UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

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

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

For the transition period from _________________________ to_________________________

Commission File Number: 001-38036

TAKUNG ART CO., LTD

(Exact name of registrant as specified in its charter)

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

Room 1105 Wing On Plaza, 62 Mody Road, Tsim Sha Tsui, Kowloon, Hong Kong

(Address of principal executive offices) (Zip Code)

+852 3158 0977

(Registrant’s telephone number, including area code)

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.x Yes¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).x Yes¨ No

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

Large accelerated filer¨	Accelerated filer¨
Non-accelerated filerx	Smaller reporting companyx
	Emerging growth company¨

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

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

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

FORM 10-Q

TAKUNG ART CO., LTD

INDEX

		Page

PART I.	Financial Information		3

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

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

	Item 3. Quantitative and Qualitative Disclosures About Market Risk.		29

	Item 4. Controls and Procedures.		29

PART II.	Other Information		30

	Item 6. Exhibits.		30

	Signatures	30

312

PART I –FINANCIAL INFORMATION

Item 1. Financial Statements

TAKUNG ART CO., LTD AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

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

June 30, December 31,
2019 2018
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 7,451,172 $ 7,974,884
Restricted cash 27,001,865 4,549,202
Account receivables, net - 568,757
Prepayment and other current assets 513,289 955,249
Amount due from a related party 5,916,824 5,907,789
Loan receivables - 2,391,350
Total current assets 40,883,150 22,347,231

Non-current assets
Property and equipment, net 1,111,462 1,445,679
Intangible assets 22,341 22,284
Operating lease right-of-use assets 1,070,655 -
Deferred tax assets, net 672,223 611,738
Other non-current assets 116,380 142,293
Total non-current assets 2,993,061 2,221,994
Total assets $ 43,876,211 $ 24,569,225

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES
Current liabilities
Accrued expenses and other payables $ 618,014 $ 641,692
Customer deposits 27,001,865 4,549,202
Advance from customers 7,043 8,995
Short-term borrowings from a related party - 2,499,500
Amount due to related parties 6,790,399 6,385,288
Operating lease liabilities – current 178,917 -
Tax payables 12,382 15,101
Total current liabilities 34,608,620 14,099,778

Non-current liabilities
Operating lease liabilities, non-current 133,200 -
Amount due to a related party, non-current 411,389 -

Total liabilities 35,153,209 14,099,778

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY
Common stock (1,000,000,000 shares authorized; $0.001 par value; 11,255,129 shares issued and outstanding as of June 30, 2019; 11,226,025 shares issued and outstanding as of December 31, 2018) 11,255 11,226
Additional paid-in capital 6,312,372 6,281,790
Retained earnings 2,642,804 4,479,133
Accumulated other comprehensive loss (243,429 ) (302,702 )
Total shareholders’ equity 8,723,002 10,469,447
Total liabilities and shareholders’ equity $ 43,876,211 $ 24,569,225

	September 30,			December 31,
	2019			2018
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	6,086,637		$	7,974,884
Restricted cash		17,008,251			4,549,202
Account receivables, net		-			568,757
Prepayment and other current assets		579,107			955,249
Amount due from a related party		5,682,807			5,907,789
Loan receivables		1,958,672			2,391,350
Total current assets		31,315,474			22,347,231

Non-current assets
Property and equipment, net		941,374			1,445,679
Intangible assets		22,257			22,284
Operating lease right-of-use assets		904,836			-
Deferred tax assets, net		776,896			611,738
Amount due from a related party, non-current		101,420			-
Other non-current assets		114,823			142,293
Total non-current assets		2,861,606			2,221,994
Total assets	$	34,177,080		$	24,569,225

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES
Current liabilities
Accrued expenses and other payables	$	522,929		$	641,692
Customer deposits		17,008,251			4,549,202
Advance from customers		10,227			8,995
Short-term borrowings from third parties		1,816,837			2,499,500
Amount due to related parties		6,759,674			6,385,288
Operating lease liabilities – current		173,156			-
Tax payables		7,831			15,101
Total current liabilities		26,298,905			14,099,778

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

Total liabilities		26,588,452			14,099,778

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY
Common stock (1,000,000,000 shares authorized; $0.001 par value; 11,255,129 shares issued and outstanding as of September 30, 2019; 11,226,025 shares issued and outstanding as of December 31, 2018)		11,255			11,226
Additional paid-in capital		6,318,645			6,281,790
Retained earnings		1,514,907			4,479,133
Accumulated other comprehensive loss		(256,179	)		(302,702	)
Total shareholders’ equity		7,588,628			10,469,447
Total liabilities and shareholders’ equity	$	34,177,080		$	24,569,225

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

TAKUNG ART CO., LTD AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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

(UNAUDITED)

For the Three Months Ended
June 30, For the Six Months Ended
June 30,
2019 2018 2019 2018
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue
Listing fee $ - $ 2,000,068 $ 284,090 $ 3,978,735
Commission 532,740 1,668,563 716,080 3,304,080
Management fee 93,343 178,913 161,614 347,228
Annual fee - 162 - 324
Authorized agent subscription revenue - - - 191,623
Online artwork sales - 6,304 - 6,304
Total revenue 626,083 3,854,010 1,161,784 7,828,294

Cost of revenue (441,028 ) (940,221 ) (708,307 ) (1,873,814 )

Gross profit 185,055 2,913,789 453,477 5,954,480

Operating expenses:
General and administrative expenses (888,460 ) (2,574,598 ) (2,163,045 ) (5,583,483 )
Selling expenses (3,784 ) (458,547 ) (34,596 ) (702,138 )
Total operating expenses (892,244 ) (3,033,145 ) (2,197,641 ) (6,285,621 )

Loss from operations (707,189 ) (119,356 ) (1,744,164 ) (331,141 )

Other income and expenses:
Other (expenses) income (79,772 ) 165,862 (101,762 ) 405,265
Loan interest expense - (149,683 ) - (304,466 )
Exchange loss (407,159 ) (1,255,187 ) (48,425 ) (262,292 )
Total other expenses (486,931 ) (1,239,008 ) (150,187 ) (161,493 )

Loss before provision for income taxes (1,194,120 ) (1,358,364 ) (1,894,351 ) (492,634 )

Income tax benefit (expense) 66,584 273,972 58,022 (168,468 )

Net loss $ (1,127,536 ) $ (1,084,392 ) $ (1,836,329 ) $ (661,102 )

Foreign currency translation adjustment 64,753 (111,111 ) 59,273 (128,278 )

Comprehensive loss $ (1,062,783 ) $ (1,195,503 ) $ (1,777,056 ) $ (789,380 )

Loss per common share – basic $ (0.10 ) $ (0.10 ) $ (0.16 ) $ (0.06 )
Loss per common share – diluted (0.10 ) (0.10 ) (0.16 ) (0.06 )
Weighted average number of common shares outstanding-basic 11,247,773 11,217,359 11,236,959 11,210,918
Weighted average number of common shares outstanding-diluted 11,247,773 11,217,359 11,236,959 11,210,918

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

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

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

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

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

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

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

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

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

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

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

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

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

TAKUNG ART CO., LTD AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUTIY

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

(UNAUDITED)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

TAKUNG ART CO., LTD AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in U.S. Dollars)

(UNAUDITED)

	Six Months			Six Months			Nine Months			Nine Months
	Ended			Ended			Ended			Ended
	June 30,			June 30,			September 30,			September 30,
	2019			2018			2019			2018
Cash flows from operating activities:
Net cash provided by (used in) operating activities	$	21,615,744		$	(5,625,065	)	$	10,828,217		$	(18,589,823	)

Cash flows from investing activities:
Purchase of property and equipment		(33,792	)		(790,159	)		(36,108	)		(775,730	)
Purchase of available-for-sale investments		(21,372,178	)		(74,934,730	)		(22,205,745	)		(90,293,454	)
Maturity and redemption of available-for-sale investments		21,372,178			74,934,730			22,205,745			90,293,454
Loan to related parties		-			(6,369,809	)
Loan to third parties								(2,093,555	)		-
Loan to a related party								-			(6,369,809	)
Repayment of loan from third parties		2,443,251			239,356			2,443,251			3,641,871
Purchase of held-to-maturity investment								-			(873,617	)
Net cash provided by (used in) investing activities		2,409,459			(6,920,612	)		313,588			(4,377,285	)

Cash flows from financing activities:
Proceeds from a related party’s loans		393,158			6,372,430
Proceeds from related parties loan								6,226			6,389,042
Proceeds from a third party’s loan								1,955,669			-
Repayment of loan to a related party								-			(483,822	)
Loan repayment to a third party		(2,499,500	)		(483,822	)		(2,499,500	)		(3,480,000	)
Net cash (used in) provided by financing activities		(2,106,342	)		5,888,608			(537,605	)		2,425,220

Effect of exchange rate change on cash, cash equivalents and restricted cash		10,090			(239,255	)		(33,398	)		(664,016	)

Net increase (decrease) in cash, cash equivalents and restricted cash		21,928,951			(6,896,324	)		10,570,802			(21,205,904	)

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

Cash, cash equivalents and restricted cash, ending balance	$	34,453,037		$	30,244,258		$	23,094,888		$	15,934,678

Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets
Cash and cash equivalents as of June 30, 2019 and 2018, respectively	$	7,451,172		$	10,327,827
Restricted cash as of June 30, 2019 and 2018, respectively		27,001,865			19,916,431
Total cash, cash equivalents, and restricted cash as of June 30, 2019 and 2018, respectively	$	34,453,037		$	30,244,258
Cash and cash equivalents as of September 30, 2019 and 2018, respectively							$	6,086,637		$	8,418,818
Restricted cash as of September 30, 2019 and 2018, respectively								17,008,251			7,515,860
Total cash, cash equivalents, and restricted cash as of September 30, 2019 and 2018, respectively							$	23,094,888		$	15,934,678

Supplemental cash flows information:

Cash paid for interest	$	-		$	144,311		$	156,453		$	241,727
Cash paid for income tax	$	-		$	261,285		$	-		$	111,917

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

TAKUNG ART CO., LTD AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Takung Art Co., Ltd and subsidiaries (“Takung” or the “Company”), 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.), a Hong Kong company (“Hong Kong Takung”) and our wholly owned subsidiary, operates an electronic online platform located at www.takungae.com for artists, art dealers and art investors to offer and trade in valuable artwork.

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

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

Takung Cultural Development (Tianjin) Co., Ltd (“Tianjin Takung”) is a limited liability company, with a registered capital of $1 million located in the Pilot Free Trade Zone in Tianjin. Tianjin Takung was incorporated on January 27, 2016 and is a direct wholly-owned subsidiary of Hong Kong Takung.

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

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

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

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

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

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

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

Recent Accounting Pronouncements

Recently Adopted Accounting Standards

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

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

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

3. PREPAYMENT AND OTHER CURRENT ASSETS

Prepayment and other current assets consisted of the following:

June 30, December 31,
2019 2018
(Unaudited)
Tax receivables $ 280,891 $ 399,026
Staff advance 66,861 93,676
Prepaid service fee 72,807 140,934
Short-term borrowings to third party 53,775 -　
Deposit 5,096 241,827
Other current assets 33,859 79,786
Prepayment and other current assets $ 513,289 $ 955,249

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

4. ACCOUNT RECEIVABLES, NET

Account receivables consisted of the following:

	June 30, 2019			December 31, 2018			September 30, 2019			December 31, 2018
	(Unaudited)							(Unaudited)
Listing fee	$	-		$	568,757		$	-		$	568,757
Authorized agent subscription revenue		559,280			557,837			557,154			557,837
Monthly commission fee		1,381,712			1,378,148			1,376,460			1,378,148
Others		53,765			53,626			53,561			53,626
Less: allowance for doubtful accounts		(1,994,757	)		(1,989,611	)		(1,987,175	)		(1,989,611	)
Account receivables, net	$	-		$	568,757		$	-		$	568,757

5. LOAN RECEIVABLES

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

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

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.

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

Through an understanding between Chongqing Aoge Import and Export Co. and Friend Sourcing, the Hong 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.

6. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following:

	June 30,			December 31,			September 30,			December 31,
	2019			2018			2019			2018
	(Unaudited)						(Unaudited)
Furniture, fixtures and equipment	$	162,712		$	156,656		$	159,239		$	156,656
Leasehold improvements		343,361			447,048			338,845			447,048
Computer trading and clearing system		3,390,702			3,382,168			3,339,155			3,382,168
Transport equipment		104,787			104,628			100,643			104,628
Sub-total		4,001,562			4,090,500			3,937,882			4,090,500
Less: accumulated depreciation		(2,890,100	)		(2,644,821	)		(2,996,508	)		(2,644,821	)
Property and equipment, net	$	1,111,462		$	1,445,679		$	941,374		$	1,445,679

Depreciation expense was ~~$157,687~~$148,774 and ~~$243,781~~$241,448 for the three months ended ~~June~~September 30, 2019 and 2018, respectively, and ~~$314,466~~$463,241 and ~~$472,485~~$713,933 for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively.

6.7. ACCRUED EXPENSES AND OTHER PAYABLES

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

June 30, December 31,
2019 2018
(Unaudited)
Accruals for consulting fees $ 265,478 $ 264,793
Accruals for professional fees 225,100 49,518
Payroll payables 54,193 104,437
Trading and clearing system 50,161 86,208
Other payables 23,082 136,736
Total accrued expenses and other payables $ 618,014 $ 641,692

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

8. SHORT-TERM BORROWINGS FROM THIRD PARTIES

In the meantime, Tianjin Takung entered an interest-free loan (the “RMB Loan”) to another third party as a guarantee for the HKD Loan. The loan amount was $ 1,955,245 (RMB 14,000,000). Through an understanding between the two third parties, the HKD Loan is “secured” by the RMB Loan. It is an understanding between the parties that when the HKD Loans is repaid, the RMB Loan will be repaid at the same time.

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

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

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

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

The weighted average interest rate of outstanding short-term borrowings was 8% per annum as of September 30, 2019. The fair value of the short-term borrowings approximates their carrying amounts. The weighted average short-term borrowings were $256,074 and $7,319,041 for the nine months period ended September 30, 2019 and 2018, respectively. The interest expenses for the short-term borrowings were $18,015 and $199,822 for the three months ended September 30, 2019 and 2018, respectively, and $18,015 and $500,080 for the nine months ended September 30, 2019 and 2018, respectively.

9. RELATED PARTY BALANCES AND TRANSACTIONS

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

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

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

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

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

	June 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
	(Unaudited)				(Unaudited)
Wang ~~(a)~~(i)	$	5,916,824	$	5,907,789	$		$	5,907,789
Total		5,916,824		5,907,789
Li (d)(i)						5,682,807		-
Total current amount due from related parties					$	5,682,807	$	5,907,789

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

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

Amount due to related parties

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

June 30,
2019 December 31,
2018
(Unaudited)
Wang (a) (i) $ 6,401,803 $ 6,385,288
Mao (c) (ii) 388,596 -
Total current amount due to related parties 6,790,399 6,385,288

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

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

	~~June 30,~~ ~~2019~~		~~December 31,~~ ~~2018~~
	~~(Unaudited)~~
~~Mao (c) (ii)~~		~~411,389~~		-
~~Total noncurrent amount due to a related party~~		~~411,389~~		-12

(i)

Amount due from and due to Wang and Li

On May 16, 2018, Hong Kong Takung entered into an interest-free loan agreement (the "HK Dollar Working Capital Loan") with Liu that was transferred to Wang on October 18, 2018 for the loan of ~~$6,401,803~~$6,377,470 (HK$50,000,000) to Hong Kong Takung. The purpose of the loan is to provide Hong Kong Takung with sufficient Hong Kong Dollar-denominated currency to meet its working capital requirements with the maturity date of the loan is May 15, 2019. On May 15, 2019, Hong Kong Takung entered into an extension agreement with Wang to extend the HK Dollar Loan with a due date on May 15, 2020. On September 16, 2019, Wang transferred this loan to Li, Shuhai, the legal representative of Tianjin Takung with the same extended maturity date.

In the meantime, Tianjin Takung entered into an interest-free loan agreement (the "RMB Working Capital Loan") with Liu that was transferred to Wang on October 18, 2018 for the loan of ~~$5,916,824~~$5,682,807 (RMB40,619,000) ~~to Wang~~ with the maturity date of the loan is May 15, 2019. On May 15, 2019, Tianjin Takung entered into an extension agreement with Wang to extend the RMB Loan with a due date on May 15, 2020. On September 16, 2019, Wang transferred this loan to Li, the legal representative of Tianjin Takung with the same extended maturity date.

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

(ii)

Amount due to / from Mao

The amount due to Mao is primarily related to the lease from Mao. On May 13, 2019, wethe Company entered into a non-cancellable lease agreement with a related party, Mao for ~~our~~the office location in Tianjin, PRC. The leased office location is approximately 2,090.61 square meters. The lease will be expired on May 12, 2021. ~~We are~~The Company is charged rent at a rate of $0.55 per square meter per day. The agreement requires a lump sum payment of ~~$211,193~~$202,840 (RMB1,449,838.04) every ~~six~~nine months and a deposit ~~in an amount~~ of ~~$105,596~~$101,420 (RMB724,919.02). The deposit is refundable to the Company. The total lease liability is ~~$793,737~~$573,500, of which $375,980 and $197,520 were included in current and noncurrent portions, respectively, as of ~~June~~September 30, 2019.

As of ~~June~~September 30, 2019, Mao also lent a startup deposit of ~~$6,248~~$6,224 to Hong Kong MQ.

8.10. INCOME TAXES

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

United States of America

Tax Cuts and Jobs Act Enacted in 2017

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

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

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

As of ~~June~~September 30, 2019, and December 31, 2018, the Company in the United States had ~~$1,680,046~~$1,886,422 and $1,332,438 in net operating loss carry forwards available to offset future taxable income, respectively. For net operating losses arising after December 31, 2017, the Tax Act limits the Company’s ability to utilize NOL carryforwards to 80% of taxable income and carryforward the NOL indefinitely. Carrybacks are now prohibited. NOLs generated prior to January 1, 2018 will not be subject to the taxable income limitation and will begin to expire in 2033 if not utilized.

Hong Kong

The two-tier profits tax rates system was introduced under the Inland Revenue (Amendment)(No.3) Ordinance 2018 (“the Ordinance”) of Hong Kong became effective for the assessment year 2018/2019. Under the two-tier profit tax rates regime, the profits tax rate for the first HKD 2 million (approximately ~~$255,010)~~$255,154) of assessable profits of a corporation will be subject to the lowered tax rate, 8.25% while the remaining assessable profits will be subject to the legacy tax rate, 16.5%. The Ordinance only allows one entity within a group of “connected entities” is eligible for the two-tier tax rate benefit. An entity is a connected entity of another entity if (1) one of them has control over the other; (2) both of them are under the control (more than 50% of the issued share capital) of the same entity; (3) in the case of the first entity being a natural person carrying on a sole proprietorship business-the other entity is the same person carrying on another sole proprietorship business. Since Hong Kong Takung, Takung Art Holdings and Hong Kong MQ are wholly owned and under the control of Takung Art Co., Ltd, both entities are connected entities. Under the Ordinance, it is an entity’s election to nominate the entity that will be subject to the two-tier profits tax rates on its Profits Tax Return. The election is irrevocable. We elected Hong Kong Takung to be subject to the two-tier profits tax rates.

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

PRC

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

The income tax provision consists of the following components:

Three Months Ended
June 30, Six Months Ended
June 30,
2019 2018 2019 2018
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Current:
Federal $ - $ - $ - $ -
State - - - -
Foreign - (183,911 ) - 172,370
Total Current $ - $ (183,911 ) $ - $ 172,370

Deferred:
Federal $ $ - $ $ 37,398
State - -
Foreign (66,584 ) (90,061 ) (58,022 ) (41,300 )
Total Deferred $ (66,584 ) $ (90,061 ) $ (58,022 ) $ (3,902 )

Total income tax (benefit) expense $ (66,584 ) $ (273,972 ) $ (58,022 ) $ 168,468

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

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

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

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

	For the Three Months Ended June 30,						For the Six Months Ended June 30,						For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018			2019			2018			2019			2018
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Loss before income tax expense	$	(1,194,120	)	$	(1,358,364	)	$	(1,894,351	)	$	(492,634	)	$	(1,245,348	)	$	(3,624,026	)	$	(3,139,699	)	$	(4,116,660	)

Computed tax (benefit) expense with statutory tax rate		(197,073	)		(224,130	)		(312,567	)		(81,285	)		(205,484	)		(597,964	)		(518,050	)		(679,249	)
Impact of different tax rates in other jurisdictions		69,620			17,108			109,101			37,808			15,956			(89,082	)		125,056			(51,274	)

Non-deductible items:
Tax effect of non-deductible expenses		11,061			(137,980	)		17,886			3,330			17,096			(167,031	)		34,982			(163,701	)
Previous years unrecognized taxation effect					-						-			7,134			6,870			7,134			6,870
Changes in valuation allowance		49,808			71,030			127,558			208,615			47,847			104,537			175,405			313,152

Total income tax (benefit) expense	$	(66,584	)	$	(273,972	)	$	(58,022	)	$	168,468
Total income tax benefit													$	(117,451	)	$	(742,670	)	$	(175,473	)	$	(574,202	)

The effective tax rate was ~~5.6%~~9.4% and ~~20.2%~~20.5% for the three months ended ~~June~~September 30, 2019 and 2018, respectively, and ~~3.1%~~5.6% and ~~(34.2)%~~13.9% for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively.

9.11. 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~~nine 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 ~~June~~September 30, 2019:

Assets/liabilities	Classification	As of June 30, 2019		Classification	As of September 30, 2019
Assets
Operating lease right-of-use assets	Operating lease assets	$	1,070,655	Operating lease assets	$	904,836

Liabilities
Current
Operating lease liability - current	Current operating lease liabilities	$	178,917	Current operating lease liabilities	$	173,156
	Amount due to related parties		382,348	Amount due to related parties		375,980

Long-term
Operating lease liability - non-current	Long-term operating lease liabilities		133,200	Long-term operating lease liabilities		92,027
	Amount due to related parties, non-current		411.389	Amount due to related parties, non-current		197,520

Total lease liabilities		$	1,105,854		$	838,683

The operating lease expenses, including lease from the related party, for the ~~six~~nine and three months ended ~~June~~September 30, 2019 were as follows:

		Three months ended		Six months ended			Three months ended		Nine months ended
Lease Cost	Classification	June 30, 2019		June 30, 2019		Classification	September 30, 2019		September 30, 2019
Operating lease cost	Cost of revenue, general and administrative expenses	$	86,395	$	137,173	Cost of revenue, general and administrative expenses	$	145,313	$	282,486
Total lease cost		$	86,395	$	137,173		$	145,313	$	282,486

Maturities of operating lease liabilities at ~~June~~September 30, 2019 were as follow:

Maturity of Lease Liabilities	Operating Leases			Operating Leases
2019 (remainder)	$	524,245		$	255,774
2020		600,072			582,171
2021		14,566			13,991
2022		14,566			13,991
2023		14,566			13,991
Thereafter		21,849			20,986
Total lease payments	$	1,189,864		$	900,904
Less: interest		(84,010	)		(62,221	)
Present value of lease payments	$	1,105,854		$	838,683

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

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

Year ending December 31, 2020		230,683

Year ending December 31, 2021		14,737

Year ending December 31, 2022		14,737

Year ending December 31, 2023 and thereafter		37,457

Total	$	693,857

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

Lease Term and Discount Rate	~~June~~September 30, 2019
Weighted-average remaining lease term (years)
Operating leases		~~2.06~~1.86

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

Other Information	June 30, 2019		September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	94,573	$	448,405
Leased assets obtained in exchange for new operating lease liabilities		275,189		1,032,824

~~10. EARNINGS~~12. LOSS PER SHARE

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

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018			2019			2018			2019			2018
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Numerator:
Net loss	$	(1,127,536	)	$	(1,084,392	)	$	(1,836,329	)	$	(661,102	)	$	(1,127,897	)	$	(2,881,356	)	$	(2,964,226	)	$	(3,542,458	)

Denominator:
Weighted-average shares outstanding - Basic		11,247,773			11,217,359			11,236,959			11,210,918			11,255,129			11,226,025			11,243,082			11,216,009
Stock options and restricted shares					-						-						-						-
Weighted-average shares outstanding - Diluted		11,247,773			11,217,359			11,236,959			11,210,918			11,255,129			11, 226,025			11,243,082			11,216,009

Loss per share
-Basic		(0.10	)		(0.10	)		(0.16	)		(0.06	)		(0.10	)		(0.26	)		(0.26	)		(0.32	)
-Diluted		(0.10	)		(0.10	)		(0.16	)		(0.06	)		(0.10	)		(0.26	)		(0.26	)		(0.32	)

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 from continued operations for the three and ~~six~~nine months ended ~~June~~September 30, 2019, approximately ~~148,890 and 15,000~~130,890 options ~~and restricted shares, respectively,~~ were excluded from the calculation of diluted net loss per share.

~~11.~~13. SUBSEQUENT EVENTS

In July 2019, Hong Kong Takung entered into a loan agreement (the “HKD Loan”) with Friend Sourcing Ltd, a Hong Kong company (“Friend Sourcing”) with interest accruing at a rate of 8% per annum. The HKD Loan is 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. In the meantime, Tianjin Takung entered an interest-free loan (the “RMB Loan”) to another third party as a guarantee for the HKD Loan. The loan amount was $ 2,039,330 (RMB 14,000,000). Through an understanding between the two third parties, the HKD Loan is “secured” by the RMB Loan. It is the understanding between the parties that when the HKD Loans is repaid, the RMB Loan will be repaid at the same time.

On August 6, 2019, Mr. Chun Hin Leslie Chow tendered his resignation as Chief Executive Officer of Takung Art Co., Ltd (the “Company”) for personal reasons. In order to fill the vacancy, the Company’s NominatingManagement assessed and Compensation Committee met on August 6, 2019 to nominate Ms. Fang Mu as the Company’s new Chief Executive Officer. On August 6, 2019, the Company’s Board of Directors approved Ms. Fang Mu’s appointment.

~~Other than that,~~determined there were no ~~other~~significant and material subsequent events occurred that would require recognition or disclosure in the interim condensed consolidated financial statements.

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

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q 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 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 unless required by applicable securities regulations or rules. The following discussion should be read in conjunction with our financial statements and the related notes filed herein.

Overview

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

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

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

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

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

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

On July 28, 2015, Hong Kong Takung incorporated a wholly owned subsidiary, Takung (Shanghai) Co., Ltd. (“Shanghai Takung”), in Shanghai Free-Trade Zone (SFTZ) in Shanghai, China, with a registered capital of $1 million. Shanghai Takung assists in Hong Kong Takung’s operations by receiving deposits from and making payments to online artwork traders in mainland China on behalf of Hong Kong Takung. On January 27, 2016, Hong Kong Takung incorporated a wholly owned subsidiary, Takung Cultural Development (Tianjin) Co., Ltd (“Tianjin Takung”) in the Tianjin Free Trade Zone (TJFTZ) in Tianjin, China with a registered capital of $1 million. Tianjin Takung provides technology development services to Hong Kong Takung and Shanghai Takung, and also carries out marketing and promotion activities in mainland China. Management has recently determined to merge the operations of Shanghai Takung with Tianjin Takung’s and eventually dissolve Shanghai Takung in order to save costs.

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

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

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

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

Our headquarters are located in Hong Kong, Special Administrative Region, People’s Republic of China and we conduct our business primarily in Hong Kong, Shanghai and Tianjin. Our principal executive offices are located at Room 1105 Wing On Plaza, 62 Mody Road, Tsim Sha Tsui, Kowloon, Hong Kong.

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

Results of Operation of Takung

Hong Kong Takung operates a platform for offering and trading artwork. We generate revenue from our services in connection with the offering and trading of artwork ownership units on our system, primarily consisting of listing fees, trading commissions, and management fees.

THREE-MONTH PERIOD ENDED ~~JUNE~~SEPTEMBER 30, 2019 COMPARED TO THREE-MONTH PERIOD ENDED ~~JUNE~~SEPTEMBER 30, 2018

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

	Three Months Ended June 30,												Three Months Ended September 30,
	2019			% of Revenue			2018			% of Revenue			2019			% of Revenue			2018			% of Revenue
	(Unaudited)						(Unaudited)						(Unaudited)						(Unaudited)
Revenue	$	626,083			100		$	3,854,010			100		$	1,123,592			100		$	363,534			100
Cost of revenue		(441,028	)		(70	)		(940,221	)		(24	)		(580,282	)		(52	)		(299,482	)		(82	)
Selling expense		(3,784	)		(1	)		(458,547	)		(12	)		(108,458	)		(10	)		(149,035	)		(41	)
General and administrative expenses		(888,460	)		(142	)		(2,574,598	)		(67	)		(1,159,502	)		(103	)		(2,208,264	)		(608	)
Impairment loss-construction-in-progress														-						(326,227	)		(90	)
Total costs and expenses		(1,333,272	)		(213	)		(3,973,366	)		(103	)		(1,848,242	)		(165	)		(2,983,008	)		(821	)
Loss from operations		(707,189	)		(113	)		(119,356	)		(3	)		(724,650	)		(65	)		(2,619,474	)		(721	)
Total other expenses		(486,931	)		(78	)		(1,239,008	)		(32	)		(520,698	)		(46	)		(1,004,552	)		(276	)
(Loss) income before income tax expenses		(1,194,120	)		(191	)		(1,358,364	)		(35	)
Loss before income tax expenses														(1,245,348	)		(111	)		(3,624,026	)		(997	)
Income tax benefit		66,584			11			273,972			7			117,451			10			742,670			204
Net loss	$	(1,127,536	)		(180	)	$	(1,084,392	)		(28	)	$	(1,127,897	)		(101	)	$	(2,881,356	)		(793	)

Revenue

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

	Three months ended June 30,				Three months ended September 30,
	2019		2018		2019		2018
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Listing fee revenue	$	-	$	2,000,068	$	-	$	-
Commission		532,740		1,668,563		939,164		253,331
Management fee revenue		93,343		178,913		184,428		107,905
Online artwork sales		-		6,304		-		2,244
Annual fee revenue		-		162		-		54
Total	$	626,083	$	3,854,010	$	1,123,592	$	363,534

(i)

Listing fee revenue

As of ~~June~~September 30, 2019, a total of 285 sets of artwork were listed for trade on our platform —comprising 60 sets of paintings and calligraphies from famous Chinese, Russian and Mongolian artists, with a total listing value of ~~$25,768,858~~$25,783,323 (HK$202,100,000); 35 pieces of jewelry with a total listing value of ~~$9,264,548~~$9,269,749 (HK$72,660,000); 134 pieces of precious stones with a total listing value of ~~$16,835,824~~$16,845,275 (HK$132,040,000); 29 pieces of amber with a total listing value of ~~$12,113,021~~$12,119,820 (HK$95,000,000); 4 pieces of antique mammoth ivory carvings with a total listing value of ~~$663,029~~$663,401 (HK$5,200,000); 2 pieces of porcelain pastel paintings with a total listing value of ~~$331,514~~$331,700 (HK$2,600,000); 7 pieces of ~~porcelains~~porcelain with a total listing value of ~~$1,083,797~~$1,084,405 (HK$8,500,000); 6 sets of Unit+ products with a total listing value of ~~$1,315,092~~$1,315,830 (HK$10,314,000); 1 piece of Yixing collectable with a listing value of ~~$127,505~~$127,577 (HK$1,000,000); and 7 pieces of ~~Sports~~sports memorabilia with a listing value of ~~$1,084,995~~$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 ~~porcelains)~~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~~sports memorabilia) of the listed values were charged as listing fees, respectively.

During the three months ended ~~June~~September 30, 2019, there were no new artworks listed on our platform.

~~The~~We had no listing ~~fees charged decreased to $0 during~~fee revenue for the three months ended ~~June~~September 30, 2019 ~~compared to $2,000,068 for the same period ended June 30,~~and 2018. During the ~~second~~third quarter of 2019, we suspended and did not have any new listings of artwork on our platform because we focused on the ~~promotion~~promoting the trading of ~~transactions on~~ our ~~platform~~existing listed artwork as opposed to new listings. We ~~are~~ also felt that any new listings would be unfavorably impacted by current market conditions. We will be more discreet about the future listings of more valuable artworks. ~~Accordingly, new listings were put off during the three months ended June 30, 2019.~~

(ii)

Commission fee revenue

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

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

For selected traders, starting from April 1, 2016, we charged a predetermined monthly fee (unlimited trades for specific artworks) for specific artworks. These 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 may have different rates but once negotiated and agreed to, the monthly fee is fixed. Using the output method, we recognize the monthly commission revenue when the selected traders receive access to our trading platform to make unlimited trades for specific artwork.

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

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

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

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

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

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

Total commission revenue ~~decreased~~increased by ~~$1,135,823 or 68%~~$685,833 for the three months ended ~~June~~September 30, 2019 to ~~$532,740~~$939,164 compared to ~~$1,668,563~~$253,331 for the three months ended ~~June~~September 30, 2018 primarily because our transaction volume increased as a result of ~~there were no new listings of artwork during the three months ended June 30, 2019, resulting~~our efforts in ~~a decrease in trading activities on~~promoting our ~~platform.~~existing listed artworks.

(iii)

Management fee revenue

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

During the three-month period ended ~~June~~September 30, 2019, management fee revenue ~~decreased~~increased by ~~$85,570,~~$76,523, from ~~$178,913~~$107,905 for the three months ended ~~June~~September 30, 2018 to ~~$93,343,~~$184,428, due to the ~~decrease~~increase in trading transactions.

(iv)

Annual fee revenue

During the three-month period ended ~~June~~September 30, 2019, there iswas no annual fee revenue, compared to ~~$162~~$54 for the three-month period ended ~~June~~September 30, 2018

(v)

Online artwork sales

During the three-month period ended ~~June~~September 30, 2019, there iswas no online artwork sales, compared to ~~$6,304~~$2,244 for the three-month period ended ~~June~~September 30, 2018

Revenue by customer type

The following table presents our revenue by customer type:

	Three months ended June 30,				Three months ended September 30,
	2019		2018		2019		2018
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Artwork owners	$	-	$	2,000,068	$	-	$	-
Non - VIP traders		481,162		993,674		853,276		140,581
VIP traders		144,921		853,964		270,316		220,709
Online artwork sales		-		6,304		-		2,244
Total	$	626,083	$	3,854,010	$	1,123,592	$	363,534

Cost of Revenue

	Three months ended June 30,				Three months ended September 30,
	2019		2018		2019		2018
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Commission rebate to service agent	$	235,088	$	598,519	$	370,204	$	2,094
Depreciation		121,763		168,424		116,082		163,736
Internet service charge		47,104		94,051		62,104		53,676
Artwork insurance		11,971		50,958		12,192		50,983
Artwork storage		25,091		24,995		19,700		27,533
Others		11		3,274		-		1,460
Total	$	441,028	$	940,221	$	580,282	$	299,482

Cost of revenue for the three months ended ~~June~~September 30, 2019 and ~~June~~September 30, 2018 was ~~$441,028~~$580,282 and ~~$940,221,~~$299,482, respectively. The ~~decrease~~increase in cost of revenue by $280,800 for the three months ended ~~June~~September 30, 2019 compared to ~~June~~September 30, 2018 was mainly due to ~~the decrease in the~~higher commission rebates to service ~~agents~~agents. The increase in commission rebates by ~~$363,431. Management~~$368,110 correlated to the higher commission revenue earned from transactions during the three months ended September 30, 2019. Such an increase was ~~focused on resuscitating interest in the existing listed artwork in the second quarter of 2019. Besides~~offset by the decrease in ~~commission rebates, the decrease~~depreciation expense and artwork insurance expense by $47,654 and $38,791, respectively. The fall in ~~cost of revenue~~depreciation expense was ~~also due to a decrease in the depreciation and amortization of hardware and software on our trading platform by $46,661 as~~ a result of the suspension of e-commerce activity and impairment of all online software development assets in ~~2018,~~2018. The reduction in the ~~decrease in internet services charges by $46,947 due to the termination of two network lines between Macau and Hong Kong, and the decrease in~~ artwork insurance ~~by $38,987~~expense was due to a negotiated discount in our new insurance contract for 2019.

Gross Profit

Gross profit was ~~$185,055~~$543,310 for the three months ended ~~June~~September 30, 2019, compared to ~~$2,913,789~~$64,052 for the three months ended ~~June~~September 30, 2018. The ~~decrease~~increase was due to the ~~decrease~~increase in our total revenue.

~~Listing fees~~As previously discussed, the spike in total revenue was largely attributable to the rise in our commission revenue earned from transactions in the three months ended September 30, 2019. Our commission revenue contributed ~~0% of the total revenue~~83.6% for the quarter ended ~~June~~September 30, 2019 compared to ~~51.9%~~69.7% in the corresponding period in ~~2018, while commission revenue contributed 85.1% for the quarter ended June 30, 2019 compared to 43.3% in the corresponding period in~~ 2018. ~~Compared to the same period in 2018, there was a significant decrease in listing fee revenue and commission revenue.~~ Consequently, we posted a gross profit margin of ~~29.6%~~48.4% for the three months ended ~~June~~September 30, 2019 compared to ~~75.6%~~17.6% for the same period in 2018.

Operating Expenses

General and administrative expenses for the three months ended ~~June~~September 30, 2019 were ~~$888,460~~$1,159,502 compared to ~~$2,574,598~~$2,208,264 for the three months ended ~~June~~September 30, 2018. The significant plunge in general and administrative ~~expense~~expenses by ~~$1,686,138~~$1,048,762 was attributed to a decrease in salary and welfare by ~~$826,334~~$829,072 due to ~~redundancies~~reduction in force since July 2018, ~~a decrease in insurance and rental expenses by $297,275 due to the relocation of our Hong Kong office to a non-central district, a decrease in legal and professional fees by $106,624,~~ a decrease in traveling and accommodation expenses by ~~$113,152~~$48,427 as a result of fewer marketing events, a decrease in non-deductible input VAT by ~~$88,699,~~$4,027, a decrease in consultancy fees by ~~$21,075,~~$29,698, share-based compensation by ~~$53,412,~~$58,537, depreciation by ~~$39,434~~$45,020 and ~~also~~ other expenses by ~~$140,133.~~$89,927.

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

	Three months ended June 30, 2019				Three months ended June 30, 2018				Three months ended September 30, 2019				Three months ended September 30, 2018
	(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
	Amount($)		% of Total		Amount($)		% of Total		Amount($)		% of Total		Amount($)		% of Total
Salary and welfare		430,369		48.4		1,256,703		48.8		405,620		35.0		1,234,692		55.9
Office, insurance and rental expenses		147,542		16.6		444,817		17.3		369,947		31.9		361,402		16.4
Legal and professional fees		108,542		12.2		215,166		8.4		213,263		18.4		165,862		7.5
Traveling and accommodation fees		30,985		3.5		144,137		5.6		28,939		2.5		77,366		3.5
Non-deductible input VAT expense		44,567		5.0		133,266		5.2		40,718		3.5		44,745		2.0
Consultancy fee		67,277		7.6		88,352		3.4		46,494		4.0		76,192		3.5
Share Based Compensation Expense		13,760		1.6		67,172		2.6
Share based compensation expense										6,273		0.5		64,810		2.9
Depreciation		35,924		4.0		75,358		2.9		32,692		2.8		77,712		3.5
Others		9,494		1.1		149,627		5.8		15,556		1.4		105,483		4.8
Total general and administrative expense	$	888,460		100	$	2,574,598		100	$	1,159,502		100	$	2,208,264		100

Other expenses

Other expenses for the three-month period ended ~~June~~September 30, 2019 were ~~$486,931,~~$520,698 compared to other expenses of ~~$1,239,008~~$1,004,552 for the same period in 2018. ~~There~~The decrease in other expenses by $483,854 was predominately resulted from a significant decrease in exchange loss by ~~$848,028,~~$354,410, arising from the ~~appreciation~~depreciation of Renminbi against US ~~dollar.~~dollar and a decrease in loan interest by $181,806 due to the loan due to a third party paid off in January 2019. Such decrease was offset by decrease in bank interest income by $49,266.

Income tax benefit

The Company’s effective tax rate varies due to its multiple jurisdictions in which the pretax book incomes or losses incur. The Company was subject to a U.S. income tax rate of 21% (34 % prior to January 1, 2018), Hong Kong profits tax rate at 8.25% for the first HKD 2 million (approximately ~~$255,010)~~$255,154) assessable profits and at 16.5% for assessable profits above HKD 2 million (approximately ~~$255,010)(16.5%~~$255,154) (16.5% prior to January 1, 2018) and PRC enterprise income tax rate at 25%.

The effective tax rates for the three months ended ~~June~~September 30, 2019 and 2018 were ~~5.6%~~9.4% and ~~20.2%~~20.5%, respectively.

Income taxes benefit for the three months ended ~~June~~September 30, 2019 and 2018 were ~~$66,584~~$117,451 and ~~$273,972,~~$742,670, respectively.

Net Loss

We had a net loss for the three months ended ~~June~~September 30, 2019 of ~~$1,127,536~~$1,127,897 compared net loss of ~~$1,084,392~~$2,881,356 for the three months ended ~~June~~September 30, 2018.

~~Increase~~The decrease in net loss during the three months ended ~~June~~September 30, 2019 was predominately due to a ~~fall~~rise in revenue by ~~$3,227,927 at 84%,~~$760,058, and a decrease in operating expenses by ~~$2,140,901, or 71%~~$1,415,566, compared to the three months ended ~~June~~September 30, 2018 ~~because~~as a result of cost-cutting measures. It was also affected by a decrease ofin exchange losses by ~~$848,028.~~$354,410.

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

~~SIX-MONTH~~

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

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

Six Months Ended
June 30,
2019 % of
Revenue 2018 % of
Revenue
(Unaudited) (Unaudited)
Revenue $ 1,161,784 100 $ 7,828,294 100
Cost of revenue (708,307 ) (61 ) (1,873,814 ) (24 )
Selling expense (34,596 ) (3 ) (702,138 ) (9 )
General and administrative expenses (2,163,045 ) (186 ) (5,583,483 ) (71 )
Total costs and expenses (2,905,948 ) (250 ) (8,159,435 ) (104 )
(Loss) income from operations (1,744,164 ) (150 ) (331,141 ) (4 )
Interest and other (expenses) income, net (150,187 ) (13 ) (161,493 ) (2 )
(Loss) income before income taxes (1,894,351 ) (163 ) (492,634 ) (6 )
Income tax benefit (expense) 58,022 5 (168,468 ) (2 )
Net loss $ (1,836,329 ) (158 ) $ (661,102 ) (8 )

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

Revenue

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

	Six months ended				Nine months ended
	June 30,				September 30,
	2019		2018		2019		2018
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Listing fee revenue	$	284,090	$	3,978,735	$	284,090	$	3,978,735
Commission		716,080		3,304,080		1,655,244		3,557,411
Management fee revenue		161,614		347,228		346,042		455,133
Authorized agent subscription revenue		-		191,623		-		191,623
Annual fee revenue				324		-		378
Online artwork sales		-		6304		-		8,548
Total	$	1,161,784	$	7,828,294	$	2,285,376	$	8,191,828

(i)

Listing fee revenue

As of ~~June~~September 30, 2019, a total of 285 sets of artwork were listed for trade on our platform ~~-comprising~~—comprising 60 sets of paintings and calligraphies from famous Chinese, Russian and Mongolian artists, with a total listing value of ~~$25,768,858~~$25,783,323 (HK$202,100,000); 35 pieces of jewelry with a total listing value of ~~$9,264,548~~$9,269,749 (HK$72,660,000); 134 pieces of precious stones with a total listing value of ~~$16,835,824~~$16,845,275 (HK$132,040,000); 29 pieces of amber with a total listing value of ~~$12,113,021~~$12,119,820 (HK$95,000,000); 4 pieces of antique mammoth ivory carvings with a total listing value of ~~$663,029~~$663,401 (HK$5,200,000); 2 pieces of porcelain pastel paintings with a total listing value of ~~$331,514~~$331,700 (HK$2,600,000); 7 pieces of ~~porcelains~~porcelain with a total listing value of ~~$1,083,797~~$1,084,405 (HK$8,500,000); 6 sets of Unit+ products with a total listing value of ~~$1,315,092~~$1,315,830 (HK$10,314,000); 1 piece of Yixing collectable with a listing value of ~~$127,505~~$127,577 (HK$1,000,000); and 7 pieces of ~~Sports~~sports memorabilia with a listing value of ~~$1,084,995~~$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 ~~porcelains)~~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~~sports memorabilia) of the listed values were charged as listing fees, respectively.

During the ~~six~~nine months ended ~~June~~September 30, 2019, there were 6 sets of paintings listed on our platform. Their total listing values were ~~$1,147,549~~$1,148,194 (HK$9,000,000) for the paintings, of which 22.9%-28% (for the paintings) of the listed values were charged as listing fees.

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

(ii)

Commission fee revenue

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

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

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

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

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

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

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

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

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

Total commission revenue decreased by ~~$2,588,000 or 78%~~$1,902,167 for the ~~six~~nine months ended ~~June~~September 30, 2019 to ~~$716,080~~$1,655,244 compared to ~~$3,304,080~~$3,557,411 for the ~~six~~nine months ended ~~June~~September 30, 2018 primarily because there were no new listings of artwork on our platform in the second ~~quarter~~and third quarters and this drove down overall trading activity during ~~the second quarter.~~

this period compared to last year.

(iii)

Management fee revenue

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

During the ~~six-month~~nine-month period ended ~~June~~September 30, 2019, management fee revenue ~~decreased~~dropped by ~~$185,614,~~$109,091, from ~~$347,228~~$455,133 for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$161,614,~~$346,042, due to the decrease in overall trading transactions ~~in the current quarter.~~this period compared to last year.

(iv)

Annual fee revenue

During the ~~six-month~~nine-month period ended ~~June~~September 30, 2019, there iswas no annual fee revenue, compared to ~~$324~~$378 for the ~~six-month~~nine-month period ended ~~June~~September 30, 2018.

(v)

Authorized agent subscription revenue

During the ~~six-month~~nine-month period ended ~~June~~September 30, 2019, there ~~are~~was no authorized agent subscription revenue, compared to $191,623 for the ~~six-month~~nine-month period ended ~~June~~September 30, 2018.

~~(v)~~(vi)

Online artwork sales

During the ~~six-month~~nine-month period ended ~~June~~September 30, 2019, there ~~are~~were no online artwork sales, compared to ~~$6,304~~$8,548 for the ~~six-month~~nine-month period ended ~~June~~September 30, 2018 ~~primarily~~ because ~~of shutting~~we shut down of online artwork sales on our platform.

Revenue by customer type

The following table presents our revenue by customer type:

	Six months ended June 30,				Nine months ended September 30,
	2019		2018		2019		2018
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Artwork owners	$	284,090	$	3,978,735	$	284,090	$	3,978,735
Non - VIP traders		640,789		2,095,208		1,494,066		2,235,789
VIP traders		236,905		1,556,424		507,220		1,777,133
Authorized agents		-		191,623		-		191,623
Online artwork sales		-		6,304		-		8,548
Total	$	1,161,784	$	7, 828,294	$	2,285,376	$	8,191,828

Cost of Revenue

	Six months ended June 30,				Nine months ended September 30,
	2019		2018		2019		2018
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Commission rebate to service agent	$	290,004	$	1,205,010	$	660,208	$	1,207,104
Depreciation		243,795		327,561		359,878		491,297
Internet service charge		97,778		186,489		159,882		240,165
Artwork insurance		23,933		104,652		36,124		155,635
Artwork storage		52,333		46,577		72,033		74,110
Others		464		3,525		464		4,985
Total	$	708,307	$	1,873,814	$	1,288,589	$	2,173,296

Cost of revenue for the ~~six~~nine months ended ~~June~~September 30, 2019 and ~~June~~September 30, 2018 was ~~$708,307~~$1,288,589 and ~~$1,873,814,~~$2,173,296, respectively. The decrease in cost of revenue for the ~~six~~nine months ended ~~June~~September 30, 2019 compared to ~~June~~September 30, 2018, was mainly due to the decrease in the commission rebates to service agents by ~~$915,006.~~$546,896. Management ~~was~~ focused on resuscitating interest in ~~the~~ listed artwork and no new artwork ~~was~~had been listed insince the second quarter of 2019. Besides the decrease in commission rebates, the decrease in cost of revenue was also due to a ~~decrease~~fall in the depreciation and amortization of hardware and software on our trading platform by ~~$83,766~~$131,419 as a result of the suspension of e-commerce activity and impairment of all online software development assets in 2018, the ~~decrease~~decline in internet services charges by ~~$88,711~~$80,283 due to the termination of two network lines between Macau and Hong Kong, ~~and~~ the decrease in artwork insurance expense by ~~$80,719~~$119,511 due to a negotiated discount in our new insurance contract for ~~2019.~~2019, the decrease in artwork storage fee by $2,077 and the drop in other expenses by $4,521.

Gross Profit

Gross profit was ~~$453,477~~$996,787 for the ~~six~~nine months ended ~~June~~September 30, 2019, compared to ~~$5,954,480~~$6,018,532 for the ~~six~~nine months ended ~~June~~September 30, 2018. The decrease was mainly due to the ~~decrease~~significant decline in total revenue.

Overall total revenue for the ~~six~~nine months ended ~~June~~September 30, 2019 dropped by ~~$6,666,510~~$5,906,452 or ~~85.2%~~72.1% compared to the same period in 2018. Compared to the same period in 2018, there was a significant decrease in listing fee revenue and commission revenue. Consequently, we posted a gross profit margin of ~~39.0%~~43.6% for the ~~six~~nine months ended ~~June~~September 30, 2019 compared to ~~76.1%~~73.5% for the same period in 2018.

Operating Expenses

General and administrative expenses for the ~~six~~nine months ended ~~June~~September 30, 2019 were ~~$2,163,045,~~$3,322,547, compared to ~~$5,583,483~~$7,791,747 for the ~~six~~nine months ended ~~June~~September 30, 2018. The significant plunge in general and administrative expense by ~~$3,420,438~~$4,469,200 was attributed to a decrease in salary and welfare by ~~$1,786,374~~$2,615,446 due to ~~redundancies~~reduction in force since July 2018, a decrease in insurance and rental expenses by ~~$534,273~~$525,728 due to the relocation of our Hong Kong office to a non-central district, a decrease in legal and professional fees by ~~$206,548,~~$159,147, a decrease in traveling and accommodation expenses by ~~$415,331~~$463,758 as a result of fewer marketing events, a decrease in non-deductible input VAT by ~~$203,622,~~$207,649, a decrease in consultancy fees by ~~$42,155,~~$71,853, share-based compensation by ~~$121,810,~~$180,347, depreciation by ~~$74,253~~$119,273 and also other expenses by ~~$36,072.~~$202,401.

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

Six months ended Six months ended
30-Jun-19 30-Jun-18
(Unaudited) (Unaudited)
Amount($) % of Total Amount($) % of Total
Salary and welfare 877,866 40.6 2,664,240 47.7
Legal and professional fees 382,640 17.7 589,188 10.6
Office, insurance and rental expenses 327,682 15.1 861,955 15.4
Consultancy fee 172,435 8.0 214,590 3.8
Non-deductible input VAT expense 89,598 4.1 293,220 5.3
Depreciation 70,671 3.3 144,924 2.6
Traveling and accommodation fees 52,343 2.4 467,674 8.4
Share Based Compensation Expense 30,611 1.4 152,421 2.7
Others 159,199 7.4 195,271 3.5
Total general and administrative expense $ 2,163,045 100 $ 5,583,483 100

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

Other ~~income and~~ expenses

Other expenses for the ~~six~~nine months ended ~~June~~September 30, 2019 ~~was $150,187,~~were $670,885, compared to ~~$161,493~~$1,166,045 for the ~~six~~nine months ended ~~June~~September 30, 2018. The ~~amount~~decrease in other expenses by $495,160 was ~~comparable between two periods.~~primarily driven by the decrease in exchange loss by $568,277, due to the appreciation of Renminbi against US dollar and drop in loan interest by $486,272 due to a third-party loan being paid off in January 2019, offset by an increase in sundry expense by $357,053, a decrease in bank interest income by $132,218 and a loss in fixed asset disposal incurred in the nine months ended September 30, 2019 by $57,295.

Income tax benefit (expenses)

The ~~Company’s~~Company's effective tax rate varies due to its multiple jurisdictions where pre-tax income or losses occur. The Company is subject to a Hong Kong profits tax rate at 8.25% for the first HKD 2 million (approximately ~~$255,010)~~$255,154) assessable profits and at 16.5% for assessable profits above HKD 2 million (approximately ~~$255,010)~~$255,154) (16.5% prior to January 1, 2018) ~~and~~, PRC enterprise income tax rate at 25%~~. PRC enterprise income tax rate of 25%~~ and U.S. income tax rate of ~~34%~~21% (34% prior to ~~January 1, 2018 while 21% after~~ January 1, 2018 due to the Tax Cuts and Jobs Act enacted on December 22, ~~2017.~~2017).

The effective tax rates for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018 were ~~3.1%~~5.6% and ~~(34.2)%~~13.9%, respectively.

Income taxes benefit ~~(expense)~~ for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018 were ~~$58,022~~$175,473 and ~~$(168,468),~~$574,202, respectively.

Net loss

We had a net loss for the ~~six~~nine months ended ~~June~~September 30, 2019 of ~~$1,836,329~~$2,964,226 compared to a net loss of ~~$661,102~~$3,542,458 for the ~~six~~nine months ended ~~June~~September 30, 2018.

The lower net loss ~~after income tax expense~~ incurred ~~during this~~in the nine months ended September 30, 2019, compared to the same period in 2018, resulted from a lower operating expenses and exchange loss in the current ~~period was predominantly driven by a decrease in gross profit by $5,501,003.~~period.

Liquidity and Capital Resources

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

Six months ended
June 30,
2019 2018
(Unaudited) (Unaudited)
Net cash provided by (used in) operating activities $ 21,615,744 $ (5,625,065 )
Net cash provided by (used in) investing activities 2,409,459 (6,920,612 )
Net cash (used in) provided by financing activities (2,106,342 ) 5,888,608
Effect of exchange rate change on cash and cash equivalents 10,090 (239,255 )
Net increase (decrease) in cash, cash equivalents and restricted cash 21,928,951 (6,896,324 )
Cash, cash equivalents and restricted cash, beginning balance 12,524,086 37,140,582
Cash, cash equivalents and restricted cash, ending balance $ 34,453,037 $ 30,244,258

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

Sources of Liquidity

During the ~~six~~nine months ended ~~June~~September 30, 2019, net cash generated from operating activities totaled ~~$21,615,744,~~$10,828,217 which resulted from the implementation of ASU2016-18 since the beginning of 2018. In fact, there was an increase in client deposits by ~~$22,452,663~~$12,459,049 placed by the customers for upcoming transactions which influenced the increased amounts due to clients simultaneously. The Company assessed and evaluated that it was ~~really~~truly a presentation issue and there should be no actual impact to the operating activities. Net cash generated from investing activities totaled ~~$2,409,459.~~$313,588. Net cash used in financing activities totaled ~~$2,106,342.~~$537,605. The resulting change in cash for the period was an increase of ~~$21,928,951.~~$10,570,802. The cash balance at the beginning of the period was $12,524,086. The cash balance on ~~June~~September 30, 2019 was ~~$34,453,037.~~$23,094,888.

During the ~~six~~nine months ended ~~June~~September 30, 2018, net cash used in operating activities totaled ~~$5,625,065~~$18,589,823 and it was resulted in the inclusion of the restricted cash balances within the overall cash balance and removal of the changes in ~~(approximately $5.3M provided by)~~ restricted cash activity due to the adoption of ASU2016-18 since beginning of 2018. ~~Actually, there~~The reduction in net cash in operating activities was predominately triggered by a decline in client deposits by ~~$5,357,186 in~~$17,757,757 which influenced the ~~drop of~~fall in the amount due to clients simultaneously. The Company assessed and evaluated it was rather a presentation issue and there should have no actual impact to the operating activities. Net cash used in investing activities totaled ~~$6,920,612.~~$4,377,285. Net cash generated from financing activities totaled ~~$5,888,608.~~$2,425,220. The resulting change in cash for the period was a decrease of ~~$6,896,324.~~$21,205,904. The cash balance at the beginning of the period was $37,140,582. The cash balance on ~~June~~September 30, 2018 was ~~$30,244,258.~~$15,934,678.

As of ~~June~~September 30, 2019, the Company had ~~$34,608,620~~$26,298,905 in total current liabilities, which comprised of ~~$618,014~~$522,929 in accrued expense and other payables, ~~$27,001,865~~$17,008,251 in customers’ deposits, ~~$7,043~~$10,227 in advance from customer, ~~$6,790,399~~$6,759,674 in amount due to related parties, ~~$178,917~~$1,816,837 in loan from a third party, $173,156 in lease liabilities and ~~$12,382~~$7,831 in tax payables. As of December 31, 2018, the Company had $14,099,778 in total current liabilities, which included $641,692 in accrued expenses and other payables $8,995 in advance from customers, $4,549,202 in customers’ deposits, $2,499,500 in short-term borrowings from third parties, $6,385,288 in amount due to related party, and $15,101 in tax payables.

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

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

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

Off-Balance Sheet Arrangements

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

Future Financings

Although we are suffering downside business including a decrease in trading volume and customer deposits, we are also undergoing a company restructuring, including re-evaluating the Company’s core business and a downsizing of its workforce. Our management forecasts that we have sufficient cash from our operations to fund our business organically. However, we may conduct equity sales of our shares of common 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, and if we are able to, there is no guarantee that existing shareholders will not be substantially diluted. In essence, we do not need to rely on equity sales to fund our business operations.

Critical Accounting Policies

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

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

Recent Accounting Pronouncements

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

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

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

~~Item 4. Controls and Procedures.~~

Item 4.

Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

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

Changes in Internal Controls over Financial Reporting

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

PART II - OTHER INFORMATION

~~Item 6. Exhibits.~~

Item 6.

Exhibits.

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

Exhibit No.		Description

3.1		Certificate of Incorporation (1)
3.2	��	By-laws of the Company (2)
3.3		Certificate of Amendment of the Certificate of Incorporation (1)
3.4		Certificate of Amendment of the Certificate of Incorporation (1)
3.5		Certificate of Amendment (2)
3.6		Certificate of Amendment of the Certificate of Incorporation (4)
3.7		Certificate of Incorporation of Hong Kong Takung Assets and Equity Artworks Exchange Co., Ltd.(3)
3.8		Articles of Association of Hong Kong Takung Assets and Equity Artworks Exchange Co., Ltd.(3)
31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1		Certification of the Principal Executive Officer and the Principal Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

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

(1)

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

(2)

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

(3)

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

(4)

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

*Filed herewith.

**Furnished herewith.

SIGNATURES

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

	TAKUNG ART CO., LTD

Date: ~~August~~November 14, 2019	By:	/s/ Fang Mu
		Fang Mu
		Chief Executive Officer
		(Principal Executive Officer)

Date: ~~August~~November 14, 2019	By:	/s/ Jehn Ming Lim
		Jehn Ming Lim
		Chief Financial Officer
		(Principal Financial Officer)

	Six months ended				Six months ended
	30-Jun-19				30-Jun-18
	(Unaudited)				(Unaudited)
	Amount($)		% of Total		Amount($)		% of Total
Salary and welfare		877,866		40.6		2,664,240		47.7
Legal and professional fees		382,640		17.7		589,188		10.6
Office, insurance and rental expenses		327,682		15.1		861,955		15.4
Consultancy fee		172,435		8.0		214,590		3.8
Non-deductible input VAT expense		89,598		4.1		293,220		5.3
Depreciation		70,671		3.3		144,924		2.6
Traveling and accommodation fees		52,343		2.4		467,674		8.4
Share Based Compensation Expense		30,611		1.4		152,421		2.7
Others		159,199		7.4		195,271		3.5
Total general and administrative expense	$	2,163,045		100	$	5,583,483		100