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 30, 2019~~March 31, 2020

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, 2019~~June 29, 2020 is ~~11,255,129.~~11,271,379.

EXPLANATORY NOTE

Takung Art Co., Ltd and subsidiaries (“Takung” or the “Company”) is filing this quarterly report on Form 10-Q after the May 15, 2020 (the “Original Due Date”) deadline applicable to it for the filing of a Form 10-Q for the quarter ended March 31, 2020 (the “Quarterly Report”) in reliance on the 45-day extension provided by an order issued by the U.S. Securities and Exchange Commission (the “SEC”) under Section 36 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), dated March 4, 2020 (Release No. 34-88318), as modified and superseded by a new SEC order issued on March 25, 2020 (Release No. 34-88465) (collectively, the “Order”).

On May 12, 2020, the Company filed a Current Report on Form 8-K to indicate its intention to rely on the Order for such extension. Consistent with its statements made in the Form 8-K, the Company was unable to file the Quarterly Report by the Original Due Date, and therefore relied on the Order. Due to the circumstances and uncertainty surrounding the effects of the COVID-19 pandemic on the business, employees, consultants and service providers of the Company, and considering the lack of time for the compilation, dissemination and review of the information required to be presented and the importance of markets and investors receiving materially accurate information in the Quarterly Report, the Quarterly Report is hereby filed before the extended due date permitted under the Order, i.e., 45 days after the Original Due Date, or June 29, 2020.

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.		1718

	Item 3. Quantitative and Qualitative Disclosures About Market Risk.		2928

	Item 4. Controls and Procedures.		2928

PART II.	Other Information		3029

	Item 6. Exhibits.		3029

	Signatures		3130

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
March 31, December 31,
2020 2019
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 5,062,253 $ 5,424,213
Restricted cash 15,466,438 16,404,941
Account receivables, net 154,813 -
Prepayment and other current assets, net 311,103 451,248
Amount due from a related party - 5,834,554
Loan receivables 1,977,178 2,010,974
Total current assets 22,971,785 30,125,930

Non-current assets
Property and equipment, net 727,443 859,826
Intangible assets 22,510 22,401
Deferred tax assets, net 557,136 540,279
Operating lease right-of-use assets 582,121 731,469
Amount due from related parties 5,838,877 104,128
Other non-current assets 57,675 57,470
Total non-current assets 7,785,762 2,315,573
Total assets $ 30,757,547 $ 32,441,503

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES
Current liabilities
Accrued expenses and other payables $ 831,399 $ 629,666
Customer deposits 15,466,438 16,404,941
Advance from customers 16,364 8,788
Short-term borrowings from a third party 1,916,540 1,868,345
Amount due to related parties 383,638 6,862,713
Operating lease liabilities – current 132,348 166,987
Tax payables 22,274 6,050
Total current liabilities 18,769,001 25,947,490

Non-current liabilities
Operating lease liabilities, non-current 49,002 48,856
Amount due to a related party, non-current 6,450,531 -
Total non-current liabilities 6,499,533 48,856
Total liabilities 25,268,534 25,996,346

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 March 31, 2020; 11,255,129 shares issued and outstanding as of December 31, 2019) 11,255 11,255
Additional paid-in capital 6,326,590 6,320,604
(Accumulated deficit) retained earnings (567,035 ) 386,327
Accumulated other comprehensive loss (281,797 ) (273,029 )
Total shareholders’ equity 5,489,013 6,445,157
Total liabilities and shareholders’ equity $ 30,757,547 $ 32,441,503

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

TAKUNG ART CO., LTD AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF 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
Three Months Ended
March 31, March 31,
2020 2019
Revenue
Listing fee $ 176,943 $ 289,072
Commission 900,823 178,358
Management fee 103,520 68,271
Total revenue 1,181,286 535,701

Cost of revenue (656,514 ) (267,279 )
Gross profit 524,772 268,422

Operating expenses
General and administrative expenses (1,110,447 ) (1,274,585 )
Selling expenses (42,989 ) (30,812 )
Total operating expenses (1,153,436 ) (1,305,397 )

Loss from operations (628,664 ) (1,036,975 )

Other income and expenses:
Other income (expenses) 38,305 (21,990 )
Loan interest expense (38,913 ) -
Exchange (loss) gain (236,695 ) 358,734
Total other (expenses) income (237,303 ) 336,744

Loss before income tax expense (865,967 ) (700,231 )

Income tax expense (87,395 ) (8,562 )

Net loss (953,362 ) (708,793 )

Foreign currency translation adjustment (8,768 ) (5,480 )

Comprehensive loss $ (962,130 ) $ (714,273 )

Loss per common share – basic $ (0.08 ) $ (0.06 )
Loss per common share – diluted $ (0.08 ) $ (0.06 )
Weighted average number of common shares outstanding –basic 11,255,129 11,226,025
Weighted average number of common shares outstanding –diluted 11,255,129 11,226,025

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

TAKUNG ART CO., LTD AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF 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
Number Common Additional
Paid-in Retained
earnings (accumulated Accumulated
other
comprehensive
of shares stock capital deficit) loss Total
Balance, December 31, 2019 11,255,129 $ 11,255 $ 6,320,604 $ 386,327 $ (273,029 ) $ 6,445,157
Shared-based compensation - - 5,986 - - 5,986
Net loss - - - (953,362 ) - (953,362 )
Foreign currency translation adjustment - - - - (8,768 ) (8,768 )
Balance, March 31, 2020 11,255,129 $ 11,255 6,326,590 (567,035 ) (281,797 ) 5,489,013

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

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

5

TAKUNG ART CO., LTD AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in U.S. Dollars)
(UNAUDITED)

Six Months Six Months
Ended Ended Three Months Ended
June 30, June 30, March 31, March 31,
2019 2018 2020 2019
Cash flows from operating activities:
Net cash provided by (used in) operating activities $ 21,615,744 $ (5,625,065 )
Net cash (used in) provided by operating activities (1,214,913 ) 6,175,680

Cash flows from investing activities:
Purchase of property and equipment (33,792 ) (790,159 ) - (27,233 )
Purchase of available-for-sale investments (21,372,178 ) (74,934,730 ) - (10,633,534 )
Maturity and redemption of available-for-sale investments 21,372,178 74,934,730 - 10,633,534
Loan to related parties - (6,369,809 )
Repayment of loan from third parties 2,443,251 239,356
Net cash provided by (used in) investing activities 2,409,459 (6,920,612 )
Repayment from loan to third party - 2,443,252
Net cash provided by investing activities - 2,416,019

Cash flows from financing activities:
Proceeds from a related party’s loans 393,158 6,372,430
Loan repayment to a third party (2,499,500 ) (483,822 )
Net cash (used in) provided by financing activities (2,106,342 ) 5,888,608
Repayment of loan from third party - (2,499,500 )
Net cash used in financing activities - (2,499,500 )

Effect of exchange rate change on cash, cash equivalents and restricted cash 10,090 (239,255 ) (85,550 ) (503,119 )

Net increase (decrease) in cash, cash equivalents and restricted cash 21,928,951 (6,896,324 )
Net (decrease) increase in cash, cash equivalents and restricted cash (1,300,463 ) 5,589,080

Cash, cash equivalents and restricted cash, beginning balance 12,524,086 37,140,582 21,829,154 12,524,086

Cash, cash equivalents and restricted cash, ending balance $ 34,453,037 $ 30,244,258 $ 20,528,691 $ 18,113,166

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 March 31, 2020 and 2019, respectively 5,062,253 7,740,711
Restricted cash as of March 31, 2020 and 2019, respectively 15,466,438 10,372,455
Total cash, cash equivalents, and restricted cash as of March 31, 2020 and 2019, respectively 20,528,691 18,113,166

Supplemental cash flows information:

Cash paid for interest $ - $ 144,311 $ - $ -
Cash paid for income tax $ - $ 261,285 $ - $ -

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


TAKUNG ART CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

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

Hong Kong Takung was incorporated in Hong Kong on September 17, 2012 and operates an electronic online platform for offering ~~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”).~~China.

Takung (Shanghai) Co., Ltd (“Shanghai Takung”) is a limited liability company, with a registered capital of $1 million, located in the Shanghai Pilot Free Trade Zone. Shanghai Takung was incorporated on July 28, ~~2015 in the PRC.~~2015. It is engaged in providing services to its parent company Hong Kong Takung by receiving deposits from and making payments to online artwork traders of Takung for and on behalf of Takung. Shanghai Takung was deregistered on May 8, 2020 and the Company merged the operations of Shanghai Takung with Tianjin 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. It is engaged in providing services to its parent company Hong Kong Takung by receiving deposits from and making payments to online artwork traders of Takung for and on behalf of Takung when Shanghai Takung was deregistered.

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

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~~its 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.

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 its artwork trading business.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated balance sheet as of December 31, ~~2018,~~2019, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements as of ~~June 30, 2019~~March 31, 2020 and for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 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,~~2019, previously filed with the SEC.
Beginning in the quarter ended March 31, 2020, a strain of coronavirus (COVID-19) has spread globally and at this point, the extent to which the COVID-19 may impact operations of the Company is uncertain. The extent of the impact of the coronavirus on the Company's business and operations will depend on several factors, such as the duration, severity, and geographic spread of the pandemic, development of the testing and treatment and stimulus measures of the government. The Company is monitoring and assessing the evolving situation closely and evaluating its potential exposure. The operating results for the three months ended March 31, 2020 may not be indicative of the future operating results for the fiscal year ending December 31, 2020 or other future periods, particularly in light of the uncertain impact COVID-19 could have on the Company's business.

This basis of accounting involves the application of accrual accounting and consequently, revenues 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 interim condensed consolidated financial position as of ~~June 30, 2019,~~March 31, 2020, its interim condensed consolidated results of operations and cash flows for the ~~six-month~~three-month periods ended ~~June 30,~~March 31, 2020 and 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 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,~~2019, 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, NET

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

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
March 31, December 31,
2020 2019
(Unaudited)
Prepaid tax $ 181,068 $ 281,582
Prepaid service fees 101,695 132,064
Short-term borrowings to a third party 54,184 53,919
Staff advance 22,892 18,380
Deposit 311 316
Other current assets 5,137 18,906
Less: allowance for doubtful accounts (54,184 ) (53,919 )
Prepayment and other current assets, net $ 311,103 $ 451,248

No provision for doubtful accounts was recognized for the three months ended March 31, 2020 and 2019.
4. ACCOUNT RECEIVABLES, NET

Account receivables consisted of the following:

June 30,
2019 December 31,
2018 March 31,
2020 December 31,
2019
(Unaudited) (Unaudited)
Listing fee $ - $ 568,757 $ 154,813 $ -
Authorized agent subscription revenue 559,280 557,837 563,537 560,780
Monthly commission fee 1,381,712 1,378,148 1,392,229 1,385,420
Others 53,765 53,626 54,174 53,909
Less: allowance for doubtful accounts (1,994,757 ) (1,989,611 ) (2,009,940 ) (2,000,109 )
Account receivables, net $ - $ 568,757 $ 154,813 $ -

No provision for doubtful accounts was recognized for the three months ended March 31, 2020 and 2019.

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 $ 706,135 0 % 7/17/2020
8/29/2019 Chongqing Aoge Import and Export Co. Tianjin
Takung 5,000,000 5,000,000 $ 706,135 0 % 8/28/2020
9/20/2019 Chongqing Aoge Import and Export Co. Tianjin
Takung 4,000,000 4,000,000 $ 564,908 0 % 9/19/2020
Total $ 1,977,178
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 “HKD 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 HKD Loans are “secured” by the RMB Loans. It is the understanding between the parties that the HKD 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, March 31, December 31,
2019 2018 2020 2019
(Unaudited) (Unaudited)
Furniture, fixtures and equipment $ 162,712 $ 156,656 $ 199,091 $ 201,093
Leasehold improvements 343,361 447,048 342,465 343,697
Computer trading and clearing system 3,390,702 3,382,168 3,375,544 3,379,654
Transport equipment 104,787 104,628 101,594 103,330
Sub-total 4,001,562 4,090,500 4,018,694 4,027,774
Less: accumulated depreciation (2,890,100 ) (2,644,821 ) (3,291,251 ) (3,167,948 )
Property and equipment, net $ 1,111,462 $ 1,445,679 $ 727,443 $ 859,826

Depreciation expense was ~~$157,687~~$127,930 and ~~$243,781~~$156,779 for the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and $314,466 and $472,485 for the six months ended June 30, 2019 and 2018,~~ respectively.

6.7. ACCRUED EXPENSES AND OTHER PAYABLES

Accrued expenses and other payables as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 consisted of the following:

June 30, December 31, March 31, December 31,
2019 2018 2020 2019
(Unaudited) (Unaudited)
Accruals for professional fees 434,650 168,040
Accruals for consulting fees $ 265,478 $ 264,793 $ 267,499 $ 311,122
Accruals for professional fees 225,100 49,518
Payroll payables 54,193 104,437 33,105 79,710
Trading and clearing system 50,161 86,208 50,543 50,295
Other payables 23,082 136,736 45,602 20,499
Total accrued expenses and other payables $ 618,014 $ 641,692 $ 831,399 $ 629,666

7.8. SHORT-TERM BORROWINGS FROM A THIRD PARTY
In July 2019, Hong Kong Takung entered into loan agreements (the “HKD Loans”) with Friend Sourcing Ltd, a Hong Kong company (“Friend Sourcing”) with interest accruing at a rate of 8% per annum. The HKD Loans are to provide Hong Kong Takung with sufficient HKD currency to meet its working capital requirements. Friend Sourcing is a non-related party to the Company.
In the meantime, Tianjin Takung entered interest-free loan (the “RMB Loans”) to another third party as a guarantee for the HKD Loans. The loan amount was $1,977,178 (RMB 14,000,000). Through an understanding between the two third parties, the HKD Loans are “secured” by the RMB Loans. It is an understanding between the parties that when the HKD Loans are repaid, the RMB Loans will be repaid at the same time.
Date Borrower Lender March 31,
2020
(USD) December 31,
2019
(USD) Annual
Interest
Rate Repayment
Due Date
7/18/2019 Hong Kong Takung Friend Sourcing Ltd. $ 718,322 $ 714,808 8 % 7/17/2020
8/29/2019 Hong Kong Takung Friend Sourcing Ltd. $ 699,624 $ 696,202 8 % 8/28/2020
9/20/2019 Hong Kong Takung Friend Sourcing Ltd. $ 559,699 $ 556,961 8 % 9/19/2020
Less: Discount loan payable $ (61,105 ) $ (99,626 )
Total $ 1,916,540 $ 1,868,345
The weighted average interest rate of outstanding short-term borrowings was 8% per annum as of March 31, 2020. The fair value of the short-term borrowings approximates their carrying amounts. The weighted average short-term borrowings were $1,916,540 and $686,884 for the three months ended March 31, 2020 and the year ended December 31, 2019, respectively. The interest expenses for the short-term borrowings were $38,913 and $nil for the three months ended March 31, 2020 and 2019, 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.~~
~~(c)~~Jianping Mao ~~Jianping~~ (“Mao”), the Human Resources Management Director of Hong Kong Takung.

(b) Shuhai Li (“Li”), the legal representative of Tianjin Takung, resigned on April 3, 2020.
(c) Jing Wang (“Wang”), the Chief Financial Officer of the Company since June 1, 2020 and the legal representative of Tianjin Takung since May 28, 2020.
Amount due from a related ~~party~~parties
Amount due from related parties consisted of the following as of the years indicated:

June 30,
2019 December 31,
2018
(Unaudited)
Wang (a) $ 5,916,824 $ 5,907,789
Total 5,916,824 5,907,789
March 31,
2020 December 31,
2019
(Unaudited)
Li (b)(i) - 5,834,554
Total current amount due from a related party $ - $ 5,834,554

March 31,
2020 December 31,
2019
(Unaudited)
Li (b)(i) 5,736,499 -
Mao (a) (ii) $ 102,378 $ 104,128

Total noncurrent amount due from related parties $ 5,838,877 $ 104,128

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
March 31,
2020 December 31,
2019
(Unaudited)
Li (b) (i) - 6,418,980
Mao (a) (ii) 383,638 443,733
Total current amount due to related parties $ 383,638 $ 6,862,713
March 31,
2020 December 31,
2019
(Unaudited)
Li (b)(i) 6,450,531 -
Total noncurrent amount due to a related party $ 6,450,531 $                 -

~~June 30,~~
~~2019~~ ~~December 31,~~
~~2018~~
~~(Unaudited)~~
~~Mao (c) (ii)~~ ~~411,389~~                  -
~~Total noncurrent amount due to a related party~~ ~~411,389~~ -
(i) Amount due ~~from~~to and due tofrom Li and Wang

On ~~May~~September 16, ~~2018,~~2019, 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~~Li for the loan of ~~$6,401,803~~$6,450,531 (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 isas May 15, ~~2019.~~2020. On May 15, ~~2019,~~2020, Hong Kong Takung entered into an extension agreement with ~~Wang~~Li to extend the HK Dollar Working Capital Loan with a ~~due~~maturity date on May 15, 2021. On May 29, 2020, the loan was transferred to Wang, the Chief Financial Officer of the Company and the legal representative of Tianjin Takung. Thus, the amount was reclassified to non-current assets as of March 31, 2020. As of March 31, 2020, the current and noncurrent portions of this loan obligation were nil and $6,450,531, respectively.

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~~Li for the loan of ~~$5,916,824~~$5,736,499 (RMB40,619,000) ~~to Wang~~ with the maturity date of the loan isas May 15, ~~2019.~~2020. On May 15, ~~2019,~~2020, Tianjin Takung entered into an extension agreement with ~~Wang~~Li to extend the RMB Working Capital Loan with a ~~due~~maturity date on May 15, 2021. On May 29, 2020, the loan was transferred to Wang. Thus, the amount was reclassified to non-current liabilities as of March 31, 2020. As of March 31, 2020, the current and noncurrent portions of this loan receivable were nil and $5,736,499, respectively.

Through an understanding between Wang 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 and due 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~~its office location in Tianjin, PRC. The leased office location is approximately 2,090.61 square meters. The lease will ~~be expired~~expire 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~~$204,756 (RMB1,449,838.04) every six months and a deposit ~~in an amount~~ of ~~$105,596~~$102,378 (RMB724,919.02). The deposit is refundable to the Company. The total lease liability ~~is $793,737~~was $377,342, which was included in current portion as of ~~June 30, 2019.~~March 31, 2020.
On October 16, 2019, Tianjin MQ entered into a non-cancellable lease agreement with Ms. Mao for its office facility in Tianjin, PRC. The leased office location is approximately 1,475.67 square meters. The lease was terminated on February 15, 2020 and monthly rent payment is approximately $24,441 (RMB 170,563). As of March 31, 2020, the amount due to Mao pertinent to this lease agreement was $nil.

As of ~~June 30, 2019,~~March 31, 2020, Mao also lent a startup deposit of ~~$6,248~~$6,296 to Hong Kong MQ.

8.10. INCOME TAXES

Takung was incorporated in the State of Delaware and is therefore subject to United States income tax. Hong Kong Takung, Takung Art ~~Holding~~Holdings 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 Coronavirus Aid, Relief and Economy Security (CARES) Act (“the ~~U.S. government~~CARES Act, H.R. 748”) was signed into law on March 27, 2020. The CARES Act temporarily eliminates the 80% taxable income limitation (as enacted ~~comprehensive tax legislation commonly referred to as~~under the Tax Cuts and Jobs Act ~~(the "Tax Act"). The Tax Act makes broad~~of 2017) for NOL deductions for 2018-2020 tax years 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). Exceptreinstated NOL carrybacks for the ~~one-time transition~~2018-2020 tax ~~most~~years. Moreover, the CARES Act also temporarily increases the business interest deduction limitations from 30% to 50% 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~~adjusted taxable income for the ~~tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from~~2019 and 2020 taxable year. Lastly, the Tax Act ~~enactment date~~technical correction classifies qualified improvement property as 15-year recovery period, allowing the bonus depreciation deduction to be claimed 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~~such property retroactively as if it was included in the Tax Act ~~and there were no adjustments recorded to~~at 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,~~time 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.enactment. 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 months ended June 30, 2019 and 2018, the Company does not ~~have any aggregated positive tested income; and~~anticipate a material impact on its financial statements as ~~such, does not have additional provision amount recorded for GILTI tax.~~of March 31, 2020 due to the recent enactment.

As of ~~June 30, 2019,~~March 31, 2020 and December 31, ~~2018,~~2019, the Company in the United States had ~~$1,680,046~~$2,403,141 and ~~$1,332,438~~$2,167,494 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)~~$257,374) 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~~U.S, these 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.~~profits tax return. The election is irrevocable. WeThe Company elected Hong Kong Takung to be subject to the two-tier profits tax rates.

The provision for current income and deferred taxes of Hong Kong Takung has been calculated by applying the ~~current~~new tax rate of ~~taxation of~~ 8.25% ~~for three and six months ended June 30, 2019, 16.5% for three and six months ended June 30, 2018, if applicable.~~. Takung Art Holdings and Hong Kong MQ still ~~applied~~apply the original tax rate of 16.5% for ~~three~~its provision for current income and ~~six months ended June 30, 2019 and 2018.~~deferred taxes.
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
March 31,
2020 2019
(Unaudited) (Unaudited)
Current:
Federal $ - $ -
State - -
Foreign 101,561 -
Total Current $ 101,561 $ -

Deferred:
Federal $ - $ -
State - -
Foreign (14,166 ) 8,562
Total Deferred $ (14,166 ) $ 8,562

Total income tax expense $ 87,395 $ 8,562

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, Three Months Ended
March 31,
2019 2018 2019 2018 2020 2019
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Loss before income tax expense $ (1,194,120 ) $ (1,358,364 ) $ (1,894,351 ) $ (492,634 ) $ (865,967 ) $ (700,231 )

Computed tax (benefit) expense with statutory tax rate (197,073 ) (224,130 ) (312,567 ) (81,285 )
Computed tax expense with statutory tax rate (142,884 ) (115,494 )
Impact of different tax rates in other jurisdictions 69,620 17,108 109,101 37,808 (5,019 ) (4,365 )
Impact of preferred tax rate 57,184 43,848

Non-deductible items:
Tax effect of non-deductible expenses 11,061 (137,980 ) 17,886 3,330 13,328 6,825
Previous years unrecognized taxation effect - -
Changes in valuation allowance 49,808 71,030 127,558 208,615 28,600 77,748

Total income tax (benefit) expense $ (66,584 ) $ (273,972 ) $ (58,022 ) $ 168,468
Others 136,186 -
Total income tax expense $ 87,395 $ 8,562

The effective tax rate was ~~5.6%~~(10.1)% and ~~20.2%~~(1.2)% for the three months ended ~~June 30,~~March 31, 2020 and 2019, respectively.
Uncertain tax positions
The reconciliation of the beginning and ~~2018, respectively, and 3.1% and (34.2)%~~ending amount of liabilities associated with uncertain tax positions is as follows:
March 31,
2020 December 31,
2019
Uncertain tax liabilities, beginning of period - -
Additions for tax position of current period 73,446                    -
Uncertain tax liabilities, end of period $ 73,446 $ -
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by the respective jurisdictions, where applicable. The statute of limitations for the tax returns varies by jurisdictions.
The amounts of uncertain tax liabilities listed above are based on the recognition and measurement criteria of ASC Topic 740, and the balance is presented as current liability in the interim condensed consolidated financial statements as of March 31, 2020. The Company anticipated that the settlements with the taxing authority are remitted within one year.
Our policy is to include interest and penalty charges related to uncertain tax liabilities as necessary in the provision for income taxes. The Company has a liability for accrued interest of nil as of March 31, 2020 and December 31, 2019, respectively.
Our subsidiary, Hong Kong Takung, has been recently selected for routine examination for its tax years ended 31 December 2016 through 2018 by Hong Kong Inland Revenue Department (“IRD”). As of March 31, 2020 and December 31, 2019, the Company had $73,446 and nil, respectively, of uncertain tax liabilities related to the different methodology of certain tax non-deductible expenses applied by the IRD. The examination is currently in progress. Due to the uncertain tax regulations, it is possible that the ultimate resolution of uncertain tax positions may result in an adverse finding and we would be subject to additional liability which could be materially different from these estimates. In such circumstances, we will record additional tax expense or tax benefit in the period in which such the resolution occurs. The Company does not expect the position ofuncertain tax liabilities will significantly fluctuate within the next twelve months.
The statute of limitations for the Internal Revenue Services to assess the income tax returns on a taxpayer expires three years from the due date of the income tax return or the date on which it was filed, whichever is later.
In accordance with the Hong Kong profits tax regulations, a tax assessment by the IRD may be initiated within six ~~months ended June 30, 2019~~years after the relevant year of assessment, but extendable to 10 years in the case of potential willful underpayment or evasion.
In accordance with PRC Tax Administration Law on the Levying and ~~2018, respectively.~~Collection of Taxes, the PRC tax authorities generally have up to five years to assess underpaid tax plus penalties and interest for PRC entities’ tax filings. In the case of tax evasion, which is not clearly defined in the law, there is no limitation on the tax years open for investigation. Accordingly, the PRC entities remain subject to examination by the tax authorities based on the above.

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 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 30, 2019:~~March 31, 2020:

Assets/liabilities Classification As of June 30,
2019 Classification As of March 31,
2020
Assets
Operating lease right-of-use assets Operating lease assets $ 1,070,655 Operating lease assets $ 582,121

Liabilities
Current
Operating lease liability - current Current operating lease liabilities $ 178,917 Current operating lease liabilities $ 132,348
Amount due to related parties 382,348 Amount due to a related party 377,342

Long-term
Operating lease liability - non-current Long-term operating lease liabilities 133,200 Long-term operating lease liabilities 49,002
Amount due to related parties, non-current 411.389

Total lease liabilities $ 1,105,854 $ 558,692

The operating lease expenses ~~including lease from the related party,~~ for the ~~six and~~ three months ended ~~June 30,~~March 31, 2020 and 2019 were as follows:

Three months
ended Six months
ended Three Months Ended March 31,
Lease Cost Classification June 30, 2019 June 30, 2019 Classification 2020 2019
Operating lease cost Cost of revenue, general and administrative expenses $ 86,395 $ 137,173 Cost of revenue, general and administrative expenses $ 200,362 190,449
Total lease cost $ 86,395 $ 137,173 $ 200,362 190,449

Maturities of operating lease liabilities at ~~June 30, 2019 were as follow:~~
Maturity of Lease Liabilities Operating Leases
2019 (remainder) $ 524,245
2020 600,072
2021 14,566
2022 14,566
2023 14,566
Thereafter 21,849
Total lease payments $ 1,189,864
Less: interest (84,010 )
Present value of lease payments $ 1,105,854

~~Future minimum lease payments as of December~~March 31, ~~2018~~2020 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
Maturity of Lease Liabilities Operating Leases
2020 (remaining) $ 530,175
2021 14,123
2022 14,123
2023 14,123
2024 14,123
Thereafter -
Total lease payments $ 586,667
Less: interest (27,975 )
Present value of lease payments $ 558,692

Three Months Ended
March 31,

Lease Term and Discount Rate 2020 2019
Weighted-average remaining lease term (years)
Operating leases 1.51 2.60

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

Three Months Ended
March 31,

Other Information 2020 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases $ 28,478 $ 41,063
Leased assets obtained in exchange for new operating lease liabilities - 275,189

~~(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 30, 2019~~
~~Weighted-average remaining lease term (years)~~
~~Operating leases~~ ~~2.06~~
~~Weighted-average discount rate (%)~~
~~Operating leases~~ 8 %
Other Information June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
  Operating cash flows from operating leases $ 94,573
Leased assets obtained in exchange for new operating lease liabilities 275,189
~~10. EARNINGS~~12. LOSS PER SHARE

Basic ~~losses~~loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted ~~losses~~loss 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
March 31,
2019 2018 2019 2018 2020 2019
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Numerator:
Net loss $ (1,127,536 ) $ (1,084,392 ) $ (1,836,329 ) $ (661,102 ) $ (953,362 ) $ (708,793 )

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

Loss per share
-Basic (0.10 ) (0.10 ) (0.16 ) (0.06 ) (0.08 ) (0.06 )
-Diluted (0.10 ) (0.10 ) (0.16 ) (0.06 ) (0.08 ) (0.06 )

~~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~~ months ended ~~June 30,~~March 31, 2019, approximately ~~148,890~~149,323 options and 15,000 ~~options and~~ restricted shares, respectively, were excluded from the calculation of diluted net loss per share.

~~11.~~Due to the loss or the three months ended March 31, 2020, approximately 100,890 options and 6,250 restricted shares, respectively, were excluded from the calculation of diluted net loss per share.
13. CONTINGENCIES
The Company received two summons dated on May 22, 2020 and June 9, 2020, respectively, there were two individuals filing claims against Shanghai Takung and Tianjing Takung in the Shanghai Pudong People’s Court, China, as a result of contractual disputes and misrepresentations over ownership units made by certain service agent. The claims amounted to approximately $0.23 million. The Company hired legal counsel to evaluate the case. The Company believes that the allegations are without merit and intends to vigorously defend itself. Currently, the cases are under review by the Shanghai Pudong People’s Court. In the opinion of management, it is not probable that the Company will incur any losses arising from these two litigation cases. As such, as of March 31, 2020, the Company has not accrued any liability in connection with potential losses from the legal proceedings.
Except for the above, as of March 31, 2020 and through the issuance date of the condensed consolidated financial statements included in this Form 10-Q, the Company does not have any other significant indemnification claims.
14. SUBSEQUENT EVENTS

~~In July 2019,~~On May 15, 2020, Hong Kong Takung entered into a loan extension agreement ~~(the “HKD Loan”)~~for its HK Dollar Working Capital Loan with ~~Friend Sourcing Ltd,~~Shuhai Li, the legal representative of Tianjin Takung who resigned on April 3, 2020, with a maturity date on May 15, 2021. On the same day, Tianjin Takung also entered into a loan extension agreement for its RMB Working Capital Loan with Shuhai Li with a maturity date on May 15, 2021.
On May 29, 2020, the Company’s Hong Kong ~~company (“Friend Sourcing”) with interest accruing at a rate of 8% per annum. The HKD Loan is to provide~~subsidiary, Hong Kong Takung entered into a loan transfer agreement for its HK Dollar Working Capital Loan with ~~sufficient HKD currency to meet its working capital requirements. Friend Sourcing is a non-related party to~~Shuhai Li, and Jing Wang, the ~~Company. In~~Chief Financial Officer of the ~~meantime,~~Company and the new legal representative of Tianjin Takung. Simultaneously, the Company’s PRC subsidiary, Tianjin Takung entered into a loan transfer agreement for its RMB Working Capital Loan with Shuhai Li and Jing Wang.
The Company had subsequently granted an ~~interest-free loan (the “RMB Loan”) to another third party~~aggregate of 10,000 shares of common stock 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~~stock-based awards to ~~fill the vacancy,~~ the Company’s ~~Nominating and Compensation Committee met~~SEC legal counsel on ~~August 6, 2019 to nominate Ms. Fang Mu~~May 27, 2020 as ~~the Company’s new Chief Executive Officer. On August 6, 2019, the Company’s Board of Directors approved Ms. Fang Mu’s appointment.~~a compensation for legal advisory services rendered.

Other than ~~that,~~the events aforementioned, the Company has evaluated subsequent events through the date of issuance of the interim condensed consolidated financial statements, there were no other 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 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 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~~en.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. Shanghai Takung was deregistered on May 8, 2020.

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~~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.
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.
Recent Impacts of COVID-19 on Our Business
While the ongoing coronavirus pandemic is spreading throughout the world, the Company’s operations have fully resumed in March 2020 and we have not identified any significant decrease in the number of transactions on our platform since then. We have also maintained a stable number of new account openings.
The extent to which the COVID-19 impacts our operations is highly uncertain and cannot be predicted with confidence. It will depend on various factors including the duration and severity of the outbreak, new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.
Although we do not expect that the virus will have a material adverse effect on our business or financial results at this time, COVID-19 may eventually affect the Company's 2020 overall business performance. The operating results for the three months ended March 31, 2020 may not be indicative of the future operating results for the fiscal year ending December 31, 2020 or other future periods, particularly in light of the uncertain impact COVID-19 could have on the Company's business.


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 30, 2019~~MARCH 31, 2020 COMPARED TO THREE-MONTH PERIOD ENDED ~~JUNE 30, 2018~~MARCH 31, 2019

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

Three Months Ended June 30, Three Months Ended March 31,
2019 % of
Revenue 2018 % of
Revenue 2020 % of
Revenue 2019 % of
Revenue
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue $ 626,083 100 $ 3,854,010 100 $ 1,181,286 100 $ 535,701 100
Cost of revenue (441,028 ) (70 ) (940,221 ) (24 ) (656,514 ) (56 ) (267,279 ) (50 )
Selling expense (3,784 ) (1 ) (458,547 ) (12 ) (42,989 ) (4 ) (30,812 ) (6 )
General and administrative expenses (888,460 ) (142 ) (2,574,598 ) (67 ) (1,110,447 ) (94 ) (1,274,585 ) (238 )
Total costs and expenses (1,333,272 ) (213 ) (3,973,366 ) (103 ) (1,809,950 ) (154 ) (1,572,676 ) (294 )
Loss from operations (707,189 ) (113 ) (119,356 ) (3 ) (628,664 ) (54 ) (1,036,975 ) (194 )
Total other expenses (486,931 ) (78 ) (1,239,008 ) (32 )
(Loss) income before income tax expenses (1,194,120 ) (191 ) (1,358,364 ) (35 )
Income tax benefit 66,584 11 273,972 7
Interest and other (expenses) income, net (237,303 ) (20 ) 336,744 63
Loss before income tax expense (865,967 ) (74 ) (700,231 ) (131 )
Income tax expense (87,395 ) (7 ) (8,562 ) (2 )
Net loss $ (1,127,536 ) (180 ) $ (1,084,392 ) (28 ) $ (953,362 ) (81 ) $ (708,793 ) (133 )

Revenue

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

Three months ended
June 30,

Three Months Ended
March 31,

2019 2018 2020 2019 ��
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Listing fee revenue $ - $ 2,000,068 $ 176,943 $ 289,072
Commission 532,740 1,668,563
Commission revenue 900,823 178,358
Management fee revenue 93,343 178,913 103,520 68,271
Online artwork sales - 6,304
Annual fee revenue - 162
Total $ 626,083 $ 3,854,010 $ 1,181,286 $ 535,701


(i) Listing fee revenue

As of ~~June 30,~~March 31, 2020, a total of 287 sets of artwork were listed for trade on our platform —comprising 62 sets of paintings and calligraphies from famous Chinese, Russian and Mongolian artists, with a total listing value of $26,779,740 (HK$208,100,000); 35 pieces of jewelry with a total listing value of $9,350,389 (HK$72,660,000); 134 pieces of precious stones with a total listing value of $16,991,816 (HK$132,040,000); 29 pieces of amber with a total listing value of $12,225,254 (HK$95,000,000); 4 pieces of antique mammoth ivory carvings with a total listing value of $669,172 (HK$5,200,000); 2 pieces of porcelain pastel paintings with a total listing value of $334,586 (HK$2,600,000); 7 pieces of porcelain with a total listing value of $1,093,838 (HK$8,500,000); 6 sets of Unit+ products with a total listing value of $1,327,276 (HK$10,314,000); 1 piece of Yixing collectable with a listing value of $128,687 (HK$1,000,000); and 7 pieces of Sports memorabilia with a listing value of $1,095,048 (HK$8,509,400), of which 22.5%-48% (for 62 sets of paintings), 24%-48.5% (for the 134 pieces of precious stones), 29%-48% (for the 35 pieces of jewelry), 47%-48.5% (for 4 piece of antique mammoth ivory carvings), 32%-48% (for the 29 pieces of amber), 45%-46% (for the 2 pieces of porcelain pastel paintings), 25%-48% (for the 7 pieces of porcelain), 30.25%-45% (for the 6 sets of Unit+ products), 45% (1 piece of Yixing collectable) and 45% (for the 7 pieces of Sports memorabilia) of the listed values were charged as listing fees, respectively.
During the three months ended March 31, 2020, there were 2 sets of paintings listed on our platform. Their total listing values were $772,121 (HK$6,000,000) for the paintings, of which 22.83%-23% (for the paintings) of the listed values were charged as listing fees.
As of March 31, 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~~$25,758,348 (HK$202,100,000); 35 pieces of jewelry with a total listing value of ~~$9,264,548~~$9,260,770 (HK$72,660,000); 134 pieces of precious stones with a total listing value of ~~$16,835,824~~$16,828,957 (HK$132,040,000); 29 pieces of amber with a total listing value of ~~$12,113,021~~$12,108,081 (HK$95,000,000); 4 pieces of antique mammoth ivory carvings with a total listing value of ~~$663,029~~$662,758 (HK$5,200,000); 2 pieces of porcelain pastel paintings with a total listing value of ~~$331,514~~$331,379 (HK$2,600,000); 7 pieces of ~~porcelains~~porcelain with a total listing value of ~~$1,083,797~~$1,083,355 (HK$8,500,000); 6 sets of Unit+ products with a total listing value of ~~$1,315,092~~$1,314,555 (HK$10,314,000); 1 piece of Yixing collectable with a listing value of ~~$127,505~~$127,453 (HK$1,000,000); and 7 pieces of Sports memorabilia with a listing value of ~~$1,084,995~~$1,084,553 (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 memorabilia) of the listed values were charged as listing fees, respectively.

During the three months ended ~~June 30,~~March 31, 2019, there were ~~no new artworks~~6 sets of paintings listed on our platform. Their total listing values were $1,147,081 (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 $0$176,943 during the three months ended ~~June 30, 2019~~March 31, 2020 compared to ~~$2,000,068~~$289,072 for the same period ended ~~June 30, 2018. During~~March 31, 2019. Compared to those for the ~~second quarter~~three months ended March 31, 2019, the number of ~~2019, we did not have any~~ new ~~listings~~listing of ~~artwork on our platform because we focused on~~paintings and the ~~promotion~~value of ~~transactions on our platform as opposed to new listings. We are also more discreet about~~ the ~~future listings~~artworks were lower during the same period in 2020. There were only two sets of ~~more valuable artworks. Accordingly, new listings were put off~~paintings listed during the three months ended ~~June 30,~~March 31, 2020 while there were six sets of paintings during the same period in 2019 listed on our platform. The total listing value of the new artworks for the three months ended March 31, 2020 was $772,121 compared to $1,147,081 for the three months ended March 31, 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~~We charge a non-transactional transfer commission on the transfer of the ownership of an artwork. The commission amount is calculated based on 0.3% of the close value of the artwork and each artwork unit. For the large volume of transfer or under certain special circumstances, we charge at an agreed-upon percentage of artworks units.
We used to ~~traders~~offer commissions to Traders and service agents. ~~We 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~~Effective January 1, ~~2017.~~2019, we no longer offered commission to our Traders. For service agents, we ~~rebate~~offer a total of 40% to 75% of the commission earned from transactions with new ~~traders~~Traders to the service agents when they bring in an agreed number of ~~traders~~Traders to the trading platform. ~~For service agents who have individual referrers referring traders to us, we will, after rebating such individual referrers 5% of the~~
The commission ~~earned from the transactions of new traders they referred, deduct such 5% of the commission from the rebates payable~~paid to the service agents ~~to which such individual referrers relate.~~
~~The rebates~~ and discounts are recognized as a cost of revenue 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~~Since the second half of ~~traders from mainland China as they could now settle their trades in Renminbi. This trend continued into 2017. However,~~2018, there was a decrease in our trading volume and transaction value amounts ~~during 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. Our trading volume and transaction value amounts increased in the fourth quarter of 2019 and first quarter of 2020.

Total commission revenue ~~decreased~~increased by ~~$1,135,823~~$722,465 or ~~68%~~405.1% for the three months ended ~~June 30, 2019~~March 31, 2020 to ~~$532,740~~$900,823 compared to ~~$1,668,563~~$178,358 for the three months ended ~~June 30, 2018 primarily because of there were no new listings of artwork during~~March 31, 2019. For the three months ended ~~June 30,~~March 31, 2020, the trading amount was approximately $1,669,248,138 (HK$12,971,393,429) compared to $163,552,049 (HK$1,283,229,377) in the same period in 2019. The number of active traders increased by 45,303, from 15,074 in the three months ended March 31, 2019 ~~resulting~~to 60,377 in ~~a decrease~~the same period in ~~trading activities on our platform.~~2020.

(iii) Management fee revenue

We charge traders a management fee to cover the costs of insurance, storage, and transportation for artwork and trading management of artwork units, which 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 30, 2019,~~March 31, 2020, management fee revenue ~~decreased~~increased by ~~$85,570,~~$35,249, from ~~$178,913~~$68,271 for the three months ended ~~June 30, 2018~~March 31, 2019 to ~~$93,343,~~$103,520, due to the ~~decrease~~increase in ~~trading transactions.~~trading.

~~(iv)~~ ~~Annual fee revenue~~
~~During the three-month period ended June 30, 2019, there is no annual fee revenue, compared to $162 for the three-month period ended June 30, 2018~~
~~(v)~~
~~Online artwork sales~~
~~During the three-month period ended June 30, 2019, there is no online artwork sales, compared to $6,304 for the three-month period ended June 30, 2018~~

Revenue by customer type

The following table presents our revenue by customer type:

Three months ended
June 30,

2019 2018
(Unaudited) (Unaudited)
Artwork owners $ - $ 2,000,068
Non - VIP traders 481,162 993,674
VIP traders 144,921 853,964
Online artwork sales - 6,304
Total $ 626,083 $ 3,854,010

Three months ended
March 31,

2020 2019
(Unaudited) (Unaudited)
Artwork owners $ 176,943 $ 289,072
Non – VIP Traders 856,132 154,645
VIP Traders 148,211 91,984
Total $ 1,181,286 $ 535,701

Cost of Revenue

Three months ended
June 30, Three months ended
March 31,
2019 2018 2020 2019
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Commission rebate to service agent $ 235,088 $ 598,519
Commissions paid to service agents $ 497,601 $ 54,916
Depreciation 121,763 168,424 96,191 122,032
Internet service charge 47,104 94,051 34,332 50,674
Artwork insurance 11,971 50,958 12,120 11,962
Artwork storage 25,091 24,995 16,270 27,242
Others 11 3,274 - 453
Total $ 441,028 $ 940,221 $ 656,514 $ 267,279

Cost of revenue for the three months ended ~~June 30,~~March 31, 2020 and March 31, 2019 was $656,514 and ~~June 30, 2018 was $441,028 and $940,221,~~$267,279, respectively. The ~~decrease~~increase in cost of revenue by $389,235, for the three months ended ~~June 30, 2019~~March 31, 2020 compared to ~~June 30, 2018,~~March 31, 2019, was mainly due to ~~the decrease~~an increase in ~~the commission rebates~~commissions paid to service agents by ~~$363,431. Management was focused on resuscitating interest~~$442,685 because of increase in trading transactions in the ~~existing listed artwork in the second~~first quarter of ~~2019. Besides the decrease in commission rebates, the decrease in cost of revenue~~2020 as discussed above. Such increase was ~~also due to~~offset by a decrease in ~~the~~ depreciation by $25,841 due to having fully depreciated of some of our computer equipment and ~~amortization of hardware and software on our~~ trading ~~platform by $46,661 as~~systems, 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~~service charges by ~~$46,947 due to the termination of two network lines between Macau~~$16,342 and ~~Hong Kong, and the decrease in~~ artwork ~~insurance~~storage costs by ~~$38,987 due to a negotiated discount in our new insurance contract for 2019.~~$10,972.

Gross Profit

Gross profit was ~~$185,055~~$524,772 or 44.4% for the three months ended ~~June 30, 2019,~~March 31, 2020, compared to ~~$2,913,789~~$268,422 or 50.1% for the three months ended ~~June 30, 2018. The decrease was due to the decrease in total revenue.~~March 31, 2019.

Listing fees contributed 0%15.0% of the total revenue for the quarter ended ~~June 30, 2019~~March 31, 2020 compared to ~~51.9%~~54.0% in the corresponding period in ~~2018,~~2019, while commission revenue contributed ~~85.1%~~76.3% for the quarter ended ~~June 30, 2019~~March 31, 2020 compared to ~~43.3%~~33.3% in the corresponding period in ~~2018.~~2019. Compared to the same period in ~~2018,~~2019, there was a significant ~~decrease~~increase in ~~listing fee~~commission revenue. On the other hand, our cost of revenue ~~and commission revenue.~~for the three months ended March 31, 2020 was 55.6% of the total revenue compared to 49.9% for the same period in 2019. The higher cost of revenue over the total revenue for the three months ended March 31, 2020 was primarily due to the more commissions being paid to service agents as discussed above. Consequently, we posted a gross profit and gross profit margin of ~~29.6%~~$524,772 and 44.4%, respectively, for the three months ended ~~June 30, 2019~~March 31, 2020 compared to ~~75.6%~~$268,422 and 50.1% for the same period in ~~2018.~~2019, respectively.

Operating Expenses

General and administrative expenses for the three months ended ~~June 30, 2019~~March 31, 2020 were ~~$888,460~~$1,110,447 compared to ~~$2,574,598~~$1,274,585 for the three months ended ~~June 30, 2018.~~March 31, 2019. The ~~significant plunge~~decrease in general and administrative ~~expense~~expenses by ~~$1,686,138~~$164,138 was ~~attributed~~attributable to a decrease in ~~salary~~salaries and welfare by ~~$826,334 due to redundancies since July 2018,~~$122,765 as a ~~decrease in insurance and rental expenses by $297,275 due to the relocation~~result of salary reductions for our ~~Hong Kong office to a non-central district,~~executives, a decrease in legal and professional fees by ~~$106,624, a decrease in traveling~~$84,880 due to reduced audit and ~~accommodation expenses~~legal fees incurred by ~~$113,152 as a result of fewer marketing events, a decrease in non-deductible input VAT by $88,699,~~Hong Kong Takung, a decrease in consultancy fees by ~~$21,075,~~$70,041 as no such fees were incurred in 2020, a decrease in share-based compensation by ~~$53,412,~~$10,865 as there were no restricted shares granted in 2020, a reduction in research and development expenses by $50,540 because such expenses were incurred by Art Era for the development of a software platform in 2019 but not in 2020, a decrease in depreciation by ~~$39,434~~$3,008 and ~~also other~~others by $9,223. The overall decrease was offset by an increase in office, insurance and rental expenses by ~~$140,133.~~$144,639 due to new offices being leased by Tianjin Takung in the second quarter in 2019, travel and accommodation fees by $15,483 attributable to meeting and conference fees incurred by Tianjin Takung for human resources and software program training, and an increase in non-deductible input VAT expenses by $27,062 as a result of an increase in service fees paid to Tianjin Takung in the first quarter 2020 compared to that in the same period in 2019.

The following table sets forth the main components of the Company’s general and administrative expenses for the three months ended ~~June 30, 2019~~March 31, 2020 and ~~2018.~~March 31, 2019.

Three months ended Three months ended
Three months ended
June 30, 2019 Three months ended
June 30, 2018 March 31, 2020 March 31, 2019
(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 48.8 324,732 29.2 447,497 35.1
Office, insurance and rental expenses 147,542 16.6 444,817 17.3 324,779 29.2 180,140 14.1
Legal and professional fees 108,542 12.2 215,166 8.4 189,218 17.1 274,098 21.5
Traveling and accommodation fees 30,985 3.5 144,137 5.6
Non-deductible input VAT expense 44,567 5.0 133,266 5.2 72,093 6.5 45,031 3.5
Travel and accommodation fees 36,841 3.3 21,358 1.7
Consultancy fee 67,277 7.6 88,352 3.4 35,117 3.2 105,158 8.3
Share Based Compensation Expense 13,760 1.6 67,172 2.6
Depreciation 35,924 4.0 75,358 2.9 31,739 2.9 34,747 2.7
R&D expense - - 50,540 4.0
Share based compensation expense 5,986 0.5 16,851 1.3
Others 9,494 1.1 149,627 5.8 89,942 8.1 99,165 7.8
Total general and administrative expense $ 888,460 100 $ 2,574,598 100 $ 1,110,447 100.0 $ 1,274,585 100.0

Other ~~expenses~~(expenses) income

Other expenses for the three-month period ended ~~June 30, 2019~~March 31, 2020 were ~~$486,931,~~$237,303, compared to other ~~expenses~~income of ~~$1,239,008~~$336,744 for the same period in ~~2018.~~2019. There was a significant ~~decrease~~increase in exchange loss by ~~$848,028,~~$595,429, arising from the ~~appreciation~~depreciation of the Renminbi against the US ~~dollar.~~dollar and loan interest expenses of $38,913 incurred in the first quarter of 2020 by a third party financing obtained in the third quarter 2019.

Income tax ~~benefit~~expenses

The Company’s effective tax rate varies due to ~~its~~the multiple jurisdictions in which ~~the~~it books its pretax ~~book incomes~~income or ~~losses incur.~~losses. The Company was subject to a U.S. income tax rate of 21% ~~(34 % prior to January 1, 2018)~~, Hong Kong profits tax rate atof 8.25% for the first ~~HKD~~HK$ 2 million (approximately ~~$255,010)~~$257,374) assessable profits and at 16.5% for assessable profits above ~~HKD~~HK$ 2 million (approximately ~~$255,010)(16.5% prior to January 1, 2018)~~$257,374) and PRC enterprise income tax rate atof 25%.

The effective tax rates for the three months ended ~~June 30,~~March 31, 2020 and 2019 were (10.1)% and ~~2018 were 5.6% and 20.2%~~(1.2)%, respectively.

Income taxes ~~benefit~~expense for the three months ended ~~June 30,~~March 31, 2020 and 2019 were $87,395 and ~~2018 were $66,584 and $273,972,~~$8,562, respectively.

Net Loss

We ~~had~~recorded a net loss of $953,362 and $708,793 for the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~of $1,127,536 compared~~respectively.
The increase in the net loss ~~of $1,084,392 for the three months ended June 30, 2018.~~
~~Increase in net loss~~by $244,569 during ~~the three months ended June 30, 2019~~this current period was predominately due to ~~a fall~~an increase in ~~revenue~~foreign exchange loss by ~~$3,227,927 at 84%,~~$595,429 and an increase in income tax expense by $78,833, which were offset by an increase in gross profit by $256,350, a decrease in operating expenses by ~~$2,140,901, or 71% compared to the three months ended June 30, 2018 because of cost-cutting measures. It was also affected by a decrease of exchange losses by $848,028.~~
~~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~~$151,961 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 on resuscitating interest in the trading of our existing artwork and generating more commission revenue.

~~SIX-MONTH PERIOD ENDED JUNE 30, 2019 COMPARED TO SIX-MONTH PERIOD ENDED JUNE 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 )
~~Revenue~~
~~The following table sets forth our condensed consolidated revenue by revenue source:~~
Six months ended
June 30,
2019 2018
(Unaudited) (Unaudited)
Listing fee revenue $ 284,090 $ 3,978,735
Commission 716,080 3,304,080
Management fee revenue 161,614 347,228
Authorized agent subscription revenue - 191,623
Annual fee revenue 324
Online artwork sales - 6304
Total $ 1,161,784 $ 7,828,294
~~(i)~~ ~~Listing fee revenue~~
As of June 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 (HK$202,100,000); 35 pieces of jewelry with a total listing value of $9,264,548 (HK$72,660,000); 134 pieces of precious stones with a total listing value of $16,835,824 (HK$132,040,000); 29 pieces of amber with a total listing value of $12,113,021 (HK$95,000,000); 4 pieces of antique mammoth ivory carvings with a total listing value of $663,029 (HK$5,200,000); 2 pieces of porcelain pastel paintings with a total listing value of $331,514 (HK$2,600,000); 7 pieces of porcelains with a total listing value of $1,083,797 (HK$8,500,000); 6 sets of Unit+ products with a total listing value of $1,315,092 (HK$10,314,000); 1 piece of Yixing collectable with a listing value of $127,505 (HK$1,000,000); and 7 pieces of Sports memorabilia with a listing value of $1,084,995 (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), 30.25%-45% (for the 6 sets of Unit+ products), 45% (1 piece of Yixing collectable) and 45% (for the 7 pieces of Sports memorabilia) of the listed values were charged as listing fees, respectively.

During the six months ended June 30, 2019, there were 6 sets of paintings listed on our platform. Their total listing values were $1,147,549 (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 months ended June 30, 2019 compared to $3,978,735 for the same period ended June 30, 2018. During the six months ended June 30, 2019, we have slowed down the listings of artwork on our platform because we focused on the promotion of transactions on our platform as opposed to new listings. We will also be more discreet about the future listings of more valuable artworks. Hence, new listings were put off during the six months ended June 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% for the six months ended June 30, 2019 to $716,080 compared to $3,304,080 for the six months ended June 30, 2018 primarily because there were no new listings of artwork on our platform in the second quarter and this drove down trading activity during the second quarter.
~~(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 period ended June 30, 2019, management fee revenue decreased by $185,614, from $347,228 for the six months ended June 30, 2018 to $161,614, due to the decrease in trading transactions in the current quarter.
~~(iv)~~ ~~Annual fee revenue~~
~~During the six-month period ended June 30, 2019, there is no annual fee revenue, compared to $324 for the six-month period ended June 30, 2018.~~

~~(v)~~ ~~Authorized agent subscription revenue~~
~~During the six-month period ended June 30, 2019, there are no authorized agent subscription revenue, compared to $191,623 for the six-month period ended June 30, 2018.~~
~~(v)~~ ~~Online artwork sales~~
During the six-month period ended June 30, 2019, there are no online artwork sales, compared to $6,304 for the six-month period ended June 30, 2018 primarily because of shutting 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,

2019 2018
(Unaudited) (Unaudited)
Artwork owners $ 284,090 $ 3,978,735
Non - VIP traders 640,789 2,095,208
VIP traders 236,905 1,556,424
Authorized agents - 191,623
Online artwork sales - 6,304
Total $ 1,161,784 $ 7, 828,294
~~Cost of Revenue~~
Six months ended
June 30,
2019 2018
(Unaudited) (Unaudited)
Commission rebate to service agent $ 290,004 $ 1,205,010
Depreciation 243,795 327,561
Internet service charge 97,778 186,489
Artwork insurance 23,933 104,652
Artwork storage 52,333 46,577
Others 464 3,525
Total $ 708,307 $ 1,873,814
Cost of revenue for the six months ended June 30, 2019 and June 30, 2018 was $708,307 and $1,873,814, respectively. The decrease in cost of revenue for the six months ended June 30, 2019 compared to June 30, 2018, was mainly due to the decrease in the commission rebates to service agents by $915,006. Management was focused on resuscitating interest in the listed artwork and no new artwork was listed in the second quarter of 2019. Besides the decrease in commission rebates, the decrease in cost of revenue was also due to a decrease in the depreciation and amortization of hardware and software on our trading platform by $83,766 as a result of the suspension of e-commerce activity and impairment of all online software development assets in 2018, the decrease in internet servicesbank charges by ~~$88,711 due to the termination of two network lines between Macau and Hong Kong, and the decrease in artwork insurance by $80,719 due to a negotiated discount in our new insurance contract for 2019.~~$25,468.

~~Gross Profit~~
~~Gross profit was $453,477 for the six months ended June 30, 2019, compared to $5,954,480 for the six months ended June 30, 2018. The decrease was mainly due to the decrease in total revenue.~~
Overall total revenue for the six months ended June 30, 2019 dropped by $6,666,510 or 85.2% 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% for the six months ended June 30, 2019 compared to 76.1% for the same period in 2018.
~~Operating Expenses~~
General and administrative expenses for the six months ended June 30, 2019 were $2,163,045, compared to $5,583,483 for the six months ended June 30, 2018. The significant plunge in general and administrative expense by $3,420,438 was attributed to a decrease in salary and welfare by $1,786,374 due to redundancies since July 2018, a decrease in insurance and rental expenses by $534,273 due to the relocation of our Hong Kong office to a non-central district, a decrease in legal and professional fees by $206,548, a decrease in traveling and accommodation expenses by $415,331 as a result of fewer marketing events, a decrease in non-deductible input VAT by $203,622, a decrease in consultancy fees by $42,155, share-based compensation by $121,810, depreciation by $74,253 and also other expenses by $36,072.

~~The following table sets forth the main components of the Company’s general and administrative expenses for the six months ended June 30, 2019 and June 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
~~Other income and expenses~~
~~Other expenses for the six months ended June 30, 2019 was $150,187, compared to $161,493 for the six months ended June 30, 2018. The amount was comparable between two periods.~~
~~Income tax benefit (expenses)~~
The Company’s effective tax rate varies due to its multiple jurisdictions where pre-tax income or losses occur. The Company is subject to a Hong Kong profits tax rate at 8.25% for the first HKD 2 million (approximately $255,010) assessable profits and at 16.5% for assessable profits above HKD 2 million (approximately $255,010) (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% prior to January 1, 2018 while 21% after January 1, 2018 due to the Tax Cuts and Jobs Act enacted on December 22, 2017.
~~The effective tax rates for the six months ended June 30, 2019 and 2018 were 3.1% and (34.2)%, respectively.~~
~~Income taxes benefit (expense) for the six months ended June 30, 2019 and 2018 were $58,022 and $(168,468), respectively.~~
~~Net loss~~
~~We had a net loss for the six months ended June 30, 2019 of $1,836,329 compared to net loss of $661,102 for the six months ended June 30, 2018.~~
~~The net loss after income tax expense incurred during this current period was predominantly driven by a decrease in gross profit by $5,501,003.~~

Liquidity and Capital Resources

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

Three months ended
March 31,
2020 2019
(Unaudited) (Unaudited)
Net cash (used in) provided by operating activities $ (1,214,913 ) $ 6,175,680
Net cash provided by investing activities - 2,416,019
Net cash used in financing activities - (2,499,500 )
Effect of exchange rate change on cash and cash equivalents (85,550 ) (503,119
Net (decrease) increase in cash, cash equivalents and restricted cash (1,300,463 ) 5,589,080
Cash, cash equivalents and restricted cash, beginning balance 21,829,154 12,524,086
Cash, cash equivalents and restricted cash, ending balance $ 20,528,691 $ 18,113,166
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
Sources of Liquidity

During the three months ended March 31, 2020, net cash used in operating activities totaled $1,214,913, which predominately resulted from the net loss of $953,362 and a decline in net change in operating assets and liabilities of $654,218 and offset by non-cash adjustments to net loss of $392,667. There was no net cash used in or provided by investing or financing activities for the three months ended March 31, 2020. The resulting change in cash for the period was a decrease of $1,300,463. The cash balance at the beginning of the period was $21,829,154. The cash balance as of March 31, 2020 was $20,528,691.
During the ~~six~~three months ended ~~June 30,~~March 31, 2019, net cash generated from operating activities totaled ~~$21,615,744,~~$6,175,680, which predominately 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~~$5,823,253 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 a presentation issue and there should be no actual impact to the operating activities.~~clients. Net cash generated from investing activities totaled ~~$2,409,459.~~$2,416,019. Net cash used in financing activities totaled ~~$2,106,342.~~$2,499,500. The resulting change in cash for the period was an increase of ~~$21,928,951.~~$5,589,080. The cash balance at the beginning of the period was $12,524,086. The cash balance ~~on June 30,~~as of March 31, 2019 was ~~$34,453,037.~~$18,113,166.
During the six months ended June 30, 2018, net cash used in operating activities totaled $5,625,065 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 was a decline in client deposits by $5,357,186 in which influenced the drop of 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. Net cash generated from financing activities totaled $5,888,608. The resulting change in cash for the period was a decrease of $6,896,324. The cash balance at the beginning of the period was $37,140,582. The cash balance on June 30, 2018 was $30,244,258.
.
As of ~~June 30, 2019,~~March 31, 2020, the Company had ~~$34,608,620~~$18,769,001 in total current liabilities, which ~~comprised of $618,014~~included $831,399 in accrued ~~expense~~expenses and other payables, ~~$27,001,865~~$15,466,438 in customers’ deposits, ~~$7,043~~$1,916,540 in ~~advance~~short-term borrowings from ~~customer, $6,790,399~~a third party, $383,638 in amount due to related parties, ~~$178,917~~$16,364 in advances from customers, $132,348 in lease liabilities and ~~$12,382~~$22,274 in tax payables.
As of December 31, ~~2018,~~2019, the Company had ~~$14,099,778~~$25,947,490 in total current liabilities, which included ~~$641,692~~$629,666 in accrued expenses and other payables, ~~$8,995 in advance from customers, $4,549,202~~$16,404,941 in customers’ deposits, ~~$2,499,500~~$1,868,345 in short-term borrowings from a third ~~parties, $6,385,288~~party, $6,862,713 in amount due to related ~~party,~~parties, $8,788 in advances from customers, $166,987 in lease liabilities and ~~$15,101~~$6,050 in ~~tax~~VAT 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 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 downturn including a decrease in trading volume and customer deposits, we are also undergoing a company restructuring, including re-evaluating the ~~Company’s core~~company’s Unit business and a ~~downsizing~~downsize of ~~its~~the 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~~shares in order to fund further expansion and growth of our business. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any sales of the equity securities to fund expansion and other activities, 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,~~2019, 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,~~2019, previously filed with the SEC.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), under the supervision of and with the participation of our management, which presently comprises our Chief Executive Officer, Ms. Fang Mu and our Chief Financial Officer, ~~Mr. Jehn Ming Lim.~~Mrs. Jing Wang. 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 30, 2019~~March 31, 2020 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 30, 2019~~March 31, 2020 that materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On or around early April and May, 2020, plaintiffs Chunji Zhao Guangming Su respectively, commenced legal proceedings against Hong Kong Takung Art Co. Ltd and Takung Cultural Development (Tianjin) Co., Ltd, over a contract dispute relating to the Company’s trading platform use agreement amounting to an aggregate of approximately $0.23 million. Both cases originated in the Shanghai Pudong People’s Court and were originally brought against Takung (Shanghai) Co., Ltd (“Shanghai Takung. However, because Shanghai Takung was deregistered on May 8, 2020, both plaintiffs requested in their respective cases that the named defendant in the case be changed to Hong Kong Takung Art Co. Ltd, its parent company. The plaintiffs also requested that Takung Cultural Development (Tianjin) Co., Ltd be named as an additional defendant in each case. In addition to damages, plaintiffs Chunji Zhao and Guangming Su are also claiming litigation costs of RMB1,090,000 (approximately, $152,000) and RMB 536,025 (approximately,$75,733) respectively. We do not believe that the proceedings have any merit and intend to vigorously defend against them.

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.~~
(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 14, 2019~~June 29, 2020
By: /s/ Fang Mu
Fang Mu
Chief Executive Officer
(Principal Executive Officer)

Date: ~~August 14, 2019~~June 29, 2020
By: /s/ ~~Jehn Ming Lim~~Jing Wang
~~Jehn Ming Lim~~Jing Wang
Chief Financial Officer
(Principal Financial Officer)

	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

	March 31,			December 31,
	2020			2019
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	5,062,253		$	5,424,213
Restricted cash		15,466,438			16,404,941
Account receivables, net		154,813			-
Prepayment and other current assets, net		311,103			451,248
Amount due from a related party		-			5,834,554
Loan receivables		1,977,178			2,010,974
Total current assets		22,971,785			30,125,930

Non-current assets
Property and equipment, net		727,443			859,826
Intangible assets		22,510			22,401
Deferred tax assets, net		557,136			540,279
Operating lease right-of-use assets		582,121			731,469
Amount due from related parties		5,838,877			104,128
Other non-current assets		57,675			57,470
Total non-current assets		7,785,762			2,315,573
Total assets	$	30,757,547		$	32,441,503

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES
Current liabilities
Accrued expenses and other payables	$	831,399		$	629,666
Customer deposits		15,466,438			16,404,941
Advance from customers		16,364			8,788
Short-term borrowings from a third party		1,916,540			1,868,345
Amount due to related parties		383,638			6,862,713
Operating lease liabilities – current		132,348			166,987
Tax payables		22,274			6,050
Total current liabilities		18,769,001			25,947,490

Non-current liabilities
Operating lease liabilities, non-current		49,002			48,856
Amount due to a related party, non-current		6,450,531			-
Total non-current liabilities		6,499,533			48,856
Total liabilities		25,268,534			25,996,346

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 March 31, 2020; 11,255,129 shares issued and outstanding as of December 31, 2019)		11,255			11,255
Additional paid-in capital		6,326,590			6,320,604
(Accumulated deficit) retained earnings		(567,035	)		386,327
Accumulated other comprehensive loss		(281,797	)		(273,029	)
Total shareholders’ equity		5,489,013			6,445,157
Total liabilities and shareholders’ equity	$	30,757,547		$	32,441,503

	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

	Three Months Ended
	March 31,			March 31,
	2020			2019
Revenue
Listing fee	$	176,943		$	289,072
Commission		900,823			178,358
Management fee		103,520			68,271
Total revenue		1,181,286			535,701

Cost of revenue		(656,514	)		(267,279	)
Gross profit		524,772			268,422

Operating expenses
General and administrative expenses		(1,110,447	)		(1,274,585	)
Selling expenses		(42,989	)		(30,812	)
Total operating expenses		(1,153,436	)		(1,305,397	)

Loss from operations		(628,664	)		(1,036,975	)

Other income and expenses:
Other income (expenses)		38,305			(21,990	)
Loan interest expense		(38,913	)		-
Exchange (loss) gain		(236,695	)		358,734
Total other (expenses) income		(237,303	)		336,744

Loss before income tax expense		(865,967	)		(700,231	)

Income tax expense		(87,395	)		(8,562	)

Net loss		(953,362	)		(708,793	)

Foreign currency translation adjustment		(8,768	)		(5,480	)

Comprehensive loss	$	(962,130	)	$	(714,273	)

Loss per common share – basic	$	(0.08	)	$	(0.06	)
Loss per common share – diluted	$	(0.08	)	$	(0.06	)
Weighted average number of common shares outstanding –basic		11,255,129			11,226,025
Weighted average number of common shares outstanding –diluted		11,255,129			11,226,025

										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

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

	Six Months			Six Months
	Ended			Ended			Three Months Ended
	June 30,			June 30,			March 31,			March 31,
	2019			2018			2020			2019
Cash flows from operating activities:
Net cash provided by (used in) operating activities	$	21,615,744		$	(5,625,065	)
Net cash (used in) provided by operating activities								(1,214,913	)		6,175,680

Cash flows from investing activities:
Purchase of property and equipment		(33,792	)		(790,159	)		-			(27,233	)
Purchase of available-for-sale investments		(21,372,178	)		(74,934,730	)		-			(10,633,534	)
Maturity and redemption of available-for-sale investments		21,372,178			74,934,730			-			10,633,534
Loan to related parties		-			(6,369,809	)
Repayment of loan from third parties		2,443,251			239,356
Net cash provided by (used in) investing activities		2,409,459			(6,920,612	)
Repayment from loan to third party								-			2,443,252
Net cash provided by investing activities								-			2,416,019

Cash flows from financing activities:
Proceeds from a related party’s loans		393,158			6,372,430
Loan repayment to a third party		(2,499,500	)		(483,822	)
Net cash (used in) provided by financing activities		(2,106,342	)		5,888,608
Repayment of loan from third party								-			(2,499,500	)
Net cash used in financing activities								-			(2,499,500	)

Effect of exchange rate change on cash, cash equivalents and restricted cash		10,090			(239,255	)		(85,550	)		(503,119	)

Net increase (decrease) in cash, cash equivalents and restricted cash		21,928,951			(6,896,324	)
Net (decrease) increase in cash, cash equivalents and restricted cash								(1,300,463	)		5,589,080

Cash, cash equivalents and restricted cash, beginning balance		12,524,086			37,140,582			21,829,154			12,524,086

Cash, cash equivalents and restricted cash, ending balance	$	34,453,037		$	30,244,258		$	20,528,691		$	18,113,166

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 March 31, 2020 and 2019, respectively								5,062,253			7,740,711
Restricted cash as of March 31, 2020 and 2019, respectively								15,466,438			10,372,455
Total cash, cash equivalents, and restricted cash as of March 31, 2020 and 2019, respectively								20,528,691			18,113,166

Supplemental cash flows information:

Cash paid for interest	$	-		$	144,311		$	-		$	-
Cash paid for income tax	$	-		$	261,285		$	-		$	-

	June 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
	(Unaudited)						(Unaudited)
Listing fee	$	-		$	568,757		$	154,813		$	-
Authorized agent subscription revenue		559,280			557,837			563,537			560,780
Monthly commission fee		1,381,712			1,378,148			1,392,229			1,385,420
Others		53,765			53,626			54,174			53,909
Less: allowance for doubtful accounts		(1,994,757	)		(1,989,611	)		(2,009,940	)		(2,000,109	)
Account receivables, net	$	-		$	568,757		$	154,813		$	-

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	$	706,135	0	%	7/17/2020
8/29/2019	Chongqing Aoge Import and Export Co.		Tianjin Takung		5,000,000		5,000,000	$	706,135	0	%	8/28/2020
9/20/2019	Chongqing Aoge Import and Export Co.		Tianjin Takung		4,000,000		4,000,000	$	564,908	0	%	9/19/2020
					Total			$	1,977,178

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

	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 March 31,
	2020			2019
		(Unaudited)			(Unaudited)
Current:
Federal	$	-		$	-
State		-			-
Foreign		101,561			-
Total Current	$	101,561		$	-

Deferred:
Federal	$	-		$	-
State		-			-
Foreign		(14,166	)		8,562
Total Deferred	$	(14,166	)	$	8,562

Total income tax expense	$	87,395		$	8,562

	March 31, 2020		December 31, 2019
Uncertain tax liabilities, beginning of period		-		-
Additions for tax position of current period		73,446		-
Uncertain tax liabilities, end of period	$	73,446	$	-

Assets/liabilities	Classification	As of June 30, 2019		Classification	As of March 31, 2020
Assets
Operating lease right-of-use assets	Operating lease assets	$	1,070,655	Operating lease assets	$	582,121

Liabilities
Current
Operating lease liability - current	Current operating lease liabilities	$	178,917	Current operating lease liabilities	$	132,348
	Amount due to related parties		382,348	Amount due to a related party		377,342

Long-term
Operating lease liability - non-current	Long-term operating lease liabilities		133,200	Long-term operating lease liabilities		49,002
	Amount due to related parties, non-current		411.389

Total lease liabilities		$	1,105,854		$	558,692

		Three months ended		Six months ended			Three Months Ended March 31,
Lease Cost	Classification	June 30, 2019		June 30, 2019		Classification	2020		2019
Operating lease cost	Cost of revenue, general and administrative expenses	$	86,395	$	137,173	Cost of revenue, general and administrative expenses	$	200,362		190,449
Total lease cost		$	86,395	$	137,173		$	200,362		190,449

Maturity of Lease Liabilities	Operating Leases
2019 (remainder)	$	524,245
2020		600,072
2021		14,566
2022		14,566
2023		14,566
Thereafter		21,849
Total lease payments	$	1,189,864
Less: interest		(84,010	)
Present value of lease payments	$	1,105,854

	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

Maturity of Lease Liabilities	Operating Leases
2020 (remaining)	$	530,175
2021		14,123
2022		14,123
2023		14,123
2024		14,123
Thereafter		-
Total lease payments	$	586,667
Less: interest		(27,975	)
Present value of lease payments	$	558,692

	Three Months Ended March 31,
Lease Term and Discount Rate	2020			2019
Weighted-average remaining lease term (years)
Operating leases		1.51			2.60

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

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

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

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

	Three Months Ended June 30,												Three Months Ended March 31,
	2019			% of Revenue			2018			% of Revenue			2020			% of Revenue			2019			% of Revenue
	(Unaudited)						(Unaudited)						(Unaudited)						(Unaudited)
Revenue	$	626,083			100		$	3,854,010			100		$	1,181,286			100		$	535,701			100
Cost of revenue		(441,028	)		(70	)		(940,221	)		(24	)		(656,514	)		(56	)		(267,279	)		(50	)
Selling expense		(3,784	)		(1	)		(458,547	)		(12	)		(42,989	)		(4	)		(30,812	)		(6	)
General and administrative expenses		(888,460	)		(142	)		(2,574,598	)		(67	)		(1,110,447	)		(94	)		(1,274,585	)		(238	)
Total costs and expenses		(1,333,272	)		(213	)		(3,973,366	)		(103	)		(1,809,950	)		(154	)		(1,572,676	)		(294	)
Loss from operations		(707,189	)		(113	)		(119,356	)		(3	)		(628,664	)		(54	)		(1,036,975	)		(194	)
Total other expenses		(486,931	)		(78	)		(1,239,008	)		(32	)
(Loss) income before income tax expenses		(1,194,120	)		(191	)		(1,358,364	)		(35	)
Income tax benefit		66,584			11			273,972			7
Interest and other (expenses) income, net														(237,303	)		(20	)		336,744			63
Loss before income tax expense														(865,967	)		(74	)		(700,231	)		(131	)
Income tax expense														(87,395	)		(7	)		(8,562	)		(2	)
Net loss	$	(1,127,536	)		(180	)	$	(1,084,392	)		(28	)	$	(953,362	)		(81	)	$	(708,793	)		(133	)

									Three months ended				Three months ended
	Three months ended June 30, 2019				Three months ended June 30, 2018				March 31, 2020				March 31, 2019
	(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		324,732		29.2		447,497		35.1
Office, insurance and rental expenses		147,542		16.6		444,817		17.3		324,779		29.2		180,140		14.1
Legal and professional fees		108,542		12.2		215,166		8.4		189,218		17.1		274,098		21.5
Traveling and accommodation fees		30,985		3.5		144,137		5.6
Non-deductible input VAT expense		44,567		5.0		133,266		5.2		72,093		6.5		45,031		3.5
Travel and accommodation fees										36,841		3.3		21,358		1.7
Consultancy fee		67,277		7.6		88,352		3.4		35,117		3.2		105,158		8.3
Share Based Compensation Expense		13,760		1.6		67,172		2.6
Depreciation		35,924		4.0		75,358		2.9		31,739		2.9		34,747		2.7
R&D expense										-		-		50,540		4.0
Share based compensation expense										5,986		0.5		16,851		1.3
Others		9,494		1.1		149,627		5.8		89,942		8.1		99,165		7.8
Total general and administrative expense	$	888,460		100	$	2,574,598		100	$	1,110,447		100.0	$	1,274,585		100.0

	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	)

	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

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*

	TAKUNG ART CO., LTD

Date: ~~August 14, 2019~~June 29, 2020	By:	/s/ Fang Mu
		Fang Mu
		Chief Executive Officer
		(Principal Executive Officer)

Date: ~~August 14, 2019~~June 29, 2020	By:	/s/ ~~Jehn Ming Lim~~Jing Wang
		~~Jehn Ming Lim~~Jing Wang
		Chief Financial Officer
		(Principal Financial Officer)