For the transition period from _________________________ to_________________________

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

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 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.

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

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

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~~2018 is ~~11,188,882.~~11,226,025.

FORM 10-Q

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

INDEX

PART I –FINANCIAL INFORMATION

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

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			2018			2017
	(Unaudited)							(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	14,887,890		$	13,395,337		$	8,418,818		$	11,866,965
Restricted cash		19,057,733			21,743,360			7,515,860			25,273,617
Account receivables, net		3,732,569			3,058,568			971,480			2,291,698
Prepayment and other current assets		870,231			968,446			2,257,181			2,300,207
Inventories								14,859			-
Amount due from a related party								5,914,240			-
Short term investments, held to maturity								873,617			-
Loan receivables		6,806,623			6,374,046			3,859,075			7,834,115
Total current assets		45,355,046			45,539,757			29,825,130			49,566,602

Non-current assets
Property and equipment, net		2,104,107			2,065,182			1,992,564			2,191,321
Intangible assets		20,394			20,546			22,297			22,334
Deferred tax assets		294,676			243,772			700,668			291,430
Other non-current assets		535,420			428,764			394,555			757,235
Total non-current assets		2,954,597			2,758,264			3,110,084			3,262,320
Total assets	$	48,309,643		$	48,298,021		$	32,935,214		$	52,828,922

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES
Current liabilities
Accrued expenses and other payables	$	780,800		$	608,883		$	623,472		$	1,461,858
Customer deposits		19,057,733			21,743,360			7,515,860			25,273,617
Advance from customers		-			360,248			14,355			170,078
Short-term borrowings from third parties		6,371,900			6,308,513			3,950,099			7,208,761
Amount due to related party		1,085,480			1,031,805
Taxes payable		1,094,885			549,897
Amount due to related parties								6,389,042			483,822
Tax payables								15,848			312,575
Total current liabilities		28,390,798			30,602,706			18,508,676			34,910,711
Deferred tax liabilities		45,301			62,618
Total non-current liabilities		45,301			62,618

Total liabilities		28,436,099			30,665,324		$	18,508,676		$	34,910,711

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
Common stock (1,000,000,000 shares authorized; $0.001 par value; 11,226,025 shares issued and outstanding as of September 30, 2018; 11,188,882 shares issued and outstanding as of December 31, 2017)							$	11,226		$	11,189
Additional paid-in capital		5,928,455			5,532,426			6,298,910			6,116,216
Retained earnings		14, 229,809			13,172,671			8,568,638			12,111,096
Accumulated other comprehensive loss		(295,909	)		(1,083,569	)		(452,236	)		(320,290	)
Total stockholders’ equity		19,873,544			17,632,697			14,426,538			17,918,211
Total liabilities and stockholders’ equity	$	48,309,643		$	48,298,021		$	32,935,214		$	52,828,922

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

~~AND COMPREHENSIVE INCOME~~

(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,
	2018			2017			2018			2017
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenue
Listing fee	$	-		$	1,455,498		$	3,978,735		$	4,606,649
Commission		253,331			1,496,826			3,557,411			4,970,651
Management fee		107,905			402,547			455,133			967,518
Annual fee		54			140			378			859
Authorized agent subscription revenue					-			191,623			-
Online artwork sales		2,244			-			8,548			-
Total revenue		363,534			3,355,011			8,191,828			10,545,677

Cost of revenue		(299,482	)		(292,168	)		(2,173,296	)		(822,335	)

Gross profit		64,052			3,062,843			6,018,532			9,723,342

Operating expenses:
General and administrative expenses		(2,208,264	)		(2,498,848	)		(7,791,747	)		(7,311,128	)
Selling expenses		(149,035	)		(624,151	)		(851,173	)		(1,272,010	)
Impairment loss – construction-in-progress		(326,227	)		-			(326,227	)		-
Total operating expenses		(2,683,526	)		(3,122,999	)		(8,969,147	)		(8,583,138	)

(Loss) income from operations		(2,619,474	)		(60,156	)		(2,950,615	)		1,140,204

Other income and expenses:
Other income		65,487			186,259			470,752			440,470
Loan interest expense		(199,821	)		(152,059	)		(504,287	)		(455,762	)
Exchange gain (loss)		(870,218	)		177,652			(1,132,510	)		526,603
Total other income (loss)		(1,004,552	)		211,852			(1,166,045	)		511,311

(Loss) income before provision for income taxes		(3,624,026	)		151,696			(4,116,660	)		1,651,515

Income tax benefit (expense)		742,670			(124,662	)		574,202			(594,377	)

Net (loss) income	$	(2,881,356	)	$	27,034		$	(3,542,458	)	$	1,057,138

Foreign currency translation adjustment		(3,668	)		311,485			(131,946	)		787,660

Comprehensive (loss) income	$	(2,885,024	)	$	338,519		$	(3,674,404	)	$	1,844,798

(Loss) earnings per common share– basic	$	(0.26	)	$	0.00		$	(0.32	)	$	0.10
(Loss) earnings per common share– diluted		(0.26	)		0.00			(0.32	)		0.09
Weighted average number of common shares outstanding-basic		11,226,025			11,188,882			11,216,009			11,039,880
Weighted average number of common shares outstanding-diluted		11,226,025			11,248,688			11,216,009			11,398,082

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

TAKUNG ART CO., LTD AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENT 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

	For the Nine Months			For the Nine Months
	Ended			Ended
	September 30,			September 30,
	2018			2017

Cash flows from operating activities:
Net (loss) income		(3,542,458	)		1,057,138
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		713,933			538,532
Interest expense		262,561			181,341
Bad debt expense		(76,402	)		241,248
Changes in exchange rate		1,132,510			(526,603	)
Stock-based compensation		217,231			558,704
Impairment loss on CIP		326,227			-
Deferred tax liabilities		-			(17,317	)
Deferred tax assets		(409,238	)		(50,904	)
Changes in operating assets and liabilities:
Account receivables		1,396,620			(915,249	)
Prepaid loan interest expense		-			(111,477	)
Prepayment and other current assets		(58,673	)		(64,440	)
Other non-current assets		362,680			(106,656	)
Customer deposits		(17,757,757	)		(2,685,627	)
Amount due to related party		-			53,675
Tax payables		(296,727	)		544,988
Advance from customer		(155,723	)		(360,248	)
Accrued expenses and other payables		(704,607	)		5,792
Net cash used in operating activities		(18,589,823	)		(1,657,103	)

Cash flows from investing activities:
Purchase of property and equipment		(775,730	)		(455,255	)
Purchase of available-for-sales investment		(90,293,454	)		(53,501,874	)
Maturity and redemption of available-for-sales investment		90,293,454			53,501,874
Loan to third parties		-			(3,518,325	)
Loan to related parties		(6,369,809	)		-
Repayment from loan to third parties		3,641,871			3,412,070
Repayment from loan to related parties		-			-
Purchase of held-to-maturity investment		(873,617	)		-
Net cash used in investing activities		(4,377,285	)		(561,510	)
Cash flows from financing activities:
Proceeds from related party loan		6,389,042			-
Loan repayment to related party		(483,822	)		-
Loan repayment to third party		(3,480,000	)		-
Net cash provided by financing activities		2,425,220			-

Effect of exchange rate change on cash, cash equivalents and restricted cash		(664,016	)		1,025,539

Net decrease in cash, cash equivalents and restricted cash		(21,205,904	)		(1,193,074	)

Cash, cash equivalents and restricted cash, beginning balance		37,140,582			35,138,697

Cash, cash equivalents and restricted cash, ending balance	$	15,934,678		$	33,945,623

Supplemental cash flows information:

Cash	$	8,418,818		$	14,887,890
Restricted cash included in customer deposits		7,515,860			19,057,733
Total cash and restricted cash	$	15,934,678		$	33,945,623

Cash paid during the period for:
Interest	$	241,727		$	212,954
Income tax	$	111,917		$	136,453

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

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

(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. Starting the second quarter of 2018, we launched an offering of artwork and artwork related merchandise for sales on our online platform. The offering is to further promote the artwork’s recognition.

~~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 and copyright registration (Takung Online) with the use of blockchain technology.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying ~~condensed~~ consolidated balance sheet as of December 31, ~~2016,~~2017, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements as of September 30, ~~2017~~2018 and for the three months ended and nine months ended September 30, ~~2017~~2018 and ~~2016~~2017 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,~~2017, 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,~~2018, its consolidated results of operations and cash flows for the nine-month periods ended September 30, ~~2017~~2018 and ~~2016,~~2017, 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.

Recently Adopted Accounting Standards

Adoption of ASC Topic 606, “Revenue from Contracts with Customers”

Effective January 1, 2018, the Company adopted Topic 606 using modified retrospective approach applied to its contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are accounted for and presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with Topic 605.

We recognize revenue when control of the promised services is transferred to our traders and offering agents. Revenue is measured at the transaction price, which is based on the amount of consideration that the Company expects to receive in exchange for transferring the promised services to our traders and offering agents. Our revenue mainly falls into the following broad categories: (i) listing fees, (ii) trading commissions, (iii) management fees, (iv) authorized agent subscription fee, (v) annual fee, and (vi) online artwork sales.

Listing fee revenue

Using the output method, we recognize the listing fee revenue at a point when the ownership units of the artwork are listed and successfully traded on our system, based on the agreed percentage of the total offering price. This amount is collected from the money raised from the issuance of such units accounted as the listing fee revenue accordingly. When the ownership units of the artwork are listed and starts trading on our system, the original owner and/or the offering agent pays us a one-time offering fee and a listing deposit.

Commission fee revenue

We generate commission fee from non-VIP traders and selected traders. We measure the progress of performance obligations using the output method, as traders obtain the benefits of receiving access to making transactions on our trading platform.

For non-VIP traders, the commission revenue is calculated based on a percentage of transaction value of artworks, where we charge trading commissions for the purchase and sale of the ownership shares of the artworks.

For selected traders, starting from April 1, 2016, we charge a predetermined monthly fee which allows unlimited trades for specific artworks.

Commission rebate programs are offered to traders and service agents. We pay to existing traders and service agents a commission rebate at a predetermined referral rate of commission earned from the transactions of new traders referred by them. The commission rebate is recognized as a reduction of the commission revenue prior to January 1, 2018 under Topic 605. Starting from January 1, 2018, we account for the commission rebate as cost of revenue under Topic 606-10-32-26. Since this is a reclassification between revenue and cost of revenue, it would have no impact on the opening balance for the year beginning January 1, 2018. Commission rebates were $1,207,104 and $201,524 for the nine months period ended September 30, 2018 and 2017, and were $2,094 and $103,742 for the three months ended September 30, 2018 and 2017.

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

Management fee revenue

A custody and insurance service are provided for each individual artwork on a daily basis. The cost of custody and insurance for each unit of artwork is constant for all artworks. Using the cost-based input method, we charge 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 daily. The management fee is accounted for as revenue, and immediately deducted from proceeds from the sale of artwork ownership shares when a transaction is completed. A discount program is offered to waive the management fee during certain promotion periods. Such discounts are recognized as a reduction of the revenue upon the completion of the transactions.'

Authorized agent subscription revenue

We charge an authorized agent subscription fee, which is an annual service fee paid by authorized agents to grant them the right to allow their network of artwork owners to list their artwork on our trading platform. This revenue is recognized ratably over the annual agreement period for each agent.

Annual fee revenue

We charge an up-front annual fee for providing traders with premium services, including in-depth information and tools on the trading platform. This revenue is recognized ratably over the service agreement period for each trader.

Online artwork sales

From the second quarter of 2018, we launched an offering of artwork and artwork related merchandise for sales on our online platform.

Sales of artwork: The sale of artwork consists of fees charged to third-party merchants that the Company provides access to the online platform for sales of their artworks, which are primarily paintings. The Company is not the primary obligor on these transactions, the Company does not bear the inventory risk, does not have the ability to establish prices, and does not provide any fulfillment services since the goods are shipped direct from third-party merchants to end customers. Upon successful sales on the Company's online platform, the Company charges the third-party merchants commission fees based on the agreed percentage of the total selling price. Commission fees are recognized on a net basis when the artwork sales order is completed.

Sales of artwork related merchandise: The Company also offers its own artwork related merchandise through its online platform. Revenue is recognized when control of the goods is transferred to the customer, which generally occurs upon our delivery to the carrier or the customer.

For comparative purpose, we adjusted the revenue for three and nine months ended September 30, 2017 as if retrospectively adopted ASC 606.

The following tables identify the disaggregation of our revenue for the three months ended September 30, 2018 and 2017, respectively:

	Three months ended September 30,
	2018		2017
	(Unaudited)		(Unaudited)
			As previously reported		Adjustments		Adjusted
Listing fee revenue	$	-	$	1,455,498		-	$	1,455,498
Commission		253,331		1,496,826		103,742		1,600,568
Management fee revenue		107,905		402,547		-		402,547
Annual fee revenue		54		140		-		140
Online artwork sales		2,244		-		-		-
Total	$	363,534	$	3,355,011	$	103,742	$	3,458,753

The following tables identify the disaggregation of our revenue for the nine months ended September 30, 2018 and 2017, respectively:

	Nine months ended September 30,
	2018		2017
	(Unaudited)		(Unaudited)
			As previously reported		Adjustments		Adjusted
Listing fee revenue	$	3,978,735	$	4,606,649		-	$	4,606,649
Commission		3,557,411		4,970,651		201,524		5,172,175
Management fee revenue		455,133		967,518		-		967,518
Authorized agent subscription revenue		191,623		-		-		-
Annual fee revenue		378		859		-		859
Online artwork sales		8,548		-		-		-
Total	$	8,191,828	$	10,545,677	$	201,524	$	10,747,201

The Company has elected to apply the practical expedient in paragraph ASC 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less.

We do not have amounts of contract assets that the Company has right to consideration in exchange for services that the Company has transferred to customers when that right is conditioned on something other than the passage of time. Our contract liabilities are the Company’s obligation to transfer services to traders for which the Company has received consideration from the traders. All contract liabilities are expected to be recognized as revenue within one month and are presented in Advance from Customers in our Condensed Consolidated Balance Sheet.

Statement of Cash Flows: In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): “Restricted Cash” (“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017 and early adoption is permitted. The adoption of this guidance will result in the inclusion of the restricted cash balances within the overall cash balance and removal of the changes in restricted cash activity, as a result, the Company no longer presents transfers between cash and cash equivalents and restricted cash in the statement of cash flows. Furthermore, an additional reconciliation will be required to reconcile Cash, cash equivalents, and restricted cash reported within the Interim Condensed Consolidated Balance Sheets to sum to the total shown in the Interim Condensed Consolidated Statement of Cash Flows. The Company has already disclosed the restricted cash separately on its Interim Condensed Consolidated Statements of Financial Position. Beginning the first quarter of 2018, the Company has adopted and included the restricted cash balances on the Interim Condensed Consolidated Statement of Cash Flows and reconciliation of Cash, cash equivalent, and restricted cash within its Interim Condensed Consolidated Statements of Financial Positions that sum to the total of the same such amounts shown in Interim Condensed Consolidated Statement of Cash Flows. The Cash Flows of nine months ended September 30, 2017 has been applied retrospectively.

In January 2018, the FASB staff released guidance on accounting for the tax provisions of Global Intangible Low-Taxed Income (“GILTI”) as provided under the Tax Cuts and Jobs Act (“the Act”). GILTI refers to the tax on the excess of a United States shareholder’s total net foreign income over a deemed return on tangible assets. Based on the information available for the third quarter of 2018, the Company provisionally made a policy election and accounted for its potential GILTI tax as a period cost when incurred.

Accounting Pronouncements Issued But Not Yet Adopted

Codification Improvements: In July 2018, the FASB issued ASU No. 2018-09,Codification Improvements. This amendment makes changes to a variety of topics to clarify, correct errors in, or make minor improvements to the Accounting Standards Codification. The majority of the amendments in ASU 2018-09 are effective for periods beginning after December 15, 2018. The Company is currently evaluating this guidance and the impact it may have on the Company's consolidated financial statements.

Leases: In July 2018, FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases. This guidance provides further clarification to the new lease standard ASC Topic 842 in certain aspects: residual value guarantees rates implicit in the lease, lessee reassessment of lease classification, lessor reassessment of lease term, and purchase option variable lease payments that depend on an index or a rate investment tax credit.

This amendment affects the amendments in ASU 2016-12, which are not yet effective, but early adoption is allowed. For entities that adopted ASC Topic 842 early, the amendments are effective upon issuance of ASU No. 2018-10, and the transition requirements are identical to those in ASC Topic 842. For entities that have not adopted ASC Topic 842, the effective date and transition requirements will be identical to the effective date and transition requirements in ASC Topic 842. This amendment will be effective for the Company in March 2019 by which time ASC Topic 842 will be adopted. The Company is currently evaluating this guidance and the impact it may have on the Company's consolidated financial statements.

In July 2018, FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements. This guidance amends ASC 842, Leases in two major areas.First ASU 842 permits lessors to combine lease and non-lease components by class of underlying assets in agreements that meet certain criteria. For a lessor to qualify for this practical expedient, the lease and non-lease components must have the same timing and pattern of transfer, and the lease component, if accounted for on a stand-alone basis, would be classified as an operating lease. Second, this guidance provides entities with a transition option for adopting ASU 842. This transition option allows entities not to apply the new lease standard at the adoption date by recognizing a cumulative effect by adjusting the opening balance of the retained earnings rather than restate the comparative periods presented in the financial statements. The Company determined that the practical expedient to the lessors is not applicable while it is evaluating the transition option.

Except for the above ASUs issued but not yet adopted and the ones disclosed in Note 2 to the financial statements on Form 10-K for the fiscal year ended December 31, 2017, 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, 2018		December 31, 2017
		(Unaudited)
Tax receivables	$	1,286,415	$	1,132,140
Prepaid service fees		241,064		489,424
Short-term borrowings to third party		436,809		461,092
Staff advance		90,054		52,124
Prepaid repair and maintenance		1,704		46,733
Other current assets		201,135		118,694
Prepayment and other current assets	$	2,257,181	$	2,300,207

4. ACCOUNT RECEIVABLES, NET

Account receivables consisted of the following:

	September 30, 2017			December 31, 2016		September 30, 2018			December 31, 2017
	(Unaudited)						(Unaudited)
Listing fee	$	1,562,924		$	1,403,255	$	971,134		$	2,259,671
Authorized agent subscription revenue		924,100			995,453		558,165			559,101
Monthly commission fee		1,422,750			605,677		1,455,501			1,463,243
Others		63,323			54,183		54,004			80,473
Subtotal							3,038,804			4,362,488
Less: allowance for doubtful accounts		(240,528	)		-		(2,067,324	)		(2,070,790	)
Account receivables, net	$	3,732,569		$	3,058,568	$	971,480		$	2,291,698

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

12/9/2016	Xiaohui Wang	Tianjin Takung		10,550,000		10,062,400	$	1,465,114		0	%	11/30/2018
4/4/2017	Xiaohui Wang	Tianjin Takung		22,921,725		9,821,725	$	1,430,071		0	%	12/31/2018
12/15/2017	Xiaohui Wang	Tianjin Takung		3,310,000		3,310,000	$	481,945		0	%	12/14/2018
12/19/2017	Xiaohui Wang	Tianjin Takung		3,310,000		3,310,000	$	481,945		0	%	12/18/2018
				Total			$	3,859,075

All the transactions were aimed to meet the Company’s working capital needs in ~~US Dollar,~~U.S. Dollars, which isare 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 Chongqing Wintus (New Star) Enterprises Group (“Chongqing”). Xiaohui 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. Wang are ~~the~~ non-related parties to the Company.

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

Through an understanding between Ms. Wang and Merit Crown, the USU.S. Dollar Loans are “secured” by the RMB Loans. It is the understanding between the parties that ~~when~~ the USU.S. 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			September 30, 2018			December 31, 2017
	(Unaudited)						(Unaudited)
Furniture, fixtures and equipment	$	157,736		$	100,386		$	332,529		$	167,651
Leasehold improvements		402,597			298,965			473,183			426,138
Computer trading and clearing system		3,220,318			2,802,430			3,642,143			3,485,844
Transport equipment								104,741			-
Sub-total		3,780,651			3,201,781			4,552,596			4,079,633
Less: accumulated depreciation		(1,676,544	)		(1,136,599	)		(2,560,032	)		(1,888,312	)
Property and equipment, net	$	2,104,107		$	2,065,182		$	1,992,564		$	2,191,321

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

As of September 30, 2018 and December 31, 2017, due to the close of Hangzhou branch office during the third quarter of 2018, the technology developments were downsized and the software projects were halted, we provide an impairment reserve for unamortized capitalized costs incurred in connection with developing or obtaining internal use software, which were included in computer and trading system, of $309,321 and $0, respectively.

7.ACCRUED EXPENSES AND OTHER PAYABLES

Accrued expenses and other payables as of September 30, ~~2017~~2018 and December 31, ~~2016~~2017 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,
	2018		2017
	(Unaudited)
Accruals for consulting fees	$	264,949	$	265,393
Trading and clearing system		82,122		52,564
Payroll payables		81,455		827,246
Discount payable to traders		79,324		-
Accruals for business trip expense		17,382		27,186
Accruals for professional fees		33,215		192,067
Other payables		65,025		97,402
Total accrued expenses, account & other payables	$	623,472	$	1,461,858

8. SHORT-TERM BORROWINGS FROM THIRD PARTIES

The following table sets forth a summary of the loan agreements in ~~loan receivables balance:~~short-term borrowings:

Date	Borrower	Lender	Original Amount (HKD)		September 30, 2017 (USD)		December 31, 2016 (USD)		Annual Interest Rate			Repayment Due Date	Borrower	Lender	September 30, 2018 (USD)			December 31, 2017 (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	Hong Kong Takung	Merit Crown Limited	$	-		$	1,500,000			8	%	12/31/2018
8/24/2016	Hong Kong Takung	Merit Crown Limited		15,596,100	$	1,996,684	$	2,011,518		8	%	12/31/2017	Hong Kong Takung	Merit Crown Limited	$	1,499,500		$	1,999,500			8	%	12/31/2018
11/18/2016	Hong Kong Takung	Merit Crown Limited		11,479,102	$	1,469,607	$	1,480,525		8	%	10/31/2017	Hong Kong Takung	Merit Crown Limited	$	-		$	1,480,000			8	%	10/31/2018
12/9/2016	Hong Kong Takung	Merit Crown Limited		11,787,600	$	1,509,103	$	1,520,314		8	%	11/30/2017	Hong Kong Takung	Merit Crown Limited	$	1,520,000		$	1,520,000			8	%	11/30/2018
12/19/2017													Hong Kong Takung	Merit Crown Limited	$	500,000		$	500,000			8	%	12/18/2018
12/22/2017													Hong Kong Takung	Merit Crown Limited	$	500,000		$	500,000			8	%	12/21/2018
													Less: Discount loan payable		$	(69,401	)	$	(290,739	)
	Less: Discount loan payable				$	101,382	$	212,859
														Total	$	3,950,099		$	7,208,761
				Total	$	6,371,900	$	6,308,513

The USU.S. Dollar Loans are to provide Hong Kong Takung with sufficient USU.S. Dollar-denominated currency to meet its working capital requirements. It 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 USU.S. Dollar Loans. It is the understanding between the parties that ~~when~~ the USU.S. Dollar Loans ~~are repaid,~~and the RMB Loans will ~~similarly~~ be ~~repaid.~~repaid simultaneously.

On July 4, 2018 and July 20, 2018, Hong Kong Takung repaid $2,000,000 and $1,480,000, respectively, to Merit Crown. Meanwhile, Ms. Wang repaid RMB13,100,000 (equals to USD 2,000,000) and RMB9,827,200 (equals to USD 1,480,000), respectively, to Shanghai Takung and Tianjin Takung, respectively.

The weighted average interest rate of outstanding short-term borrowings was 8% per annum as of September 30, ~~2017~~2018 and December 31, ~~2016.~~2017. 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 $7,319,041 and ~~$1,678,803~~$6,315,799 for the nine months period ended September 30, ~~2017~~2018 and the year ended December 31, ~~2016,~~2017, respectively. The interest expenses for the short-term borrowings were ~~$133,174~~$199,822 and ~~$62,670~~$133,174 for the three months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively, and ~~$394,295~~$500,080 and ~~$62,670~~$394,295 for the nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, 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 related parties to which the Company has transactions with:

(a) Jianping Mao (“Mao”), the wife of the Vice General Manager of Hong Kong Takung.

(b) Liu Zhenying (“Liu”), the Vice President of Hong Kong Takung

Amount due from a related party

	September 30, 2018		December 31, 2017
		(Unaudited)
Liu (b)	$	5,914,240	$	-
Total		5,914,240		-

Amount due to related ~~party~~parties

	September 30, 2018		December 31, 2017
		(Unaudited)
Mao (a)	$	-	$	483,822
Liu (b)		6,389,042		-
Total		6,389,042		483,822

~~Amount~~

The Company fully repaid the amount due to ~~related party consisted~~Mao on March 13, 2018.

On May 16, 2018, Hong Kong Takung entered into an interest-free loan agreement (the "HK Dollar Loan") with Liu for the loan of $6,389,042 (HK$50,000,000) to Hong Kong Takung. The purpose of the ~~following as~~loan is to provide Hong Kong Takung with sufficient Hong Kong Dollar-denominated currency to meet its working capital requirements. The maturity date of the ~~periods indicated:~~loan is May 15, 2019.

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

In the meantime, Tianjin Takung entered into an interest-free loan agreement (the "RMB Loan") with Liu for the loan of $5,914,240 (RMB40,619,000) to Liu. The maturity date of the loan is May 15, 2019.

Through an understanding between Liu and the Company, the HK Dollar Loan is "secured" by the RMB Loan. It is the understanding between the parties that the HK Dollar Loan and the RMB Loan will be repaid simultaneously.

10. INCOME TAXES

Takung was incorporated in the State of Delaware and is subject to United States income tax. Hong Kong Takung was incorporated in Hong Kong S.A.R. People’s Republic of China and is subject to Hong Kong profits tax. Shanghai Takung and Tianjin Takung 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 ~~interest~~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.

Under the Tax Act, the Company is subject to tax on GILTI earned by its foreign subsidiaries and made a reasonable estimate 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~~impact for the nine months ended September 30, ~~2017~~2018. The GILTI provision requires the Company to include the excess of the U.S. shareholder’s net controlled foreign corporations’ earnings over the U.S. shareholder’s deemed tangible income return. The Company provisionally made a policy election and ~~2016, respectively, and $20,652 and $19,941~~accounted for its estimated tax on GILTI for the ~~three~~nine months ended September 30, ~~2017 and 2016, respectively.~~2018 as a period cost when incurred since the Company does not anticipate any deferred tax impact around GILTI due to its current period impact on the U.S. tax payable.

On October 26, 2017, Hong Kong Takung entered into a supplementary agreement with Mao that, as of 30 September 2017, the outstanding principal amount of the Loan (as defined in the Loan Agreement) to be repaid by Hong Kong Takung 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 the maturity date of the Outstanding Principal Loan Amount and the interest thereof by Hong Kong Takung as below: (i) HK$4,500,000 and the interest thereof, together with the Accrued Interest to be due and payable by November 30, 2017; and (ii) HK$3,500,000 together with the interest thereof to be due and payable by December 31, 2017.

~~10. INCOME TAXES~~

~~United States of America~~

As of September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the Company in the United States had ~~$4,008,459~~$1,003,852 and ~~$2,212,890~~$250,590 in net operating loss ~~carried forward~~carry forwards available to offset future taxable income, respectively. ~~Federal~~For net operating losses ~~can generally be carried forward twenty years. The federal corporate net operating loss carryover is expired in 20~~arising after December 31, 2017, the Tax Act limits the Company’s ability to utilize NOL carryforwards to 80% of taxable ~~years following~~income and carryforward the ~~taxable year of the loss.~~

~~The Company believes that it is more likely than not that these net accumulated operating losses~~NOL indefinitely. Carrybacks are now prohibited. NOLs generated prior to January 1, 2018 will not be ~~utilized~~subject to the taxable income limitation and will begin to expire in 2033 if not utilized.

On December 22, 2017, the ~~future. Therefore,~~SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. As of September 30, 2018, the Company has ~~provided a full valuation allowance~~not completed its accounting for all tax effects of the ~~deferred~~Tax Act and has made reasonable estimates during 2017. The Company will monitor future guidance set forth by the Department of Treasury with regard to the 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 assetsprovisions under the ~~US entity.~~Act that are applicable and will revise relevant estimates as appropriate within the one year measurement period.

Hong Kong

The provision for current income taxes of the subsidiary operating in Hong Kong has been calculated by applying the current rate of taxation of 16.5% for the nine months ended September 30, ~~2017~~2018 and ~~2016,~~the year ended December 31, 2017, if applicable.

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

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2018			2017			2018			2017
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Current:
Federal	$	-		$	-		$	-		$	-
State		-			-			-			-
Foreign		(332,918	)		159,281			(160,548	)		662,598
Total Current	$	(332,918	)	$	159,281		$	(160,548	)	$	662,598

Deferred:
Federal	$	-		$	-		$	37,398		$	-
State		-			-			-			-
Foreign		(409,752	)		(34,619	)		(451,052	)		(68,221	)
Total Deferred	$	(409,752	)	$	(34,619	)	$	(413,654	)	$	(68,221	)

Total income tax (benefit) expense	$	(742,670	)	$	124,662		$	(574,202	)	$	594,377

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,						For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016			2018			2017			2018			2017
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Income before income tax expense	$	151,697		$	3,048,469		$	1,651,515		$	6,041,710
Income (loss) before income tax expense													$	(3,624,026	)	$	151,696		$	(4,116,660	)	$	1,651,515

Computed tax expense with statutory tax rate		25,030			502,998			271,806			994,688			(597,964	)		25,030			(679,249	)		271,806
Impact of different tax rates in other jurisdictions		(73,258	)		(24,505	)		(230,651	)		(254,199	)		(89,082	)		(73,258	)		(51,274	)		(230,651	)

Non-deductible items:
Tax effect of non-deductible expenses		25,896			11,117			100,789			32,742			(167,031	)		25,896			(163,701	)		100,789
Previous years unrecognized taxation effect														6,870			-			6,870
Changes in valuation allowance		146,994			107,122			452,433			603,847			104,537			146,994			313,152			452,433

Actual income tax expense	$	124,662		$	596,732		$	594,377		$	1,377,078
Total income tax (benefit) expense													$	(742,670	)	$	124,662		$	(574,202	)	$	594,377

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

11. COMMITMENTS AND CONTINGENCIES

Operation Commitments

The total future minimum lease payments under the non-cancellable operating lease with respect to the office and the dormitory as of September 30, ~~2017~~2018 are payable as follows:

Three months ending December 31, 2017	$	244,960

Year ending December 31, 2018		761,175
Nine months ending December 31, 2018			$	205,025

Year ending December 31, 2019		223,026		170,022

Year ending December 31, 2020		39,999		39,736

Year ending December 31, 2021		15,030		14,560

Year ending December 31, 2022 and thereafter		53,232		51,568

Total	$	1,337,422	$	480,911

Rental expense of the Company was ~~$293,338~~$276,246 and ~~$199,514~~$293,338 for the three months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively, and ~~$721,492~~$831,308 and ~~$428,440~~$721,492 for the nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively.

12. EARNINGS PER SHARE

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

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2017		2016		2017		2016		2018			2017		2018			2017
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)			(Unaudited)		(Unaudited)			(Unaudited)
Numerator:
Net income	$	27,034		2,451,737	$	1,057,138		4,664,632
Net (loss) income									$	(2,881,356	)	$	27,034	$	(3,542,458	)	$	1,057,138

Denominator:
Weighted-average shares outstanding
Weighted-average shares outstanding - Basic		11,188,882		10,632,276		11,039,880		10,632,276		11,226,025			11,188,882		11,216,009			11,039,880
Stock options and restricted shares		59,806		733,321		358,202		645,569		-			59,806		-			358,202
Weighted-average shares outstanding - Diluted		11,248,688		11,365,597		11,398,082		11,277,845		11,226,025			11,248,688		11,216,009			11,398,082

Earnings per share
(Loss) earnings per share
-Basic		0.00		0.23		0.10		0.44		(0.26	)		0.00		(0.32	)		0.10
-Diluted		0.00		0.22		0.09		0.41		(0.26	)		0.00		(0.32	)		0.09

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 continuing operations, approximately 29,104 restricted shares for the three months ended September 30, ~~2017,~~2018 and 34,915 restricted shares for 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, nine months ended September 30, ~~2017 and 2016 respectively.~~2018, were excluded from the calculation of diluted earnings (loss) per share, because their effect would have been antidilutive.

~~There were dilutive effects~~13. SUBSEQUENT EVENT

Pursuant to the notice of ~~487,000 shares~~termination of tenancy for redevelopment from the landlord of the Hong Kong office on July 31, 2018, the Company will be required to vacate the Hong Kong office on or by January 31, 2019. Meanwhile, the Company is in process of the tenancy search 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~~

Other than the newly signed extension agreements as disclosed in Note 8, and the supplementary agreement with related party as disclosed in Note 9 above, the Company does not identify any other subsequent events with material financial impact on the unaudited condensed consolidated financial statements.new Hong Kong office.

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~~this 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 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 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 an on-line listing and trading services that ~~allow artists/~~allows artists, art ~~dealers/~~dealers and owners to access a ~~much bigger art~~larger artwork trading market where they can engage with a wide range of investors that they ~~might~~may not encounter without access of our platform. Our platform also makes ~~investment~~investments 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 in providing services to its parent company Hong Kong Takung by receiving deposits from and making payments to online artwork traders for and on behalf of Hong Kong Takung.

On January 27, 2016, Hong Kong Takung incorporated another subsidiary, Takung Cultural Development (Tianjin) Co., Ltd (“Tianjin Takung”), a limited liability company, with a registered capital of $1 million in Tianjin Pilot Free Trade Zone in Tianjin, People’s Republic of China. Tianjin Takung provides technology development services to Hong Kong Takung and Shanghai Takung, and also carries out marketing and promotion activities in mainland China.

~~Recently Shanghai Takung set up an office in Hangzhou to carry out technology development.~~

Since July 28, 2016, we have expanded access to our 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.

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 Road, Central Hong Kong.

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

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 and copyright registration (Takung Online) with the use of blockchain technology.

Shanghai Takung closed its office in Hangzhou, used for technology development on September 13, 2018.

On October 1, 2018, Wang Song (Marketing Manager) was appointed as Hong Kong Takung’s new CEO and President and Xiao Di resigned therefrom effective as of the same day. As from October 1, 2018, Xiao Di is mainly responsible for the e-commerce business, with a focus on the Company’s new subsidiary, Takung Art Holdings and diversity in the new e-commerce business, such as combining Takung Online, the development of the application of blockchain and the use of intellectual property among others.

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 artwork ownership units on our system, primarily consisting of listing fees, trading commissions, and management fees. Starting in the ~~Company~~second quarter of 2018, Shanghai Takung launched an offering of artwork and artwork related merchandise for sales on our online platform. The offering is to further promote the ~~three-month and nine-month period ended September 30, 2017 and 2016 and related notes thereto.~~artwork’s recognition.

THREE-MONTH PERIOD ENDED SEPTEMBER 30, ~~2017~~2018 COMPARED TO THREE-MONTH PERIOD ENDED SEPTEMBER 30, ~~2016~~

~~Revenue~~2017

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

	Three Months Ended September 30,						Three Months Ended September 30,
	2017			2016			2018			2017
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenue	$	3,355,011		$	5,742,209		$	363,534		$	3,355,011
Cost of revenue		(292,168	)		(285,252	)		(299,482	)		(292,168	)
Selling expense		(624,151	)		(652,207	)		(149,035	)		(624,151	)
General and administrative expenses		(2,498,848	)		(1,744,965	)		(2,208,264	)		(2,498,848	)
Impairment loss – construction-in-progress								(326,227	)		-
Total costs and expenses		(3,415,167	)		(2,682,424	)		(2,983,008	)		(3,415,167	)
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
Loss from operations								(2,619,474	)		(60,156	)
Interest and other (expenses) income, net								(1,004,552	)		211,852
(Loss) income before income taxes								(3,624,026	)		151,696
Income tax benefit (expense)		(124,662	)		(596,732	)		742,670			(124,662	)
Net income	$	27,034		$	2,451,737
Net (loss) income							$	(2,881,356	)	$	27,034

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

	Three Months Ended September 30,						Three Months Ended September 30,
	2017			2016			2018			2017
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenue		100	%		100	%		100	%		100	%
Cost of revenue – Direct revenue		(9	)		(5	)		(82	)		(9	)
Selling expense		(18	)		(11	)		(41	)		(18	)
General and administrative expenses		(74	)		(30	)		(608	)		(74	)
Impairment loss – construction-in-progress								(90	)		-
Total costs and expenses		(101	)		(46	)		(821	)		(101	)
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	%
(Loss) income from operations								(721	)		(1	)
Interest and other (expenses) income, net								(276	)		6
(Loss) income before income taxes								(997	)		5
Income tax benefit (expense)								204			(4	)
Net (loss) income								(793	)%		1	%

Revenue

~~Listing fee~~

For comparative purpose, we adjusted the 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.~~as if retrospectively adopting ASC 606.

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

Three months ended
September 30,
2018 2017
(Unaudited) (Unaudited)
As previously
reported Adjustments Adjusted
Listing fee revenue $ - $ 1,455,498 - $ 1,455,498
Commission 253,331 1,496,826 103,742 1,600,568
Management fee revenue 107,905 402,547 - 402,547
Annual fee revenue 54 140 - 140
Online artwork sales 2,244 - - -
Total $ 363,534 $ 3,355,011 $ 103,742 $ 3,458,753
21

(i) Listing fee revenue

~~Listing fee revenue is calculated based on~~As of September 30, 2018, a ~~percentage~~total of ~~the listing value and transaction value~~278 sets of ~~artworks.~~
~~Listing value is the total offering price of an~~ artwork ~~when the ownership units are initially~~were listed for trade on our ~~trading platform. We utilize an appraised value 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.
~~During the three months ended September 30, 2017, there were 6~~—comprising 54 sets of paintings and calligraphies 9from famous Chinese, Russian and Mongolian artists, with a total listing value of $24,628,845 (HK$193,100,000); 35 pieces of jewelry with a total listing value of $9,267,384 (HK$72,660,000); 134 pieces of precious stones 1with a total listing value of $16,267,027 (HK$127,540,000); 29 pieces of ~~jewelry and 1 set of Unit+ product listed on our platform. Their~~amber with a total listing ~~values were $2,118,726~~value of $12,690,679 (HK$~~16,500,000) for the~~99,500,000); 4 pieces of antique mammoth ivory carvings with a total listing value of $663,231 (HK$5,200,000); 2 pieces of porcelain pastel paintings with a total listing value of $331,616 (HK$2,600,000); 6 pieces of porcelains with a total listing value of $956,584 (HK$7,500,000); 6 sets of ~~paintings~~Unit+ products with a total listing value of $1,315,494 (HK$10,314,000); 1 piece of Yixing collectable with a listing value of $127,545 (HK$1,000,000); and ~~calligraphies, $1,132,555~~7 pieces of Sports memorabilia with a listing value of $1,085,327 (HK$ ~~8,820,000) for~~8,509,400), of which 22.5%-48% (for 54 sets of paintings), 24%-48.5% (for the 9134 pieces of precious ~~stones, $46,227 (HK$360,000) for~~stones), 29%-48% (for the 135 pieces of ~~jewelry and $152,578 (HK$1,188,000) for~~jewelry), 47%-48.5% (for 4 piece of antique mammoth ivory carvings), 32%-48% (for the ~~1 set~~29 pieces of ~~Unit+ product,~~amber), 45%-46% (for the 2 pieces of ~~which 41.5%-47%~~porcelain pastel paintings), 44.94%-48% (for the 6 pieces of porcelains), 30.25%-45% (for the 6 sets of ~~paintings~~Unit+ products), 45% (1 piece of Yixing collectable) and ~~calligraphies), 26%-46%~~45% (for the 97 pieces of ~~precious stones), 43% (for the 1 pieces of jewelry) and 30.3% (for the 1 set of Unit+ product)~~Sports memorabilia) of the listed values were charged as listing fees, respectively.

~~Compared to~~During the ~~corresponding period~~three months ended September 30, ~~2016,~~2018, there were ~~7 sets of paintings and calligraphies, 7 pieces of amber, 14 pieces of precious stones, 5 pieces of jewelry successfully~~no more artworks listed on our system. The total listing values were $1,802,475 (HK$14,000,000) 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.platform.

The decrease in ~~number of pieces listed, listing values and corresponding~~ listing fees charged during the three months ended September 30, ~~2017~~2018 compared to the same period ended September 30, ~~2016 resulted~~2017 due to the downsizing of online fine art and collectibles platforms, tightening of liquidity in China, and the Company’s decision of suspending the new artwork listing activities that was announced in a ~~decrease in listing fee revenue~~press release furnished in the current ~~period. The decrease in number of pieces listed was due to a new listing category (“A-tier”) implemented~~report 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.Form 8-K dated August 13, 2018.

(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, 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 complete.
For selected traders, starting April 1, 2016, we charged a predetermined monthly fee allowing unlimited trades for specific artworks. These traders are selected by authorized agents and reviewed by us. After review, we negotiate individually with each reviewed trader 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, whereby the selected traders receive access to our trading platform where they can make unlimited trades for specific artworks.
22
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 January 1, 2017. For service agents, we rebate a total of 40% to 68% 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 commission rebate is recognized as reduction of the commission revenue prior to January 1, 2018 under Topic 605. Starting January 1, 2018, we account for the commission rebate as cost of revenue under Topic 606.
The rebates and discounts are recognized in the same period the related revenue is recognized.
Total commission revenue decreased by $1,243,495 or 83% for the three months ended September 30, 2018 to $253,331 compared to $1,496,826 for the three months ended September 30, 2017 primarily because of the suspension of new listings of products, with the decrease of trading activity on the artwork platform.
(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. The management fee is deducted from proceeds from the sale of artwork units.
During the three-month period ended September 30, 2018, management fee revenue decreased by $294,642, from $402,547 for the three months ended September 30, 2017 to $107,905, due to the decrease in trading transactions in the current quarter.
(iv) Annual fee revenue
During the three-month period ended September 30, 2018, annual fee revenue decreased by $86, from $140 for the three-month period ended September 30, 2017 to $54.
23
(v) Online artwork sales
Since the second quarter of 2018, we have provided an offering of artwork and artwork related merchandise for sale on our online platform.
Sales of artwork: The sale of artwork consists of fees charged to third-party merchants that the Company provides access to the online platform for sales of their artworks ,which are primarily paintings. The Company is not the primary obligor on these transactions, the Company does not bear the inventory risk, does not have the ability to establish prices, and does not provide any fulfillment services since the goods are shipped directly from third-party merchants to end customers. Upon successful sales on the Company's online platform, the Company charges the third-party merchants commission fees based on the agreed percentage of the total selling price. Commission fees are recognized on a net basis when the artwork sales order is completed.
Sales of artwork related merchandise: The Company also offers its own artwork related merchandise through its online platform. Revenue is recognized when control of the goods is transferred to the customer, which generally occurs upon our delivery to the carrier or the customer.
During the three-month period ended September 30, 2018, online artwork sales were $2,244.
Revenue by customer type
The following table presents our revenue by customer type:

Three months ended
September 30,

2018 2017
(Unaudited) (Unaudited)
Artwork owners $ - $ 1,455,498
Non - VIP traders 140,581 199,929
VIP traders 220,709 1,699,584
Online artwork sales 2,244 -
Total $ 363,534 $ 3,355,011
24
Cost of Revenue
Three months ended
September 30,
2018 2017
(Unaudited) (Unaudited)
Commission rebate to service agent $ 2,094 $ -
Depreciation 163,736 100,769
Internet service charge 53,676 139,174
Artwork insurance 50,983 43,818
Artwork storage 27,533 8,407
Others 1,460 -
Total $ 299,482 $ 292,168
Cost of revenue for the three months ended September 30, 2018 and September 30, 2017 was $299,482 and $292,168, respectively. The increase in cost of revenue, for the three months ended September 30, 2018 compared to September 30, 2017, was mainly due to the increase in the commission rebates to service agents by $2,094, subject to the new trader transaction, which is pursuant to the commission rebate program. During the three months ended September 30, 2017, the Company paid to existing traders and service agents a referral rebate of $103,742 at a predetermined referral rate of commission earned from the transactions of new traders referred by those existing traders and service agents. (SeeAdoption of ASC Topic 606, “Revenue from Contracts with Customers”) The commission rebate is recognized as a reduction of the commission revenue prior to January 1, 2018 under Topic 605. Despite the increase in commission rebate, the increase in cost of revenue was also due to increases in the depreciation and amortization of hardware and software for our trading platform by $62,967 due to the termination of the software development team and amortization of all of the “work in process” items at one time during the third quarter of 2018, the decrease in the internet services charge by $85,498 due to the termination of two network lines between Macau and Hong Kong; the increase in artwork insurance by $7,165; and the increase in artwork storage by $19,126, because of the number of artwork listed increased. Our cost of revenue primarily includes the commission rebate to service agents, internet service charge, artwork insurance, artwork storage and depreciation and amortization of hardware and software for our trading platform.
Gross Profit
Gross profit was $64,052 for the three months ended September 30, 2018, compared to $3,062,843 for the three months ended September 30, 2017. The decrease was due to the significant decrease in listing fee revenue and commission revenue earned in the three months ended September 30, 2018.
Listing fees contributed 0% of the total revenue for the quarter ended September 30, 2018 compared to 43.4% in the corresponding period in 2017, while commission revenue contributed 69.7% for the quarter ended September 30, 2018 compared to 44.6% in the corresponding period in 2017. Compared to the same period in 2017, there was a significant decrease in listing fee revenue and commission revenue. Consequently, we posted a comparable gross profit margin of 17.6% for the three months ended September 30, 2018 compared to 91.3% for the same period in 2017.
25
Operating Expenses
General and administrative expenses for the three months ended September 30, 2018 were $2,208,264 compared to $2,498,848 for the three months ended September 30, 2017. A slight decrease in general and administrative expense by $290,584 was primarily due to a decrease in the following items: legal and professional fees by $52,204, office expenses and rental by $68,645, traveling and accommodation by $110,414, stock-based compensation by $73,351, depreciation by $12,145, bad debt expense by $241,226 and others by $26,509,which was offset by an increase in consultancy fee of $30,133, salary and welfare of $225,956 and non-deductible input VAT expense of $37,821. In the three months ended September 30, 2017, the Company wrote off the receivables related to listing revenue. In the three months ended September 30, 2018, the increase in salary and welfare was driven by the severance packages paid during the reduction in the workforce.
The following table sets forth the main components of the Company’s general and administrative expenses for the three months ended September 30, 2018 and September 30, 2017.
Three months ended
September 30, 2018 Three months ended
September 30, 2017
(Unaudited) (Unaudited)
Amount($) % of Total Amount($) % of Total
Consultancy fee 76,192 3 % 46,059 2 %
Legal and professional fees 165,862 8 % 218,066 9 %
Salary and welfare 1,234,692 56 % 1,008,736 40 %
Office, insurance and rental expenses 361,402 16 % 430,047 17 %
Non-deductible input VAT expenses 44,745 2 % 6,924 0 %
Traveling and accommodation fees 77,366 4 % 187,780 8 %
Share-based compensation 64,810 3 % 138,161 6 %
Depreciation 77,712 4 % 89,857 3 %
Bad debt expenses 22 0 % 241,248 10 %
Other 105,461 4 % 131,970 5 %
Total general and administrative expense $ 2,208,264 100.0 % $ 2,498,848 100.0 %
Other income (loss) and expenses
Other loss and expenses for the three months ended September 30, 2018 were $1,004,552, compared to other income of $211,852 for the three months ended September 30, 2017. The significant increase in other expenses was primarily attributable to the exchange loss incurred in the three months ended September 30, 2018 by $870,218. The exchange loss arose from the fluctuation of exchange rate between the Renminbi and the US dollar.
Income tax benefit (expense)
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 of 16.5%, PRC enterprise income tax rate of 25% and U.S. income tax rate of 34% prior to January 1, 2018, whereas 21% after January 1, 2018 due to the Tax Cuts and Jobs Act enacted on December 22, 2017.
The effective tax rates for the three months ended September 30, 2018 and 2017 were 20.5% and 82.2%, respectively.
Income tax benefit for the three months ended September 30, 2018 was $742,670 and income tax expense for the three months ended September 30, 2017 was $124,662.
Net (Loss) Income
We had a net loss for the three months ended September 30, 2018 of $2,881,356 compared to net income of $27,034 for the three months ended September 30, 2017.
The decrease in net income during this current period was predominately due to a fall in revenue by $2,991,477, an increase in impairment loss on CIP by $326,227 and an increase of exchange loss by $1,047,870, as discussed in the previous paragraphs.
The reason for the decrease in revenue is because of the following: the Company announced, on August 13, 2018, the suspension of new listings of its art products, the company faced the downside of a downturn in the online fine art and collectibles platforms space, downturns in A-shares, and the tightening of liquidity in China.
26
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2018 COMPARED TO NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2017
The following tables set forth our condensed consolidated statements of income data:
Nine Months Ended
September 30,
2018 2017
(Unaudited) (Unaudited)
Revenue $ 8,191,828 $ 10,545,677
Cost of revenue (2,173,296 ) (822,335 )
Selling expense (851,173 ) (1,272,010 )
General and administrative expenses (7,791,747 ) (7,311,128 )
Impairment loss – construction-in-progress (326,227 ) -
Total costs and expenses (11,142,443 ) (9,405,473 )
(Loss) income from operations (2,950,615 ) 1,140,204
Interest and other (expenses) income, net (1,166,045 ) 511,311
(Loss) income before income taxes (4,116,660 ) 1,651,515
Income tax benefit (expense) 574,202 (594,377 )
Net (loss) income $ (3,542,458 ) $ 1,057,138
The following tables set forth our condensed consolidated statements of income data (as a percentage of revenue):
Nine Months Ended
September 30,
2018 2017
(Unaudited) (Unaudited)
Revenue 100 % 100 %
   Cost of revenue – Direct revenue (27 ) (8 )
   Selling expense (10 ) (12 )
   General and administrative expenses (95 ) (69 )
       Impairment loss – construction-in-progress (4 ) -
Total costs and expenses (136 ) (89 )
(Loss) income from operations (36 ) 11
Interest and other (expenses) income, net (14 ) 5
(Loss) income before income taxes (50 ) 16
Income tax benefit (expense) 7 (6 )
Net (loss) income (43 )% 10 %
Revenue
For comparative purpose, we adjusted the revenue for nine months ended September 30, 2017 as if retrospectively adopting ASC 606.
The following table set forth our condensed consolidated revenue by revenue source:
Nine months ended
September 30,
2018 2017
(Unaudited) (Unaudited)
As previously
reported Adjustments Adjusted
Listing fee revenue $ 3,978,735 $ 4,606,649 - $ 4,606,649
Commission 3,557,411 4,970,651 201,524 5,172,175
Management fee revenue 455,133 967,518 - 967,518
Authorized agent subscription revenue 191,623 - - -
Annual fee revenue 378 859 - 859
Online artwork sales 8,548 - - -
Total $ 8,191,828 $ 10,545,677 $ 201,524 $ 10,747,201
27
(i) Listing fee revenue
As of September 30, 2018, a total of 278 sets of artwork were listed for trade on our platform —comprising 54 sets of paintings and calligraphies from famous Chinese, Russian and Mongolian artists, with a total listing value of $24,628,845 (HK$193,100,000); 35 pieces of jewelry with a total listing value of $9,267,384 (HK$72,660,000); 134 pieces of precious stones with a total listing value of $16,267,027 (HK$127,540,000); 29 pieces of amber with a total listing value of $12,690,679 (HK$99,500,000); 4 pieces of antique mammoth ivory carvings with a total listing value of $663,231 (HK$5,200,000); 2 pieces of porcelain pastel paintings with a total listing value of $331,616 (HK$2,600,000); 6 pieces of porcelains with a total listing value of $956,584 (HK$7,500,000); 6 sets of Unit+ products with a total listing value of $1,315,494 (HK$10,314,000); 1 piece of Yixing collectable with a listing value of $127,545 (HK$1,000,000); and 7 pieces of Sports memorabilia with a listing value of $1,085,327 (HK$8,509,400), of which 22.5%-48% (for 54 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), 44.94%-48% (for the 6 pieces of porcelains), 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, 2018, there were 14 sets of paintings, 8 pieces of precious stones, 4 pieces of porcelains, 5 sets of Unit+ products and 6 pieces of Sports memorabilia listed on our platform. Their total listing values were $5,229,325 (HK$41,000,000) for the paintings, $984,644 (HK$7,720,000) for the precious stones, $854,548 (HK$6,700,000) for the porcelains, $1,163,971 (HK$9,126,000) for the Unit+ products, and $957,202 (HK$7,505,000) for the Sports memorabilia, of which 41.67%-47.3% (for the paintings), 24%-46% (for the precious stones), 44.94%-48% (for porcelains), 45% (for the Unit+ products), and 45% (for the Sports memorabilia) of the listed values were charged as listing fees, respectively.
The decrease in the listing of artworks during the nine months ended September 30, 2018, compared to the same period ended September 30, 2017, resulted in a decrease in the listing fee value in the current period, the cause of which was announced in a press release furnished in the Company’s current report on Form 8-K dated August 13, 2018.
(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). 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, we ran a discount program for them starting from April 1, 2015, when their trading volumes of the certain artworks reached an agreed level in each month, a contractually determined flat rate of trading commission was applied 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.complete.

For selected ~~Traders,~~traders, starting from April 1, 2016, we charged a predetermined monthly fee ~~(unlimited~~that allows 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~~reviewed traders 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 upon the selected traders that receives access to our trading platform to make unlimited trades for specific artworks.
28
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~~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 ~~rate~~ 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.~~relate. The commission rebate is recognized as reduction of the commission ~~revenue.~~ revenue prior to January 1, 2018 under Topic 605. Starting January 1, 2018, we account for the commission rebate as cost of revenue under Topic 606.
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~~$1,413,240 or ~~10%~~28.4% for the ~~three~~nine months ended September 30, 2018 to $3,557,411 compared to $4,970,651 for the nine months ended September 30, 2017 ~~to $1,496,826 compared to $1,669,698 for the three months ended September 30, 2016~~ primarily because of a decrease in selected traders commission revenue by $3,309,553 and an increase in transaction commission revenue by $1,700,029 resulting from the ~~change~~implementation of an A-tier model, which led to an increase in ~~our commission fee policy and~~ the ~~decrease~~number 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.new product categories.

(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,~~2018, management fee revenue decreased by ~~$378,672,~~$512,385, from $781,219 for the three months ended September 30, 2016 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 the completion of the transactions. Although the listed artworks increased, the management fee decreased by the promotions.
~~(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 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 period ended September 30, 2016, 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) 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 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.
~~(ii)~~ ~~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~~$455,133, due 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,~~promotions we conducted during that period. We waived management fees for certain VIP ~~Traders.~~traders. We recognized these promotions as a reduction of revenue, which was recognized upon the completion of the transactions.

(iv) ~~Other~~Annual fee revenue

During the nine-month period ended September 30, ~~2017,~~2018, annual fee revenue ~~increased~~decreased by ~~$10,~~$481, from ~~$869 for the nine-month period ended September 30, 2016 to $859.~~
(~~v) Authorized agent subscription revenue~~
~~Authorized agent subscription revenue~~$859 for the nine-month period ended September 30, 2017 ~~was nil compared~~ to ~~$966,059 for~~$378.
(v) Authorized agent subscription revenue
During the nine-month period ended September 30, ~~2016. We have ceased charging new~~2018, authorized agent ~~with~~ subscription revenue was $191,623, compared to $0 for the same period ended in 2017.
(vi) Online artwork sales
From the second quarter of 2018, we launched an offering of artwork and artwork related merchandise for sales on our online platform.
Sales of artwork: The sale of artwork consists of fees charged to third-party merchants that the Company provides access to the online platform for sales of their artworks, which are primarily paintings. The Company is not the primary obligor on these transactions, the Company does not bear the inventory risk, does not have the ability to establish prices, and does not provide any fulfillment services since the goods are shipped directly from third-party merchants to end customers. Upon successful sales on the Company's online platform, the Company charges the third-party merchants commission fees based on the agreed percentage of the total selling price. Commission fees are recognized on a net basis when the artwork sales order is completed.
Sales of artwork related merchandise: The Company also offers its own artwork related merchandise through the online platform. Revenue is recognized when control of the goods is transferred to ~~encourage high quality authorized agent~~the customer, which generally occurs upon our delivery to ~~sign up with~~the carrier or the customer.
During the nine-month period ended September 30, 2018, online artwork sales was $8,548 comparing to $0 for the nine months ended September 30, 2017.
Revenue by customer type
The following table presents our ~~platform.~~revenue by customer type:

Nine months ended
September 30,

2018 2017
(Unaudited) (Unaudited)
Artwork owners $ 3,978,735 $ 4,606,649
Non - VIP traders 2,235,789 779,208
VIP traders 1,777,133 5,159,820
Authorized agents 191,623 -
Online artwork sales 8,548 -
Total $ 8,191,828 $ 10,545,677
29

Cost of Revenue
Nine months ended
September 30,
2018 2017
(Unaudited) (Unaudited)
Commission rebate to service agent $ 1,207,104 $ -
Depreciation 491,297 301,538
Internet service charge 240,165 344,986
Artwork insurance 155,635 126,789
Artwork storage 74,110 49,022
Others 4,985 -
Total $ 2,173,296 $ 822,335
Cost of revenue for the nine months ended September 30, 2018 and September 30, 2017 was $2,173,296 and ~~2016~~$822,335, respectively. The increase in cost of revenue by $1,350,961 was ~~$822,335~~mainly due to the increase in commission rebates to service agents by $1,207,104, subject to the trader transaction, which is pursuant to the commission rebate program. During the nine months ended September 30, 2017, the Company paid to existing traders and ~~$822,735, respectively.~~service agents a referral rebate of $201,524 at a predetermined referral rate of commission earned from the transactions of new traders referred by those existing traders and service agents. (SeeAdoption of ASC Topic 606, “Revenue from Contracts with Customers”.) The commission rebate is recognized as a reduction of the commission revenue prior to January 1, 2018 under Topic 605. Despite the increase in commission rebates, the increase in cost of revenue was also due to increases in the depreciation and amortization of hardware and software for our trading platform by $189,759, due to the termination of the software development team and amortization of all of the “work in process” items at one time during the third quarter of 2018; the decrease in the internet services charge by $104,821, due to the termination of two network lines between Macau and Hong Kong; the increase in artwork insurance by $28,846; and the increase in artwork storage by $25,088, because of the number of artwork listed increased. Our cost of revenue primarily includes the commission rebates to service agents, the internet ~~service fee,~~services charge, artwork insurance, artwork storage, and depreciation and amortization of hardware and software for our trading platform.

In the third quarter of 2014, we entered into an agreement with a third party service provider, Shenzhen Qianrong Cultural Investment Development Co., Ltd (“Qianrong”), to provide software development services with a total contract amount of $902,592 (HK$6,995,000). The services contracted for are divided into different modules, according to different upgrades 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.
Gross Profit

Gross profit was $6,018,532 for the nine months ended September 30, 2018, compared to $9,723,342 for the nine months ended September 30, ~~2017, compared~~2017. The decrease was mainly due to ~~$13,391,517~~the increase in service agent rebates and a decrease in listing fee and commission revenue.
Overall total revenue for the nine months ended September 30, ~~2016.~~2018 reduced by $2,353,849 or 22% compared to the same period in 2017. The decrease in revenue was ~~due~~chiefly attributable to fewer listing of artwork and lower trading transactions in the ~~less artworks listed on our platform,~~third quarter of 2018. The shrinkage in gross profit was also triggered by the ~~change~~rise in ~~our commission fee policy and~~ the ~~decrease~~cost of ~~transaction volume of non VIP traders and non-selected traders.~~
~~Operating Expenses~~
~~Selling expenses were $1,272,010, or 13% of net sales,~~revenue for the nine months ended September 30, ~~2017~~2018. In the current period, the cost of revenue increased by $1,350,961 or 164% compared to ~~$1,993,782 or 15%~~the same period in 2017. Consequently, we posted a comparable gross profit margin of ~~net sales,~~73% for the ~~comparable~~nine months ended September 30, 2018 compared to 92% for the same period in ~~2016, a decrease by 36%. Selling expenses consist primarily of marketing expenses.~~2017.
30
Operating Expenses

General and administrative expenses for the nine months ended September 30, ~~2017~~2018 were ~~$7,311,128~~$7,791,747 compared to ~~$5,076,689~~$7,311,128 for the nine months ended September 30, ~~2016.~~2017. The ~~substantial~~significant increase ~~by $2,234,439 or 44%~~in general and administrative expense of $480,619 was ~~chiefly~~primarily due to anincreases in the following items: salary and welfare by $732,253, non-deductible input VAT expense by $321,596, consultancy fee by $103,552, legal and professional fees by $21,584, and others by $142,709, which was offset by a decrease in stock-based compensation by $344,953, bad debt expense by $317,650, traveling and accommodation by $134,910, office expenses and rental by $29,204, and depreciation by $14,358. In the nine months ended September 30, 2017, the Company wrote off the receivables related to listing revenue. In the nine months ended September 30, 2018, the increase in ~~salaries~~salary and welfare was driven by ~~$1,314,324 because of an increase~~the severance packages paid during the reduction in ~~employee headcount, accrual of doubtful accounts, by $241,248, office, insurance and rental expenses by $400,067 and an increase in travelling expenses by $495,715 which were incurred to attend to~~ the ~~listing of our common stock on the NYSE American.~~
workforce.

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

Nine months ended
September 30, 2017 Nine months ended
September 30, 2016 Nine months ended
September 30, 2018 Nine months ended
September 30, 2017
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Amount($) % of Total Amount($) % of Total 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 % 3,898,932 50.0 % 3,166,679 43.3 %
Office, insurance and rental expenses 1,252,561 17 % 852,494 17 % 1,223,357 15.7 % 1,252,561 17.1 %
Legal and professional fees 755,050 9.7 % 733,466 10.0 %
Traveling and accommodation fees 545,040 7.0 % 679,950 9.3 %
Non-deductible input VAT expense 16,369 - % - - % 337,965 4.3 % 16,369 0.2 %
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 %
Consultancy 290,782 3.7 % 187,230 2.6 %
Share based compensation 217,231 2.8 % 562,184 7.7 %
Depreciation 222,636 2.9 % 236,994 3.2 %
Bad debt expense (76,402 ) (1.0 )% 241,248 3.3 %
Other 377,156 4.9 % 234,447 3.3 %
Total general and administrative expense $ 7,791,747 100.0 % $ 7,311,128 100.0 %

Other income (loss) and expenses
Other loss and expenses for the nine months ended September 30, 2018 was $1,166,045, compared to other income of $511,311 for the nine months ended September 30, 2017. The significant increase in other expenses for the nine months ended September 30, 2018 was primarily attributed to the exchange loss arising from the fluctuation of the exchange rate between Renminbi and the US dollar. Such increase was slightly offset by the interest earned from the short-term investments in the current period.
Income Taxes Expenses
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 of 16.5%, PRC enterprise income tax rate of 25% and U.S. income tax rate of 34% prior to January 1, 2018 while 21% after 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, 2018 and 2017 were 13.9% and 36.0%, respectively.
Income taxes benefit for the nine months ended September 30, 2018 was $574,202 and income taxes expense for the nine months ended September 30, 2017 was $594,377.
Net Income

We had a net ~~income~~loss for the nine months ended September 30, ~~2017~~2018 of ~~$1,057,138~~$3,542,458 compared to a net income of ~~$4,664,632~~$1,057,138 for the nine months ended September 30, ~~2016.~~2017.

The ~~decrease in~~ net loss after income ~~by $3,607,494~~tax expense incurred during this current period was ~~due to~~predominantly driven by a ~~fall of revenue~~decrease in gross profit by ~~$3,668,575, and the~~$3,704,810, an increase of general and administrative ~~expenses by $2,234,439~~expense of $480,619, an increase of impairment loss on CIP of $326,227, and an increase of exchange loss of $1,659,113, as discussed in the previous paragraphs.

31

Liquidity and Capital Resources

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

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
Nine months ended
September 30,
2018 2017
(Unaudited) (Unaudited)
Net cash used in operating activities $ (18,589,823 ) $ (1,657,103 )
Net cash used in investing activities (4,377,285 ) (561,510 )
Net cash provided by financing activities 2,425,220 -
Effect of exchange rate change on cash and cash equivalents (664,016 ) 1,025,539
Net decrease in cash, cash equivalents and restricted cash (21,205,904 ) (1,193,074 )
Cash, cash equivalents and restricted cash, beginning balance 37,140,582 35,138,697
Cash, cash equivalents and restricted cash, ending balance $ 15,934,678 $ 33,945,623

Sources of Liquidity
During the nine months ended September 30, 2018, net cash used in operating activities totaled $18,589,823,which resulted from the implementation of ASU2016-18 since the beginning of 2018. In fact, there was a decline in client deposits by $17,757,757 which influenced the drop of the amount due to clients simultaneously. The Company assessed and evaluated that it was really a presentation issue and there should be no actual impact to the operating activities. Net cash used in investing activities totaled $4,377,285. Net cash generated from financing activities totaled $2,425,220. The resulting change in cash for the period was a decrease of $21,205,904. The cash balance at the beginning of the period was $37,140,582. The cash balance on September 30, 2018 was $15,934,678.

During the nine months ended September 30, 2017, net cash ~~generated from~~used in operating activities totaled ~~$1,028,524.~~$1,657,103. Net cash used in investing activities totaled $561,510. No cash was generated from financing activities during the period. The resulting change in cash for the period was ~~an increase~~a decrease of ~~$1,492,553.~~$1,193,074. The cash balance at the beginning of the period was ~~$13,395,337.~~$35,138,697. The cash balance on September 30, 2017 was ~~$14,887,890.~~
During the nine months ended September 30, 2016, net cash provided by operating activities totaled $5,635,391. Net cash used in investing activities totaled $1,276,378. Net cash provided by financing activities totaled $2,346,941. The resulting change in cash for the period was an increase of $6,061,579. The cash balance at the beginning of the period was $10,769,456. The cash balance on September 30, 2016 was $16,831,035.$33,945,623.

As of September 30, ~~2017,~~2018, the Company had ~~$28,390,798~~$18,508,676 in total current liabilities, which comprised of ~~$780,800~~$623,472 in accrued expense and other payables, ~~$19,057,733~~$7,515,860 in customers’ deposits, ~~$6,371,900~~$14,355 in advance from customer, $3,950,099 in short-term borrowings from third parties, ~~$1,085,480~~$6,389,042 in amount due to related party, and ~~$1,094,885~~$15,848 in tax payables. As of December 31, ~~2016,~~2017, the Company had ~~$30,602,706~~$34,910,711 in total current liabilities, which included ~~$608,883~~$1,461,858 in accrued expense and other accruals, ~~$21,743,360~~$25,273,617 in customers’ deposits, ~~$360,248~~$170,078 in advance from customers, ~~$6,308,513~~$7,208,761 in short-term borrowings from third parties, ~~$1,031,805~~$483,822 in amount due to related party, and ~~$549,897~~$312,575 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 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.

32
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 Unit business and a downsize of the 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 common shares 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 23 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,~~2017, previously filed with the SEC.

Recent Accounting Pronouncements

See Note 23 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,~~2017, previously filed with the SEC.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

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 and our Chief Financial Officer, Mr. Chun Hin Leslie Chow. 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 the nine months ended September 30, ~~2017~~2018 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~~2018 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

27
33

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.

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

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

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

(4) ~~(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.

34
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~~19, 2018 By: /s/ Di Xiao
Di Xiao
Chief Executive Officer
(Principal Executive Officer) ~~and Director~~

Date: November ~~14, 2017~~19, 2018 By: /s/ Chun Hin Leslie Chow
Chun Hin Leslie Chow
Chief Financial Officer
(Principal Financial ~~Officer and Principal Accounting~~ Officer)

35

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

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

		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.	1719

	Item 3. Quantitative and Qualitative Disclosures About Market Risk.	2633

	Item 4. Controls and Procedures.	2733

PART II.	Other Information	28

	~~Item 1. Legal Proceedings.~~	28

	~~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.~~	2834

	Item 6. Exhibits.	2834

	Signatures	2935

	Three months ended September 30, 2018					Three months ended September 30, 2017
	(Unaudited)					(Unaudited)
	Amount($)		% of Total			Amount($)		% of Total
Consultancy fee		76,192		3	%		46,059		2	%
Legal and professional fees		165,862		8	%		218,066		9	%
Salary and welfare		1,234,692		56	%		1,008,736		40	%
Office, insurance and rental expenses		361,402		16	%		430,047		17	%
Non-deductible input VAT expenses		44,745		2	%		6,924		0	%
Traveling and accommodation fees		77,366		4	%		187,780		8	%
Share-based compensation		64,810		3	%		138,161		6	%
Depreciation		77,712		4	%		89,857		3	%
Bad debt expenses		22		0	%		241,248		10	%
Other		105,461		4	%		131,970		5	%
Total general and administrative expense	$	2,208,264		100.0	%	$	2,498,848		100.0	%

	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					Nine months ended September 30, 2018						Nine months ended September 30, 2017
	(Unaudited)					(Unaudited)					(Unaudited)						(Unaudited)
	Amount($)		% of Total			Amount($)		% of Total			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	%		3,898,932			50.0	%		3,166,679		43.3	%
Office, insurance and rental expenses		1,252,561		17	%		852,494		17	%		1,223,357			15.7	%		1,252,561		17.1	%
Legal and professional fees												755,050			9.7	%		733,466		10.0	%
Traveling and accommodation fees												545,040			7.0	%		679,950		9.3	%
Non-deductible input VAT expense		16,369		-	%		-		-	%		337,965			4.3	%		16,369		0.2	%
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	%
Consultancy												290,782			3.7	%		187,230		2.6	%
Share based compensation												217,231			2.8	%		562,184		7.7	%
Depreciation												222,636			2.9	%		236,994		3.2	%
Bad debt expense												(76,402	)		(1.0	)%		241,248		3.3	%
Other												377,156			4.9	%		234,447		3.3	%
Total general and administrative expense											$	7,791,747			100.0	%	$	7,311,128		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

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)

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*

	TAKUNG ART CO., LTD

Date: November ~~14, 2017~~19, 2018	By:	/s/ Di Xiao
		Di Xiao
		Chief Executive Officer
		(Principal Executive Officer) ~~and Director~~

Date: November ~~14, 2017~~19, 2018	By:	/s/ Chun Hin Leslie Chow
		Chun Hin Leslie Chow
		Chief Financial Officer
		(Principal Financial ~~Officer and Principal Accounting~~ Officer)