UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, ~~2017~~2019

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

For the transition period from _________________________ to_________________________

Commission File Number: 001-38036

TAKUNG ART CO., LTD

(Exact name of registrant as specified in its charter)

Delaware		26-4731758
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~Flat/RM 03-04 20/F Hutchison House 10 Harcourt~~Room 1105 Wing On Plaza, 62 Mody Road, ~~Central,~~Tsim Sha Tsui, Kowloon, Hong Kong

(Address of principal executive offices) (Zip Code)

+852 3158 0977

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	TKAT	NYSE American

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.xYes¨No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every ~~interactive~~Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). xYes¨No

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

Large accelerated filer¨	Accelerated filer¨
Non-accelerated filer ~~(Do not check if a smaller reporting company)~~¨x	Smaller reporting companyx
	Emerging growth company¨

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

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d)of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.¨Yes¨No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The number of shares of common stock issued and outstanding as of November ~~14, 2017~~13, 2019 is ~~11,188,882.~~11,255,129.

FORM 10-Q

TAKUNG ART ~~CO,~~CO., LTD

INDEX

PART I –FINANCIAL INFORMATION

~~Item 1. Interim Condensed Consolidated Financial Statements (Unaudited)~~

Item 1. Financial Statements

TAKUNG ART CO., LTD AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in U.S. Dollars except Number of Shares)

	September 30,			December 31,			September 30,			December 31,
	2017			2016			2019			2018
	(Unaudited)						(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	14,887,890		$	13,395,337		$	6,086,637		$	7,974,884
Restricted cash		19,057,733			21,743,360			17,008,251			4,549,202
Account receivables, net		3,732,569			3,058,568			-			568,757
Prepayment and other current assets		870,231			968,446			579,107			955,249
Amount due from a related party								5,682,807			5,907,789
Loan receivables		6,806,623			6,374,046			1,958,672			2,391,350
Total current assets		45,355,046			45,539,757			31,315,474			22,347,231

Non-current assets
Property and equipment, net		2,104,107			2,065,182			941,374			1,445,679
Intangible assets		20,394			20,546			22,257			22,284
Deferred tax assets		294,676			243,772
Operating lease right-of-use assets								904,836			-
Deferred tax assets, net								776,896			611,738
Amount due from a related party, non-current								101,420			-
Other non-current assets		535,420			428,764			114,823			142,293
Total non-current assets		2,954,597			2,758,264			2,861,606			2,221,994
Total assets	$	48,309,643		$	48,298,021		$	34,177,080		$	24,569,225

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES
Current liabilities
Accrued expenses and other payables	$	780,800		$	608,883		$	522,929		$	641,692
Customer deposits		19,057,733			21,743,360			17,008,251			4,549,202
Advance from customers		-			360,248			10,227			8,995
Short-term borrowings from third parties		6,371,900			6,308,513			1,816,837			2,499,500
Amount due to related party		1,085,480			1,031,805
Taxes payable		1,094,885			549,897
Amount due to related parties								6,759,674			6,385,288
Operating lease liabilities – current								173,156			-
Tax payables								7,831			15,101
Total current liabilities		28,390,798			30,602,706			26,298,905			14,099,778
Deferred tax liabilities		45,301			62,618
Total non-current liabilities		45,301			62,618

Non-current liabilities
Operating lease liabilities, non-current								92,027			-
Amount due to a related party, non-current								197,520			-

Total liabilities		28,436,099			30,665,324			26,588,452			14,099,778

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY
Common stock (1,000,000,000 shares authorized; $0.001 par value; 11,188,882 shares issued and outstanding as of September 30, 2017; 11,169,276 shares issued and outstanding as of December 31, 2016)		11,189			11,169
SHAREHOLDERS’ EQUITY
Common stock (1,000,000,000 shares authorized; $0.001 par value; 11,255,129 shares issued and outstanding as of September 30, 2019; 11,226,025 shares issued and outstanding as of December 31, 2018)								11,255			11,226
Additional paid-in capital		5,928,455			5,532,426			6,318,645			6,281,790
Retained earnings		14, 229,809			13,172,671			1,514,907			4,479,133
Accumulated other comprehensive loss		(295,909	)		(1,083,569	)		(256,179	)		(302,702	)
Total stockholders’ equity		19,873,544			17,632,697
Total liabilities and stockholders’ equity	$	48,309,643		$	48,298,021
Total shareholders’ equity								7,588,628			10,469,447
Total liabilities and shareholders’ equity							$	34,177,080		$	24,569,225

The accompanying notes are an integral part of these ~~interim condensed~~ consolidated financial statements.

TAKUNG ART CO., LTD AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~

OPERATIONS AND COMPREHENSIVE ~~INCOME~~LOSS

(Stated in U.S. Dollars except Number of Shares)

(UNAUDITED)

For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
2017 2016 2017 2016
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue
Listing fee revenue $ 1,455,498 $ 2,968,534 $ 4,606,649 $ 8,166,072
Commission revenue 1,496,826 1,669,698 4,970,651 3,739,958
Gross management fee revenue 402,547 781,219 967,518 1,341,294
Annual fee revenue 140 440 859 869
Authorized agent subscription revenue - 322,318 - 966,059
Total revenue 3,355,011 5,742,209 10,545,677 14,214,252

Cost of revenue (292,168 ) (285,252 ) (822,335 ) (822,735 )

Gross profit 3,062,843 5,456,957 9,723,342 13,391,517

Operating expenses:
General and administrative expenses (2,498,848 ) (1,744,965 ) (7,311,128 ) (5,076,689 )
Selling expenses (624,151 ) (652,207 ) (1,272,010 ) (1,993,782 )

Income(loss)from operations (60,156 ) 3,059,785 1, 140,204 6,321,046

Other income and expenses:
Other income 186,259 163,738 440,470 314,268
Loan interest expense (152,059 ) (62,670 ) (455,762 ) (62,670 )
Exchange gain (loss) 177,652 (112,384 ) 526,603 (530,934 )
Total other income (loss) 211,852 (11,316 ) 511,311 (279,336 )

Income before income taxes 151,696 3,048,469 1,651,515 6,041,710

Income tax (expense) benefit (124,662 ) (596,732 ) (594,377 ) (1,377,078 )

Net income $ 27,034 $ 2,451,737 $ 1,057,138 $ 4,664,632

Foreign currency translation adjustment 311,485 10,172 787,660 18,322

Comprehensive income $ 338,519 $ 2,461,909 $ 1,844,798 $ 4,682,954

Earnings per common share– basic $ 0.00 $ 0.23 $ 0.10 $ 0.44
Earnings per common share– diluted 0.00 0.22 0.09 0.41
Weighted average number of common shares outstanding-basic 11,188,882 10,632,276 11,039,880 10,632,276
Weighted average number of common shares outstanding-diluted 11,248,688 11,365,597 11,398,082 11,277,845

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenue
Listing fee	$	-		$	-		$	284,090		$	3,978,735
Commission		939,164			253,331			1,655,244			3,557,411
Management fee		184,428			107,905			346,042			455,133
Annual fee		-			54			-			378
Authorized agent subscription revenue		-			-			-			191,623
Online artwork sales		-			2,244			-			8,548
Total revenue		1,123,592			363,534			2,285,376			8,191,828

Cost of revenue		(580,282	)		(299,482	)		(1,288,589	)		(2,173,296	)

Gross profit		543,310			64,052			996,787			6,018,532

Operating expenses:
General and administrative expenses		(1,159,502	)		(2,208,264	)		(3,322,547	)		(7,791,747	)
Selling expenses		(108,458	)		(149,035	)		(143,054	)		(851,173	)
Impairment loss-construction-in-progress					(326,227	)		-			(326,227	)
Total operating expenses		(1,267,960	)		(2,683,526	)		(3,465,601	)		(8,969,147	)

Loss from operations		(724,650	)		(2,619,474	)		(2,468,814	)		(2,950,615	)

Other income and expenses:
Other income (expenses)		13,125			65,487			(88,637	)		470,752
Loan interest expense		(18,015	)		(199,821	)		(18,015	)		(504,287	)
Exchange loss		(515,808	)		(870,218	)		(564,233	)		(1,132,510	)
Total other expenses		(520,698	)		(1,004,552	)		(670,885	)		(1,166,045	)

Loss before provision for income taxes		(1,245,348	)		(3,624,026	)		(3,139,699	)		(4,116,660	)

Income tax benefit		117,451			742,670			175,473			574,202

Net loss	$	(1,127,897	)	$	(2,881,356	)	$	(2,964,226	)	$	(3,542,458	)

Foreign currency translation adjustment		(12,750	)		(3,668	)		46,523			(131,946	)

Comprehensive loss	$	(1,140,647	)	$	(2,885,024	)	$	(2,917,703	)	$	(3,674,404	)

Loss per common share – basic	$	(0.10	)	$	(0.26	)	$	(0.26	)	$	(0.32	)
Loss per common share – diluted		(0.10	)		(0.26	)		(0.26	)		(0.32	)
Weighted average number of common shares outstanding-basic		11,255,129			11,226,025			11,243,082			11,216,009
Weighted average number of common shares outstanding-diluted		11,255,129			11,226,025			11,243,082			11,216,009

The accompanying notes are an integral part of these ~~interim condensed~~ consolidated financial statements.

TAKUNG ART CO., LTD AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF ~~CASH FLOWS~~

~~(Stated in U.S. Dollars)~~

~~(UNAUDITED)~~

For the Nine Months For the Nine Months
Ended Ended
September 30, September 30,
2017 2016
Cash flows from operating activities:
Net cash provided by operating activities 1,028,524 5,635,391

Cash flows from investing activities:
Purchase of property and equipment (455,255 ) (976,460 )
Purchase of held-to-maturity investments - (14,995,876 )
Purchase of available-for-sales investment (53,501,874 ) (299,918 )
Maturity and redemption of available-for-sales investment 53,501,874 -
Maturity and redemption of held-to-maturity investments - 14,995,876
Loan to third parties (3,518,325 ) -
Repayment from loan to third parties 3,412,070 -
Net cash used in investing activities (561,510 ) (1,276,378 )

Cash Flows from financing activities:
Proceeds from short-term borrowings - 3,519,580
Proceeds from related party loans - 2,340,895
Loan to third parties - (3,513,534 )
Net cash provided by financing activities - 2,346,941

Effect of exchange rate change on cash and cash equivalents 1,025,539 (644,375 )

Net increase in cash and cash equivalents 1,492,553 6,061,579

Cash and cash equivalents, beginning balance 13,395,337 10,769,456

Cash and cash equivalents, ending balance $ 14,887,890 $ 16,831,035

Supplemental cash flows information:
Cash paid for interest $ 212,954 $ -
Cash paid for income tax $ 136,453 $ 562,994

~~The accompanying notes are an integral part of these interim condensed consolidated financial statements.~~

~~TAKUNG ART CO., LTD AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~CHANGES IN EQUTIY

(Stated in U.S. Dollars except Number of Shares)

(UNAUDITED)

										Accumulated
					Additional					other
	Number		Common		Paid-in		Retained			comprehensive
	of shares		stock		capital		Earnings			Income (loss)			Total
Balance, December 31, 2018		11,226,025		11,226		6,281,790		4,479,133			(302,702	)		10,469,447

Issuance of ordinary shares for restricted stock award		-		-		-		-			-			-

Shared-based compensation		-		-		16,851		-			-			16,851

Net loss		-		-		-		(708,793	)		-			(708,793	)

Foreign currency translation adjustment		-		-		-		-			(5,480	)		(5,480	)

Balance, March 31, 2019		11,226,025		11,226		6,298,641		3,770,340			(308,182	)		9,772,025

Issuance of ordinary shares for restricted stock award		29,104		29		4,012		-			-			4,041

Shared-based compensation		-		-		9,719		-			-			9,719

Net loss		-		-		-		(1,127,536	)		-			(1,127,536	)

Foreign currency translation adjustment		-		-		-		-			64,753			64,753

Balance, June 30, 2019		11,255,129		11,255		6,312,372		2,642,804			(243,429	)		8,723,002

Shared-based compensation		-				6,273		-			-			6,273

Net loss		-		-		-		(1,127,897	)		-			(1,127,897	)

Foreign currency translation adjustment		-		-		-		-			(12,750	)		(12,750	)

Balance, September 30, 2019		11,255,129		11,255		6,318,645		1,514,907			(256,179	)		7,588,628

											Accumulated
					Additional						other
	Number		Common		Paid-in			Retained			comprehensive
	of shares		Stock		capital			Earnings			loss			Total
Balance, December 31, 2017		11,188,882		11,189		6,116,216			12,111,096			(320,290	)		17,918,211

Issuance of ordinary shares for restricted stock award		20,000		20		(20	)		-			-			-

Shared-based compensation		-		-		73,749			-			-			73,749

Net income		-		-		-			423,290			-			423,290

Foreign currency translation adjustment		-		-		-			-			(17,167	)		(17,167	)

Balance, March 31, 2018		11,208,882		11,209		6,189,945			12,534,386			(337,457	)		18,398,083

Issuance of ordinary shares for restricted stock award		17,143		17		(17	)		-			-			-

Shared-based compensation		-		-		55,672			-			-			55,672

Net loss		-		-		-			(1,084,392	)		-			(1,084,392	)

Foreign currency translation adjustment		-		-		-			-			(111,111	)		(111,111	)

Balance, June 30, 2018		11,226,025		11,226		6,245,600			11,449,994			(448,568	)		17,258,252

Issuance of ordinary shares for restricted stock award		-		-		-			-			-			-

Shared-based compensation		-		-		53,310			-			-			53,310

Net loss		-		-		-			(2,881,356	)		-			(2,881,356	)

Foreign currency translation adjustment		-		-		-			-			(3,668	)		(3,668	)

Balance, September 30, 2018		11,226,025		11,226		6,298,910			8,568,638			(452,236	)		14,426,538

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

TAKUNG ART CO., LTD AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in U.S. Dollars)

(UNAUDITED)

	Nine Months			Nine Months
	Ended			Ended
	September 30,			September 30,
	2019			2018
Cash flows from operating activities:
Net cash provided by (used in) operating activities	$	10,828,217		$	(18,589,823	)

Cash flows from investing activities:
Purchase of property and equipment		(36,108	)		(775,730	)
Purchase of available-for-sale investments		(22,205,745	)		(90,293,454	)
Maturity and redemption of available-for-sale investments		22,205,745			90,293,454
Loan to third parties		(2,093,555	)		-
Loan to a related party		-			(6,369,809	)
Repayment of loan from third parties		2,443,251			3,641,871
Purchase of held-to-maturity investment		-			(873,617	)
Net cash provided by (used in) investing activities		313,588			(4,377,285	)

Cash flows from financing activities:
Proceeds from related parties loan		6,226			6,389,042
Proceeds from a third party’s loan		1,955,669			-
Repayment of loan to a related party		-			(483,822	)
Loan repayment to a third party		(2,499,500	)		(3,480,000	)
Net cash (used in) provided by financing activities		(537,605	)		2,425,220

Effect of exchange rate change on cash, cash equivalents and restricted cash		(33,398	)		(664,016	)

Net increase (decrease) in cash, cash equivalents and restricted cash		10,570,802			(21,205,904	)

Cash, cash equivalents and restricted cash, beginning balance		12,524,086			37,140,582

Cash, cash equivalents and restricted cash, ending balance	$	23,094,888		$	15,934,678

Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets
Cash and cash equivalents as of September 30, 2019 and 2018, respectively	$	6,086,637		$	8,418,818
Restricted cash as of September 30, 2019 and 2018, respectively		17,008,251			7,515,860
Total cash, cash equivalents, and restricted cash as of September 30, 2019 and 2018, respectively	$	23,094,888		$	15,934,678

Supplemental cash flows information:

Cash paid for interest	$	156,453		$	241,727
Cash paid for income tax	$	-		$	111,917

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

TAKUNG ART CO., LTD AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Takung Art Co., Ltd and ~~Subsidiaries~~subsidiaries (“Takung”, or the “Company”~~, “we”, “us” and “our”~~), a Delaware corporation (formerly Cardigant Medical Inc.) through Hong Kong Takung Art Company Limited (formerly Hong Kong Takung Assets and Equity of Artworks Exchange Co., Ltd.) ~~(“Hong Kong Takung”)~~, a Hong Kong company (“Hong Kong Takung”) and our wholly owned subsidiary, operates an electronic online platform located at www.takungae.com for artists, art dealers and art investors to offer and trade in valuable artwork.

Hong Kong Takung was incorporated in Hong Kong on September 17, 2012 and operates an electronic online platform for offering, selling and trading artwork. For the period from September 17, 2012 (inception) to December 31, 2012, ~~there was~~the company had no operation except for the issuance of shares for subscription ~~receivable. We generate~~receivables. The Company generates revenue from ~~our~~its services in connection with the offering and trading of artwork on ~~our~~its system, primarily consisting of listing fees, trading commissions, and management fees. ~~We conduct our~~The Company conducts its business primarily in Hong Kong, People’s Republic of ~~China.~~China (the “PRC”).

Takung (Shanghai) Co., Ltd (“Shanghai Takung”) is a limited liability company, with a registered capital of $1 million, located in the Shanghai Pilot Free Trade Zone. Shanghai Takung was incorporated on July 28, ~~2015.~~2015 in the PRC. It is engaged in providing services to its parent company, Hong Kong Takung by receiving deposits from and making payments to online artwork traders of Takung for and on behalf of Takung.

~~Shanghai Takung set up a new office in Hangzhou, PRC on November 20, 2016 for technology development.~~ Takung Cultural Development (Tianjin) Co., Ltd (“Tianjin Takung”) is a limited liability company, with a registered capital of $1 million located in the Pilot Free Trade ~~Zone.~~Zone in Tianjin. Tianjin Takung was incorporated on January 27, ~~2016.~~ 2016 and is a direct wholly-owned subsidiary of Hong Kong Takung.

Tianjin Takung provides technology ~~support~~development services to Hong Kong ~~Takung and Shanghai~~ Takung and also carries out marketing and promotion activities in mainland China.

Hong Kong Takung Art Holdings Company Limited (“Takung Art Holdings”) was formed in Hong Kong on July 20, 2018 and operates as a holding company to control an online platform for offering, selling and trading whole piece of artwork.

Art Era Internet Technology (Tianjin) Co., Ltd (“Art Era”) was formed in Tianjin on September 7, 2018, is a directly wholly owned subsidiary of Takung Art Holdings, and formed as a limited liability company with a registered capital of $2 million located in the Pilot Free Trade Zone in Tianjin. Art Era mainly focuses on developing our e-commerce platform for art. Art Era was deregistered on June 18, 2019 due to Company’s plan to put off the e-commerce platform development. Art Era was deregistered on June 18, 2019 due to Company’s plan to put off the e-commerce platform development.

Hong Kong MQ Group Limited (“Hong Kong MQ”) was formed in Hong Kong on November 27, 2018 and currently has no operations. On June 19, 2019, as a result of a private transaction, one (1) share of common stock of Hong Kong MQ was transferred from Ms. Hiu Ngai Ma to the Company. The net asset of Hong Kong MQ was $nil as of the acquisition date. The consideration paid for the ownership transfer, which represent 100% of the issued and outstanding share capital of Hong Kong MQ, was $0.13 (HK$1). Hong Kong MQ became a direct wholly-owned subsidiary of the Company.

MQ (Tianjin) Enterprise Management Consulting Co., Ltd. (“Tianjin MQ”) was incorporated in Tianjin, PRC on July 9, 2019 and is a directly wholly owned subsidiary of Hong Kong MQ. It was established as a limited liability company with a registered capital of $100,000 located in the Pilot Free Trade Zone in Tianjin. Tianjin MQ will focus on exploring business opportunities and promoting our artwork trading business.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying ~~condensed~~ consolidated balance sheet as of December 31, ~~2016,~~2018, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements as of September 30, ~~2017~~2019 and for the three ~~months ended~~ and nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and disclosures, which are normally included in financial statements prepared in accordance with United States (“U.S. ~~GAAP,~~”) generally accepted accounting principles (“GAAP”), have been condensed or omitted pursuant to such rules and ~~regulations, although the management~~regulations. Management believes that the disclosures made are adequate to provide ~~for~~a fair presentation. The interim financial information should be read in conjunction with the ~~Financial Statements~~financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2018, previously filed with the SEC.

This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses are recognized when incurred. The Company’s financial statements are expressed in U.S. ~~dollars.~~Dollars.

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company’s ~~unaudited interim condensed~~ consolidated financial position as of September 30, ~~2017,~~2019, its consolidated results of operations and cash flows for the nine-month periods ended September 30, ~~2017~~2019 and ~~2016,~~2018, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.

Recent Accounting Pronouncements

Recently Adopted Accounting Standards

On January 1, 2019, the Company adopted ASC 842, Leases, using the modified retrospective method which allows for the application of the transition provisions at the beginning of the period of adoption, rather than at the beginning of the earliest comparative period presented in these condensed consolidated financial statements. As permitted by the guidance, the Company elected to retain the original lease classification and historical accounting for initial direct costs for leases existing prior to the adoption date and did not reassess contracts entered into prior to the adoption date for the existence of a lease. The Company also did not recognize ROU assets and lease liabilities for short-term leases, which are leases in existence as of the adoption date with an original term of twelve months or less.

As a result of the adoption of the standard, the Company recognized operating lease right-of-use assets and operating lease liabilities on its condensed consolidated balance sheet as of September 30, 2019. The assets and liabilities recognized upon application of the transition provisions were primarily associated with existing office and storage leases. Please refer to footnote 9. Leases for details.

Except for the ASUs issued but not yet adopted disclosed in Note 2 to the financial statements on Form 10-K for the fiscal year ended December 31, 2018, previously filed with the SEC, there is no ASU issued by the FASB that is expected to have a material impact on the condensed consolidated financial statements upon adoption.

3. PREPAYMENT AND OTHER CURRENT ASSETS

Prepayment and other current assets ~~mainly consist~~consisted of the ~~prepaid services for development, maintenance of online trading system, the advertising and promotional services, prepaid financial advisory and banking services, as well as other current assets.~~following:

September 30,
2017 December 31,
2016
(Unaudited)
Advertising and promotional services 438,741 296,163
Prepaid professional fee 144,706 -
Prepaid rental expense 82,793 60,822
Prepaid insurance 54,875 31,082
Prepaid maintenance of trading system 78,784 17,514
Staff advance 11,263 28,806
Prepaid financial advisory and banking services 39,153 201,808
Short-term borrowings to third party - 259,254
Other current assets 19,916 72,997
Prepayment and other current assets $ 870,231 $ 968,446

	September 30,		December 31,
	2019		2018
		(Unaudited)
Tax receivables	$	279,687	$	399,026
Staff advance		-		93,676
Prepaid service fee		192,435		140,934
Short-term borrowings to third party		53,571		-
Deposit		9,234		241,827
Other current assets		44,180		79,786
Prepayment and other current assets	$	579,107	$	955,249

4. ACCOUNT RECEIVABLES, NET

Account receivables consisted of the following:

	September 30, 2017			December 31, 2016		September 30, 2019			December 31, 2018
	(Unaudited)						(Unaudited)
Listing fee	$	1,562,924		$	1,403,255	$	-		$	568,757
Authorized agent subscription revenue		924,100			995,453		557,154			557,837
Monthly commission fee		1,422,750			605,677		1,376,460			1,378,148
Others		63,323			54,183		53,561			53,626
Less: allowance for doubtful accounts		(240,528	)		-		(1,987,175	)		(1,989,611	)
Account receivables, net	$	3,732,569		$	3,058,568	$	-		$	568,757

Management reviewed the collectability of the receivables periodically, and identified certain inactive traders during this quarter. Management considered the receivables due from these traders are uncertain and provided bad debt provision of $240,528 for the three and nine months ended September 30, 2017.

5. LOAN RECEIVABLES

The following table sets forth a summary of the loan agreements in loan receivables balance:

Date Borrower Lender Original
Amount
(RMB)
September 30,
2017
(USD)

December 31,
2016
(USD)
Annual
Interest
Rate Repayment
Due Date
(Unaudited)
7/15/2016 Xiaohui Wang Shanghai Takung 10,080,000 $ - $ 1,451,822 0 % 3/31/2017
8/24/2016 Xiaohui Wang Shanghai Takung 13,350,000 $ - $ 1,922,800 0 % 3/31/2017
11/14/2016 Xiaohui Wang Shanghai Takung 10,275,000 $ 1,544,346 $ 1,479,908 0 % 10/31/2017
12/9/2016 Xiaohui Wang Tianjin Takung 10,550,000 $ 1,585,680 $ 1,519,516 0 % 11/30/2017
1/4/2017 Xiaohui Wang Tianjin Takung 24,461,505 $ 3,676,597 $ - 0 % 12/31/2017
Total $ 6,806,623 $ 6,374,046

Date	Borrower	Lender	Original Amount (RMB)		Outstanding Balance (RMB)		Amount in Reporting Currency (USD)		Annual Interest Rate			Repayment Due Date
7/18/2019	Chongqing Aoge Import and Export Co.	Tianjin Takung		5,000,000		5,000,000	$	699,526		0	%	7/17/2020
8/29/2019	Chongqing Aoge Import and Export Co.	Tianjin Takung		5,000,000		5,000,000	$	699,526		0	%	8/28/2020
9/20/2019	Chongqing Aoge Import and Export Co.	Tianjin Takung		4,000,000		4,000,000	$	559,620		0	%	9/19/2020
				Total			$	1,958,672

~~All the transactions were aimed to meet the Company’s working capital needs in US Dollar, which is freely convertible to Hong Kong Dollar.~~

The interest-free loans (the “RMB Loans”) ~~that Shanghai Takung and~~entered into by Tianjin Takung ~~entered~~ were guaranteed by Mr. Daquan Wang who is a General Manager and legal representative of Chongqing ~~Wintus (New Star) Enterprises Group~~Aoge Import and Export Co. (“Chongqing”). ~~Xiaohui~~Mr. Daquan Wang ~~(“Ms. Wang”)~~ is a ~~national~~citizen of the People’s Republic of China. ~~Ms. Wang is a shareholder and the legal representative of Chongqing.~~ Both Chongqing and ~~Ms.~~Mr. Daquan Wang are ~~the~~ non-related parties to the Company.

~~In the meantime,~~ Hong Kong Takung entered into loan agreements (the ~~“US~~“Hong Kong Dollar Loans”) with ~~Merit Crown Limited,~~Friend Sourcing Ltd., a Hong Kong company (“~~Merit Crown)~~Friend Sourcing”) with interest accruing at a rate of 8% per annum (See Note 8). ~~Merit Crown~~Friend Sourcing is a non-related party to the Company.

The transactions with Friend Sourcing were aimed to meet the Company’s working capital needs in Hong Kong Dollars.

Through an understanding between ~~Ms. Wang~~Chongqing Aoge Import and ~~Merit Crown,~~Export Co. and Friend Sourcing, the USHong Kong Dollar Loans are “secured” by the RMB Loans. It is the understanding between the parties that ~~when~~ the USHong Kong Dollar Loans ~~are repaid,~~and the RMB Loans will be repaid ~~at the same time.~~

simultaneously.

6. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following:

September 30,
2017 December 31,
2016
(Unaudited)
Furniture, fixtures and equipment $ 157,736 $ 100,386
Leasehold improvements 402,597 298,965
Computer trading and clearing system 3,220,318 2,802,430
Sub-total 3,780,651 3,201,781
Less: accumulated depreciation (1,676,544 ) (1,136,599 )
Property and equipment, net $ 2,104,107 $ 2,065,182

	September 30,			December 31,
	2019			2018
	(Unaudited)
Furniture, fixtures and equipment	$	159,239		$	156,656
Leasehold improvements		338,845			447,048
Computer trading and clearing system		3,339,155			3,382,168
Transport equipment		100,643			104,628
Sub-total		3,937,882			4,090,500
Less: accumulated depreciation		(2,996,508	)		(2,644,821	)
Property and equipment, net	$	941,374		$	1,445,679

Depreciation expense ~~amounted to~~ ~~$190,626~~was $148,774 and ~~$133,608~~$241,448 for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, and ~~$538,532~~$463,241 and ~~$373,308~~$713,933 for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively.

7.ACCRUED EXPENSES AND OTHER PAYABLES

Accrued expenses and other payables as of September 30, ~~2017~~2019 and December 31, ~~2016~~2018 consisted ~~of:~~of the following:

September 30, December 31,
2017 2016
(Unaudited)
Trading and clearing system $ 54,688 $ 61,735
Accruals for professional fees 19,972 49,952
Accruals for consulting fees 297,461 290,773
Payroll payables 295,722 141,022
Accruals for business trip expense 23,722 -
Other payables 89,235 65,401
Total accrued expenses and other payables $ 780,800 $ 608,883

	September 30,		December 31,
	2019		2018
		(Unaudited)
Accruals for consulting fees	$	264,469	$	264,793
Accruals for professional fees		110,442		49,518
Payroll payables		70,231		104,437
Trading and clearing system		49,970		86,208
Other payables		27,817		136,736
Total accrued expenses and other payables	$	522,929	$	641,692

8. SHORT-TERM BORROWINGS FROM THIRD PARTIES

In July 2019, Hong Kong Takung entered into a loan agreement (the “HKD Loan”) with Friend Sourcing Ltd, a Hong Kong company (“Friend Sourcing”) with interest accruing at a rate of 8% per annum. The ~~following table sets forth a summary of the loan agreements in loan receivables balance:~~

Date Borrower Lender Original Amount
(HKD) September 30,
2017
(USD) December 31,
2016
(USD) Annual
Interest Rate Repayment
Due Date
(Unaudited)
7/15/2016 Hong Kong Takung Merit Crown Limited 11,700,000 $ 1,497,888 $ 1,509,015 8 % 12/31/2017
8/24/2016 Hong Kong Takung Merit Crown Limited 15,596,100 $ 1,996,684 $ 2,011,518 8 % 12/31/2017
11/18/2016 Hong Kong Takung Merit Crown Limited 11,479,102 $ 1,469,607 $ 1,480,525 8 % 10/31/2017
12/9/2016 Hong Kong Takung Merit Crown Limited 11,787,600 $ 1,509,103 $ 1,520,314 8 % 11/30/2017

Less: Discount loan payable $ 101,382 $ 212,859

Total $ 6,371,900 $ 6,308,513

~~The US Dollar Loans are~~HKD Loan is to provide Hong Kong Takung with sufficient ~~US Dollar-denominated~~HKD currency to meet its working capital requirements. ItFriend Sourcing is a non-related party to the Company.

In the meantime, Tianjin Takung entered an interest-free loan (the “RMB Loan”) to another third party as a guarantee for the HKD Loan. The loan amount was $ 1,955,245 (RMB 14,000,000). Through an understanding between the two third parties, the HKD Loan is “secured” by the ~~aforementioned~~ RMB ~~Loans (See Note 5) of equivalent amount by its subsidiary to an individual and guarantor affiliated with the lender of the US Dollar Loans.~~Loan. It is ~~the~~an understanding between the parties that when the ~~US Dollar~~HKD Loans ~~are~~is repaid, the RMB Loan will be repaid at the same time.

Date	Borrower	Lender	September 30, 2019 (USD)			December 31, 2018 (USD)		Annual Interest Rate			Repayment Due Date
8/24/2016	Hong Kong Takung	Merit Crown Limited	$	-		$	1,499,500		8	%		1/2/2019
12/19/2017	Hong Kong Takung	Merit Crown Limited	$	-		$	500,000		8	%		1/2/2019
12/22/2017	Hong Kong Takung	Merit Crown Limited	$	-		$	500,000		8	%		1/2/2019
7/18/2019	Hong Kong Takung	Friend Sourcing Ltd.	$	710,186		$	-		8	%		7/17/2020
8/29/2019	Hong Kong Takung	Friend Sourcing Ltd.	$	691,699		$	-		8	%		8/28/2020
9/20/2019	Hong Kong Takung	Friend Sourcing Ltd.	$	553,360		$	-		8	%		9/19/2020

		Less: Discount loan payable	$	(138,408	)	$	-

		Total	$	1,816,837		$	2,499,500

The U.S. Dollar Loans ~~will similarly be repaid.~~of $2,499,500 as of December 31, 2018 was settled on January 2, 2019.

The weighted average interest rate of outstanding short-term borrowings was 8% per annum as of September 30, ~~2017 and December 31, 2016.~~2019. The fair ~~values~~value of the short-term borrowings ~~approximate~~approximates their carrying amounts. The weighted average short-term ~~borrowing was $6,419,099~~borrowings were $256,074 and ~~$1,678,803~~$7,319,041 for the nine months period ended September 30, ~~2017~~2019 and ~~year ended December 31, 2016,~~2018, respectively. The interest expenses for the short-term borrowings were ~~$133,174~~$18,015 and ~~$62,670~~$199,822 for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, and ~~$394,295~~$18,015 and ~~$62,670~~$500,080 for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively.

On October 30, 2017, Hong Kong Takung entered into agreements with both Merit Crown Limited and Ms. Wang to extend the US Dollar Loan and RMB Loan (see Note 5) with the original maturity date on October 31, 2017, to October 31, 2018.

9. RELATED PARTY BALANCES AND TRANSACTIONS

The following is a list of director and related parties to which the Company has transactions with:

(a) Wang Song (“Wang”), the General Manager of Tianjin Takung and Shanghai Takung, and Director of Hong Kong Takung, Tianjin Takung and Shanghai Takung.

(b) Liu Zhenying (“Liu”), the former Vice President of Hong Kong Takung. Liu resigned from the Company on September 30, 2018.

(c) Mao Jianping ~~Mao~~ (“Mao”), the ~~wife of the Vice General Manager~~Human Resources Management Director of Hong Kong Takung.

(d) Li Shuhai (“Li”), the legal representative of Tianjin Takung.

Amounts due from related parties consisted of the following as of the years indicated:

	September 30, 2019		December 31, 2018
	(Unaudited)
Wang (a)(i)	$		$	5,907,789
Li (d)(i)		5,682,807		-
Total current amount due from related parties	$	5,682,807	$	5,907,789

	September 30, 2019		December 31, 2018
	(Unaudited)
Mao (c) (ii)	$	101,420	$	-

Total noncurrent amount due from a related party	$	101,420	$	-

Amount due to related ~~party~~parties

Amount due to related ~~party~~parties consisted of the following as of the ~~periods~~years indicated:

September 30,
2017 December 31,
2016
(Unaudited)
Mao (a) $ 1,085,480 $ 1,031,805
Total 1,085,480 1,031,805

	September 30, 2019		December 31, 2018
	(Unaudited)
Wang (a) (i)	$	-	$	6,385,288
Li (d) (i)		6,377,470		-
Mao (c) (ii)		382,204		-
Total current amount due to related parties	$	6,759,674	$	6,385,288

	September 30, 2019		December 31, 2018
		(Unaudited)
Mao (c) (ii)	$	197,520	$	-
Total noncurrent amount due to a related party	$	197,520	$	-

The interest rate of the outstanding short-term loan from Mao was 8% per annum as of September 30, 2017 and December 31, 2016. The interest expense was $61,283 and $19,941 for the nine months ended September 30, 2017 and 2016, respectively, and $20,652 and $19,941 for the three months ended September 30, 2017 and 2016, respectively.

(i)	Amount due from and due to Wang and Li

On ~~October 26, 2017,~~May 16, 2018, Hong Kong Takung entered into ~~a supplementary~~an interest-free loan agreement (the "HK Dollar Working Capital Loan") with ~~Mao~~Liu that aswas transferred to Wang on October 18, 2018 for the loan of ~~30 September 2017, the outstanding principal amount~~$6,377,470 (HK$50,000,000) to Hong Kong Takung. The purpose of the ~~Loan (as defined in the Loan Agreement)~~loan is to ~~be repaid by~~provide Hong Kong Takung with sufficient Hong Kong Dollar-denominated currency to ~~Mao is HK$8,000,000 (Hong Kong Dollars Eight Million) (“~~~~Outstanding Principal Loan Amount~~~~”), and the accrued interest of the Outstanding Principal Loan Amount is HK$478,685 (“~~~~Accrued Interest~~~~”). Mao hereby agreed to extend~~meet its working capital requirements with the maturity date of the ~~Outstanding Principal Loan Amount and the interest thereof by~~loan is May 15, 2019. On May 15, 2019, Hong Kong Takung ~~as below: (i) HK$4,500,000~~entered into an extension agreement with Wang to extend the HK Dollar Loan with a due date on May 15, 2020. On September 16, 2019, Wang transferred this loan to Li, Shuhai, the legal representative of Tianjin Takung with the same extended maturity date.

In the meantime, Tianjin Takung entered into an interest-free loan agreement (the "RMB Working Capital Loan") with Liu that was transferred to Wang on October 18, 2018 for the loan of $5,682,807 (RMB40,619,000) with the maturity date of the loan is May 15, 2019. On May 15, 2019, Tianjin Takung entered into an extension agreement with Wang to extend the RMB Loan with a due date on May 15, 2020. On September 16, 2019, Wang transferred this loan to Li, the legal representative of Tianjin Takung with the same extended maturity date.

Through an understanding between Li and the ~~interest thereof, together~~Company, the HK Dollar Working Capital Loan is "secured" by the RMB Working Capital Loan. It is the understanding between the parties that the HK Dollar Working Capital Loan and the RMB Working Capital Loan will be repaid simultaneously.

(ii)	Amount due to / from Mao

The amount due to Mao is primarily related to the lease from Mao. On May 13, 2019, the Company entered into a non-cancellable lease agreement with a related party, Mao for the ~~Accrued Interest~~office location in Tianjin, PRC. The leased office location is approximately 2,090.61 square meters. The lease will be expired on May 12, 2021. The Company is charged rent at a rate of $0.55 per square meter per day. The agreement requires a lump sum payment of $202,840 (RMB1,449,838.04) every nine months and a deposit of $101,420 (RMB724,919.02). The deposit is refundable to ~~be due~~the Company. The total lease liability is $573,500, of which $375,980 and ~~payable by November~~$197,520 were included in current and noncurrent portions, respectively, as of September 30, ~~2017; and (ii) HK$3,500,000 together with the interest thereof~~2019.

As of September 30, 2019, Mao also lent a startup deposit of $6,224 to ~~be due and payable by December 31, 2017.~~Hong Kong MQ.

10. INCOME TAXES

Takung was incorporated in the State of Delaware and is subject to United States income tax. Hong Kong Takung, Takung Art Holding and Hong Kong MQ were incorporated in Hong Kong S.A.R. People’s Republic of China and are subject to Hong Kong profits tax. Shanghai Takung, Tianjin Takung and Tianjin MQ are PRC corporations and are subject to enterprise taxes in the PRC.

United States of America

Tax Cuts and Jobs Act Enacted in 2017

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate income tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal corporate income taxes on dividends from foreign subsidiaries; and (4) providing modification to subpart F provisions and new taxes on certain foreign earnings such as Global Intangible Low-Taxed Income (GILTI). Except for the one-time transition tax, most of these provisions went into effect starting January 1, 2018.

On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB118”) was issued to provide guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. As of December 22, 2018, the Company has completed the assessment of the income tax effect of the Tax Act and there were no adjustments recorded to the provisional amounts.

The Global Intangible Low-taxed Income (GILTI) is a new provision introduced by the Tax Cuts and Jobs Act. U.S. shareholders, who are domestic corporations, of controlled foreign corporations (CFCs) are eligible for up to an 80% deemed paid foreign tax credit (FTC) and a 50% deduction of the current year inclusion with the full amount of the Section 78 gross-up subject to limitation. This new provision is effective for tax years of foreign corporations beginning after December 31, 2017. The Company has evaluated whether it has additional provision amount resulted by the GILTI inclusion on current earnings and profits of its foreign controlled corporations. The Company has made an accounting policy choice of treating taxes due on future U.S. inclusions in taxable amount related to GILTI as a current period expense when incurred. For the three and nine months ended September 30, 2019 and 2018, the Company does not have any aggregated positive tested income; and as such, does not have additional provision amount recorded for GILTI tax.

As of September 30, ~~2017~~2019, and December 31, ~~2016,~~2018, the Company in the United States had ~~$4,008,459~~$1,886,422 and ~~$2,212,890~~$1,332,438 in net operating loss ~~carried forward~~carry forwards available to offset future taxable income, respectively. ~~Federal~~For net operating losses ~~can generally~~arising after December 31, 2017, the Tax Act limits the Company’s ability to utilize NOL carryforwards to 80% of taxable income and carryforward the NOL indefinitely. Carrybacks are now prohibited. NOLs generated prior to January 1, 2018 will not be ~~carried forward twenty years. The federal corporate net operating loss carryover is expired in 20 taxable years following~~subject to the taxable ~~year of the loss.~~income limitation and will begin to expire in 2033 if not utilized.

Hong Kong

The ~~Company believes that~~two-tier profits tax rates system was introduced under the Inland Revenue (Amendment)(No.3) Ordinance 2018 (“the Ordinance”) of Hong Kong became effective for the assessment year 2018/2019. Under the two-tier profit tax rates regime, the profits tax rate for the first HKD 2 million (approximately $255,154) of assessable profits of a corporation will be subject to the lowered tax rate, 8.25% while the remaining assessable profits will be subject to the legacy tax rate, 16.5%. The Ordinance only allows one entity within a group of “connected entities” is eligible for the two-tier tax rate benefit. An entity is a connected entity of another entity if (1) one of them has control over the other; (2) both of them are under the control (more than 50% of the issued share capital) of the same entity; (3) in the case of the first entity being a natural person carrying on a sole proprietorship business-the other entity is the same person carrying on another sole proprietorship business. Since Hong Kong Takung, Takung Art Holdings and Hong Kong MQ are wholly owned and under the control of Takung Art Co., Ltd, both entities are connected entities. Under the Ordinance, it is ~~more likely than not~~an entity’s election to nominate the entity that ~~these net accumulated operating losses~~ will ~~not~~ be ~~utilized in~~subject to the ~~future. Therefore, the Company has provided a full valuation allowance for the deferred~~two-tier profits tax assets arising from the losses at the U.S. during the nine months ended September 30, 2017 and year ended December 31, 2016 amounting to $1,414,445 and $962,012, respectively. Accordingly, the Company has no net deferred tax assets under the US entity.

rates on its Profits Tax Return. The election is irrevocable. We elected Hong Kong Takung to be subject to the two-tier profits tax rates.

The provision for current income taxes of ~~the subsidiary operating in~~ Hong Kong Takung has been calculated by applying the current rate of taxation of ~~16.5%~~8.25% for ~~the~~three and nine months ended September 30, ~~2017~~2019, 16.5% for three and ~~2016,~~nine months ended September 30, 2018, if applicable. Takung Art Holdings and Hong Kong MQ still applied the original tax rate of 16.5% for three and nine months ended September 30, 2019.

PRC

In accordance with the relevant tax laws and regulations of the PRC, a company registered in the PRC is subject to income taxes within the PRC at the applicable tax rate on taxable income. All the PRC subsidiaries were subject to income tax at a rate of 25%.

The income tax provision consists of the following components:

For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
2017 2016 2017 2016
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Current $ 159,281 $ 684,801 $ 662,598 $ 1,561,728
Deferred (34,619 ) (88,069 ) (68,221 ) (184,650 )

Total provision for income taxes $ 124,662 $ 596,732 $ 594,377 $ 1,377,078

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Current:
Federal	$	-		$	-		$	-		$	-
State		-			-			-			-
Foreign		-			(332,918	)		-			(160,548	)
Total Current	$	-		$	(332,918	)	$	-		$	(160,548	)

Deferred:
Federal	$	-		$	-		$	-		$	37,398
State		-			-			-			-
Foreign		(117,451	)		(409,752	)		(175,473	)		(451,052	)
Total Deferred	$	(117,451	)	$	(409,752	)	$	(175,473	)	$	(413,654	)

Total income tax benefit	$	(117,451	)	$	(742,670	)	$	(175,473	)	$	(574,202	)

A reconciliation between the Company’s actual provision for income taxes and the provision at the Hong Kong statutory rate is as ~~follow:~~follows:

For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
2017 2016 2017 2016
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Income before income tax expense $ 151,697 $ 3,048,469 $ 1,651,515 $ 6,041,710

Computed tax expense with statutory tax rate 25,030 502,998 271,806 994,688
Impact of different tax rates in other jurisdictions (73,258 ) (24,505 ) (230,651 ) (254,199 )

Non-deductible items:
Tax effect of non-deductible expenses 25,896 11,117 100,789 32,742
Changes in valuation allowance 146,994 107,122 452,433 603,847

Actual income tax expense $ 124,662 $ 596,732 $ 594,377 $ 1,377,078

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Loss before income tax expense	$	(1,245,348	)	$	(3,624,026	)	$	(3,139,699	)	$	(4,116,660	)

Computed tax (benefit) expense with statutory tax rate		(205,484	)		(597,964	)		(518,050	)		(679,249	)
Impact of different tax rates in other jurisdictions		15,956			(89,082	)		125,056			(51,274	)

Non-deductible items:
Tax effect of non-deductible expenses		17,096			(167,031	)		34,982			(163,701	)
Previous years unrecognized taxation effect		7,134			6,870			7,134			6,870
Changes in valuation allowance		47,847			104,537			175,405			313,152

Total income tax benefit	$	(117,451	)	$	(742,670	)	$	(175,473	)	$	(574,202	)

The ~~Company's~~ effective tax rate was ~~82.2%~~9.4% and ~~19.6%~~20.5% for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, and ~~36.0%~~5.6% and ~~22.8%~~13.9% for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively.

11. ~~COMMITMENTS AND CONTINGENCIES~~

~~Operation Commitments~~LEASES

The ~~total future minimum~~Company has operating leases for its office facilities and artwork storages. The Company's leases have remaining terms of less than one year to approximately nine years. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease ~~payments under~~expense for these leases on a straight-line basis over the ~~non-cancellable operating~~ lease term. The Company does not separate non-lease components from the lease components to which they relate, and instead accounts for each separate lease and non-lease component associated with ~~respect to the office and the dormitory~~that lease component as a single lease component for all underlying asset classes.

The following table provides a summary of leases by balance sheet location as of September 30, ~~2017 are payable as follows:~~ 2019:

Three months ending December 31, 2017 $ 244,960

Year ending December 31, 2018 761,175

Year ending December 31, 2019 223,026

Year ending December 31, 2020 39,999

Year ending December 31, 2021 15,030

Year ending December 31, 2022 and thereafter 53,232

Total $ 1,337,422

Assets/liabilities	Classification	As of September 30, 2019
Assets
Operating lease right-of-use assets	Operating lease assets	$	904,836

Liabilities
Current
Operating lease liability - current	Current operating lease liabilities	$	173,156
	Amount due to related parties		375,980

Long-term
Operating lease liability - non-current	Long-term operating lease liabilities		92,027
	Amount due to related parties, non-current		197,520

Total lease liabilities		$	838,683

~~Rental expense of~~The operating lease expenses, including lease from the ~~Company was $293,338 and $199,514~~related party, for the nine and three months ended September 30, ~~2017 and 2016, respectively, and $721,492 and $428,440 for the nine months ended~~2019 were as follows:

		Three months ended		Nine months ended
Lease Cost	Classification	September 30, 2019		September 30, 2019
Operating lease cost	Cost of revenue, general and administrative expenses	$	145,313	$	282,486
Total lease cost		$	145,313	$	282,486

Maturities of operating lease liabilities at September 30, ~~2017 and 2016, respectively.~~2019 were as follow:

Maturity of Lease Liabilities	Operating Leases
2019 (remainder)	$	255,774
2020		582,171
2021		13,991
2022		13,991
2023		13,991
Thereafter		20,986
Total lease payments	$	900,904
Less: interest		(62,221	)
Present value of lease payments	$	838,683

Future minimum lease payments as of December 31, 2018 were as follows:

	Lease (1)
Year ending December 31, 2019	$	396,243

Year ending December 31, 2020		230,683

Year ending December 31, 2021		14,737

Year ending December 31, 2022		14,737

Year ending December 31, 2023 and thereafter		37,457

Total	$	693,857

(1) Amounts are based on ASC 840, Leases that was superseded upon our adoption of ASC 842, Lease on January 1, 2019.

Lease Term and Discount Rate	September 30, 2019
Weighted-average remaining lease term (years)
Operating leases		1.86

Weighted-average discount rate (%)
Operating leases		8	%

Other Information	September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	448,405
Leased assets obtained in exchange for new operating lease liabilities		1,032,824

12. ~~EARNINGS~~LOSS PER SHARE

Basic ~~earnings~~losses per share is computed by dividing net ~~income~~loss by the weighted-average number of common shares outstanding during the period. Diluted ~~earnings~~losses per share is computed by dividing net ~~income~~loss by the weighted-average number of common shares and dilutive potential common shares outstanding during the period.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Numerator:
Net loss	$	(1,127,897	)	$	(2,881,356	)	$	(2,964,226	)	$	(3,542,458	)

Denominator:
Weighted-average shares outstanding - Basic		11,255,129			11,226,025			11,243,082			11,216,009
Stock options and restricted shares					-						-
Weighted-average shares outstanding - Diluted		11,255,129			11, 226,025			11,243,082			11,216,009

Loss per share
-Basic		(0.10	)		(0.26	)		(0.26	)		(0.32	)
-Diluted		(0.10	)		(0.26	)		(0.26	)		(0.32	)

For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
2017 2016 2017 2016
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Numerator:
Net income $ 27,034 2,451,737 $ 1,057,138 4,664,632

Denominator:
Weighted-average shares outstanding
Weighted-average shares outstanding - Basic 11,188,882 10,632,276 11,039,880 10,632,276
Stock options and restricted shares 59,806 733,321 358,202 645,569
Weighted-average shares outstanding - Diluted 11,248,688 11,365,597 11,398,082 11,277,845

Earnings per share
-Basic 0.00 0.23 0.10 0.44
-Diluted 0.00 0.22 0.09 0.41

Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock.

~~For~~Due to the loss from continued operations for the three months ended September 30, 2017, the diluted earnings per share calculation did not include options to purchase up to 109,160 shares of the Company's common stock, because they were out of money. It has no such impact for three months ended September 30, 2016,and nine months ended September 30, ~~2017 and 2016 respectively.~~2019, approximately 130,890 options were excluded from the calculation of diluted net loss per share.

There were dilutive effects of 487,000 shares for the nine months period ended September 30, 2017 and 2016. The 487,000 restricted shares of Common Stock (the “Compensation Shares”) related to the Consulting Agreement with Regeneration Capital Group, LLC (“Regeneration”) were placed in an escrow account and were subject to Regeneration’s performance condition. The shares were released from escrow account and transferred to Regeneration since the Company successfully listed on NYSE on March 22, 2017.

13. SUBSEQUENT ~~EVENT~~EVENTS

~~Other than the newly signed extension agreements as disclosed in Note 8,~~Management assessed and ~~the supplementary agreement with related party as disclosed in Note 9 above, the Company does not identify any other~~determined there were no significant and material subsequent events ~~with material financial impact on~~occurred that would require recognition or disclosure in the ~~unaudited~~interim condensed consolidated financial statements.

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

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

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

Overview

We were incorporated in Delaware under the name Cardigant Medical Inc. on April 17, 2009. Our initial business plan was to focus on the development of novel biologic and ~~peptide based~~peptide-based compounds and enhanced methods for local delivery for the treatment of vascular disease including peripheral artery disease and ischemic stroke.

Hong Kong Takung is a limited liability company incorporated on September 17, 2012 under the laws of Hong Kong, Special Administrative Region, China. Although Takung was incorporated in 2012, it did not commence business operations until late 2013.

As a result of the transfer of the excluded assets pursuant to the Contribution Agreement and the acquisition of all the issued and outstanding shares of Hong Kong Takung, we are no longer conducting the Cardigant Business and have now assumed Hong Kong Takung’s business operations as it now our only operating wholly-owned subsidiary.

Hong Kong Takung operates an electronic online platform located at http://eng.takungae.com for artists, art dealers and art investors to offer and trade in valuable artwork.

Through Hong Kong Takung, we offer on-line listing and trading services that allow artists/art dealers/owners to access a much bigger art trading market where they can engage with a wide range of investors that they might not encounter without our platform. Our platform also makes investment in high-end and expensive artwork more accessible to ordinary people without substantial financial resources.

We generate revenue from our services in connection with the offering and trading of artwork on our system, primarily consisting of listing fees, trading commissions, management fees and authorized agent subscription.

On July 28, 2015, Hong Kong Takung incorporated a wholly owned subsidiary, Takung (Shanghai) Co., Ltd. (“Shanghai Takung”), in Shanghai Free-Trade Zone (SFTZ) in Shanghai, China, with a registered capital of $1 million. Shanghai Takung ~~is engaged~~assists in ~~providing services to its parent company~~ Hong Kong ~~Takung~~Takung’s operations by receiving deposits from and making payments to online artwork traders ~~for and~~in mainland China on behalf of Hong Kong Takung.

On January 27, 2016, Hong Kong Takung incorporated ~~another~~a wholly owned subsidiary, Takung Cultural Development (Tianjin) Co., Ltd (“Tianjin Takung”)~~, a limited liability company,~~ in the Tianjin Free Trade Zone (TJFTZ) in Tianjin, China with a registered capital of $1 ~~million in Tianjin Pilot Free Trade Zone in Tianjin, People’s Republic of China.~~million. Tianjin Takung provides technology development services to Hong Kong Takung and Shanghai Takung, and also carries out marketing and promotion activities in mainland China. Management has recently determined to merge the operations of Shanghai Takung with Tianjin Takung’s and eventually dissolve Shanghai Takung in order to save costs.

~~Recently Shanghai~~Hong Kong Takung ~~set up~~Art Holdings Company Limited (“Takung Art Holdings”) was incorporated in Hong Kong on July 20, 2018 and operates as a holding company to operate an ~~office~~e-commerce platform for offering, selling and trading whole pieces of artwork instead of units of artwork.

Art Era Internet Technology (Tianjin) Co., Ltd (“Art Era”) was incorporated in ~~Hangzhou~~Tianjin, China on September 7, 2018, and is a directly wholly-owned subsidiary of Takung Art Holdings. It is a limited liability company with a registered capital of $2 million located in the Pilot Free Trade Zone in Tianjin. Art Era will focus on developing our e-commerce platform. Art Era was deregistered on June 18, 2019 due to ~~carry out technology~~Company’s plan to put off the e-commerce platform development.

~~Since~~Hong Kong MQ Group Limited (“Hong Kong MQ”) was formed in Hong Kong on November 27, 2018 and currently has no operations. On June 19, 2019, as a result of a private transaction, one (1) share of common stock of Hong Kong MQ has been transferred from Ms. Hiu Ngai Ma to the Company. The consideration paid for the ownership transfer, which represent 100% of the issued and outstanding share capital of Hong Kong MQ, was $0.13 (HK$1). Hong Kong MQ became a direct wholly-owned subsidiary of the Company.

MQ (Tianjin) Enterprise Management Consulting Co., Ltd. (“Tianjin MQ”) was incorporated in Tianjin on July ~~28, 2016, we have expanded access to~~9, 2019 and is a directly wholly owned subsidiary of Hong Kong MQ. It was established as a limited liability company with a registered capital of $100,000 located in the Pilot Free Trade Zone in Tianjin. Tianjin MQ will focus on exploring business opportunities for and promoting our artwork trading platform to residents of Russia, Mongolia, Australia and New Zealand – our first major expansion of operations outside of China. To further stimulate trading interest, we have added selected portfolios from these countries to our platform, which now numbers 199 artworks including three Russian painting portfolios and fifteen Mongolian paintings. business.

Our headquarters are located in Hong Kong, Special Administrative Region, People’s Republic of China and we conduct our business primarily in Hong Kong, Shanghai and Tianjin. ~~Recently, we set up a new office in Hangzhou to conduct technology development.~~ Our principal executive offices are located at ~~Flat/RM 03-04, 20/F, Hutchison House, 10 Harcourt~~Room 1105 Wing On Plaza, 62 Mody Road, ~~Central~~Tsim Sha Tsui, Kowloon, Hong Kong.

Our common stock began trading on the NYSE American under the symbol “TKAT” on March 22, 2017.

Results of Operation of Takung

~~The following discussion should be read~~Hong Kong Takung operates a platform for offering and trading artwork. We generate revenue from our services in ~~conjunction~~connection with the ~~unaudited condensed consolidated Financial Statements~~offering and trading of ~~the Company for the three-month~~artwork ownership units on our system, primarily consisting of listing fees, trading commissions, and ~~nine-month period ended September 30, 2017 and 2016 and related notes thereto.~~management fees.

THREE-MONTH PERIOD ENDED SEPTEMBER 30, ~~2017~~2019 COMPARED TO THREE-MONTH PERIOD ENDED SEPTEMBER 30, ~~2016~~

~~Revenue~~2018

The following tables set forth our condensed consolidated statements of income ~~data:~~data with a percentage:

	Three Months Ended September 30,						Three Months Ended September 30,
	2017			2016			2019			% of Revenue			2018			% of Revenue
	(Unaudited)			(Unaudited)			(Unaudited)						(Unaudited)
Revenue	$	3,355,011		$	5,742,209		$	1,123,592			100		$	363,534			100
Cost of revenue		(292,168	)		(285,252	)		(580,282	)		(52	)		(299,482	)		(82	)
Selling expense		(624,151	)		(652,207	)		(108,458	)		(10	)		(149,035	)		(41	)
General and administrative expenses		(2,498,848	)		(1,744,965	)		(1,159,502	)		(103	)		(2,208,264	)		(608	)
Impairment loss-construction-in-progress								-						(326,227	)		(90	)
Total costs and expenses		(3,415,167	)		(2,682,424	)		(1,848,242	)		(165	)		(2,983,008	)		(821	)
Income from operations		(60,156	)		3,059,785
Interest and other income (loss), net		211,852			(11,316	)
Income before income taxes		151,696			3,048,469
Income tax benefit (expense)		(124,662	)		(596,732	)
Net income	$	27,034		$	2,451,737
Loss from operations								(724,650	)		(65	)		(2,619,474	)		(721	)
Total other expenses								(520,698	)		(46	)		(1,004,552	)		(276	)
Loss before income tax expenses								(1,245,348	)		(111	)		(3,624,026	)		(997	)
Income tax benefit								117,451			10			742,670			204
Net loss							$	(1,127,897	)		(101	)	$	(2,881,356	)		(793	)

Revenue

The following ~~tables set~~table sets forth our condensed consolidated ~~statements of income data (as a percentage of revenue):~~revenue by revenue source:

Three Months Ended
September 30,
2017 2016
(Unaudited) (Unaudited)
Revenue 100 % 100 %
   Cost of revenue – Direct revenue (9 ) (5 )
   Selling expense (18 ) (11 )
   General and administrative expenses (74 ) (30 )
Total costs and expenses (101 ) (46 )
Income from operations (1 ) 54
Interest and other income (loss), net 6 -
Income before income taxes 5 54
Income tax expense (4 ) (10 )
Net income 1 % 44 %

	Three months ended September 30,
	2019		2018
	(Unaudited)		(Unaudited)
Listing fee revenue	$	-	$	-
Commission		939,164		253,331
Management fee revenue		184,428		107,905
Online artwork sales		-		2,244
Annual fee revenue		-		54
Total	$	1,123,592	$	363,534

Listing fee revenue was $1,455,498 and $2,968,534; commission revenue was $1,496,826 and $1,669,698, gross management fee revenue was $402,547 and $781,219, annual fee revenue was $140 and $440 , authorized agent subscription revenue was $nil and $322,318 for the three months ended September 30, 2017 and 2016, respectively.

(i)

Listing fee revenue

~~Listing fee revenue is calculated based~~As of September 30, 2019, a total of 285 sets of artwork were listed for trade on our platform —comprising 60 sets of paintings and calligraphies from famous Chinese, Russian and Mongolian artists, with a ~~percentage~~total listing value of $25,783,323 (HK$202,100,000); 35 pieces of jewelry with a total listing value of $9,269,749 (HK$72,660,000); 134 pieces of precious stones with a total listing value of $16,845,275 (HK$132,040,000); 29 pieces of amber with a total listing value of $12,119,820 (HK$95,000,000); 4 pieces of antique mammoth ivory carvings with a total listing value of $663,401 (HK$5,200,000); 2 pieces of porcelain pastel paintings with a total listing value of $331,700 (HK$2,600,000); 7 pieces of porcelain with a total listing value of $1,084,405 (HK$8,500,000); 6 sets of Unit+ products with a total listing value of $1,315,830 (HK$10,314,000); 1 piece of Yixing collectable with a listing value of $127,577 (HK$1,000,000); and 7 pieces of sports memorabilia with a listing value of $1,085,604 (HK$8,509,400), of which 22.5%-48% (for 60 sets of paintings), 24%-48.5% (for the 134 pieces of precious stones), 29%-48% (for the 35 pieces of jewelry), 47%-48.5% (for 4 piece of antique mammoth ivory carvings), 32%-48% (for the 29 pieces of amber), 45%-46% (for the 2 pieces of porcelain pastel paintings), 25%-48% (for the 7 pieces of porcelain), 30.25%-45% (for the 6 sets of Unit+ products), 45% (1 piece of Yixing collectable) and 45% (for the 7 pieces of sports memorabilia) of the ~~listing value and transaction value of artworks.~~

~~Listing value is the total offering price of an artwork when the ownership units are initially~~ listed ~~on our trading platform. We utilize an appraised value~~values were charged as ~~a basis to determine the appropriate listing value for each artwork, or portfolio of artworks.~~

Takung Unit+ is a new unit trading platform for collectibles. It allows investors to buy and trade shared ownership units of portfolios of collectibles, however, unlike the Company's standard Unit trading platform, each Takung Unit+ portfolio will contain multiple numbers of the same item, and traders will have the option of direct ownership with physical delivery by trading the units they own for one or more of the items in the portfolio. Takung will collect listing fees, on the initial listing values of new portfolios, commissions on trades made by investors using the platform, and management fees for the storage, transportation, and insurance of the items in the portfolio.respectively.

During the three months ended September 30, ~~2017,~~2019, there were ~~6 sets of paintings and calligraphies, 9 pieces of precious stones, 1 pieces of jewelry and 1 set of Unit+ product~~no new artworks listed on our platform. Their total listing values were $2,118,726 (HK$16,500,000) for the 6 sets of paintings and calligraphies, $1,132,555 (HK$ 8,820,000) for the 9 pieces of precious stones, $46,227 (HK$360,000) for the 1 pieces of jewelry and $152,578 (HK$1,188,000) for the 1 set of Unit+ product, of which 41.5%-47% (for the 6 sets of paintings and calligraphies), 26%-46% (for the 9 pieces of precious stones), 43% (for the 1 pieces of jewelry) and 30.3% (for the 1 set of Unit+ product) of the listed values were charged as listing fees, respectively.

Compared to the corresponding period ended September 30, 2016, there were 7 sets of paintings and calligraphies, 7 pieces of amber, 14 pieces of precious stones, 5 pieces of jewelry successfully listed on our system. The totalWe had no listing ~~values were $1,802,475 (HK$14,000,000)~~fee revenue for the 7 sets of paintings and calligraphies, $2,974,083 (HK$23,100,000) for the 7 pieces of amber, $1,042,860 (HK$8,100,000) for the 14 pieces of precious stones, $746,739 (HK$5,800,000) for 5 pieces of jewelry, of which 47.75%-48% (for the 7 sets of paintings and calligraphies) ,46% (for the 7 pieces of amber), 32%-48.5% (for the 14 pieces of precious stones), 29%-48% (for the 5 pieces of jewelry) of the listed values were charged as listing fees, respectively.

~~The decrease in number of pieces listed, listing values and corresponding listing fees charged during~~ the three months ended September 30, ~~2017 compared~~2019 and 2018. During the third quarter of 2019, we suspended and did not have any new listings of artwork on our platform because we focused on the promoting the trading of our existing listed artwork as opposed to new listings. We also felt that any new listings would be unfavorably impacted by current market conditions. We will be more discreet about the ~~same period ended September 30, 2016 resulted in a decrease in listing fee revenue in the current period. The decrease in number~~future listings of pieces listed was due to a new listing category (“A-tier”) implemented on July 3, 2017. A-tier is aim to meet an elevated set of standards including higher levels of liquidity, market value, number of owners and number of VIP traders. Therefore, the listing schedule of some artworks were deferred to a later time.more valuable artworks.

(ii)

Commission fee revenue

We generate commission fee from non-VIP traders and selected traders as follows:

For non-VIP ~~Traders,~~traders, the commission revenue was calculated based on a percentage of transaction value of artworks, ~~which~~where we charge trading commissions for the purchase and sale of the ownership shares of the artworks. The commission is typically 0.3% of the total amount of each transaction, but as an initial promotion, we currently charge a reduced fee of 0.2% (resulting in an aggregate of 0.4% for both buy and sell transactions) of the total transaction amount with the minimum charge of $0.13 (HK$1). The commission is accounted for as revenue and immediately deducted from the proceeds from the sales of artwork units when a transaction is completed.

~~For selected VIP Traders,~~ On November 7, 2018 we ~~ran a discount program for them starting from April 1, 2015, when their trading volumes of~~lowered the ~~certain artworks reached an agreed level in each month, a contractually determined flat rate of trading commission was applied~~minimum charge to the transactions of these certain artworks. Any trading commission charges incurred by the VIP Traders over the flat rate would be waived. The discounted rate varied between selected artworks. This discount program ended on March 31, 2016.$0.0013 (HK$0.01).

For selected ~~Traders,~~traders, starting from April 1, 2016, we charged a predetermined monthly fee (unlimited trades for specific artworks) for specific artworks. These ~~Traders~~traders are selected by authorized agents and reviewed by us. After review, we negotiate individually with each one of them to determine a fixed monthly fee. Different ~~Traders~~traders may have different rates but once negotiated and agreed to, the monthly fee is fixed. Using the output method, we recognize the monthly commission revenue when the selected traders receive access to our trading platform to make unlimited trades for specific artwork.

We define traders as “inactive” if they meet the following criteria;

	•	The trader defaults in payment over three months;
	•	The trader did not incur any transactions in the month of reassessment;
	•	The service agent has confirmed with the relevant trader that he/she was inactive.

Once an inactive trader has been assessed and identified, his/her contract will be reassessed pursuant to ASC 606-10-25-5 because there has been a significant change in fact and circumstances and pursuant to ASC 606-10-25-1)e), his/her contract will not be deemed to exist and revenue will not be recognized until consideration is received in accordance with ASC 606-10-25-7(a) as we would have already performed our obligations ahead of receiving consideration.

Commission rebate programs are offered to ~~Traders~~traders and service agents. We ~~would rebate~~pay to existing traders 5% of the commission earned from the transactions of new ~~Traders~~traders referred by ~~the existing Traders.~~them. The rebate was adjusted from 15% to 5%, starting January 1, 2017. For service agents, we rebate a total of 40% to 75% of the commission earned from transactions with new traders to the service agents when they bring in an agreed number of traders to the trading platform. For service agents who have individual referrers referring traders to us, we will, after rebating such individual referrers 5% of the commission earned from the transactions of new traders they referred, deduct such 5% of the commission from the rebates payable to the service agents to which such individual referrers relate.

The rebates and discounts are recognized in the same period the related revenue is recognized.

Our trading volume and transaction value amounts increased significantly from 2016 when we commenced operations in Shanghai and consequently added a significant number of traders from mainland China as they could now settle their trades in Renminbi. This trend continued into 2017. However, there has been a decrease in our trading volume and transaction value amounts since the second half of 2018 because of the deteriorating economy in China due to the under-performance of its financial stock markets as well as the fall-out from the P2P (peer-to-peer) lending market. The situation has continued into 2019.

Total commission revenue increased by $685,833 for the three months ended September 30, 2019 to $939,164 compared to $253,331 for the three months ended September 30, 2018 primarily because our transaction volume increased as a result of our efforts in promoting our existing listed artworks.

(iii)

Management fee revenue

We charge traders a management fee to cover the costs of insurance, storage, and transportation for artwork and trading management of artwork units, which are calculated at $0.0013 (HK$0.01) per 100 artwork units per day. On November 7, 2018 we lowered the minimum charge to $0.0013 (HK$0.01). The management fee is deducted from proceeds from the sale of artwork units.

During the three-month period ended September 30, 2019, management fee revenue increased by $76,523, from $107,905 for the three months ended September 30, 2018 to $184,428, due to the increase in trading transactions.

(iv)

Annual fee revenue

During the three-month period ended September 30, 2019, there was no annual fee revenue, compared to $54 for the three-month period ended September 30, 2018

(v)

Online artwork sales

During the three-month period ended September 30, 2019, there was no online artwork sales, compared to $2,244 for the three-month period ended September 30, 2018

Revenue by customer type

The following table presents our revenue by customer type:

	Three months ended September 30,
	2019		2018
	(Unaudited)		(Unaudited)
Artwork owners	$	-	$	-
Non - VIP traders		853,276		140,581
VIP traders		270,316		220,709
Online artwork sales		-		2,244
Total	$	1,123,592	$	363,534

Cost of Revenue

	Three months ended September 30,
	2019		2018
	(Unaudited)		(Unaudited)
Commission rebate to service agent	$	370,204	$	2,094
Depreciation		116,082		163,736
Internet service charge		62,104		53,676
Artwork insurance		12,192		50,983
Artwork storage		19,700		27,533
Others		-		1,460
Total	$	580,282	$	299,482

Cost of revenue for the three months ended September 30, 2019 and September 30, 2018 was $580,282 and $299,482, respectively. The increase in cost of revenue by $280,800 for the three months ended September 30, 2019 compared to September 30, 2018 was mainly due to higher commission rebates to service agents. The increase in commission rebates by $368,110 correlated to the higher commission revenue earned from transactions during the three months ended September 30, 2019. Such an increase was offset by the decrease in depreciation expense and artwork insurance expense by $47,654 and $38,791, respectively. The fall in depreciation expense was a result of the suspension of e-commerce activity and impairment of all online software development assets in 2018. The reduction in the artwork insurance expense was due to a negotiated discount in our new insurance contract for 2019.

Gross Profit

Gross profit was $543,310 for the three months ended September 30, 2019, compared to $64,052 for the three months ended September 30, 2018. The increase was due to the increase in our total revenue.

As previously discussed, the spike in total revenue was largely attributable to the rise in our commission revenue earned from transactions in the three months ended September 30, 2019. Our commission revenue contributed 83.6% for the quarter ended September 30, 2019 compared to 69.7% in the corresponding period in 2018. Consequently, we posted a gross profit margin of 48.4% for the three months ended September 30, 2019 compared to 17.6% for the same period in 2018.

Operating Expenses

General and administrative expenses for the three months ended September 30, 2019 were $1,159,502 compared to $2,208,264 for the three months ended September 30, 2018. The significant plunge in general and administrative expenses by $1,048,762 was attributed to a decrease in salary and welfare by $829,072 due to reduction in force since July 2018, a decrease in traveling and accommodation expenses by $48,427 as a result of fewer marketing events, a decrease in non-deductible input VAT by $4,027, a decrease in consultancy fees by $29,698, share-based compensation by $58,537, depreciation by $45,020 and other expenses by $89,927.

The following table sets forth the main components of our general and administrative expenses for the three months ended September 30, 2019 and 2018.

	Three months ended September 30, 2019				Three months ended September 30, 2018
	(Unaudited)				(Unaudited)
	Amount($)		% of Total		Amount($)		% of Total
Salary and welfare		405,620		35.0		1,234,692		55.9
Office, insurance and rental expenses		369,947		31.9		361,402		16.4
Legal and professional fees		213,263		18.4		165,862		7.5
Traveling and accommodation fees		28,939		2.5		77,366		3.5
Non-deductible input VAT expense		40,718		3.5		44,745		2.0
Consultancy fee		46,494		4.0		76,192		3.5
Share based compensation expense		6,273		0.5		64,810		2.9
Depreciation		32,692		2.8		77,712		3.5
Others		15,556		1.4		105,483		4.8
Total general and administrative expense	$	1,159,502		100	$	2,208,264		100

Other expenses

Other expenses for the three-month period ended September 30, 2019 were $520,698 compared to other expenses of $1,004,552 for the same period in 2018. The decrease in other expenses by $483,854 was predominately resulted from a significant decrease in exchange loss by $354,410, arising from the depreciation of Renminbi against US dollar and a decrease in loan interest by $181,806 due to the loan due to a third party paid off in January 2019. Such decrease was offset by decrease in bank interest income by $49,266.

Income tax benefit

The Company’s effective tax rate varies due to its multiple jurisdictions in which the pretax book incomes or losses incur. The Company was subject to a U.S. income tax rate of 21% (34 % prior to January 1, 2018), Hong Kong profits tax rate at 8.25% for the first HKD 2 million (approximately $255,154) assessable profits and at 16.5% for assessable profits above HKD 2 million (approximately $255,154) (16.5% prior to January 1, 2018) and PRC enterprise income tax rate at 25%.

The effective tax rates for the three months ended September 30, 2019 and 2018 were 9.4% and 20.5%, respectively.

Income taxes benefit for the three months ended September 30, 2019 and 2018 were $117,451 and $742,670, respectively.

Net Loss

We had a net loss for the three months ended September 30, 2019 of $1,127,897 compared net loss of $2,881,356 for the three months ended September 30, 2018.

The decrease in net loss during the three months ended September 30, 2019 was predominately due to a rise in revenue by $760,058, and a decrease in operating expenses by $1,415,566, compared to the three months ended September 30, 2018 as a result of cost-cutting measures. It was also affected by a decrease in exchange losses by $354,410.

We announced on August 13, 2018 the suspension of new listings of artwork. We were on the downside of a downturn in the online fine art and collectibles platform space, a by-product of a downturn in A-shares on the Chinese markets tightening of liquidity in China, declines in both the Shanghai and Shenzhen stock exchanges and the fallout from increased peer-to-peer (P2P) loan defaults. We slowly resumed new listings in January 2019 but there were no new listings this quarter. We were focused on resuscitating interest in the trading of our existing artwork and generating more commission revenue.

NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2019 COMPARED TO NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2018

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

	Nine Months Ended
	September 30,
	2019			% of Revenue			2018			% of Revenue
	(Unaudited)						(Unaudited)
Revenue	$	2,285,376			100		$	8,191,828			100
Cost of revenue		(1,288,589	)		(56	)		(2,173,296	)		(27	)
Selling expense		(143,054	)		(6	)		(851,173	)		(10	)
General and administrative expenses		(3,322,547	)		(146	)		(7,791,747	)		(95	)
Impairment loss – construction-in-progress		-			-			(326,227			(4	)
Total costs and expenses		(4,754,190	)		(208	)		(11,142,443	)		(136	)
Loss from operations		(2,468,814	)		(108	)		(2,950,615	)		(36	)
Interest and other expenses, net		(670,885	)		(29	)		(1,166,045	)		(14	)
Loss before income taxes		(3,139,699	)		(137	)		(4,116,660	)		(50	)
Income tax benefit		175,473			8			574,202			7	)
Net loss	$	(2,964,226	)		(129	)	$	(3,542,458	)		(43	)

Revenue

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

	Nine months ended
	September 30,
	2019		2018
	(Unaudited)		(Unaudited)
Listing fee revenue	$	284,090	$	3,978,735
Commission		1,655,244		3,557,411
Management fee revenue		346,042		455,133
Authorized agent subscription revenue		-		191,623
Annual fee revenue		-		378
Online artwork sales		-		8,548
Total	$	2,285,376	$	8,191,828

(i)

Listing fee revenue

As of September 30, 2019, a total of 285 sets of artwork were listed for trade on our platform —comprising 60 sets of paintings and calligraphies from famous Chinese, Russian and Mongolian artists, with a total listing value of $25,783,323 (HK$202,100,000); 35 pieces of jewelry with a total listing value of $9,269,749 (HK$72,660,000); 134 pieces of precious stones with a total listing value of $16,845,275 (HK$132,040,000); 29 pieces of amber with a total listing value of $12,119,820 (HK$95,000,000); 4 pieces of antique mammoth ivory carvings with a total listing value of $663,401 (HK$5,200,000); 2 pieces of porcelain pastel paintings with a total listing value of $331,700 (HK$2,600,000); 7 pieces of porcelain with a total listing value of $1,084,405 (HK$8,500,000); 6 sets of Unit+ products with a total listing value of $1,315,830 (HK$10,314,000); 1 piece of Yixing collectable with a listing value of $127,577 (HK$1,000,000); and 7 pieces of sports memorabilia with a listing value of $1,085,604 (HK$8,509,400), of which 22.5%-48% (for 60 sets of paintings), 24%-48.5% (for the 134 pieces of precious stones), 29%-48% (for the 35 pieces of jewelry), 47%-48.5% (for 4 piece of antique mammoth ivory carvings), 32%-48% (for the 29 pieces of amber), 45%-46% (for the 2 pieces of porcelain pastel paintings), 25%-48% (for the 7 pieces of porcelain), 30.25%-45% (for the 6 sets of Unit+ products), 45% (1 piece of Yixing collectable) and 45% (for the 7 pieces of sports memorabilia) of the listed values were charged as listing fees, respectively.

During the nine months ended September 30, 2019, there were 6 sets of paintings listed on our platform. Their total listing values were $1,148,194 (HK$9,000,000) for the paintings, of which 22.9%-28% (for the paintings) of the listed values were charged as listing fees.

The listing fees charged decreased to $284,090 during the nine months ended September 30, 2019 compared to $3,978,735 for the same period ended September 30, 2018. During the nine months ended September 30, 2019, we suspended new listings of artwork on our platform because we were more focused on promoting the trading of our existing listed artworks and felt that any new listings would be unfavorably impacted by current market conditions. We will also be more discreet about future listings of more valuable artworks. Accordingly, there were no listings during the nine months ended September 30, 2019.

(ii)

Commission fee revenue

We generate a commission fee from non-VIP traders and selected traders as follows:

For non-VIP traders, the commission revenue was calculated based on a percentage of transaction value of artworks, which we charge trading commissions for the purchase and sale of the ownership shares of the artworks. The commission is typically 0.3% of the total amount of each transaction, but as an initial promotion, we currently charge a reduced fee of 0.2% (resulting in an aggregate of 0.4% for both buy and sell transactions) of the total transaction amount with the minimum charge of $0.13 (HK$1). On November 7, 2018, we lowered the minimum charge to $0.0013 (HK$0.01). The commission is accounted for as revenue and immediately deducted from the proceeds from the sales of artwork units when a transaction is complete.

For selected traders, starting from April 1, 2016, we charged a predetermined monthly fee that allows unlimited trades for specific artworks. These traders are selected by authorized agents and reviewed by us. After review, we negotiate individually with each reviewed traders to determine a fixed monthly fee. Different traders may have different rates but once negotiated and agreed to, the monthly fee is fixed. Using the output method, we recognize the monthly commission revenue upon the selected traders that receives access to our trading platform to make unlimited trades for specific artworks.

We defined a selected trader as an inactive trader who meets one of the following criteria:

The trader has been default in making monthly commission payment over three months.

The trader has not incurred any sales or purchase transactions in the month of reassessment.

The offering agent confirms that the respective selected trader is inactive.

Commission rebate programs are offered to traders and service agents. We pay to existing traders 5% of the commission earned from the transactions of new traders referred by them. The rebate was adjusted from 15% to 5%, starting from January 1, 2017. For service agents, we rebate a total of 40% to ~~60%~~68% of the commission earned from transactions with new ~~Traders~~traders to the service agents when they bring in an agreed number of ~~Traders~~traders to the trading platform. For service agents who have individual referrers referring ~~Traders~~traders to us, we will, after rebating such individual referrers ~~15%~~5% of the commission earned from the transactions of new ~~Traders~~traders they referred, deduct such ~~15%~~5% of the commission from the rebates payable to the service agents to which such individual referrers ~~belong. The commission rebate is recognized as reduction of the commission revenue.~~ relate.

The rebates and discounts are recognized ~~as a reduction of revenue~~ in the same period the related revenue is recognized.

~~In spite of this, total~~

Total commission revenue decreased by ~~$172,872 or 10%~~$1,902,167 for the ~~three~~nine months ended September 30, ~~2017~~2019 to ~~$1,496,826~~$1,655,244 compared to ~~$1,669,698~~$3,557,411 for the ~~three~~nine months ended September 30, ~~2016~~2018 primarily because there were no new listings of artwork on our platform in the ~~change in our commission fee policy~~second and ~~the decrease of transaction volume of non VIP traders~~third quarters and ~~non-selected traders. From April 1, 2016 onwards, selected Traders pay a predetermined monthly fixed fee for their trades in specific artworks while our other non-VIP Traders continue~~this drove down overall trading activity during this period compared to ~~pay a commission calculated based on a percentage of transaction value of artworks.~~last year.

(iii)

Management fee revenue

We charge ~~Traders~~traders a management fee to cover the costs of insurance, storage, and transportation for an artwork and trading management of artwork units, which are calculated at $0.0013 (HK$0.01) per 100 artwork units per day. The management fee is deducted from proceeds from the sale of artwork units.

During the ~~three-month~~nine-month period ended September 30, ~~2017,~~2019, management fee revenue ~~decreased~~dropped by ~~$378,672,~~$109,091, from ~~$781,219~~$455,133 for the ~~three~~nine months ended September 30, ~~2016~~2018 to ~~$402,547. From September 1, 2016, we waived management fees for certain VIP Traders. We recognized these promotions as a reduction of revenue, which was recognized upon~~$346,042, due to the ~~completion of the transactions. Although the listed artworks increased, the management fee decreased by the promotions.~~decrease in overall trading transactions this period compared to last year.

(iv)

~~Other revenue~~

~~During the three-month period ended September 30, 2017, annual fee revenue decreased by $300, from $440 for the three-month period ended September 30, 2016 to $140.~~

~~(v) Authorized agent subscription revenue~~

Authorized agent subscription revenue was nil for the three-month period ended September 30, 2017 compared to $322,318 for the three-month period ended September 30, 2016. We have ceased charging new authorized agent with subscription revenue in order to encourage high quality authorized agent to sign up with our platform.

~~Cost of Revenue~~

Cost of revenue for the three months ended September 30, 2017 and 2016 was $292,168 and $285,252, respectively. Our cost of revenue primarily includes internet service fee, depreciation and amortization of hardware and software for our trading platform.

~~Gross Profit~~

Gross profit was $3,062,843 for the three months ended September 30, 2017, compared to $5,456,957 for the three months ended September 30, 2016. The decrease was due to the less artworks listed on our platform, the change in our commission fee policy and the decrease of transaction volume of non VIP traders and non-selected traders.

Listing fees contributed 43.4% of the total revenue for the three months ended September 30, 2017 compared to 51.7% in the corresponding period in 2016, while commission revenue contributed 44.6% for the three months ended September 30, 2017 compared to 29% in the corresponding period in 2016. While there was a decrease in commission revenue in the current period, the negative factors were catalyzed by a decrease in listing fees due to less artworks listing on the platform during the current period. Consequently, we posted a comparable gross profit margin of 91% for the three months ended September 30, 2017 compared to 95% for the same period in 2016.

~~Operating Expenses~~

Selling expenses were $624,151, or 20% of net sales, for the three months ended September 30, 2017 compared to $652,207, or 12% of net sales, for the comparable period in 2016, a decrease by $28,056. Selling expenses consist primarily of marketing expenses.

General and administrative expenses for the three months ended September 30, 2017 were $2,498,848 compared to $1,744,965 for the three months ended September 30, 2016. The substantial increase was primarily due to an increase in salaries by $258,469 because of an increase in employee headcount, accrual of doubtful account by $241,248, office, insurance and rental expense by $141,281 and an increase in travelling expenses by $116,220 which were incurred to attend to the listing of our common stock on the NYSE American.

~~The following table sets forth the main components of the Company’s general and administrative expenses for the three months ended September 30, 2017 and 2016.~~

Three months ended
September 30, 2017 Three months ended
September 30, 2016
(Unaudited) (Unaudited)
Amount($) % of Total Amount($) % of Total
Consultancy fee $ 46,059 2 % $ 92,809 5 %
Legal and professional fees 218,066 9 % 247,278 14 %
Salary and welfare 1,008,736 40 % 750,267 43 %
Office, insurance and rental expenses 430,047 17 % 288,766 17 %
Non-deductible input VAT expenses 6,924 0 % - - %
Traveling and accommodation fees 187,780 8 % 71,560 4 %
Share-based compensation 138,161 6 % 186,928 11 %
Bad debt expenses 241,248 10 % - - %
Others 221,827 8 % 107,357 6 %
Total general and administrative expenses $ 2,498,848 100.0 % $ 1,744,965 100.0 %

~~Net Income~~

~~We had a net income for the three months ended September 30, 2017 of $27,034 compared to net income of $2,451,737 for the three months ended September 30, 2016.~~

~~The decrease in net income by $2,424,703 during this current period was primarily due to a decrease of revenue by $2,387,198 as discussed in the previous paragraphs.~~

~~NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2017 COMPARED TO NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2016~~

~~Revenue~~

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

Nine Months Ended
September 30,
2017 2016
(Unaudited) (Unaudited)
Revenue $ 10,545,677 $ 14,214,252
Cost of revenue (822,335 ) (822,735 )
Selling expense (1,272,010 ) (1,993,782 )
General and administrative expenses (7,311,128 ) (5,076,689 )
Total costs and expenses (9,405,473 ) (7,893,206 )
Income from operations 1,140,204 6,321,046
Interest and other income (loss), net 511,311 (279,336 )
Income before income taxes 1,651,515 6,041,710
Income tax expense (594,377 ) (1,377,078 )
Net income $ 1,057,138 $ 4,664,632

~~The following tables set forth our condensed consolidated statements of income data (as a percentage of revenue):~~

Nine Months Ended
September 30,
2017 2016
(Unaudited) (Unaudited)
Revenue 100 % 100 %
   Cost of revenue – Direct revenue (8 ) (6 )
   Selling expense (12 ) (14 )
   General and administrative expenses (69 ) (36 )
Total costs and expenses (89 ) (56 )
Income from operations 11 44
Interest and other income (loss), net 5 (2 )
Income before income taxes 16 42
Income tax expense (6 ) (10 )
Net income 10 % 32 %

Listing fee revenue was $4,606,649 and $8,166,072; commission revenue was $4,970,651 and $3,739,958, gross management fee revenue was $967,518 and $1,341,294, annual fee revenue was $859 and $869, authorized agent subscription revenue was $nil and $966,059, for the nine months ended September 30, 2017 and 2016, respectively.

~~(i)~~

~~Listing~~Annual fee revenue

During the nine months ended September 30, 2017, there were 49 sets of artwork listed for trade on our platform —comprising 8 sets of paintings and calligraphies, with a total listing value of $2,632,356 (HK$20,500,000), 16 pieces of jewelry with a total listing value of $5,567,754 (HK$43,360,000), 23 pieces of precious stones with a total listing value of $3,212,759 (HK$25,020,000), 1 piece of porcelains with a total listing value of $38,522 (HK$300,000) and 1 set of Unit+ product which was listed in Unit+ trading platform, with a total listing value of $152,548 (HK$1,188,000), of which 41.5%-47% (for 8 sets of paintings and calligraphies), 33.5%-48% (for the 16 pieces of jewelry), 26%-47% (for the 23 pieces of precious stones), 46% (for the 1 pieces of porcelains) and 43% (for the 1 set of Unit+ product) of the listed values were charged as listing fees, respectively.

~~Compared to the corresponding~~nine-month period ended September 30, ~~2016,~~2019, there were 15 pieces of painting, 59 pieces of precious stones, 11 pieces of jewelry, 3 pieces of ivory, 18 pieces of amber and 2 pieces of porcelain pastel paintings successfully listed on our system. The total listing values were $3,349,005 (HK$26,000,000)was no annual fee revenue, compared to $378 for the 15 pieces of painting, $5,744,832 (HK$44,600,000) for the 59 pieces of precious stones, $1,816,191 (HK$14,100,000) for the 11 pieces of jewelry, $515,232 (HK$4,000,000) for the 3 pieces of ivory, $7,239,003 (HK$56,200,000) for the 18 pieces of amber, and $334,900 (HK$2,600,000) for the 2 pieces of porcelain pastel paintings, of which 47.75%-48% (for the 15 pieces of painting), 29%-48.5% (for the 59 pieces of precious stones), 29%-48% (for the 11 pieces of jewelry), 47% (for the 3 pieces of ivory), 45%-48% (for the 18 pieces of amber), and 45%-46% (for 2 pieces of porcelain pastel paintings ) of the relevant listed values were charged as listing fees, respectively.

~~The decrease in number of pieces listed, listing values and corresponding listing fees charged during the nine months ended September 30, 2017 compared to the same~~nine-month period ended September 30, ~~2016 resulted in a decrease in listing fee revenue in the current period. The decrease in number of pieces listed was due to a new listing category (~~“~~A-tier~~”) implemented on July 3, 2017. A-tier is aim to meet an elevated set of standards including higher levels of liquidity, market value, number of owners and number of VIP traders. Therefore, the rigorous listing requirements of A-tier led some artworks listing deferred.2018.

~~(ii)~~(v)

~~Commission fee revenue~~

Our trading volume and transaction value amounts increased significantly from 2015 when we commenced operations in Shanghai and consequently added a significant number of Traders from mainland China as they could now settle their trades in Renminbi. This trend continued into 2017. Trading volume increased by 193% and trading amount increased by 178% for the nine months ended September 30, 2017 compared to corresponding period in 2016.

In spite of this, total commission revenue increased by $1,230,693 or 33% for the nine months ended September 30, 2017 to $4,970,651 compared to $3,739,958 for the nine months ended September 30, 2016 primarily because of the change in our commission fee policy and the decrease of transaction volume of non VIP traders and non-selected traders . From April 1, 2016 onwards, selected Traders pay a predetermined monthly fixed fee for their trades in specific artworks while our other non-VIP Traders continue to pay a commission calculated based on a percentage of transaction value of artworks.

~~(iii)~~

~~Management fee revenue~~

During the nine month period ended September 30, 2017, management fee revenue decreased by $373,776, from $1,341,294 for the nine months ended September 30, 2016 to $967,518. From September 1, 2016, we waived management fees for certain VIP Traders. We recognized these promotions as a reduction of revenue, which was recognized upon the completion of the transactions.

~~(iv)~~

~~Other~~Authorized agent subscription revenue

During the nine-month period ended September 30, ~~2017, annual fee~~2019, there was no authorized agent subscription revenue, ~~increased by $10, from $869~~compared to $191,623 for the nine-month period ended September 30, ~~2016 to $859.~~2018.

(~~v) Authorized agent subscription revenue~~

(vi)

Online artwork sales

~~Authorized agent subscription revenue~~During the nine-month period ended September 30, 2019, there were no online artwork sales, compared to $8,548 for the nine-month period ended September 30, 2017 was nil compared to $966,059 for the nine-month period ended September 30, 2016. We have ceased charging new authorized agent with subscription revenue in order to encourage high quality authorized agent to sign up with2018 because we shut down online artwork sales on our platform.

Revenue by customer type

The following table presents our revenue by customer type:

	Nine months ended September 30,
	2019		2018
	(Unaudited)		(Unaudited)
Artwork owners	$	284,090	$	3,978,735
Non - VIP traders		1,494,066		2,235,789
VIP traders		507,220		1,777,133
Authorized agents		-		191,623
Online artwork sales		-		8,548
Total	$	2,285,376	$	8,191,828

Cost of Revenue

	Nine months ended September 30,
	2019		2018
	(Unaudited)		(Unaudited)
Commission rebate to service agent	$	660,208	$	1,207,104
Depreciation		359,878		491,297
Internet service charge		159,882		240,165
Artwork insurance		36,124		155,635
Artwork storage		72,033		74,110
Others		464		4,985
Total	$	1,288,589	$	2,173,296

Cost of revenue for the nine months ended September 30, ~~2017~~2019 and ~~2016~~September 30, 2018 was ~~$822,335~~$1,288,589 and ~~$822,735,~~$2,173,296, respectively. ~~Our~~The decrease in cost of revenue ~~primarily includes internet~~for the nine months ended September 30, 2019 compared to September 30, 2018, was mainly due to the decrease in the commission rebates to service ~~fee,~~agents by $546,896. Management focused on resuscitating interest in listed artwork and no new artwork had been listed since the second quarter of 2019. Besides the decrease in commission rebates, the decrease in cost of revenue was also due to a fall in the depreciation and amortization of hardware and software ~~for~~on our trading ~~platform.~~

Inplatform by $131,419 as a result of the ~~third quarter~~suspension of ~~2014, we entered into an agreement with a third party service provider, Shenzhen Qianrong Cultural Investment Development Co., Ltd (“Qianrong”), to provide~~e-commerce activity and impairment of all online software development assets in 2018, the decline in internet services ~~with~~charges by $80,283 due to the termination of two network lines between Macau and Hong Kong, the decrease in artwork insurance expense by $119,511 due to a ~~total~~negotiated discount in our new insurance contract ~~amount of $902,592 (HK$6,995,000). The services contracted~~ for ~~are divided into different modules, according to different upgrades~~2019, the decrease in artwork storage fee by $2,077 and ~~new functionalities. As of September 30, 2017 and 2016, nine out of~~ the ~~ten modules have been completed and are operational. We capitalized (with a total cost of $1,069,853 (HK$8,295,000)) and amortized these costs once the modules were completed.~~drop in other expenses by $4,521.

Gross Profit

Gross profit was ~~$9,723,342~~$996,787 for the nine months ended September 30, ~~2017,~~2019, compared to ~~$13,391,517~~$6,018,532 for the nine months ended September 30, ~~2016.~~2018. The decrease was mainly due to the ~~less artworks listed on our platform, the change~~significant decline in ~~our commission fee policy and the decrease of transaction volume of non VIP traders and non-selected traders.~~total revenue.

~~Operating Expenses~~

~~Selling expenses were $1,272,010, or 13% of net sales,~~Overall total revenue for the nine months ended September 30, ~~2017~~2019 dropped by $5,906,452 or 72.1% compared to ~~$1,993,782 or 15%~~the same period in 2018. Compared to the same period in 2018, there was a significant decrease in listing fee revenue and commission revenue. Consequently, we posted a gross profit margin of ~~net sales,~~43.6% for the ~~comparable~~nine months ended September 30, 2019 compared to 73.5% for the same period in ~~2016, a decrease by 36%. Selling expenses consist primarily of marketing expenses.~~

2018.

Operating Expenses

General and administrative expenses for the nine months ended September 30, ~~2017~~2019 were ~~$7,311,128~~$3,322,547, compared to ~~$5,076,689~~$7,791,747 for the nine months ended September 30, ~~2016.~~2018. The ~~substantial increase~~significant plunge in general and administrative expense by ~~$2,234,439 or 44%~~$4,469,200 was ~~chiefly~~attributed to a decrease in salary and welfare by $2,615,446 due to ~~an increase~~reduction in ~~salaries by $1,314,324 because of an increase~~force since July 2018, a decrease in ~~employee headcount, accrual of doubtful accounts, by $241,248, office,~~ insurance and rental expenses by ~~$400,067~~$525,728 due to the relocation of our Hong Kong office to a non-central district, a decrease in legal and ~~an increase~~professional fees by $159,147, a decrease in ~~travelling~~traveling and accommodation expenses by ~~$495,715 which were incurred to attend to the listing~~$463,758 as a result of ~~our common stock on the NYSE American.~~

fewer marketing events, a decrease in non-deductible input VAT by $207,649, a decrease in consultancy fees by $71,853, share-based compensation by $180,347, depreciation by $119,273 and also other expenses by $202,401.

The following table sets forth the main components of ~~the Company’s~~our general and administrative expenses for the nine months ended September 30, ~~2017~~2019 and ~~2016.~~September 30, 2018.

	Nine months ended September 30, 2019					Nine months ended September 30, 2018
	(Unaudited)					(Unaudited)
	Amount($)		% of Total			Amount($)			% of Total
Salary and welfare		1,283,486		38.6	%		3,898,932			50.0	%
Office, insurance and rental expenses		697,629		21.0	%		1,223,357			15.7	%
Legal and professional fees		595,903		18.0	%		755,050			9.7	%
Traveling and accommodation fees		81,282		2.4	%		545,040			7.0	%
Non-deductible input VAT expense		130,316		3.9	%		337,965			4.3	%
Consultancy		218,929		6.6	%		290,782			3.7	%
Share based compensation		36,884		1.1	%		217,231			2.8	%
Depreciation		103,363		3.1	%		222,636			2.9	%
Bad debt expense		-		-	%		(76,402	)		(1.0	)%
Other		174,755		5.3	%		377,156			4.9	%
Total general and administrative expense	$	3,322,547		100.0	%	$	7,791,747			100.0	%

Other expenses

Other expenses for the nine months ended September 30, 2019 were $670,885, compared to $1,166,045 for the nine months ended September 30, 2018. The decrease in other expenses by $495,160 was primarily driven by the decrease in exchange loss by $568,277, due to the appreciation of Renminbi against US dollar and drop in loan interest by $486,272 due to a third-party loan being paid off in January 2019, offset by an increase in sundry expense by $357,053, a decrease in bank interest income by $132,218 and a loss in fixed asset disposal incurred in the nine months ended September 30, 2019 by $57,295.

Income tax benefit (expenses)

Nine months ended
September 30, 2017 Nine months ended
September 30, 2016
(Unaudited) (Unaudited)
Amount($) % of Total Amount($) % of Total
Consultancy fee $ 187,230 3 % $ 361,610 7 %
Legal and professional fees 733,466 10 % 728,856 14 %
Salary and welfare 3,166,679 43 % 1,852,355 36 %
Office, insurance and rental expenses 1,252,561 17 % 852,494 17 %
Non-deductible input VAT expense 16,369 - % - - %
Traveling and accommodation fees 679,950 9 % 184,235 4 %
Share-based compensation 562,184 8 % 846,703 17 %
Bad debt expenses 241,248 4 % - - %
Others 471,441 6 % 250,436 5 %
Total general and administrative expenses $ 7,311,128 100.0 % $ 5,076,689 100.0 %

The Company's effective tax rate varies due to its multiple jurisdictions where pre-tax income or losses occur. The Company is subject to a Hong Kong profits tax rate at 8.25% for the first HKD 2 million (approximately $255,154) assessable profits and at 16.5% for assessable profits above HKD 2 million (approximately $255,154) (16.5% prior to January 1, 2018), PRC enterprise income tax rate at 25% and U.S. income tax rate of 21% (34% prior to January 1, 2018 due to the Tax Cuts and Jobs Act enacted on December 22, 2017).

The effective tax rates for the nine months ended September 30, 2019 and 2018 were 5.6% and 13.9%, respectively.

Income taxes benefit for the nine months ended September 30, 2019 and 2018 were $175,473 and $574,202, respectively.

Net ~~Income~~loss

We had a net ~~income~~loss for the nine months ended September 30, ~~2017~~2019 of ~~$1,057,138~~$2,964,226 compared to a net ~~income~~loss of ~~$4,664,632~~$3,542,458 for the nine months ended September 30, ~~2016.~~

2018. The ~~decrease in~~lower net ~~income by $3,607,494 during this current period was due to a fall of revenue by $3,668,575, and the increase of general and administrative expenses by $2,234,439 as discussed~~loss incurred in the ~~previous paragraphs.~~nine months ended September 30, 2019, compared to the same period in 2018, resulted from a lower operating expenses and exchange loss in the current period.

Liquidity and Capital Resources

The following tables set forth our ~~condensed~~ consolidated statements of cash flow:

	Nine months ended
	September 30,
	2019			2018
	(Unaudited)			(Unaudited)
Net cash provided by (used in) operating activities	$	10,828,217		$	(18,589,823	)
Net cash provided by (used in) investing activities		313,588			(4,377,285	)
Net cash (used in) provided by financing activities		(537,605	)		2,425,220
Effect of exchange rate change on cash and cash equivalents		(33,398	)		(664,016	)
Net increase (decrease) in cash, cash equivalents and restricted cash		10,570,802			(21,205,904	)
Cash, cash equivalents and restricted cash, beginning balance		12,524,086			37,140,582
Cash, cash equivalents and restricted cash, ending balance	$	23,094,888		$	15,934,678

Nine months ended September 30
2017 2016
(Unaudited) (Unaudited)
Net cash provided by operating activities $ 1, 028,524 $ 5,635,391
Net cash used in investing activities (561,510 ) (1,276,378 )
Net cash provided by financing activities - 2,346,941
Effect of exchange rate change on cash and cash equivalents 1,025,539 (644,375 )
Net increase in cash and cash equivalents 1,492,553 6,061,579
Cash and cash equivalents, beginning balance 13,395,337 10,769,456
Cash and cash equivalents, ending balance $ 14,887,890 $ 16,831,035

Sources of Liquidity

During the nine months ended September 30, ~~2017,~~2019, net cash generated from operating activities totaled ~~$1,028,524.~~$10,828,217 which resulted from the implementation of ASU2016-18 since the beginning of 2018. In fact, there was an increase in client deposits by $12,459,049 placed by the customers for upcoming transactions which influenced the increased amounts due to clients simultaneously. The Company assessed and evaluated that it was truly a presentation issue and there should be no actual impact to the operating activities. Net cash generated from investing activities totaled $313,588. Net cash used in ~~investing~~financing activities totaled ~~$561,510. No cash was generated from financing activities during the period.~~$537,605. The resulting change in cash for the period was an increase of ~~$1,492,553.~~$10,570,802. The cash balance at the beginning of the period was ~~$13,395,337.~~$12,524,086. The cash balance on September 30, ~~2017~~2019 was ~~$14,887,890.~~$23,094,888.

During the nine months ended September 30, ~~2016,~~2018, net cash ~~provided by~~used in operating activities totaled ~~$5,635,391.~~$18,589,823 and it was resulted in the inclusion of the restricted cash balances within the overall cash balance and removal of the changes in restricted cash activity due to the adoption of ASU2016-18 since beginning of 2018. The reduction in net cash in operating activities was predominately triggered by a decline in client deposits by $17,757,757 which influenced the fall in the amount due to clients simultaneously. The Company assessed and evaluated it was rather a presentation issue and there should have no actual impact to the operating activities. Net cash used in investing activities totaled ~~$1,276,378.~~$4,377,285. Net cash ~~provided by~~generated from financing activities totaled ~~$2,346,941.~~$2,425,220. The resulting change in cash for the period was ~~an increase~~a decrease of ~~$6,061,579.~~$21,205,904. The cash balance at the beginning of the period was ~~$10,769,456.~~$37,140,582. The cash balance on September 30, ~~2016~~2018 was ~~$16,831,035.~~$15,934,678.

As of September 30, ~~2017,~~2019, the Company had ~~$28,390,798~~$26,298,905 in total current liabilities, which comprised of ~~$780,800~~$522,929 in accrued expense and other payables, ~~$19,057,733~~$17,008,251 in customers’ deposits, ~~$6,371,900~~$10,227 in advance from customer, $6,759,674 in amount due to related parties, $1,816,837 in loan from a third party, $173,156 in lease liabilities and $7,831 in tax payables. As of December 31, 2018, the Company had $14,099,778 in total current liabilities, which included $641,692 in accrued expenses and other payables $8,995 in advance from customers, $4,549,202 in customers’ deposits, $2,499,500 in short-term borrowings from third parties, ~~$1,085,480~~$6,385,288 in amount due to related party, and $1,094,885 in tax payables. As of December 31, 2016, the Company had $30,602,706 in total current liabilities, which included $608,883 in accrued expense and other accruals, $21,743,360 in customers’ deposits, $360,248 in advance from customers, $6,308,513 in short-term borrowings from third parties, $1,031,805 in amount due to related party and $549,897$15,101 in tax payables.

The Company had deferred tax liabilities as long-term liability of $45,301 as of September 30, 2017, and $62,618 as of December 31, 2016, respectively. The Company’s total liabilities as of September 30, 2017 and December 31, 2016 amounted to $28,436,099 and $30,665,324, respectively.

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

Applicable PRC law permits payment of dividends to us by our operating subsidiaries in China only out of their net income, if any, determined in accordance with PRC accounting standards and regulations. Our operating subsidiaries in China are also required to set aside a portion of their net income, if any, each year to fund general reserves for appropriations until such reserves have reached 50% of the subsidiary's registered capital. These reserves are not distributable as cash dividends. In addition, registered share capital and capital reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held in each operating subsidiary. In contrast, there is no foreign exchange control or restrictions on capital flows into and out of Hong Kong. Hence, our Hong Kong operating subsidiary is able to transfer cash without any limitation to the U.S. under normal circumstances.

If our operating subsidiaries were to incur additional debt on their own behalf in the future, the instruments governing the debt may restrict the ability of our operating subsidiaries to transfer cash to our U.S. investors.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements, including arrangements that would affect our liquidity, capital resources, market risk support, and credit risk support or other benefits.

Future Financings

WeAlthough we are suffering downside business including a decrease in trading volume and customer deposits, we are also undergoing a company restructuring, including re-evaluating the Company’s core business and a downsizing of its workforce. Our management forecasts that we have ~~always been generating~~ sufficient cash from our ~~operation~~operations to fund our business organically. However, we may conduct equity sales of our shares of common ~~shares~~stock in order to fund further expansion and growth of our business. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any sales of the equity securities to fund expansion and other activities, orand if we are able to, there is no guarantee that existing shareholders will not be substantially diluted. In essence, we do not need to rely on equity sales to fund our business operations.

Critical Accounting Policies

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

See Note 2 to the financial statements included herewith and Note 2 to the financial statements on Form 10-K for the fiscal year ended December 31, ~~2016,~~2018, previously filed with the SEC.

Recent Accounting Pronouncements

See Note 2 to the financial statements included herewith and Note 2 to the financial statements on Form 10-K for the fiscal year ended December 31, ~~2016,~~2018, previously filed with the SEC.

~~Item 3. Quantitative and Qualitative Disclosures About Market Risk.~~

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

~~Item 4. Controls and Procedures.~~

Item 4.

Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), under the supervision of and with the participation of our management, which presently comprises our Chief Executive Officer, ~~Mr. Di Xiao~~Ms. Fang Mu and our Chief Financial Officer, Mr. ~~Chun Hin Leslie Chow.~~Jehn Ming Lim. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of September 30, ~~2017~~2019 were effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our fiscal quarter ended September 30, ~~2017~~2019 that materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

PART II - OTHER INFORMATION

~~Item 1. Legal Proceedings.~~

~~None.~~

~~Item 1A. Risk Factors~~

~~Not applicable.~~

~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.~~

~~None.~~

~~Item 3. Defaults Upon Senior Securities.~~

~~None.~~

~~Item 4. Mine Safety Disclosures.~~

~~Not applicable.~~

~~Item 5. Other Information.~~

~~Not applicable.~~

~~Item 6. Exhibits.~~

Item 6.

Exhibits.

Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.

Exhibit No.		Description

3.1		Certificate of Incorporation (1)
3.2	��	By-laws of the Company ~~(1)~~(2)
3.3		Certificate of Amendment of the Certificate of Incorporation (1)
3.4		Certificate of Amendment of the Certificate of Incorporation (1)
3.5		Certificate of Amendment (2)
3.6		Certificate of Amendment of the Certificate of Incorporation (4)
3.7		Certificate of Incorporation of Hong Kong Takung Assets and Equity Artworks Exchange Co., Ltd.(3)
3.8		Articles of Association of Hong Kong Takung Assets and Equity Artworks Exchange Co., Ltd.(3)

~~3.9~~

Certificate of Change of Name of Hong Kong Takung Assets and Equity Artworks Exchange Co., Ltd.*

31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1		Certification of the Principal Executive Officer and the Principal Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

101.INS		XBRL Instance Document*
101.SCH		XBRL Taxonomy Extension Schema Document*
101.CAL		XBRL Taxonomy Calculation Linkbase Document*
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB		XBRL Taxonomy Label Linkbase Document*
101.PRE		XBRL Taxonomy Presentation Linkbase Document*

(1)

Incorporated by reference to the exhibit to our registration statement on Form S-1 filed with the SEC on August 16, 2011.

(2)

Incorporated by reference to the exhibit to our current report on Form 8-K filed with the SEC on March 7, 2013.

(3)

Incorporated by reference to the exhibit to our current report on Form 8-K filed with the SEC on October 22, 2014.

(4)

Incorporated by reference to the exhibit to our current report on Form 8-K filed with the SEC on November 6, 2014.

*Filed herewith.

**Furnished herewith.

SIGNATURES

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

	TAKUNG ART CO., LTD

Date: November 14, ~~2017~~2019	By:	/s/ ~~Di Xiao~~Fang Mu
		~~Di Xiao~~Fang Mu
		Chief Executive Officer
		(Principal Executive Officer) ~~and Director~~

Date: November 14, ~~2017~~2019	By:	/s/ ~~Chun Hin Leslie Chow~~Jehn Ming Lim
		~~Chun Hin Leslie Chow~~Jehn Ming Lim
		Chief Financial Officer
		(Principal Financial ~~Officer and Principal Accounting~~ Officer)

				Page

PART I.		Financial Information		3

		Item 1. Interim Condensed Consolidated Financial Statements (Unaudited).		3

		Item 2. Management’s Discussion and Analysis of Financial Condition and ~~results~~Results of Operation.		17

		Item 3. Quantitative and Qualitative Disclosures About Market Risk.		2629

		Item 4. Controls and Procedures.		2729

PART II.		Other Information		2830

		Item ~~1. Legal Proceedings.~~6. Exhibits.		2830

	~~Item 1A. Risk Factors.~~	28

	~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.~~	28

	~~Item 3. Defaults Upon Senior Securities.~~	28

	~~Item 4. Mine Safety Disclosures.~~	28

	~~Item 5. Other Information.~~	28

	~~Item 6. Exhibits.~~	28

	Signatures		2930

	For the Nine Months			For the Nine Months
	Ended			Ended
	September 30,			September 30,
	2017			2016
Cash flows from operating activities:
Net cash provided by operating activities		1,028,524			5,635,391

Cash flows from investing activities:
Purchase of property and equipment		(455,255	)		(976,460	)
Purchase of held-to-maturity investments		-			(14,995,876	)
Purchase of available-for-sales investment		(53,501,874	)		(299,918	)
Maturity and redemption of available-for-sales investment		53,501,874			-
Maturity and redemption of held-to-maturity investments		-			14,995,876
Loan to third parties		(3,518,325	)		-
Repayment from loan to third parties		3,412,070			-
Net cash used in investing activities		(561,510	)		(1,276,378	)

Cash Flows from financing activities:
Proceeds from short-term borrowings		-			3,519,580
Proceeds from related party loans		-			2,340,895
Loan to third parties		-			(3,513,534	)
Net cash provided by financing activities		-			2,346,941

Effect of exchange rate change on cash and cash equivalents		1,025,539			(644,375	)

Net increase in cash and cash equivalents		1,492,553			6,061,579

Cash and cash equivalents, beginning balance		13,395,337			10,769,456

Cash and cash equivalents, ending balance	$	14,887,890		$	16,831,035

Supplemental cash flows information:
Cash paid for interest	$	212,954		$	-
Cash paid for income tax	$	136,453		$	562,994

Three months ending December 31, 2017	$	244,960

Year ending December 31, 2018		761,175

Year ending December 31, 2019		223,026

Year ending December 31, 2020		39,999

Year ending December 31, 2021		15,030

Year ending December 31, 2022 and thereafter		53,232

Total	$	1,337,422

	Three months ended September 30, 2017					Three months ended September 30, 2016
	(Unaudited)					(Unaudited)
	Amount($)		% of Total			Amount($)		% of Total
Consultancy fee	$	46,059		2	%	$	92,809		5	%
Legal and professional fees		218,066		9	%		247,278		14	%
Salary and welfare		1,008,736		40	%		750,267		43	%
Office, insurance and rental expenses		430,047		17	%		288,766		17	%
Non-deductible input VAT expenses		6,924		0	%		-		-	%
Traveling and accommodation fees		187,780		8	%		71,560		4	%
Share-based compensation		138,161		6	%		186,928		11	%
Bad debt expenses		241,248		10	%		-		-	%
Others		221,827		8	%		107,357		6	%
Total general and administrative expenses	$	2,498,848		100.0	%	$	1,744,965		100.0	%

	Nine months ended September 30, 2017					Nine months ended September 30, 2016
	(Unaudited)					(Unaudited)
	Amount($)		% of Total			Amount($)		% of Total
Consultancy fee	$	187,230		3	%	$	361,610		7	%
Legal and professional fees		733,466		10	%		728,856		14	%
Salary and welfare		3,166,679		43	%		1,852,355		36	%
Office, insurance and rental expenses		1,252,561		17	%		852,494		17	%
Non-deductible input VAT expense		16,369		-	%		-		-	%
Traveling and accommodation fees		679,950		9	%		184,235		4	%
Share-based compensation		562,184		8	%		846,703		17	%
Bad debt expenses		241,248		4	%		-		-	%
Others		471,441		6	%		250,436		5	%
Total general and administrative expenses	$	7,311,128		100.0	%	$	5,076,689		100.0	%

	Nine months ended September 30
	2017			2016
	(Unaudited)			(Unaudited)
Net cash provided by operating activities	$	1, 028,524		$	5,635,391
Net cash used in investing activities		(561,510	)		(1,276,378	)
Net cash provided by financing activities		-			2,346,941
Effect of exchange rate change on cash and cash equivalents		1,025,539			(644,375	)
Net increase in cash and cash equivalents		1,492,553			6,061,579
Cash and cash equivalents, beginning balance		13,395,337			10,769,456
Cash and cash equivalents, ending balance	$	14,887,890		$	16,831,035