into any material transaction in foreign currencies. Transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company.

The consolidated balance sheet amounts, with the exception of equity, as of December 31, 2021 and 2020, were translated at RMB 6.3757 to $1.00 and RMB 6.5249 to $1.00, respectively. Equity accounts were stated at their historical rates. The average translation rates applied to consolidated statements of operations and comprehensive loss and cash flows for the years ended December 31, 2021, 2020 and 2019 were RMB 6.4515, RMB 6.8976, and RMB 6.8985 to $1.00, respectively.

Comprehensive Loss

Comprehensive loss is comprised of net loss and all changes to the statements of shareholders’ equity, except those due to investments by shareholders, changes in paid-in capital and distributions to shareholders. For the Company, comprehensive loss for the years ended December 31, 2021, 2020 and 2019 consisted of net loss and unrealized income/loss from foreign currency translation adjustment.

Reclassification

Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net earnings and financial position.

Business Combinations

The Company accounts for its business combination using the acquisition method of accounting in accordance with ASC 805, Business Combinations. The cost of an acquisition is measured as the aggregate of the acquisition date fair values of the assets transferred and liabilities incurred by the Company to the sellers and equity instruments issued. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date, irrespective of the extent of any noncontrolling interests. The excess of (i) the total costs of acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated statements of operations and comprehensive loss. During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded on the consolidated statements of operations and comprehensive loss.

In a business combination achieved in stages, the Company remeasures the previously held equity interests in the acquiree when obtaining control at its acquisition date fair value and the remeasurement gain or loss, if any, is recognized on the consolidated statements of operations and comprehensive loss.

Share-based Compensation

Share based compensation arise from share-based awards, including share options for the purchase of the Company’s ordinary shares. In June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”) to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees. The Company adopted ASU 2018-07 on January 1, 2019, and accounts for share-based compensation to nonemployees under the fair value method which requires all such compensation to be calculated based on the fair value at the measurement date (generally the grant date), and recognized in the statement of operations over the requisite service period. The Company recognized $1,024,361 and $1,005,000 share-based compensation for the years ended December 31, 2021 and 2020, respectively. See details in NOTE 14.

F-14

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Per Share Data

ASC Topic 260 “Earnings per Share,” requires presentation of both basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company.

Basic net loss per common share are computed by dividing net loss available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. Common stock equivalents are not included in the calculation of diluted loss per common share if their effect would be anti-dilutive. The following table presents a reconciliation of basic and diluted net loss per common share:

|  | Year Ended December 31, 2021 |  |  | Year Ended December 31, 2020 |  |  | Year Ended December 31, 2019 |
Net loss for basic and diluted net loss per share of common stock |  | $ | (7,050,755 | ) |  | $ | (3,181,596 | ) |  | $ | (2,243,234 | )
Weighted average common stock outstanding – basic and diluted |  |  | 24,504,462 |  |  |  | 20,385,574 |  |  |  | 20,013,288 |
Net loss per common share - basic and diluted |  | $ | (0.29 | ) |  | $ | (0.16 | ) |  | $ | (0.11 | )

The Company did not have any common stock equivalents and potentially dilutive common stock outstanding during the years ended December 31, 2021, 2020 and 2019.

Related Parties

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all significant related party transactions in NOTE 12.

Fiscal Year End

The Company has adopted a fiscal year end of December 31st.

F-15

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments (Topic 326)”, and issued subsequent amendments to the initial guidance, transitional guidance and other interpretive guidance between November 2018 and March 2020 within ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11, ASU 2020-02 and ASU 2020-03. ASU 2016-13 introduces new guidance for credit losses on instruments within its scope, which significantly changes the way entities recognize impairment of many financial assets by requiring immediate recognition of estimated credit losses expected to occur over their remaining life, instead of when incurred. For smaller reporting companies, the guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. All entities may adopt this ASU through a cumulative effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). The amendments in ASU 2016-13 and 2018-19 are effective for the Company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes”, which removes specific exceptions to the general principles in Topic 740 and to simplifies accounting for income taxes. The guidance is effective for public business entities for fiscal years beginning after December 15, 2020 and for interim periods within those fiscal years. The Company adopted ASU 2019-12 on January 1, 2021. The adoption did not have an impact on the Company’s consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815”, which clarifies the interaction of the accounting for equity investments under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The guidance is effective for public business entities for fiscal years beginning after December 15, 2020 and for interim periods within those fiscal years. The Company adopted ASU 2020-01 on January 1, 2021. The adoption did not have an impact on the Company’s consolidated financial statements.

NOTE 4 – LOAN RECEIVABLE, NET

In December 2021, the Company extended a loan to Cacti Fintec Limited in an amount of $2.1 million. The loan bears an interest rate of 3.78% per annum with a maturity date of December 24, 2022. As of December 31, 2021, the Company expects to fully collect the balance and therefore has not created any allowance for it.

Pursuant to the investment agreement dated as of September 1, 2021, the Company has agreed to invest $350,000 to acquire a 4.99% interest in HuaMei Trading Management Limited (“HuaMei Trading”), a Hong Kong corporation. HuaMei Trading acquired a wholly-owned subsidiary, Xiaosong Xiaoya (Chongqing) Technology Co., Ltd (“Xiaosong Xiaoya”) on January 25, 2021. Xiaosong Xiaoya was incorporated in People’s Republic of China (“PRC”) on January 25, 2021. HuaMei Trading is a financial technology company which provides data service. As the Company changed its investment strategy and considered operation risks, on December 5, 2021, HuaMei Trading has agreed to return $350,000 in full before December 5, 2022. The balance of $350,000 was transferred into an interest bearing loan. Term of the loan is December 5, 2021 to December 4, 2022, and the interest rate is 3.85% per annum.

F-16

NOTE 4 – LOAN RECEIVABLE, NET (continued)

Pursuant to the loan agreement dated November 5, 2021, the Company has agreed to loan $200,000 to HuaMei Trading. Term of the loan is from November 12, 2021 to November 11, 2022, and the interest rate is 3.85% per annum.

Considering that the business conditions of HuaMei Trading were not as expected, the Company recorded an allowance for bad debts of $550,000 to fully reserve the loan to Huamei Trading, which was included in “Other general and administrative expenses” on the accompanying consolidated statements of operations and comprehensive loss.

NOTE 5 – LOAN RECEIVABLE – RELATED PARTY

Pursuant to the loan agreement dated August 10, 2019, the Company has agreed to loan RMB548,500 (approximately $79,000) to Zhengtong Huazhi (Beijing) Technology Co., Ltd (“Zhengtong Huazhi”). Term of the loan is from August 10, 2019 to August 11, 2020, and interest rate is 4.35% per annum. Zhengtong Huazhi is a wholly-owned subsidiary of Xtransfer Tech Limited (“Xtransfer”), a Hong Kong corporation and an equity investee of the Company. The loan and related interest have been fully collected during the year ended December 31, 2020.

On January 1, 2020, the Company invested RMB 5.7 million (approximately $817,000) to acquire a 35% equity interest in Xtransfer. As Xtransfer failed to fulfill the restrictive terms prescribed in the investment agreement, pursuant to the supplementary investment agreement dated October 31, 2020, Xtranfer has agreed to return RMB 2.6 million (approximately $399,000) to the Company and reduce the Company’s equity interest in Xtransfer to 19%. As of December 31, 2020, the Company has received RMB 2.0 million (approximately $306,000) from Xtransfer. The remaining RMB 0.6 million (approximately $93,000) was transferred into non-interest bearing loan and was recorded as “loan receivable - related party” on the accompanying consolidated balance sheet as of December 31, 2020. The loan has been fully collected during the year ended December 31, 2021.

NOTE 6 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

As of December 31, 2021 and 2020, prepaid expenses and other current assets consisted of the following:

|  | December 31, 2021 |  |  | December 31, 2020 |
Prepaid professional service fees |  | $ | 111,200 |  |  | $ | 25,190 |
Other receivables |  |  | 30,546 |  |  |  | 28,181 |
Deposits |  |  | - |  |  |  | 117,346 |
Others |  |  | 103,275 |  |  |  | 17,277 |
|  | $ | 245,021 |  |  | $ | 187,994 |

F-17

NOTE 7 – PROPERTY AND EQUIPMENT, NET

As of December 31, 2021 and 2020, property and equipment consisted of the following:

|  | Useful life |  | December 31, 2021 |  |  | December 31, 2020 |
Office equipment and furniture |  | 3 - 5 Years |  | $ | 166,979 |  |  | $ | 142,482 |
Leasehold improvement |  | The lesser of remaining lease term or 2 - 3 Years |  |  | 92,358 |  |  |  | 90,246 |
Software |  | 1 - 3 Years |  |  | 13,018 |  |  |  | 12,721 |
Finance lease right-of-use asset |  | 4 Years |  |  | 165,242 |  |  |  | - |
|  |  |  |  | 437,597 |  |  |  | 245,449 |
Less: accumulated depreciation |  |  |  |  | (170,164 | ) |  |  | (142,567 | )
|  |  |  | $ | 267,433 |  |  | $ | 102,882 |

For the years ended December 31, 2021, 2020 and 2019, depreciation expense amounted to $40,130, $54,576 and $25,839, respectively, all of which were included in operating expenses.

The Company entered into a finance vehicle lease in 2021 and the finance lease right-of-use asset with a net carrying amount of $161,111 as of December 31, 2021 was included in property and equipment, net. Finance lease liabilities was nil as of December 31, 2021. The Company made cash payments of $163,301 for finance lease liabilities during the year ended December 31, 2021, which is included within the financing activities section on the consolidated statements of cash flows.

NOTE 8 – LONG-TERM INVESTMENTS

The Company’s long-term investments consist of equity investments without readily determinable fair value which were accounted for using measurement alternative as of December 31, 2021 and 2020. It also had an equity investment accounted for using equity method prior to the return of investment on October 31, 2020.

Equity Investment Using Measurement Alternative

On July 1, 2019, the Company invested RMB 1.0 million (approximately $143,000) to acquire a 4.9% interest in Caishang Education Technology (Beijing) Co., Ltd (“Caishang”). Since the Company does not exercise significant influence over Caishang and Caishang does not have readily determinable fair value as a privately held Company, the investment was accounted for using measurement alternative, in which the Company record the investment at cost, less impairment, and plus or minus subsequent adjustments for observable price changes.

On January 1, 2020, the Company invested RMB 5.7 million (approximately $817,000) to acquire a 35% interest in Xtransfer. As Xtransfer failed to fulfill the restrictive terms prescribed in the investment agreement, on October 31, 2020, Xtranfer has agreed to return RMB 2.6 million (approximately $399,000) to the Company and reduce the Company’s interest to 19%. The investment was accounted for under the equity method prior to the return of investment, and the carrying amount of the investment on October 31, 2020 was RMB 2.8 million (approximately $425,000). Since the Company no longer has significant influence over Xtransfer after the return of investment and Xtransfer does not have readily determinable fair value as a privately held Company, the remaining investment was accounted for using measurement alternative, in which the initial basis of the investment is the carrying amount as of October 31, 2020 and subsequently adjusted for any impairment and observable price changes.

The Company reviews its investments for impairment based on performance and financial position of the investees as well as other evidence of market value. Such evaluation includes, but is not limited to, reviewing the investee’s cash position, recent financing, projected and historical financial performance, cash flow forecasts and financing needs. The Company recorded impairment on long-term investments for an amount of RMB3,776,275 (approximately $585,000) during the year ended December 31, 2021. As a result, the carrying value of long-term investments was reduced to zero.

Pursuant to the investment agreement dated as of September 1, 2021, the Company has agreed to invest USD 350,000 to acquire a 4.99% interest in HuaMei Trading Management Limited (“HuaMei Trading”), a Hong Kong corporation. HuaMei Trading acquired a wholly-owned subsidiary, Xiaosong Xiaoya (Chongqing) Technology Co., Ltd (“Xiaosong Xiaoya”) on January 25, 2021. Xiaosong Xiaoya was incorporated in People’s Republic of China (“PRC”) on January 25, 2021. HuaMei Trading Management Limited is a financial technology company which provides data service. As the Company changed its investment strategy and considered operation risks, on December 5, 2021, HuaMei Trading has agreed to return $350,000 in full before December 5, 2022.The investment of $350,000 was transferred into an interest bearing loan and was recorded as “loan receivable” on the accompanying consolidated balance sheet, which was fully reserved as of December 31, 2021.

F-18

NOTE 8 – LONG-TERM INVESTMENTS (continued)

Equity Method Investment

On March 28, 2018, the Company acquired a 24.9% interest in MMBD Trading by cash payment of $12,450. The remaining 75.1% of MMBD Trading was owned by 32.7% shareholders of the Company. The Company agreed to purchase from the shareholders the remaining 75.1% of outstanding securities of MMBD Trading on April 25, 2019, and the acquisition was closed on October 18, 2019 (See NOTE 9). The investment was accounted for under the equity method prior to the acquisition. Equity method investment is recorded at original cost and adjusted periodically to recognize: (i) the Company’s proportionate share of investee’ net income or losses after the date of the investment; (ii) additional contributions made or distributions received; and (iii) impairment losses relating to the investment. During the period from January 1, 2019 through October 18, 2019, the Company has paid in cash of $87,762 in equity method investment, and recognized a loss on equity method investment in an amount of $49,413. On October 18, 2019, the Company remeasured the investment at its share of MMBD Trading’s fair value and recognized a remeasurement gain of $42,415, which is recorded as part of the “other expenses” in the Company’s consolidated statement of operations and comprehensive loss.

As mentioned above, the investment in Xtransfer was accounted for under the equity method from January 1, 2020 through October 31, 2020. Equity method investment is recorded at original cost and adjusted periodically to recognize: (i) the Company’s proportionate share of investee’ net income or losses after the date of the investment; (ii) additional contributions made or distributions received; and (iii) impairment losses relating to the investment. During the period from January 1, 2020 through October 31, 2020, the Company has recognized a loss on equity method investment in an amount of RMB 318,000 (approximately $46,000), which is recorded as “loss on equity method investment” in the Company’s consolidated statement of operations and comprehensive loss. As of October 31, 2020, the carrying amount of the investment was RMB 2.8 million (approximately $425,000). The remaining investment was accounted for using measurement alternative, and the investment under equity method as of December 31, 2021 and 2020 was nil.

NOTE 9 – BUSINESS COMBINATION

Pursuant to the Securities Purchase Agreement dated April 25, 2019, the Company agreed to purchase from Xiangdong Wen and Zhen Fan the remaining 75.1% of outstanding securities of MMBD Trading Ltd. Prior to the consummation of this acquisition, (i) the Company held 24.9% of outstanding securities of MMBD Trading, and (ii) each Xiangdong Wen (the Chairman of the board and chief executive officer of the Company, a 14.9% shareholder of the Company) and Zhen Fan (the Company’s former chief executive officer, a 13% shareholder of the Company) beneficially owned 37.55% of outstanding securities of MMBD. The Company has agreed to pay the aggregate purchase price of $185,000 for such securities to be equally divided between the two shareholders of MMBD Trading, also see NOTE 12. The acquisition closed on October 18, 2019. Following and as a result of this acquisition, MMBD has become a wholly-owned subsidiary of the Company.

The Company remeasured the previously held equity interests in MMBD Trading at its acquisition date and determined the fair value to be $61,338, and recognized a remeasurement gain of $42,415, which is recorded as part of the “other expense” in the Company’s consolidated statement of operations and comprehensive loss for the year ended December 31, 2019. The financial results of MMBD Trading have been included in the Company’s consolidated financial statements from October 18, 2019.

The following table summarizes the fair value of the assets acquired and liabilities assumed as of the date of acquisition and total purchase price:

|  | Amount |
Cash & cash equivalents |  | $ | 75,506 |
Accounts receivable |  |  | 75,629 |
Prepaid expenses and other current assets |  |  | 770 |
Security deposit, current |  |  | 72,214 |
Accounts payable |  |  | (104,821 | )
Other payables |  |  | (677 | )
Net assets acquired |  | $ | 118,621 |
Cash paid for acquisition |  |  | 185,000 |
Fair value of existing equity interest in MMBD Trading |  |  | 61,338 |
Total purchase price |  | $ | 246,338 |
Goodwill |  | $ | 127,717 |

F-19

NOTE 9 – BUSINESS COMBINATION (continued)

Goodwill represents the excess of the purchase consideration over the fair value of the identifiable assets acquired and liabilities assumed from the acquired entity as a result of the Company’s acquisitions of interests in its subsidiaries. The Company recognized $127,717 impairment loss on goodwill during the year ended December 31, 2019, which is recorded as part of the “other expense” in the Company’s consolidated statement of operations and comprehensive loss.

The Company did not have business combination during the years ended December 31, 2021 and 2020.

NOTE 10 – ACCRUED LIABILITIES AND OTHER PAYABLES

As of December 31, 2021 and 2020, accrued liabilities and other payables consisted of the following:

|  | December 31, |  |  | December 31, |
|  | 2021 |  |  | 2020 |
Accrued professional service fees |  | $ | 105,186 |  |  | $ | 94,041 |
Accrued technical service fees |  |  | 188,215 |  |  |  | - |
Others |  |  | 78 ,767 |  |  |  | 758 |
|  | $ | 372,168 |  |  | $ | 94,799 |

NOTE 11 – LOAN PAYABLE

On April 22, 2020, the company entered into a loan of $41,250 pursuant to the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) as administered by the U.S. Small Business Administration (the "SBA"). The loan proceeds will be used to cover payroll costs, rent, interest, and utilities. The company believes it has met the requirements for 100% forgiveness on December 4, 2020. The PPP loan Forgiveness Application was approved by SBA on January 12, 2021 and the entire PPP Loan amount of $41,250 as well as the interest of $298 has been forgiven in full. There is no further action the company needs to take.

NOTE 12 – RELATED PARTY TRANSACTIONS

Loan Receivable – Related Party

As of December 31, 2021 and 2020, the Company had loan receivable from a related party of nil and $92,831, respectively. See details in NOTE 5.

Due to Related Parties

As of December 31, 2021 and 2020, due to related parties consisted of the following:

|  | December 31, 2021 |  |  | December 31, 2020 |
Advances from Xiangdong Wen (1) |  | $ | - |  |  | $ | 2,339 |
Advances to Zhen Fan (2) |  |  | - |  |  |  | (906 | )
|  | $ | - |  |  | $ | 1,433 |

| (1) | Xiangdong Wen is the chief executive officer, chairman of the board and 10.4% shareholder of the Company.

| (2) | Zhen Fan is the former chief executive officer and 9.4% shareholder of the Company.

From time to time, Xiangdong Wen, Zhen Fan and Hinman Au, a director of the Company, provided advances to the Company or made payment on behalf of the Company to supplement its working capital needs. Those advances are short-term in nature, non-interest bearing, unsecured and payable on demand. The expenses paid on behalf of the Company were nil, $4,000, and $179,503 for the years ended December 31, 2021, 2020 and 2019, respectively.

F-20

NOTE 12 – RELATED PARTY TRANSACTIONS (continued)

Acquisition of MMBD Trading

During the year ended December 31, 2019, the Company acquire 75.1% of equity interests in MMBD Trading from Xiangdong Wen and Zhen Fan by cash payment of $185,000. See NOTE 9 for details.

NOTE 13 – INCOME TAXES

British Virgin Islands (“BVI”)

Under the current laws of BVI, MMTEC and MMBD Trading is not subject to tax on income or capital gain. In addition, payments of dividends by the Company to their shareholders are not subject to withholding tax in the BVI.

Hong Kong

Subsidiaries in Hong Kong are subject to 16.5% income tax on their taxable income generated from operations in Hong Kong. The first HK$2 million of profits arising in or derived from Hong Kong are taxed at 8.25% and any assessable profits over HK$2 million are taxed at 16.5%. The Company’s subsidiaries, MM Future and MM Global Capital are incorporated in Hong Kong and had a loss for the years ended December 31, 2021, 2020 and 2019. Therefore, there was no provision for income taxes in the years ended December 31, 2021, 2020 and 2019.

Cayman Islands

There is no income tax for companies domiciled in the Cayman Islands. Accordingly, MM Fund, MM Capital, Fundex SPC and MM SPC do not present any income tax provisions related to Cayman Islands tax jurisdiction, where these four companies are domiciled.

United States

MM Global was incorporated in the State of Illinois and operates as a securities broker/dealer in New York City. MMBD Advisory is formed as an investment advisor firm under the laws of the State of New York. MM Global and MMBD Advisory are subject to Federal, State, and Local income taxes on its net income. MM Global and MMBD Advisory had a net loss for the year ended December 31, 2021. MM Global had a net income of $47,451 for the year ended December 31, 2020, which was offset by the carried-forward tax losses. MMBD Advisory had a loss for the year ended December 31, 2020. As a result, no provision for income tax has been made in the years ended December 31, 2021 and 2020. MM Global and MMBD Advisory have determined that there are no material uncertain tax positions that require recognition or disclosure in its financial statements.

MM Global and MMBD Advisory’s income tax returns are subject to examination by the appropriate tax jurisdictions. As of December 31, 2021, MM Global and MMBD Advisory’s federal and state tax returns generally remain open for the last three years.

PRC

Gujia was incorporated in the PRC and are subject to PRC Enterprise Income Tax (“EIT”) on the taxable income in accordance with the relevant PRC income tax laws. On March 16, 2007, the National People’s Congress enacted a new enterprise income tax law, which took effect on January 1, 2008. The law applies a uniform 25% enterprise income tax rate to both foreign invested enterprises and domestic enterprises. In the years ended December 31, 2021, 2020 and 2019, Gujia were recognized as small low-profit enterprises and received a preferential income tax rate of 5%. In the years ended December 31, 2021, 2020 and 2019, Gujia and did not generate any taxable income. Therefore, there was no provision for income taxes in the years ended December 31, 2021, 2020 and 2019.

F-21

NOTE 13 – INCOME TAXES (continued)

The reconciliations of the statutory income tax rate and the Company’s effective income tax rate are as follows:

|  | For the Year Ended |  |  | For the Year Ended |  |  | For the Year Ended |
|  | December 31, 2021 |  |  | December 31, 2020 |  |  | December 31, 2019 |
Hong Kong statutory income tax rate |  |  | 16.5 | % |  |  | 16.5 | % |  |  | 16.5 | %
Valuation allowance recognized with respect to the loss in the Hong Kong companies |  |  | (16.5 | )% |  |  | (16.5 | )% |  |  | (16.5 | )%
PRC statutory income tax rate |  |  | 25.0 | % |  |  | 25.0 | % |  |  | 25.0 | %
Effect of income tax exemptions and reliefs |  |  | (20.0 | )% |  |  | (20.0 | )% |  |  | (20.0 | )%
Valuation allowance recognized with respect to the loss in the PRC companies |  |  | (5.0 | )% |  |  | (5.0 | )% |  |  | (5.0 | )%
US corporate tax rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
Valuation allowance recognized with respect to the loss in the US companies |  |  | (21.0 | )% |  |  | (21.0 | )% |  |  | (21.0 | )%
Total |  |  | 0.0 | % |  |  | 0.0 | % |  |  | 0.0 | %

As of December 31, 2021, 2020 and 2019, the components of the Company’s deferred income tax assets were set forth below:

|  | December 31, 2021 |  |  | December 31, 2020 |  |  | December 31, 2019 |
Deferred Tax Assets: |  |  |  |  |  |  |  |  |
Net operating losses carry forward |  | $ | 859,455 |  |  | $ | 645,345 |  |  | $ | 526,519 |
Cutoff adjustments |  |  | 47,704 |  |  |  | - |  |  |  | - |
Gross deferred tax assets |  |  | 907,159 |  |  |  | 645,345 |  |  |  | 526,519 |
Less: valuation allowance |  |  | (907,159 | ) |  |  | (645,345 | ) |  |  | (526,519 | )
Net deferred tax assets |  | $ | - |  |  | $ | - |  |  | $ | - |

As of December 31, 2021, the Company has a net operating loss (“NOL”) carry forward for tax purposes of $11,628,112 available to offset future taxable income. Most of the NOLs from its subsidiaries as of December 31, 2021 will expire in years 2022 to 2026 if not utilized. The NOL from the MM Global and MMBD Advisory as of December 31, 2021 will expire in years 2037 to 2041 if not utilized.

The Company provided a valuation allowance equal to the deferred income tax asset for the years ended December 31, 2021, 2020 and 2019. The management believes that the Company’s cumulative losses arising from recurring business of subsidiaries constituted significant strong evidence that most of the deferred tax assets would not be realizable and this evidence outweighed the expectations that the Company would generate future taxable income. As such, deferred tax assets arise from net operating losses are fully allowed for the years ended December 31, 2021, 2020 and 2019. The increase in the allowance was $261,814, $118,826, and $137,203 for the years ended December 31, 2021, 2020 and 2019, respectively.

Accounting for Uncertainty in Income Taxes

The tax authority of the PRC government conducts periodic and ad hoc tax filing reviews on business enterprises operating in the PRC after those enterprises complete their relevant tax filings. Therefore, the Company’s PRC entities’ tax filings results are subject to change. It is therefore uncertain as to whether the PRC tax authority may take different views about the Company’s PRC entities’ tax filings, which may lead to additional tax liabilities. Tax years that remain subject to examination are the years ended December 31, 2021, 2020 and 2019.

ASC 740 requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. The management evaluated the Company’s tax positions and concluded that no provision for uncertainty in income taxes was necessary as of December 31, 2021, 2020 and 2019.

F-22

NOTE 14 – SHAREHOLDERS’ EQUITY

Common Stock

The Company is authorized to issue 500,000,000 shares of common stock with a par value of $0.001 per share.

On January 4, 2018, MMTEC, Inc. was incorporated in the British Virgin Islands. On the same day, the Company issued 20,000 common shares at $0.001 per share to its two directors/incorporators with cash proceeds of $20. On March 23, 2018, the Company issued 8,980,000 common shares at $0.18 per share to eight individuals and four companies for total cash proceeds of $1,616,400. On May 23, 2018, the Company issued 45,000,000 common shares at $0.001 per share to the same 12 shareholders for total cash proceeds of $45,000.

On January 7, 2019, the Company completed its initial public offering on the NASDAQ Capital Market under the symbol of “MTC”. The Company offered 1,800,000 common shares at $4 per share. Net proceeds raised by the Company from the initial public offering amounted to $6,478,801 after deducting underwriting discounts and commissions and other offering expenses. Out of the $6.5 million net proceeds, $500,000 was deposited into an escrow account to satisfy the initial $500,000 in potential indemnification obligations arising during an escrow period of two years following the closing date of January 7, 2019. On January 7, 2019, the Company sold additional 270,000 common shares at $4 per share. Net proceeds raised by the Company amounted to $993,600 after deducting underwriting discounts. As a result, the Company raised a total of $7,472,401 from the issuance of 2,070,000 shares of common stock in January 2019.

Pursuant to the service agreement dated July 21, 2020, the company issued 750,000 common shares to Tony Wayne Network Technology Co., Limited as compensation of a Hong Kong and China based consulting program. The stock-based compensation of $1,005,000 was recognized as part of the “professional fees” in the Company’s consolidated statement of operations and comprehensive loss.

On February 22, 2021 the Company entered into a Securities Purchase Agreement with certain institutional investors in connection with a registered direct offering of 4,300,000 of the Company’s common shares, at a purchase price of $3.70 per share. The Company sold the common shares for aggregate gross proceeds of $15,910,000. The net proceeds from the transactions were $14,637,200, after deducting certain fees due to the placement agent and the Company’s transaction expenses, and will be used for working capital and general corporate purposes.

Pursuant to the service agreement dated September 25, 2021, the company issued 426,200 shares to Fortune Fintech Limited (“Fortune”) on December 28, 2021 as compensation of an investor relationship consulting program. The fair value of the shares on the grant date was $319,820.

On December 20, 2021 the Company entered into a Securities Purchase Agreement with a single investor pursuant to which the investor will make a $2,000,000 investment in the Company in a Regulation S private placement. Under the terms of the Purchase Agreement, the investor will purchase 5,000,000 common shares of the Company at a purchase price of $0.40 per share. The gross proceeds of the transaction were $2.0 million before deducting fees and other expenses.

Pursuant to the restricted stock award agreement dated December 17, 2021, the board issued 531,300 shares to employees as 2020 awards on December 31, 2021. The fair value of the shares on the grant date was $475,514.

Pursuant to the restricted stock award agreement dated December 24, 2021, the board issued 292,500 shares to former employees on December 31, 2021. The fair value of the shares on the grant date was $229,028.

F-23

NOTE 14 – SHAREHOLDERS’ EQUITY (continued)

Share-based compensation

On January 14, 2020, 2019 Share Incentive Plan approved by the Company’s shareholders at the Annual Meeting, the purpose of which is to provide an incentive for employees and consultant contributing to the Company. The Company has Stock Option Plan with 2,000,000 shares authorized for issuan ce under the Plan. The fair value of restricted share units granted with service conditions is estimated based on the fair market value of the underlying ordinary shares of the Company on the date of grant.

Pursuant to the service agreement dated July 21, 2020, the company issued 750,000 shares to Tony Wayne Network Technology Co., Limited (“Tony Wayne”) on July 30, 2020 as compensation of a Hong Kong and China based consulting program. The fair value of the shares on the grant date was $1,005,000. The Company recognized the $1,005,000 in full as stock-based compensation to nonemployee during the year ended December 31, 2020.

Pursuant to the service agreement dated September 25, 2021, the company issued 426,200 shares to Fortune Fintech Limited (“Fortune”) on December 28, 2021 as compensation of an investor relationship consulting program. The fair value of the shares on the grant date was $319,820.

Subject to 2019 Share Incentive Plan, pursuant to the restricted stock award agreement dated December 17, 2021, the board issued 531,300 shares to employees as 2020 awards on December 31, 2021. The fair value of the shares on the grant date was $475,514. Pursuant to the restricted stock award agreement dated December 24, 2021, the board issued 292,500 shares to former employees on December 31, 2021. The fair value of the shares on the grant date was $229,028.

The Company recognized the fair value of the shares $1,024,361 as stock-based compensation to employee and nonemployee during the year ended December 31, 2021. As of the date of this report, all the authorized shares under the 2019 Share Incentive Plan were issued.

On January 17, 2022, 2021 Share Incentive Plan was approved by the Company’s shareholders at the Annual Meeting, the purpose of which is to provide an incentive for employees and consultant contributing to the Company. The Company has Stock Option Plan with 3,000,000 shares authorized for issuance under the Plan. The fair value of restricted share units granted with service conditions is estimated based on the fair market value of the underlying ordinary shares of the Company on the date of grant. As of the date of this report, there were 3,000,000 shares available for issuance under the 2021 Share Incentive Plan.

NOTE 15 - STATUTORY RESERVE

Gujia operate in the PRC, are required to reserve 10% of their net profit after income tax, as determined in accordance with the PRC accounting rules and regulations. Appropriation to the statutory reserve by the Company is based on profit arrived at under PRC accounting standards for business enterprises for each year. The profit arrived at must be set off against any accumulated losses sustained by the Company in prior years, before allocation is made to the statutory reserve. Appropriation to the statutory reserve must be made before distribution of dividends to shareholders. The appropriation is required until the statutory reserve reaches 50% of the registered capital. This statutory reserve is not distributable in the form of cash dividends.

Gujia had sustained losses since establishment. As of December 31, 2021, 2020 and 2019, no appropriation to statutory reserves was required as it incurred recurring net losses.

F-24

NOTE 16 – COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company entered into various operating lease agreements for office space. As a result of the adoption of ASC 842, the Company recognized RMB2,057,797 (approximately $295,000) of right-of-use assets and corresponding short-term leasing liabilities recorded in “Lease liabilities, current” and long-term leasing liabilities recorded in “Lease liabilities, non-current” in total of RMB 1,356,772 (approximately $194,000) on the consolidated balance sheets as of January 1, 2019. The adoption had no material impact on the company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2019 or the opening balances of retained earnings as of January 1, 2019.

The company leases office space under non-cancelable operating lease agreements, which expire at various dates in 2022 and 2024. As of December 31, 2021, the Company’s operating leases had a weighted average remaining lease term of 1.57 years and a weighted average discount rate of 4.78%. Future lease payments under operating leases as of December 31, 2021 were as follows:

|  | December 31, 2021 |
2022 |  | $ | 373,949 |
2023 |  | $ | 58,783 |
2024 |  | $ | 48,095 |
Total future lease payments |  | $ | 480,827 |
Less imputed interest |  | $ | (17,008 | )
Total lease liabilities |  | $ | 463,819 |
Less: current portion |  | $ | 356,274 |
Operating lease liability, non-current |  | $ | 107,545 |

Lease expense is recognized on a straight-line basis over the lease term. For the year ended December 31, 2021, the Company had operating lease costs of $385,126 and short-term lease costs of $27,490. For the year ended December 31, 2020, the Company had operating lease costs of $387,459 and short-term lease costs of $16,123. Cash paid for amounts included in the measurement of operating lease liabilities were $396,569 and $313,120 during the years ended December 31, 2021 and 2020, respectively.

Contingencies

In the normal course of business, MM Global is engaged in various trading and brokerage activities on a principal and agency basis through a clearing broker. As a regulated FINRA broker-dealer, MM Global is subject to regulatory trading inquiries and investigations to determine whether any violations of federal securities or FINRA rules may have occurred. As such, MM Global has responded to FINRA inquires and continues to be subject to an open matter. The open matter could result in censures fines or other sanctions. The potential loss on contingent liability is probable but the amount of the loss cannot be reasonably estimated by the Company. Consequently, no accruals have been recorded with respect to the FINRA inquiries as of December 31, 2021.

NOTE 17 - CONCENTRATIONS

Customer

The following table sets forth information as to each customer that accounted for 10% or more of the Company’s revenue for the years ended December 31, 2021, 2020 and 2019. There is no customer that accounted for 10% or more of the Company’s revenue for the years ended December 31, 2020.

Customer |  | Year Ended December 31, 2021 |  |  | Year Ended December 31, 2020 |  |  | Year Ended December 31, 2019 |
A |  |  | * | % |  |  | * | % |  |  | 28.0 | %
B |  |  | * | % |  |  | * | % |  |  | 15.2 | %
C |  |  | * | % |  |  | * | % |  |  | 33.6 | %
E |  |  | 11.1 | % |  |  | * | % |  |  | * | %

* | Less than 10%

F-25

NOTE 18 – SEGMENT INFORMATION

The Company currently has two operating segments, (i) Gujia, MM Future, HC Securities and MMBD Advisory provide market data services and fund management services, and (ii) MM Global operates as an introducing broker that clears all transactions through a clearing broker dealer and earns commission income and other related income from customers. Unallocated amounts that do not relate to an operating segment have been allocated to “Unallocated.” Since most of the Company’s long-lived assets are located in the PRC, no geographical information on long-lived assets is presented. Refer to Note 3 for disaggregated revenue information by geographical region attributed on the basis of the location where the revenue is originated.

The following tables present summary information by segment:

|  | Gujia, MM Future, HC Securities and MMBD Advisory |  |  | MM Global |  |  | Unallocated |  |  | Total |
Year Ended December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |
REVENUE |  | $ | 260,678 |  |  | $ | 392,358 |  |  | $ | - |  |  | $ | 653,036 |
GROSS PROFIT |  | $ | 119,376 |  |  | $ | 392,358 |  |  | $ | - |  |  | $ | 511,734 |
NET LOSS |  | $ | (4,008,966 | ) |  | $ | (451,204 | ) |  | $ | (2,590,585 | ) |  | $ | (7,050,755 | )
DEPRECIATION AND AMORTIZATION |  | $ | 40,130 |  |  | $ | - |  |  | $ | - |  |  | $ | 40,130 |
CAPITAL EXPENDITURE |  | $ | 37,068 |  |  | $ | - |  |  | $ | - |  |  | $ | 37,068 |
Year Ended December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
REVENUE |  | $ | 94,637 |  |  | $ | 647,488 |  |  | $ | - |  |  | $ | 742,125 |
GROSS PROFIT |  | $ | 87,232 |  |  | $ | 647,488 |  |  | $ | - |  |  | $ | 734,720 |
NET INCOME (LOSS) |  | $ | (1,576,531 | ) |  | $ | 46,280 |  |  | $ | (1,651,345 | ) |  | $ | (3,181,596 | )
DEPRECIATION AND AMORTIZATION |  | $ | 54,576 |  |  | $ | - |  |  | $ | - |  |  | $ | 54,576 |
CAPITAL EXPENDITURE |  | $ | 18,379 |  |  | $ | - |  |  | $ | - |  |  | $ | 18,379 |
Year Ended December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
REVENUE |  | $ | 161,832 |  |  | $ | 38,965 |  |  | $ | - |  |  | $ | 200,797 |
GROSS PROFIT |  | $ | 70,942 |  |  | $ | 38,965 |  |  | $ | - |  |  | $ | 109,907 |
NET LOSS |  | $ | (1,264,273 | ) |  | $ | (36,418 | ) |  | $ | (942,543 | ) |  | $ | (2,243,234 | )
DEPRECIATION AND AMORTIZATION |  | $ | 25,839 |  |  | $ | - |  |  | $ | - |  |  | $ | 25,839 |
CAPITAL EXPENDITURE |  | $ | 129,800 |  |  | $ | - |  |  | $ | - |  |  | $ | 129,800 |
As of December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
TOTAL ASSETS |  | $ | 6,204,026 |  |  | $ | 121,358 |  |  | $ | 8,262,117 |  |  | $ | 14,587,501 |
As of December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
TOTAL ASSETS |  | $ | 2,912,884 |  |  | $ | 295,064 |  |  | $ | 502,324 |  |  | $ | 3,710,272 |

F-26

NOTE 19 – SUBSEQUENT EVENTS

The following subsequent events were evaluated on April 22, 2022, the date the financial statements were issued.

Except as set forth below, there were no events that occurred subsequent to December 31, 2021 that require adjustment to or disclosure in the consolidated financial statements.

On January 17, 2022, the Company adopted the 2021 Equity Incentive Plan. The purpose of the 2021 Equity Incentive Plan is to attract and retain outstanding individuals as employees, directors and consultants of the Company and its subsidiaries, to recognize the contributions made to the Company and its subsidiaries by employees, directors and consultants, and to provide such employees, directors and consultants with additional incentive to expand and improve the profits and achieve the objectives of the Company and its subsidiaries, by providing such employees, directors and consultants with the opportunity to acquire or increase their proprietary interest in the Company through receipt of Awards.

On January 26, 2022, the Company received a letter (the “Notification Letter”) from the Listings Qualifications Department of The NASDAQ Stock Market LLC notifying the Company that the minimum closing bid price per share for its common stock was below $1.00 for a period of 30 consecutive business days and that the Company did not meet the minimum bid price requirement set forth in NASDAQ Listing Rule 5550(a)(2). The Notification Letter has no immediate effect on the listing or trading of the Company’s common stock on the NASDAQ Capital Market.

Pursuant to NASDAQ Listing Rule 5810(c)(3)(A), the Company has a compliance period of 180 calendar days, or until July 25, 2022 (the “Compliance Period”), to regain compliance with NASDAQ’s minimum bid price requirement. If at any time during the Compliance Period, the closing bid price per share of the Company's common stock is at least $1.00 for a minimum of 10 consecutive business days, NASDAQ will provide the Company a written confirmation of compliance and the matter will be closed.

F-27

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