TAKUNG ART CO., LTD AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF ~~CASH FLOWS~~CHANGES IN EQUITY

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

(UNAUDITED)


								Accumulated
				Additional				other
	Number	Common		Paid-in		Accumulated		comprehensive
	of shares	Stock		capital		deficit		loss		Total
Balance, December 31, 2020	11,271,379	$	11,271	$	6,358,115	$	(226,311)	$	(328,030)	$	5,815,045
Shared-based compensation	0		0		3,717		0		0		3,717
Net loss	0		0		0		(572,588)		0		(572,588)
Foreign currency translation adjustment	0		0		0		0		(37,763)		(37,763)
Balance, March 31, 2021	11,271,379		11,271		6,361,832		(798,899)		(365,793)		5,208,411

Issuance of ordinary shares for restricted stock award	335,000		335		6,863,814		0		0		6,864,149
Exercise of stock options	61,065		61		180,424		0		0		180,485
Net loss	—		0		0		(7,225,831)		0		(7,225,831)
Foreign currency translation adjustment	—		0		0		0		3,933		3,933
Balance, June 30, 2021	11,667,444	$	11,667	$	13,406,070	$	(8,024,730)	$	(361,860)	$	5,031,147
Issuance of ordinary shares for professional services	160,000		160		1,897,440		0		—		1,897,600
Issuance of ordinary shares related to a private placement	571,429		571		4,999,429		0		0		5,000,000
Issuance of ordinary shares related to a non-marketable investment	1,558,480		1,559		10,128,561		0		0		10,130,120
Net loss	—		0		0		(1,992,680)		0		(1,992,680)
Foreign currency translation adjustment	—		0		0		0		(34,280)		(34,280)
Balance, September 30, 2021	13,957,353	$	13,957	$	30,431,500	$	(10,017,410)	$	(396,140)	$	20,031,907


						Retained		Accumulated
				Additional		earnings		other
	Number	Common		Paid-in		(accumulated		comprehensive
	of shares	Stock		Capital		deficit)		Loss		Total
Balance, December 31, 2019	11,255,129	$	11,255	$	6,320,604	$	386,327	$	(273,029)	$	6,445,157
Shared-based compensation	0		0		5,986		0		0		5,986
Net loss	0		0		0		(953,362)		0		(953,362)
Foreign currency translation adjustment	0		0		0		0		(8,768)		(8,768)
Balance, March 31, 2020	11,255,129		11,255		6,326,590		(567,035)		(281,797)		5,489,013

Issuance of ordinary shares for restricted stock award	6,250		6		(6)		0		0		0
Issuance of ordinary shares for professional services	10,000		10		13,240		0		0		13,250
Shared-based compensation	0		0		6,053		0		0		6,053
Net loss	0		0		0		(14,769)		0		(14,769)
Foreign currency translation adjustment	0		0		0		0		(1,608)		(1,608)
Balance, June 30, 2020	11,271,379		11,271		6,345,877		(581,804)		(283,405)		5,491,939
Share-based compensation	—		—		6,119		—		—		6,119
Net income	—		—		—		82,078		—		82,078
Foreign currency translation adjustment	—		—		—		—		(38,371)		(38,371)
Balance, September 30, 2020	11,271,379	$	11,271	$	6,351,996	$	(499,726)	$	(321,776)	$	5,541,765

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TAKUNG ART CO., LTD AND SUBSIDIARIES

INTERIM CONDENSED Consolidated Statements of Cash Flows

(Stated in U.S. Dollars)

(UNAUDITED)



	Nine Months Ended
	September 30,		September 30,
	2021		2020
Cash flows from operating activities:
Net cash provided by (used in) operating activities	$	43,471,227	$	(6,680,813)

Cash flows from investing activities:
Purchase of property and equipment		(1,688)		(19,961)
Purchase of a non-marketable investment		(500,000)		0
Loan repayment from a third party		389,917		0
Net cash used in investing activities		(111,771)		(19,961)

Cash flows from financing activities:
Proceeds from stock option exercised		180,485		0
Proceeds from a private placement		5,000,000		0
Net cash provided by financing activities		5,180,485		0

Effect of exchange rate change on cash, cash equivalents and restricted cash		(281,110)		122,268
Net increase (decrease) in cash, cash equivalents and restricted cash		48,258,831		(6,578,506)
Cash, cash equivalents and restricted cash, beginning balance		13,842,745		21,829,154
Cash, cash equivalents and restricted cash, ending balance	$	62,101,576	$	15,250,648
Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets
Cash and cash equivalents as of September 30, 2021 and 2020, respectively		8,859,865		4,934,049
Restricted cash as of September 30, 2021 and 2020, respectively		53,241,711		10,316,599
Total cash, cash equivalents, and restricted cash as of September 30, 2021 and 2020, respectively	$	62,101,576	$	15,250,648
Supplemental cash flows information:
Cash paid for interest	$	86,823	$	0
Cash paid for income tax	$	112,429	$	58,452

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

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

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

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

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

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

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

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

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

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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 (“Takung”~~, 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 and ~~our~~its 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 and trading artwork. ~~For the period from September 17, 2012 (inception) to December 31, 2012, there was no operation except the issuance of shares for subscription receivable. We generate~~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 business primarily in Hong Kong, People’s Republic of China.

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. It is engaged in providing services to its parent company Hong Kong Takung by receiving deposits from and making payments to online artwork traders of Takung for and on behalf of Takung.

Shanghai Takung ~~set up a new office in Hangzhou, PRC~~was deregistered on ~~November 20, 2016 for technology development.~~ May 8, 2020 and the Company merged the operations of Shanghai Takung with Takung Cultural Development (Tianjin) Co., Ltd.

Takung Cultural Development (Tianjin) Co., Ltd (“Tianjin Takung”) ~~is a limited liability company, with a registered capital of $1 million located in Pilot Free Trade Zone. Tianjin Takung was incorporated on January 27, 2016.~~

~~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. 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 when Shanghai Takung was deregistered.

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. Takung Art Holdings was deregistered on April 29, 2020 due to deregistration of its wholly-owned subsidiary, Art Era Internet Technology (Tianjin) Co., Ltd., on June 18, 2019.

Hong Kong MQ Group Limited (“Hong Kong MQ”) was formed in Hong Kong on November 27, 2018, and is engaged in blockchain and non-fungible tokens (“NFT”) businesses, including consultancy service for NFT launch projects, developing its own NFT marketplace to facilitate users to buy and sell NFTs, as well as development of block chain-based online games. On June 19, 2019, as a result of a private transaction, one (1) share of common stock of Hong Kong MQ was transferred from Ms. Hiu Ngai Ma to the Company. The net asset of Hong Kong MQ was $nil as of the acquisition date. The consideration paid for the ownership transfer, which represent 100% of the issued and outstanding share capital of Hong Kong MQ, was $0.13 (HK$1). Hong Kong MQ became a direct wholly-owned subsidiary of the Company.

MQ (Tianjin) Enterprise Management Consulting Co., Ltd. (“Tianjin MQ”) was incorporated in Tianjin, PRC on July 9, 2019 and is a directly wholly owned subsidiary of Hong Kong MQ. It was established as a limited liability company with a registered capital of $100,000 located in the Pilot Free Trade Zone in Tianjin. Tianjin MQ focused on exploring business opportunities and promoting its artwork trading business. Tianjin MQ was deregistered on August 10, 2020 due to the Company streamlining its operation.

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Cultural Objects Provenance Holdings Limited

Cultural Objects Provenance Holdings Limited is an investment holding company. Its wholly-owned subsidiary is headquartered in Hong Kong, with global outposts in China (Shenzhen), Europe (Germany), and USA (NY/LA). It is an artwork authentication platform powered by blockchain. According to company home page, the subsidiary is the official technology parrter for NANZUKA Gallery in Tokyo, Japan. It authenticated some sought-after editions and limited edition works from some of the world’s most prolific artists, including Hajime Sorayama, Javier Calleja, Daniel Arsham, James Jarvis, and more.

On May 28, 2021, Takung entered into a Securities Purchase Agreement (the “SPA”) with Cultural Objects Provenance Holdings Limited (“Cultural Objects”), a British Virgin Islands company with a wholly-owned subsidiary in Hong Kong engaging in an operation of an artwork authentication platform powered by blockchain with global presence in China, Germany and the United States. Takung shall invest in Cultural Objects through paying certain purchase that consists of cash consideration, $500,000 and issuance of 282,000 shares of common stock of Takung in exchange for 54,100 common shares of Cultural Objects and 290,000 unvested restricted shares of common stock of Takung to Cultural Objects in exchange for 32,460 unvested common shares of Cultural Objects.

On August 21, 2021, Takung and Cultural Objects entered to an amendment to the SPA. The amendment provides that the original purchase price was amended to be $500,000 in cash and the issuance of 771,040 restricted shares of common stock of Takung to Cultural Objects in exchange for 54,100 common shares of Cultural Objects, and, subject to the satisfaction of the conditions stipulated in the SPA, the issuance of 787,440 unvested restricted shares of common stock of Takung to Cultural Objects in exchange for 32,460 unvested common shares of Cultural Objects. The cash consideration of $500,000 was paid to Cultural Objects by the end of August 2021. On September 9, 2021, an aggregate amount of 1,558,480 restricted shares of common stock of Takung issued to Cultural Objects in an exchange for an aggregate 86,560 common shares of Cultural Objects. Together with the cash consideration paid $500,000 and the total value of the restricted shares issued to Cultural Objects, $10,130,120, the total value of the investment in Cultural Objects was $10,630,120 (see Note 3).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying ~~condensed~~ consolidated balance sheet as of December 31, ~~2016,~~2020, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements as of September 30, ~~2017~~2021 and for the three ~~months ended~~ and nine months ended September 30, ~~2017~~2021 and ~~2016~~2020 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,~~2020, previously filed with the SEC.

Beginning in 2021, a strain of coronavirus (COVID-19) has spread globally. Although the Company’s operations have fully resumed in March 2021 and maintained an increasing trend of new trader accounts opening, the extent of the impact of the coronavirus on the Company's business and operations is highly uncertain and cannot be predicted with confidence. The Company’s business and operation will depend on several factors, such as the duration, severity, and geographic spread of the pandemic, development of the testing and treatment and stimulus measures of the government. The Company is monitoring and assessing the evolving situation closely and evaluating its potential exposure. The operating results for the nine months ended September 30, 2021 may not be indicative of the future operating results for the fiscal year ending December 31, 2021 or other future periods, particularly in light of the uncertain impact COVID-19 could have on the Company's business.

This basis of accounting involves the application of accrual accounting and consequently, ~~revenues~~revenue 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,~~2021, its interim condensed consolidated results of operations and cash flows for the ~~nine-month periods~~three and nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, 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.

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Recent Accounting Pronouncements

Except for the ASUs issued but not yet adopted disclosed in Note 2 to the financial statements on Form 10-K for the fiscal year ended December 31, 2020, 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. GOING CONCERN

Due to the recent regulatory scrutiny by PRC governments on digital asset related business, the artwork unit trading platform operated by the PRC subsidiary Tianjin Takung was suspended by the local authority. The Management became aware of the suspension on or around November 8, 2021. The local authority indicated the suspension was to facilitate certain investigation although it did not announce the purpose of the investigation. The Company intends to fully cooperate with the local authority's investigation.

In the event that the suspension carries on for a substantial period of time or the investigation results in unfavourable outcome, the Company is subject to various risks, including, but not limited to, permanent discontinuation of the artwork unit trading platform business, material loss of Tianjin Takung’s carrying assets, material impact to the Company’s financial performance and liquidity, and being involved in litigation.

3.The following table sets forth the carrying value of the assets and liabilities of Tianjin Takung whose operation was suspended as disclosed above, which were included in the accompanying unaudited condensed consolidated financial statements:


	September 30,		December 31,
	2021		2020
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	5,897,115	$	3,922,665
Restricted cash		53,241,711		9,144,610
Prepayment and other current assets, net		212,868		71,876
Intercompany receivables		1,439,513		1,379,393
Amount due from related parties		6,303,970		6,225,134
Loan receivables		2,172,766		2,609,748
Total current assets		69,267,943		23,353,426

NON-CURRENT ASSETS
Property and equipment, net		113,481		231,939
Deferred tax assets, net		138,501		125,190
Operating lease right-of-use assets		51,953		59,790
Total non-current assets		303,935		416,919

TOTAL ASSETS	$	69,571,878	$	23,770,345

CURRENT LIABILITIES
Accrued expenses and other payables	$	614,128	$	436,674
Customer deposits		53,241,711		9,144,610
Intercompany payables		16,328,379		14,829,608
Operating lease liabilities - current		12,381		11,517
Tax payable		11,009		20,003
Total current liabilities		70,207,608		24,442,412

NON-CURRENT LIABILITIES
Operating lease liability - non-current		27,932		40,610
TOTAL LIABILITIES	$	70,235,540	$	24,483,022

The Company has considered whether there is substantial doubt about its ability to continue as a going concern based on above factor. In evaluating if there is substantial doubt about its ability to continue as a going concern, the Company is trying to alleviate the

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going concern risk through further developing its operations in blockchain and NFT related businesses including consultancy services, development of NFT marketplace and “Play to Earn” style block chain-based online games.

Meanwhile, the Company is actively seeking other strategic partners with resources that can expand its blockchain and NFT businesses.

4. INVESTMENTS

We adopted ASU 2016-01 on January 1, 2018. This guidance requires us to measure all equity investments that are not accounted for under the equity method or result in consolidation at fair value and recognize any changes in net income. For equity investments with readily determinable and observable fair values, we use quoted market prices to determine the fair value of equity securities. For equity investments without readily determinable fair values, we have elected the measurement alternative under which we measure these investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

Equity investments with readily determinable fair values that are not accounted for under the equity method classified as trading are not assessed for impairment, since they are carried at fair value with the change in fair value included in net income. Similarly, prior to the adoption of ASU 2016-01, equity investment classified as trading was not tested for impairment.

Equity investments without readily determinable fair values are reviewed each reporting period to determine whether a significant event or change in circumstances has occurred that may have an adverse effect on the fair value of each investment. When such events or changes occur, we assess the fair value compared to our cost basis in the investment. We also perform this assessment every reporting period for each investment for which our cost basis has exceeded the fair value.

For investments in privately-held companies, management's assessment of fair value is based on valuation methodologies such as discounted cash flows, estimates of revenue and appraisals, as applicable. We consider and apply the assumptions that we believe market participants would use in evaluating estimated future cash flows when utilizing the discounted cash flow or estimates of revenue valuation methodologies. In the event the fair value of an investment declines below our cost basis, management determines if the decline in fair value is other than temporary and records an impairment accordingly.

As of September 30, 2021, our investment merely includes a non-marketable investment in a privately held company incorporated in British Virgin Islands without readily determinable market values. We elected the measurement alternative under which we measured the investment at cost minus impairment with an adjustment to the changes from observable price changes in orderly transactions for the similar investments of the same issuer.

The carrying value is measured as the total initial cost minus impairment. The carrying value for our non-marketable investment is summarized below:


	September 30,		December 31,
	2021		2020
	(Unaudited)
Total initial cost	$	10,630,120	$	—
Cumulative net gain (loss)		—		—
Total carrying value	$	10,630,120	$	—

For the three months and nine months ended September 30, 2021, we did not incur any unrealized gain or loss in connection with the non-marketable investment. Since the investment was acquired in August 2021, there was 0 unrealized gain or loss incurred for the three months and nine months ended September 30, 2020.

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5. PREPAYMENT AND OTHER CURRENT ASSETS,

NET

Prepayment and other current assets mainly consist of the prepaid ~~services for development, maintenance of online trading system, the advertising and promotional services,~~tax, prepaid ~~financial advisory and banking services,~~service fees, as well as ~~other current assets.~~staff advance.


	September 30,		December 31,
	2021		2020
	(Unaudited)
Prepaid tax	$	26,341	$	32,262
Prepaid service fees		335,200		202,647
Prepaid rent		150,347		—
Staff advance		—		2,299
Deposit		—		35,879
Other current assets		776		6,300
Less: allowance for doubtful accounts		0		0
Prepayment and other current assets, net	$	512,664	$	279,387

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

~~4. ACCOUNT RECEIVABLES, NET~~

~~Account receivables consisted of the following:~~

September 30,
2017 December 31,
2016
(Unaudited)
Listing fee $ 1,562,924 $ 1,403,255
Authorized agent subscription revenue 924,100 995,453
Monthly commission fee 1,422,750 605,677
Others 63,323 54,183
Less: allowance for doubtful accounts (240,528 ) -
Account receivables, net $ 3,732,569 $ 3,058,568

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 debtNaN provision ~~of $240,528~~for doubtful accounts was recognized for the three and nine months ended September 30, ~~2017.~~2021 and 2020, respectively.

6. ACCOUNT RECEIVABLES, NET

5.Account receivables consisted of the following:


	September 30,		December 31,
	2021		2020
	(Unaudited)
Listing fee	$	154,143	$	154,771
Consultancy service		80,000		0
Less: allowance for doubtful accounts		0		0
Account receivables, net	$	234,143	$	154,771

NaN provision for doubtful accounts was recognized for the three and nine months ended September 30, 2021 and 2020, respectively.

7. LOAN RECEIVABLES

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

Amount in

Original

Outstanding

Reporting

Annual

Amount

Balance

Currency

Interest

Repayment

Date

Borrower

Lender

(RMB)

(USD)

Rate

Due Date

7/18/2019

Chongqing Aoge Import and Export Co.

Tianjin Takung

5,000,000

775,988

4/1/2022

8/29/2019

Chongqing Aoge Import and Export Co.

Tianjin Takung

5,000,000

775,988

4/1/2022

9/20/2019

Chongqing Aoge Import and Export Co.

Tianjin Takung

4,000,000

620,790

4/1/2022

Total

2,172,766

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

All the transactions entered with Chongqing Aoge Import and Export co. 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”) entered into by Tianjin Takung were guaranteed by Mr. Daquan Wang who is a General Manager and legal representative of Chongqing Aoge Import and Export Co. (“Chongqing”). Mr. Daquan Wang is a citizen of the People’s Republic of China. Both Chongqing and Mr. Daquan Wang are non-related parties to the Company.

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●

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

The ~~interest-free loans (the “RMB Loans”) that Shanghai Takung and Tianjin Takung entered~~transactions with Friend Sourcing were ~~guaranteed by Chongqing Wintus (New Star) Enterprises Group (“Chongqing”). Xiaohui Wang (“Ms. Wang”) is a national of~~aimed to meet 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,~~Company’s working capital needs in Hong Kong Takung entered into loan agreements (the “US Dollar Loans”) with Merit Crown Limited, a Hong Kong company (“Merit Crown) with interest accruing at a rate of 8% per annum (See Note 8). Merit Crown is a non-related party to the Company.

Dollars.

Through an understanding between ~~Ms. Wang~~Chongqing Aoge Import and ~~Merit Crown,~~Export Co. and Friend Sourcing, the USHong Kong Dollar Loans are “secured” by the RMB Loans. It is the understanding between the parties that the Hong Kong Dollar Loans and the RMB Loans will be repaid simultaneously. The loans were extended on August 1, 2020 with a new repayment due date on April 1, 2022.

On November 30, 2020, Tianjin offered a short-term financing in an amount of $1,008,784 (RMB6,500,000) with an annual interest rate at 6% to a non-related third party, Tianjin Zhiyuan Enterprise Management Co., Ltd. The loan was matured on February 2, 2021. Portion of the loan amount, $543,191 (RMB 3,500,000) was paid off on December 31, 2020 . The remaining balance, $470,032 (RMB3,028,603), inclusive of the outstanding principal balance, $465,593 (RMB3,000,000) and interest receivable, $4,439 (RMB28,603) was fully repaid on January 27, 2021.

8. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following:


	September 30,		December 31,
	2021		2020
	(Unaudited)
Furniture, fixtures and equipment	$	220,130	$	218,430
Leasehold improvements		23,121		23,216
Computer trading and clearing system		3,473,208		3,468,346
Transport equipment		111,644		110,245
Sub-total		3,828,103		3,820,237
Less: accumulated depreciation		(3,611,973)		(3,382,241)
Property and equipment, net	$	216,130	$	437,996

Depreciation expense was $57,747 and $109,766 for the three months ended September 30, 2021 and 2020, respectively, and $225,389 and $356,756 for the nine months ended September 30, 2021 and 2020, respectively.

9. ACCRUED EXPENSES AND OTHER PAYABLES

Accrued expenses and other payables as of September 30, 2021 and December 31, 2020 consisted of the following:


	September 30,		December 31,
	2021		2020
	(Unaudited)
Accruals for professional fees	$	611,309	$	267,427
Accruals for consulting fees		302,308		365,634
Payroll payables		30,247		80,026
Trading and clearing system		5,509		—
Accrued interest		86,625		—
Other payables		37,797		15,001
Total accrued expenses and other payables	$	1,073,795	$	728,088

10. SHORT-TERM BORROWINGS FROM A THIRD PARTY

In July 2019, Hong Kong Takung entered into HKD Loans with Friend Sourcing with interest accruing at a rate of 8% per annum. The HKD Loans are to provide Hong Kong Takung with sufficient HKD currency to meet its working capital requirements. Friend Sourcing is a non-related party to the Company. On April 1, 2021, Hong Kong Takung extended the due date of the HKD Loans with Friend Sourcing to July 30, 2021. On August 1, 2021, Hong Kong Takung further extended the financing with Friend Souring to April 1, 2022. An interest payable, $86,823, was accrued upon extension and was paid on October 22, 2021.

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In accordance with PRC Tax Administration Law on the Levying and ~~$199,514~~Collection of Taxes, the PRC tax authorities generally have up to five years to assess underpaid tax plus penalties and interest for PRC entities’ tax filings. In the case of tax evasion, which is not clearly defined in the law, there is no limitation on the tax years open for investigation. Accordingly, the PRC entities remain subject to examination by the tax authorities based on the above.

13. LEASES

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

The following table provides a summary of leases by balance sheet location as of September 30, 2021:


		As of
		September 30,
Assets/liabilities	Classification	2021
Assets		(Unaudited)
Operating lease right-of-use assets	Operating lease assets	$	130,073

Liabilities
Current
Operating lease liability - current	Current operating lease liabilities	$	76,719

Long-term
Operating lease liability - non-current	Long-term operating lease liabilities		41,714


Total lease liabilities		$	118,433

The operating lease expenses for the three months ~~ended September 30, 2017~~ and ~~2016, respectively, and $721,492 and $428,440 for the~~ nine months ended September 30, ~~2017~~2021 and ~~2016, respectively.~~2020 were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,
Lease Cost	Classification	2021			2020	2021			2020
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Operating lease cost	Cost of revenue, general and administrative expenses	$	127,173	$	72,901	$	294,399	$	466,419
Total lease cost		$	127,173	$	72,901	$	294,399	$	466,419

Maturities of operating lease liabilities at September 30, 2021 were as follows:


	Operating
Maturity of Lease Liabilities	Leases
2021 (remaining)	$	17,065
2022		80,663
2023		15,520
2024		15,520
2025		0
Thereafter		0
Total lease payments	$	128,768
Less: interest		(10,335)
Present value of lease payments	$	118,433

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	Nine Months Ended
	September 30,
Lease Term and Discount Rate	2021		2020
	(Unaudited)		(Unaudited)
Weighted-average remaining lease term (years)
Operating leases	2.1		2.8

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


	Nine Months Ended
	September 30,
Other Information	2021		2020
	(Unaudited)		(Unaudited)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	49,651	$	208,198
Leased assets obtained in exchange for new operating lease liabilities		—		—

~~12.~~

14. (LOSS) EARNINGS PER SHARE

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Numerator:
Net (loss) income	$	(1,992,680)	$	82,078	$	(9,791,099)	$	(886,053)
Denominator:
Weighted-average shares outstanding - Basic		12,689,317		11,271,379		11,897,019		11,261,694
Stock options and restricted shares		0		0		0		0
Weighted-average shares outstanding - Diluted		12,689,317		11,271,379		11,897,019		11,261,694

(Loss) income per share
-Basic	$	(0.16)		0.01		(0.82)		(0.08)
-Diluted	$	(0.16)		0.01		(0.82)		(0.08)

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

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

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

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

Due to the loss for the three and nine months ended September 30, 2021, approximately 39,825 and 39,825 options, respectively, were excluded from the calculation of diluted net loss per share.

~~For~~Due to the options were out-of-money, approximately 100,890 options were excluded from the calculation of the diluted net income per share, for the three months ended September 30, ~~2017,~~2020.

Due to the ~~diluted earnings per share calculation did not include options to purchase up to 109,160 shares of~~loss from continued operations for 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~~2020 approximately 100,890 options were excluded from the calculation of diluted net loss per share.

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15. EQUITY

Exercise of stock options:

56,000 and ~~2016~~5,065 stock options were exercised on April 12, 2021 and May 25, 2021, respectively. As a result of the exercise, 61,065 ordinary shares were issued.

Award of restricted shares:

~~There were dilutive effects~~On April 21, 2021, the board of ~~487,000~~directors of the Company approved an issuance of 335,000 ordinary shares as share-based awards to its independent directors, employees and consultants under the 2015 Incentive Stock Plan. The Company recognized a share-based compensation expense of $6,863,815 in connection with this issuance in April 2021.

On July 12, 2021, pursuant to the terms of that certain Securities Purchase Agreement dated July 8, 2021, the Company sold 571,429 shares (the “Shares”) of its common stock, par value $0.001 per share (the “Common Stock”), to an institutional investor (the “Investor”) at a price of $8.75 per share, for gross proceeds of $5,000,000 before deducting the ~~nine months period ended September 30, 2017~~placement agent fee and ~~2016.~~offering expenses (the “Private Placement”).

On July 9, 2021, the Company entered into an Advisory Agreement with an independent institutional contractor for exploring potential investors and projects to advance new business development. Upon signing the agreement, an aggregate of 160,000 ordinary shares at a price of $11.86 was awarded to the contractor under the 2015 Incentive Stock Plan. The ~~487,000~~Company recognized a share-based compensation expense of $1,897,600 in connection with this issuance in July 2021.

On May 28, 2021, the Company entered into a Securities Purchase Agreement with a company incorporated in British Virgin Islands (“BVI entity”). In exchange for an aggregate amount of 86,560 common shares of the BVI entity, the Company shall remit $500,000 in cash and issue 572,000 restricted shares of ~~Common Stock (the “Compensation Shares”)~~the Company to the BVI entity. On August 21, 2021, both parties entered into an Amendment to Securities Purchase Agreement and the number of restricted shares of the Company to be issued to the BVI entity was increased to 1,558,480. The Company remitted the cash payment of $500,000 to the BVI entity on August 20, 2021. On September 9, 2021, an aggregate amount of 1,558,480 restricted shares at a price of $6.5 was issued to the BVI entity. The Company recognized the carrying amount of this equity investment, $10,630,120, in noncurrent asset.

16. CONTINGENCIES

On or around July 2020, a claim was filed in the Shanghai Pudong People’s Court, China against Hong Kong Takung on the basis of alleged breaches of contract. The claim amount has yet to be determined. A court hearing was initially scheduled on July 20, 2021 but the Company never received any court order or subpoena. As of the filing of this report, the Company did not have further details nor received any court order related to this claim.

Except for the ~~Consulting Agreement with Regeneration Capital Group, LLC (“Regeneration”) were placed~~above, as of September 30, 2021 and through the issuance date of the condensed consolidated financial statements included 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,~~this Form 10-Q, the Company does not ~~identify~~have any other ~~subsequent events~~significant indemnification claims.

17. SUBSEQUENT EVENTS

On or around November 8, 2021, the Management became aware that the artwork unit trading platform operated by our PRC subsidiary Tianjin Takung was suspended by the local authority. The local authority indicated the suspension was to facilitate certain investigation although it did not announce the purpose of the investigation yet. The Company intends to fully cooperate with ~~material financial impact on~~ the ~~unaudited condensed consolidated financial statements.~~local authority's investigation.

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

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

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

Overview

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

Takung Art Co., Ltd is a holding company that, through Hong Kong Takung ~~is a limited liability company incorporated on September 17, 2012 under the laws of~~ Art Company Limited (“Hong Kong ~~Special Administrative Region, China. Although~~Takung”) and 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 assumedCultural Development (Tianjin) Co. Ltd., Hong Kong Takung’s ~~business operations as it now our only operating~~ wholly-owned ~~subsidiary.~~

~~Hong Kong Takung~~subsidiary in China (“Tianjin Takung”), operates an electronic online platform located at http://~~eng.takungae.com~~en.takungae.com/ for artists, art dealers and art investors to offer and trade in ownership units over valuable artwork.

On June 19, 2019, Takung Art Co., Ltd purchased from Ms. Ma Hiu Ngai, the Company’s shareholder, one (1) ordinary share of Hong Kong MQ Group Limited (“Hong Kong MQ”), constituting 100% of its issued and outstanding shares, for a cash consideration of HK$1.00 and therefore made Hong Kong MQ its wholly-owned subsidiary.

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

In July 2021, Takung appointed Mr. Kwok Leung Li as the CEO to lead the new direction with three initiatives to develope our blockchain and NFT related businesses. 1. Blockchain and NFT consultation: with Mr. Li's vast experience and expertise in blockchain development and execution, we offer consultancy services to third parties on their NFT launch projects. 2. NFT marketplace: we are planning to launch our own NFT marketplace to facilitate users to buy and sell NFT's. The marketplace is currently under developmentm, and we have already been in discussion with artists and NFT creators for listings on the platform. 3. Game-Fi development: combining decentralized finance (“DeFi”) and NFTs with blockchain-based online games, we are developing the “Play to earn” style games, giving players financial incentives to play and progress through games. With the help of NFTs, games now become more sustainable than before as players can trade digital game assets and earn passive income by playing games. The in-game NFTs can then be traded on our own NFT marketplace.

We, through our operating subsidiaries, generate revenue from ~~our~~ services in connection with the offering and trading of artwork on our system, primarily consisting of listing fees, trading commissions, and 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 andas well as consulancy service 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.

NFT project.

Our ~~headquarters are~~headquarter is 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~~Our new ~~office in Hangzhou to conduct technology development. Our~~ principal executive ~~offices are~~office is located at ~~Flat/RM 03-04, 20/F, Hutchison House, 10~~Room 709, Tower 2, Admiralty Centre, 18 Harcourt Road, ~~Central~~Admiralty, Hong Kong.

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Recent Impacts of COVID-19 on Our Business

~~Our common stock began~~While the ongoing coronavirus pandemic is spreading throughout the world, our operating subsidiaries’ business has fully resumed since March 2020. Compared to the same period in 2020, our operating subsidiaries had additional listing of artworks, higher trading volume, and incurred higher listing and management revenue in the third quarter of 2021. Although we do not expect that the virus will have a material adverse effect on our business or financial results at this time, it is not possible to predict the unanticipated consequence of the pandemic on our future business performance and liquidity due to the severity of global situation of COVID-19. The Company continues to monitor and assess the evolving situation closely and evaluate its potential exposure.

The extent to which the COVID-19 impacts our operating subsidiaries’ business is highly uncertain and cannot be predicted with confidence. It will depend on various factors including the duration and severity of the outbreak, new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.

Although we do not expect that the virus will have a material adverse effect on our operating subsidiaries’ business or financial results at this time, COVID-19 may eventually affect the Company's 2021 overall business performance. The operating results for the three and nine months ended September 30, 2021 may not be indicative of the future operating results for the fiscal year ending December 31, 2021 or other future periods, particularly in light of the uncertain impact COVID-19 could have on the ~~NYSE American under the symbol “TKAT” on March 22, 2017.~~

Company's business.

Results of Operation of Takung

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

~~THREE-MONTH PERIOD~~THREE MONTHS ENDED SEPTEMBER 30, ~~2017~~2021 COMPARED TO ~~THREE-MONTH PERIOD~~THREE MONTHS ENDED SEPTEMBER 30, ~~2016~~

~~Revenue~~

2020

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

Three Months Ended
September 30,
2017 2016
(Unaudited) (Unaudited)
Revenue $ 3,355,011 $ 5,742,209
Cost of revenue (292,168 ) (285,252 )
Selling expense (624,151 ) (652,207 )
General and administrative expenses (2,498,848 ) (1,744,965 )
Total costs and expenses (3,415,167 ) (2,682,424 )
Income from operations (60,156 ) 3,059,785
Interest and other income (loss), net 211,852 (11,316 )
Income before income taxes 151,696 3,048,469
Income tax benefit (expense) (124,662 ) (596,732 )
Net income $ 27,034 $ 2,451,737

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


	Three Months Ended September 30,
	2021		% of Revenue	2020		% of Revenue
	(Unaudited)			(Unaudited)
Revenue	$	2,608,677	100	$	685,465	100
Cost of revenue		(719,826)	(28)		(393,990)	(58)
Selling expense		(48,511)	(2)		(174,379)	(25)
General and administrative expenses		(3,817,635)	(146)		(617,228)	(90)
Total costs and expenses		(4,585,972)	(176)		(1,185,597)	(173)
Loss from operations		(1,977,295)	(76)		(500,132)	(73)
Other income (expenses), net		68,507	3		581,579	85
(Loss) income before income taxes		(1,908,788)	(73)		81,447	12
Income tax expense (benefit)		83,892	3		(631)	(0)
Net (loss) income	$	(1,992,680)	(76)	$	82,078	12

Revenue

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


	Three Months Ended September 30,
	2021		2020
	(Unaudited)		(Unaudited)
Listing fee revenue	$	320,173	$	—
Commission revenue		1,083,976		568,853
Management fee revenue		1,124,528		116,612
Consultancy service fee revenue		80,000		—
Total	$	2,608,677	$	685,465

Table of ~~revenue):~~Contents

(i)

Listing fee revenue

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

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

~~(i)~~

~~Listing fee revenue~~

~~Listing fee revenue is calculated based on~~2021, a ~~percentage~~total of ~~the listing value and transaction value~~310 sets of ~~artworks.~~

~~Listing value is the total offering price of an~~ artwork ~~when the ownership units are initially~~were listed ~~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~~Platform — comprising 85 sets of paintings and calligraphies 9from famous Chinese, Russian and Mongolian artists, with a total listing value of $33,357,795 (HK$259,100,000); 35 pieces of jewelry with a total listing value of $9,354,602 (HK$72,660,000); 134 pieces of precious stones 1with a total listing value of $16,999,472 (HK$132,040,000); 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 $12,230,762 (HK$~~16,500,000) for the~~95,000,000); 4 pieces of antique mammoth ivory carvings with a total listing value of $669,473 (HK$5,200,000); 2 pieces of porcelain pastel paintings with a total listing value of $334,737 (HK$2,600,000); 7 pieces of porcelain with a total listing value of $1,094,331 (HK$8,500,000); 6 sets of ~~paintings~~Unit+ products with a total listing value of $1,327,875 (HK$10,314,000); 1 piece of Yixing collectable with a listing value of $128,745 (HK$1,000,000); and ~~calligraphies, $1,132,555~~7 pieces of Sports memorabilia with a listing value of $1,095,542 (HK$ ~~8,820,000) for~~8,509,400), of which 22%-48% (for 85 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), 25%-48% (for the 7 pieces of porcelain), 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,~~2021, there were 711 new sets of painting listed on the Platform. The total listing value was $1,457,567 (HK$11,500,000) for the painting, of which 22% (for the painting) of the listed value was charged as the listing fee.

As of September 30, 2020, a total of 292 sets of artwork were listed for trade on the Platform —comprising 67 sets of paintings and calligraphies 7from famous Chinese, Russian and Mongolian artists, with a total listing value of $28,502,185 (HK$221,100,000); 35 pieces of ~~amber, 14~~jewelry with a total listing value of $9,366,661 (HK$72,660,000); 134 pieces of precious stones 5with a total listing value of $17,021,386 (HK$132,040,000); 29 pieces of ~~jewelry successfully listed on our system. The~~amber with a total listing ~~values were $1,802,475~~value of $12,246,529 (HK$~~14,000,000) for the 7 sets~~95,000,000); 4 pieces of antique mammoth ivory carvings with a total listing value of $670,336 (HK$5,200,000); 2 pieces of porcelain pastel paintings ~~and calligraphies, $2,974,083~~with a total listing value of $335,168 (HK$~~23,100,000) for the~~2,600,000); 7 pieces of ~~amber, $1,042,860~~porcelain with a total listing value of $1,095,742 (HK$~~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~~8,500,000); 6 sets of ~~paintings~~Unit+ products with a total listing value of $1,329,586 (HK$10,314,000); 1 piece of Yixing collectable with a listing value of $128,911 (HK$1,000,000); and ~~calligraphies) ,46% (for the~~ 7 pieces of ~~amber)~~Sports memorabilia with a listing value of $1,096,954 (HK$8,509,400), ~~32%~~of which 22.5%-48% (for 67 sets of paintings), 24%-48.5% (for the 14134 pieces of precious stones), 29%-48% (for the 535 pieces of jewelry), 47%-48.5% (for 4 piece of antique mammoth ivory carvings), 32%-48% (for the 29 pieces of amber), 45%-46% (for the 2 pieces of porcelain pastel paintings), 25%-48% (for the 7 pieces of porcelain), 30.25%-45% (for the 6 sets of Unit+ products), 45% (1 piece of Yixing collectable) and 45% (for the 7 pieces of Sports memorabilia) of the listed values were charged as listing fees, respectively.

~~The decrease~~During the three months ended September 30, 2020, there were no new artworks listed on the Platform because of the uncertain economic climate and tepid investor interest. We incurred $320,173 listing fee revenue for the three months ended September 30, 2021 compared to nil for the same period in ~~number~~2020. There were 11 new sets of ~~pieces~~painting listed ~~listing values and corresponding listing fees charged~~on our trading platform during the three months ended September 30, ~~2017 compared to~~2021 whereas there was no new artwork listed on the Platform in 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 listing schedule of some artworks were deferred to a later time.

2020.

(ii)

Commission fee revenue

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

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

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

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

●

The trader defaults in payment over three months;

●

The trader did not incur any transactions in the month of reassessment;

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●

The service agent has confirmed with the relevant trader that he/she was inactive.

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

~~Commission rebate programs are offered~~We charge a non-transactional transfer commission on the transfer of the ownership of an artwork. The commission amount is calculated based on 0.3% of the close value of the artwork and each artwork unit. For the large volume of transfer or under certain special circumstances, we charge at an agreed-upon percentage of artworks units.

We used to ~~Traders~~offer commissions to traders and service agents. ~~We would rebate 5% of the commission earned from the transactions of new Traders referred by the existing Traders. The rebate rate was adjusted from 15% to 5%, starting from~~Effective January 1, ~~2017.~~2020, we no longer offer commissions to our traders. For service agents, we ~~rebate~~offer a total of 40% to ~~60%~~75% 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 to us, we will, after rebating such individual referrers 15% of the~~Platform.

The commission ~~earned from the transactions of new Traders they referred, deduct such 15% of the commission from the rebates payable~~paid to the service agents ~~to which such individual referrers belong. The commission rebate is recognized as reduction of the commission revenue. The rebates~~ and discounts are recognized as a ~~reduction~~cost of revenue in the same period the related revenue is recognized.

~~In spite of this, total~~Total commission revenue ~~decreased~~increased by ~~$172,872~~$515,123 or ~~10%~~91% for the three months ended September 30, ~~2017~~2021 to ~~$1,496,826~~$1,083,976 compared to ~~$1,669,698~~$568,853 for the three months ended September 30, ~~2016 primarily~~2020, which was mainly a result of a spike in trading amounts of non-VIP trader $4,020,185,469 (HKD31,225,986,590) during the three months ended September 30, 2021 compared to $2,193,609,402 (HKD17,007,931,139) during the same period in 2020.

(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 is 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 months ended September 30, 2021 management fee revenue rose by $1,007,916, from $116,612 for the three months ended September 30, 2020 to $1,124,528 due to a significant increase in trading artwork units. For the three months ended September 30, 2021, the trading artwork units amounted for 477,847,726 compared to 254,830,720 during the same period in 2020.

(iv) Consultancy service fee revenue

During the three months ended September 30, 2021, we incurred a consultancy service fee revenue, $80,000, which was pertinent to providing consultancy services with respect to the strategic utilization of blockchain technology and NFT launch to a third party.

Revenue by customer type

The following table presents our revenue by customer type:


	Three Months Ended September 30,
	2021		2020
	(Unaudited)		(Unaudited)
Artwork owners	$	320,173	$	—
Non – VIP Traders		1,153,367		427,373
VIP Traders		1,055,137		258,092
Corporate advisee		80,000		—
Total	$	2,608,677	$	685,465

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Cost of Revenue


	Three Months Ended September 30,
	2021		2020
	(Unaudited)		(Unaudited)
Commissions paid to service agents	$	609,752	$	233,784
Depreciation		35,854		79,518
Internet service charge		43,661		51,591
Artwork insurance		12,710		12,152
Artwork storage		17,849		15,802
Others		—		1,143
Total	$	719,826	$	393,990

Cost of revenue for the three months ended September 30, 2021 and September 30, 2020 was $719,826 and $393,990, respectively. The rise in cost of revenue by $325,836 for the three months ended September 30, 2021 compared to September 30, 2020, was mainly due to an increase in commissions paid to service agents by $375,968 because of an increase in trading amounts during the ~~change~~three months ended September 30, 2021 as discussed above. Overall increase in ~~our commission fee policy and~~cost of revenue was offset by the decrease in depreciation by $43,664 due to some of our computer equipment and trading systems having been fully depreciated, a decline in internet service charges by $7,930.

Gross Profit

Gross profit was $1,888,851 or 72.4% of the total revenue for the three months ended September 30, 2021 compared to $291,475 or 42.5% of the total revenue for the three months ended September 30, 2020. The significant spike in gross profit for the three months ended September 30, 2021 was primarily due to a significant increase in total revenue by $1,923,212 which was contributed by an increase in commission, management fee revenue and consultancy service fee revenue as discussed aforementioned.

Operating Expenses

General and administrative expenses for the three months ended September 30, 2021 were $3,817,635 compared to $617,228 for the three months ended September 30, 2020. The spike in general and administrative expenses by $3,200,407 or 518.5% was attributable to a spike in share based compensation expense by $1,891,481 as we granted 160,000 shares to an independent consultant in July 2021 in connection with the private placement, an increase in consultancy fee by $132,397 due to a rise in service fee, an increase in legal and professional fees by $512,599 as a result of additional amounts paid to legal counsels, brokerage firms, investment specialists for the closing of private placement and review of agreements as well as fees paid to auditors for regulatory filing, an increase in office, insurance and rental expenses by $123,088 as we had rented a staff accommodation and others, $517,430 which chiefly included a payment to an exhibition company which assisted us in locating the potential investors.

The following table sets forth the main components of the Company’s general and administrative expenses for the three months ended September 30, 2021 and September 30, 2020.


	Three Months Ended
	September 30,
	2021		% of Total	2020		% of Total
	(Unaudited)			(Unaudited)
Salary and welfare	$	288,820	7.6	$	281,247	45.6
Office, insurance and rental expenses		205,203	5.4		82,115	13.3
Legal and professional fees		622,912	16.3		110,313	17.9
Non-deductible input VAT expense		62,525	1.6		61,179	9.9
Travel and accommodation fees		24,865	0.7		2,017	0.3
Consultancy fee		159,304	4.2		26,907	4.4
Depreciation		21,893	0.6		30,248	4.9
Share based compensation expense		1,897,600	49.6		6,119	1.0
Others		534,513	14.0		17,083	2.7
Total general and administrative expense	$	3,817,635	100.0	$	617,228	100.0

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Other income

Other income for the three months ended September 30, 2021 was $68,507, compared to $581,579 for the same period in 2020. The significant decrease in other income for the three months ended September 30, 2021 is predominantly due to a significant decrease in foreign currency exchange gain by $452,103, arising from the depreciation of the Hong Kong dollar against the US dollar and an increase in loan interest by $65,156.

Income tax expense (benefits)

The Company’s effective tax rate varies due to the multiple jurisdictions in which it books its pretax income or losses. The Company was subject to a U.S. income tax rate of 21%, Hong Kong profits tax rate of 8.25% for the first HK$ 2 million (approximately $257,490) assessable profits and at 16.5% for assessable profits above HK$ 2 million (approximately $257,490) and PRC enterprise income tax rate of 25%.

The effective tax rates for the three months ended September 30, 2021 and 2020 were (4.4)% and (0.8)%, respectively.

The income tax expense (benefits) were $83,892 and $(631) for the three months ended September 30, 2021 and 2020, respectively.

Net (loss) income

We recorded a net loss of $1,992,680 and net income of $82,078 for the three months ended September 30, 2021 and 2020, respectively. The net loss incurred for the three months ended September 30, 2021 was primarily due to comparatively higher share-based compensation expense incurred as discussed aforementioned.

NINE MONTHS ENDED SEPTEMBER 30, 2021 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2020

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


	Nine Months Ended
	September 30,
			% of			% of
	2021		Revenue	2020		Revenue
	(Unaudited)			(Unaudited)
Revenue	$	4,531,280	100	$	3,545,916	100
Cost of revenue		(1,424,528)	(31)		(1,804,566)	(51)
Selling expense		(284,980)	(6)		(278,953)	(8)
General and administrative expenses		(12,783,107)	(282)		(2,657,403)	(75)
Total costs and expenses		(14,492,615)	(319)		(4,740,922)	(134)
Loss from operations		(9,961,335)	(219)		(1,195,006)	(34)
Other income		260,721	6		403,178	11
Loss before income taxes		(9,700,614)	(213)		(791,828)	(23)
Income tax expense		90,485	2		94,225	3
Net loss	$	(9,791,099)	(215)	$	(886,053)	(26)

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Revenue

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


	Nine Months Ended
	September 30,
	2021		2020
	(Unaudited)		(Unaudited)
Listing fee revenue	$	887,267	$	557,789
Commission fee revenue		2,090,372		2,657,989
Management fee revenue		1,483,641		330,138
Consultancy service fee revenue		80,000		—
Total	$	4,531,280	$	3,545,916

(i)

Listing fee revenue

As of September 30, 2021, a total of 310 sets of artwork were listed for trade on the Platform —comprising 85 sets of paintings and calligraphies from famous Chinese, Russian and Mongolian artists, with a total listing value of $33,357,795 (HK$259,100,000); 35 pieces of jewelry with a total listing value of $9,354,602 (HK$72,660,000); 134 pieces of precious stones with a total listing value of $16,999,472 (HK$132,040,000); 29 pieces of amber with a total listing value of $12,230,762 (HK$95,000,000); 4 pieces of antique mammoth ivory carvings with a total listing value of $669,473 (HK$5,200,000); 2 pieces of porcelain pastel paintings with a total listing value of $334,737 (HK$2,600,000); 7 pieces of porcelain with a total listing value of $1,094,331 (HK$8,500,000); 6 sets of Unit+ products with a total listing value of $1,327,875 (HK$10,314,000); 1 piece of Yixing collectable with a listing value of $128,745 (HK$1,000,000); and 7 pieces of Sports memorabilia with a listing value of $1,095,542 (HK$8,509,400), of which 22%-48% (for 85 sets of paintings), 24%-48.5% (for the 134 pieces of precious stones), 29%-48% (for the 35 pieces of jewelry), 47%-48.5% (for 4 piece of antique mammoth ivory carvings), 32%-48% (for the 29 pieces of amber), 45%-46% (for the 2 pieces of porcelain pastel paintings), 25%-48% (for the 7 pieces of porcelain), 30.25%-45% (for the 6 sets of Unit+ products), 45% (1 piece of Yixing collectable) and 45% (for the 7 pieces of Sports memorabilia) of the listed values were charged as listing fees, respectively.

During the nine months ended September 30, 2021, there were 15 new sets of painting listed on the Platform. The total listing value was $3,865,133 (HK$30,000,000) for the painting, of which 22% (for the painting) of the listed value was charged as the listing fee.

As of September 30, 2020, a total of 285 sets of artwork were listed for trade on the Platform —comprising 60 sets of paintings and calligraphies from famous Chinese, Russian and Mongolian artists, with a total listing value of $25,783,323 (HK$202,100,000); 35 pieces of jewelry with a total listing value of $9,269,749 (HK$72,660,000); 134 pieces of precious stones with a total listing value of $16,845,275 (HK$132,040,000); 29 pieces of amber with a total listing value of $12,119,820 (HK$95,000,000); 4 pieces of antique mammoth ivory carvings with a total listing value of $663,401 (HK$5,200,000); 2 pieces of porcelain pastel paintings with a total listing value of $331,700 (HK$2,600,000); 7 pieces of porcelain with a total listing value of $1,084,405 (HK$8,500,000); 6 sets of Unit+ products with a total listing value of $1,315,830 (HK$10,314,000); 1 piece of Yixing collectable with a listing value of $127,577 (HK$1,000,000); and 7 pieces of sports memorabilia with a listing value of $1,085,604 (HK$8,509,400), of which 22.5%-48% (for 60 sets of paintings), 24%-48.5% (for the 134 pieces of precious stones), 29%-48% (for the 35 pieces of jewelry), 47%-48.5% (for 4 piece of antique mammoth ivory carvings), 32%-48% (for the 29 pieces of amber), 45%-46% (for the 2 pieces of porcelain pastel paintings), 25%-48% (for the 7 pieces of porcelain), 30.25%-45% (for the 6 sets of Unit+ products), 45% (1 piece of Yixing collectable) and 45% (for the 7 pieces of sports memorabilia) of the listed values were charged as listing fees, respectively.

During the nine months ended September 30, 2020, there were 6 sets of paintings listed on the Platform. Their total listing values were $1,148,194 (HK$9,000,000) for the paintings, of which 22.9%-28% (for the paintings) of the listed values were charged as listing fees.

The listing fees revenue rose to $877,267 during the nine months ended September 30, 2021 compared to $557,789 for the same period ended September 30, 2020. The higher listing fee revenue for the nine months ended September 30, 2021 compared to that for the same period in 2020 was due to additional artworks listed during the nine months ended September 30, 2021. Our listing fee was charged based on the listing value of an artwork.

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(ii)

Commission fee revenue

Total commission revenue declined by $567,617 or 21.3% for the nine months ended September 30, 2021 to $2,090,372 compared to $2,657,989 for the nine months ended September 30, 2020. Total transaction amounts for the nine months ended September 30, 2021 and 2020 were $11,126,221,742 (HKD86,420,702,138) and $6,084,027,573 (HKD47,171,899,387), respectively. Although we incurred a higher trading amount in the nine months ended September 30, 2021 compared to that in the same period in 2020, majority of the transactions were initiated by our selected traders. Other than the fixed commission revenue from those selected traders, we did not earn additional commission revenue based on the trading transaction volume of ~~non VIP traders and non-selected~~those selected traders. ~~From April 1, 2016 onwards, selected Traders pay a predetermined monthly fixed fee~~Therefore, our commission revenue for ~~their trades~~the nine months ended September 30, 2021 was lower than that in ~~specific artworks while our other non-VIP Traders continue to pay a commission calculated based on a percentage of transaction value of artworks.~~

the same period in 2020.

(iii)

~~(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 period ended September 30, 2017, management fee revenue decreased by $378,672, from $781,219 for the three~~nine 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~~2021, 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,~~increased by $1,153,503, from $330,138 for the nine months ended September 30, ~~2017 and 2016, respectively.~~

2020 to $1,483,641, due to the higher trading units in the current period.

(iv)

~~(i)~~

~~Listing~~Consultancy service 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~~2021, we incurred 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+ productconsultancy service fee revenue, $80,000, which was ~~listed in Unit+ trading platform,~~pertinent to providing consultancy services 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~~respect to the ~~corresponding period ended September 30, 2016, there were 15 pieces~~strategic utilization of ~~painting, 59 pieces of precious stones, 11 pieces of jewelry, 3 pieces of ivory, 18 pieces of amber~~blockchain technology 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.NFT launch to a third party.

Revenue by customer type

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 feefollowing table presents our 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.~~customer type:


	Nine Months Ended
	September 30,
	2021		2020
	(Unaudited)		(Unaudited)
Artwork owners	$	877,267	$	557,789
Non – VIP traders		2,111,960		2,362,204
VIP traders		1,462,053		625,923
Corporate advisee		80,000		—
Total	$	4,531,280	$	3,545,916

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

~~(iii)~~

~~Management fee revenue~~

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

~~(iv)~~

~~Other revenue~~

~~During the nine-month period ended September 30, 2017, annual fee revenue increased by $10, from $869 for the nine-month period ended September 30, 2016 to $859.~~

(~~v) Authorized agent subscription revenue~~

Authorized agent subscription revenue for the nine-month period ended September 30, 2017 was nil compared to $966,059 for the nine-month period ended September 30, 2016. We have ceased charging new authorized agent with subscription revenue in order to encourage high quality authorized agent to sign up with our platform.

Cost of Revenue


	Nine Months ended
	September 30,
	2021		2020
	(Unaudited)		(Unaudited)
Commissions paid to service agents	$	1,096,278	$	1,333,089
Depreciation		150,398		263,954
Internet service charge		89,638		122,226
Artwork insurance		38,185		36,423
Artwork storage		50,029		47,731
Others		—		1,143
Total	$	1,424,528	$	1,804,566

Cost of revenue for the nine months ended September 30, ~~2017~~2021 and ~~2016~~September 30, 2020 was ~~$822,335~~$1,424,528 and ~~$822,735,~~$1,804,566, respectively. ~~Our~~The decrease in cost of revenue ~~primarily includes internet service fee, 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 $9,723,342~~ for the nine months ended September 30, ~~2017,~~2021 compared to ~~$13,391,517~~September 30, 2020 was mainly due to a decrease in the commissions paid to service agents by $236,811. This decrease was driven by a lower commission fee

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during the nine months ended September 30, 2021 as discussed above. Such decrease was further contributed by a decrease in depreciation by $113,556 due to some of our computer equipment and trading systems having been fully depreciated and a decline in internet service charges by $32,588.

Gross Profit

Gross profit was $3,106,752 or 68.6% of the total revenue for the nine months ended September 30, ~~2016. The decrease was due~~2021, compared to $1,741,350 or 49.1% of 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.~~

~~Operating Expenses~~

~~Selling expenses were $1,272,010, or 13% of net sales,~~total revenue for the nine months ended September 30, ~~2017 compared~~2020. The increase in gross profit and margin was mainly due to ~~$1,993,782 or 15%~~the growth in listing fee revenue, management fee revenue and consultancy service fee revenue as well as a fall in depreciation of ~~net sales, for the comparable period in 2016, a decrease by 36%. Selling expenses consist primarily of marketing expenses.~~trading systems and commission paid to service agents.

Operating Expenses

General and administrative expenses for the nine months ended September 30, ~~2017~~2021 were ~~$7,311,128~~$12,783,107, compared to ~~$5,076,689~~$2,657,403 for the ~~nine months ended September 30, 2016.~~same period in 2020. The surge in general and administrative expense by $10,125,704 or 381% was attributed to a substantial increase in share-based compensation by $2,234,439 or 44% was chiefly due to an increase in salaries by $1,314,324 because of an increase 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$8,734,059. We granted 335,000 shares of our common stock onto our independent directors, employees and consultants in April 2021 and 160,000 shares of our common stock to an independent consultant in July 2021 related to the ~~NYSE American.~~

private placement, an increase in consultancy fee by $612,237 due to a rise in service fee and engagement of additional consultants, an increase in legal and professional fees by $669,140 as a result of additional amounts paid to legal counsels, brokerage firms, investment specialists for the closing of private placement and review of agreements as well as fees paid to auditors for regulatory filing and annual filing, and others, $421,533 which chiefly a payment to an exhibition company which assisted us in locating the potential investors.

The following table sets forth the main components of the Company’s general and administrative expenses for the nine months ended September 30, ~~2017~~2021 and ~~2016.~~September 30, 2020.


	Nine Months Ended
	September 30,
	2021		% of Total	2020		% of Total
	(Unaudited)			(Unaudited)
Salary and welfare	$	749,133	5.9	$	900,014	33.9
Legal and professional fees		1,123,575	8.8		454,435	17.1
Office, insurance and rental expenses		504,447	3.9		592,591	22.3
Consultancy fee		709,449	5.5		97,212	3.7
Non-deductible input VAT expense		147,406	1.2		213,758	8.0
Depreciation		74,991	0.6		92,802	3.5
Traveling and accommodation fees		58,071	0.5		46,148	1.7
Share Based Compensation Expense		8,765,467	68.6		31,408	1.2
Others		650,568	5.0		229,035	8.6
Total general and administrative expense	$	12,783,107	100.0	$	2,657,403	100.0

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

~~Net Income~~Other income

~~We had a net~~Other income for the nine months ended September 30, ~~2017 of $1,057,138~~2021 was $260,721 compared to ~~net income of $4,664,632~~$403,178 for the nine months ended September 30, ~~2016.~~

2020. The decrease in ~~net~~other income for the nine months ended September 30, 2021 is predominantly due to a decrease in foreign currency exchange gain by $78,485, arising from the depreciation of the Hong Kong dollar against the US dollar and decrease in sundry income by ~~$3,607,494~~$74,560. Takung Hong Kong received a subsidy out of Employment Support Scheme enacted by the government of Hong Kong Special Administrative Region in June and September 2020. However, this subsidy scheme was no longer available during the nine months ended September 30, 2021.

Income tax expense

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The effective tax rates for the nine months ended September 30, 2021 and 2020 were (0.9)% and (11.9)%, respectively.

The income tax expense was $90,485 and $94,225 for the nine months ended September 30, 2021 and 2020, respectively. The income tax expense for the nine months ended September 30, 2021 included the recognition of deferred tax expense due to the utilization of the net operating loss of Takung Hong Kong. The income tax expense for the nine months ended September 30, 2020 was triggered by a recognition of uncertain tax position driven by the income tax examination of our subsidiary in Hong Kong. The effective tax rate for the nine months ended September 30, 2021 was lower than that for the same period in 2020 because we incurred a higher loss before income tax expense for the nine months ended September 30, 2021. Such loss was primarily caused by a higher share-based compensation incurred by Takung US as discussed aforementioned.

Net loss

We recorded a net loss for the nine months ended September 30, 2021 of $9,791,099 compared to net loss of $886,053 for the nine months ended September 30, 2020.

The substantial increase in the net loss by $8,905,046 during this current period compared to the same period in 2020 was ~~due to a fall of revenue~~predominantly generated by ~~$3,668,575, and~~ the ~~increase of general and administrative expenses by $2,234,439~~higher share-based compensation for the nine months ended September 30, 2021 as discussed ~~in the previous paragraphs.~~

above.

Liquidity and Capital Resources

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


	Nine Months Ended
	September 30,
	2021		2020
	(Unaudited)		(Unaudited)
Net cash provided by (used in) operating activities	$	43,471,227	$	(6,680,813)
Net cash used in investing activities		(111,771)		(19,961)
Net cash provided by financing activities		5,180,485		—
Effect of exchange rate change on cash, cash equivalents and restricted cash		(281,110)		122,268
Net increase (decrease) in cash, cash equivalents and restricted cash		48,258,831		(6,578,506)
Cash, cash equivalents and restricted cash, beginning balance		13,842,745		21,829,154
Cash, cash equivalents and restricted cash, ending balance	$	62,101,576	$	15,250,648

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

Sources of Liquidity

During the nine months ended September 30, ~~2017,~~2021, net cash ~~generated from~~provided by operating activities totaled ~~$1,028,524.~~$43,471,227, which predominantly resulted from the receipt of customer deposits, $44,097,101, offset by prepayment of artwork storage fee, $248,817, operating lease payment, $61,665 and income tax payment, $95,345. Net cash used in investing activities ~~totaled $561,510. No~~included purchase of furniture and computer equipment, $1,688, investment in cultural projects, $500,000, offset by a loan repayment from a third party, $389,917. Net cash ~~was generated from~~provided by financing activities ~~during~~for the ~~period.~~nine months ended September 30, 2021 included proceeds from a private placement and exercise of stock options. The resulting change in cash for the period was an increase of ~~$1,492,553.~~$48,258,831. The cash balance at the beginning of the period was ~~$13,395,337.~~$13,842,745. The cash balance onas of September 30, ~~2017~~2021 was ~~$14,887,890.~~

$62,101,576.

During the nine months ended September 30, ~~2016,~~2020, net cash ~~provided by~~used in operating activities totaled ~~$5,635,391.~~$6,680,813, which predominantly resulted from the net loss of $886,053 and a decline in net change in operating assets and liabilities of $5,931,174 and offset by non-cash adjustments to net loss of $136,414. Net cash used in investing activities ~~totaled $1,276,378. Net~~included purchase of furniture and computer equipment by Tianjin Takung. There was no net cash used in or provided by financing activities ~~totaled $2,346,941.~~for the nine months ended September 30, 2020. The resulting change in cash for the period was ~~an increase~~a decrease of ~~$6,061,579.~~$6,578,506. The cash balance at the beginning of the period was ~~$10,769,456.~~$21,829,154. The cash balance onas of September 30, ~~2016~~2020 was ~~$16,831,035.~~

$15,250,648.

As of September 30, ~~2017,~~2021, the Company had $28,390,798 in total current liabilities, which comprised of $780,800 in accrued expense and other payables, $19,057,733 in customers’ deposits, $6,371,900 in short-term borrowings from third parties, $1,085,480 in amount due to related party and $1,094,885 in tax payables. As of December 31, 2016, the Company had $30,602,706$62,816,821 in total current liabilities, which included ~~$608,883~~$1,073,795 in accrued ~~expense~~expenses and other ~~accruals, $21,743,360~~payables, $53,241,711 in ~~customers’~~customer deposits, ~~$360,248 in advance from customers, $6,308,513~~$1,969,084 in short-term borrowings from a third ~~parties, $1,031,805~~party, $6,422,608 in amount due to a related party, $21,895 in advances from customers, $76,719 in operating lease liabilities and $11,009 in tax payables.

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As of December 31, 2020, the Company had $18,494,724 in total current liabilities, which consisted of $728,088 in accrued expenses and other payables, $9,144,610 in customer deposits, $1,977,109 in short-term borrowings from a third party, $6,448,784 in amount due to related ~~party~~parties, $17,412 in advance from customers, $72,367 in lease liabilities and ~~$549,897~~$106,354 in ~~tax~~VAT 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”,~~account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital ~~account”,~~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 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~~subsidiary’s registered capital. These reserves are not distributable as cash dividends. In addition, registered share capital and capital reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held in each operating subsidiary. In contrast, there is no foreign exchange control or restrictions on capital flows into and out of Hong Kong. Hence, our Hong Kong operating subsidiary is able to transfer cash without any limitation to the U.S. under normal circumstances.

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

Off-Balance Sheet Arrangements

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

Future Financings

WeOur 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~~stock in order to fund further expansion and growth of our business. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any sales of the equity securities to fund expansion and other activities, orand if we are able to, there is no guarantee that existing shareholders will not be substantially diluted. In essence, we do not need to rely on equity sales to fund our business operations.

Critical Accounting Policies

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

See Note 2 to the financial statements included herewith and Note 2 to the financial statements on Form 10-K for the fiscal year ended December 31, 2020, previously filed with the SEC.

Recent Accounting Pronouncements

See Note 2 to the financial statements included herewith and Note 2 to the financial statements on Form 10-K for the fiscal year ended December 31, ~~2016,~~2020, previously filed with the SEC.

~~Recent Accounting Pronouncements~~30

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

Item 3. Quantitative and Qualitative Disclosures ~~About~~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~~Kwok Leung Li and our Chief Financial Officer, ~~Mr. Chun Hin Leslie Chow.~~Ms. Wing Yan Leung. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of September 30, ~~2017~~2021 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~~2021 that materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

~~None.~~

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~~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~~ 10.1⁽¹⁾		~~Certificate~~Form of ~~Incorporation (1)~~the Securities Purchase Agreement
~~3.2~~ 10.2⁽²⁾		~~By-laws~~Form of the ~~Company (1)~~Registration Rights Agreement
~~3.3~~ 10.3⁽³⁾		~~Certificate of~~ Amendment ofto the ~~Certificate of Incorporation (1)~~Securities Purchase Agreement, dated August 21, 2021, by and between Takung Art Co., Ltd and Cultural Objects Provenance Holdings Limited
~~3.4~~ 10.4⁽⁴⁾		~~Certificate of Amendment of the Certificate of Incorporation (1)~~Employment Agreement, dated September 30, 2021, by and between Takung Art Co., Ltd. and Leung Wing Yan
~~3.5~~ 31.1		~~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.*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~~
101.INS		Inline XBRL Instance Document*Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document*Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document*Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document*Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document*Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document*Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

(1)

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

~~(2)~~

~~Incorporated by reference to the exhibit~~10.1 to our current report on Form 8-K filed with the SEC on ~~March 7, 2013.~~July 13, 2021.

(2)

~~(3)~~

Incorporated by reference to the exhibit 10.2 to our current report on Form 8-K filed with the SEC on ~~October 22, 2014.~~July 13, 2021.

(3)

~~(4)~~

Incorporated by reference to the exhibit 10.1 to our current report on Form 8-K filed with the SEC on ~~November 6, 2014.~~September 15, 2021.

(4)	Incorporated by reference to the exhibit 10.1 to our current report on Form 8-K filed with the SEC on September 30, 2021

*Filed herewith.

**Furnished herewith.32

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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~~22, 2021	By:	/s/ ~~Di Xiao~~Kwok Leung Li
		~~Di Xiao~~ Kwok Leung Li
		Chief Executive Officer
		(Principal Executive Officer) ~~and Director~~

Date: November ~~14, 2017~~22, 2021	By:	/s/ ~~Chun Hin Leslie Chow~~Wing Yan Leung
		~~Chun Hin Leslie Chow~~ Wing Yan Leung
		Chief Financial Officer
		(Principal Financial ~~Officer and Principal Accounting~~ Officer)

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

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

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


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
(Loss) income before income tax expense	$	(1,908,788)	$	81,447	$	(9,700,614)	$	(791,828)
Computed tax benefit with statutory tax rate		(400,844)		13,440		(2,037,129)		(130,651)
Impact of different tax rates in other jurisdictions		766		16,109		1,864		14,432
Impact of preferred tax rate		(158,079)		7,729		(152,689)		62,248
U.S. tax on foreign entities		213,238		—		213,238		—
Tax effect of non-deductible expenses		31,084		153,619		95,459		337,519
Changes in valuation allowance		524,905		(204,420)		2,098,066		(338,577)
Others		(127,178)		12,892		(128,324)		149,254
Total income tax expense (benefit)	$	83,892	$	(631)	$	90,485	$	94,225

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

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

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

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

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

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


Room 709 Tower 2, Admiralty Centre, 18 Harcourt Road, Admiralty, Hong Kong
(Address of principal executive offices)	(Zip Code)

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

			Page
PART I.		Financial Information	3
~~PART I.~~	~~Financial Information~~	3

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

		Item 2. Management’s Discussion and Analysis of Financial Condition and ~~results~~Results of Operation.	17 20

		Item 3. Quantitative and Qualitative Disclosures About Market Risk.	26 31

		Item 4. Controls and Procedures.	27 31

PART II.		Other Information	28 31

	~~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.~~	28

	Item 6. Exhibits.	28 32

	~~Signatures~~	29Signatures	33

	September 30,			December 31,
	2017			2016
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	14,887,890		$	13,395,337
Restricted cash		19,057,733			21,743,360
Account receivables, net		3,732,569			3,058,568
Prepayment and other current assets		870,231			968,446
Loan receivables		6,806,623			6,374,046
Total current assets		45,355,046			45,539,757

Non-current assets
Property and equipment, net		2,104,107			2,065,182
Intangible assets		20,394			20,546
Deferred tax assets		294,676			243,772
Other non-current assets		535,420			428,764
Total non-current assets		2,954,597			2,758,264
Total assets	$	48,309,643		$	48,298,021

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES
Current liabilities
Accrued expenses and other payables	$	780,800		$	608,883
Customer deposits		19,057,733			21,743,360
Advance from customers		-			360,248
Short-term borrowings from third parties		6,371,900			6,308,513
Amount due to related party		1,085,480			1,031,805
Taxes payable		1,094,885			549,897
Total current liabilities		28,390,798			30,602,706
Deferred tax liabilities		45,301			62,618
Total non-current liabilities		45,301			62,618
Total liabilities		28,436,099			30,665,324

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
Additional paid-in capital		5,928,455			5,532,426
Retained earnings		14, 229,809			13,172,671
Accumulated other comprehensive loss		(295,909	)		(1,083,569	)
Total stockholders’ equity		19,873,544			17,632,697
Total liabilities and stockholders’ equity	$	48,309,643		$	48,298,021

	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

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

Three months ending December 31, 2017	$	244,960

Year ending December 31, 2018		761,175

Year ending December 31, 2019		223,026

Year ending December 31, 2020		39,999

Year ending December 31, 2021		15,030

Year ending December 31, 2022 and thereafter		53,232

Total	$	1,337,422

	Three Months Ended September 30,
	2017			2016
	(Unaudited)			(Unaudited)
Revenue	$	3,355,011		$	5,742,209
Cost of revenue		(292,168	)		(285,252	)
Selling expense		(624,151	)		(652,207	)
General and administrative expenses		(2,498,848	)		(1,744,965	)
Total costs and expenses		(3,415,167	)		(2,682,424	)
Income from operations		(60,156	)		3,059,785
Interest and other income (loss), net		211,852			(11,316	)
Income before income taxes		151,696			3,048,469
Income tax benefit (expense)		(124,662	)		(596,732	)
Net income	$	27,034		$	2,451,737

	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			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

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

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