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 this report,
the words “anticipate”, “believe”, “estimate”, “expect”, “future”,
“intend”, “plan” or the negative of these terms and similar expressions as they relate to us or our management
identify forward-looking statements. Such statements reflect the current view of our management with respect to future events
and are subject to risks, uncertainties, assumptions and other factors as they relate to our industry, our operations and results
of operations, and any businesses that we may acquire. Should one or more of the events described in these risk factors materialize,
or should our underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed,
estimated, expected, intended or planned.
Although we believe
that the expectations reflected in the forward looking statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. Except as required by applicable law, including the U.S. federal securities laws, we do
not intend to update any of the forward-looking statements to conform them to actual results 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 for artists, art dealers, and art investors to offer and trade
in valuable artwork.
Through Hong Kong
Takung, we offer an on-line listing and trading services that allows artists, art dealers and owners to access a larger artwork
trading market where they can engage with a wide range of investors that they may not encounter without access of our platform.
Our platform also makes investments in high-end and expensive artwork more accessible to ordinary people without substantial financial
resources.
We generate revenue
from our services in connection with the offering and trading of artwork on our system, primarily consisting of listing fees,
trading commissions, management fees and authorized agent subscription.
On July 28, 2015,
Hong Kong Takung incorporated a wholly owned subsidiary, Takung (Shanghai) Co., Ltd. (“Shanghai Takung”), in Shanghai
Free-Trade Zone (SFTZ) in Shanghai, China, with a registered capital of $1 million. Shanghai Takung is engaged in providing services
to its parent company Hong Kong Takung by receiving deposits from and making payments to online artwork traders for and on behalf
of Hong Kong Takung.
On January 27, 2016,
Hong Kong Takung incorporated another subsidiary, Takung Cultural Development (Tianjin) Co., Ltd (“Tianjin Takung”),
a limited liability company, with a registered capital of $1 million in Tianjin Pilot Free Trade Zone in Tianjin, People’s
Republic of China. Tianjin Takung provides technology development services to Hong Kong Takung and Shanghai Takung, and also carries
out marketing and promotion activities in mainland China.
Since July 28, 2016,
we have expanded access to our trading platform to residents of Russia, Mongolia, Australia and New Zealand – our first
major expansion of operations outside of China. To further stimulate trading interest, we have added selected portfolios from
these countries to our platform, which now numbers 199 artworks including three Russian painting portfolios and fifteen Mongolian
paintings.
Our headquarters are
located in Hong Kong, Special Administrative Region, People’s Republic of China and we conduct our business primarily in
Hong Kong, Shanghai, and Tianjin. Our principal executive offices are located at Flat/RM 03-04, 20/F, Hutchison House, 10 Harcourt
Road, Central Hong Kong.
Our common stock began
trading on the NYSE American under the symbol “TKAT” on March 22, 2017.
Hong Kong Takung Art
Holdings Company Limited (“Takung Art Holdings”) was formed in Hong Kong on July 20, 2018 and operates as a holding
company to control an online platform for offering, selling and trading whole piece of artwork.
Art Era Internet Technology
(Tianjin) Co., Ltd (“Art Era”) was formed in Tianjin on September 7, 2018, is a directly wholly owned subsidiary of
Takung Art Holdings, and formed as a limited liability company with a registered capital of $2 million located in the Pilot Free
Trade Zone in Tianjin. Art Era mainly focuses on developing our e-commerce platform for art and copyright registration (Takung
Online) with the use of blockchain technology.
Shanghai Takung closed
its office in Hangzhou, used for technology development on September 13, 2018.
On October 1, 2018,
Wang Song (Marketing Manager) was appointed as Hong Kong Takung’s new CEO and President and Xiao Di resigned therefrom effective
as of the same day. As from October 1, 2018, Xiao Di is mainly responsible for the e-commerce business, with a focus on the Company’s
new subsidiary, Takung Art Holdings and diversity in the new e-commerce business, such as combining Takung Online, the development
of the application of blockchain and the use of intellectual property among others.
Results of Operation of Takung
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. Starting
in the second quarter of 2018, Shanghai Takung launched an offering of artwork and artwork related merchandise for sales on our
online platform. The offering is to further promote the artwork’s recognition.
THREE-MONTH PERIOD ENDED SEPTEMBER
30, 2018 COMPARED TO THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2017
The following tables set forth our condensed
consolidated statements of income data:
|
|
|
Three Months
Ended
September 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Revenue
|
|
$
|
363,534
|
|
|
$
|
3,355,011
|
|
|
Cost of revenue
|
|
|
(299,482
|
)
|
|
|
(292,168
|
)
|
|
Selling expense
|
|
|
(149,035
|
)
|
|
|
(624,151
|
)
|
|
General and administrative expenses
|
|
|
(2,208,264
|
)
|
|
|
(2,498,848
|
)
|
|
Impairment loss – construction-in-progress
|
|
|
(326,227
|
)
|
|
|
-
|
|
|
Total costs and expenses
|
|
|
(2,983,008
|
)
|
|
|
(3,415,167
|
)
|
|
Loss from operations
|
|
|
(2,619,474
|
)
|
|
|
(60,156
|
)
|
|
Interest and other (expenses) income, net
|
|
|
(1,004,552
|
)
|
|
|
211,852
|
|
|
(Loss) income before income taxes
|
|
|
(3,624,026
|
)
|
|
|
151,696
|
|
|
Income tax benefit (expense)
|
|
|
742,670
|
|
|
|
(124,662
|
)
|
|
Net (loss) income
|
|
$
|
(2,881,356
|
)
|
|
$
|
27,034
|
|
The following tables set forth our condensed
consolidated statements of income data (as a percentage of revenue):
|
|
|
Three Months Ended
September 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Revenue
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Cost of revenue – Direct revenue
|
|
|
(82
|
)
|
|
|
(9
|
)
|
|
Selling expense
|
|
|
(41
|
)
|
|
|
(18
|
)
|
|
General and administrative expenses
|
|
|
(608
|
)
|
|
|
(74
|
)
|
|
Impairment loss –
construction-in-progress
|
|
|
(90
|
)
|
|
|
-
|
|
|
Total costs and expenses
|
|
|
(821
|
)
|
|
|
(101
|
)
|
|
(Loss) income from operations
|
|
|
(721
|
)
|
|
|
(1
|
)
|
|
Interest and other (expenses) income, net
|
|
|
(276
|
)
|
|
|
6
|
|
|
(Loss) income before income taxes
|
|
|
(997
|
)
|
|
|
5
|
|
|
Income tax benefit (expense)
|
|
|
204
|
|
|
|
(4
|
)
|
|
Net (loss) income
|
|
|
(793
|
)%
|
|
|
1
|
%
|
Revenue
For comparative purpose, we adjusted the
revenue for three months ended September 30, 2017 as if retrospectively adopting ASC 606.
The following table sets forth our condensed
consolidated revenue by revenue source:
|
|
|
Three months ended
September 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
As previously
reported
|
|
|
Adjustments
|
|
|
Adjusted
|
|
|
Listing fee revenue
|
|
$
|
-
|
|
|
$
|
1,455,498
|
|
|
|
-
|
|
|
$
|
1,455,498
|
|
|
Commission
|
|
|
253,331
|
|
|
|
1,496,826
|
|
|
|
103,742
|
|
|
|
1,600,568
|
|
|
Management fee revenue
|
|
|
107,905
|
|
|
|
402,547
|
|
|
|
-
|
|
|
|
402,547
|
|
|
Annual fee revenue
|
|
|
54
|
|
|
|
140
|
|
|
|
-
|
|
|
|
140
|
|
|
Online artwork sales
|
|
|
2,244
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Total
|
|
$
|
363,534
|
|
|
$
|
3,355,011
|
|
|
$
|
103,742
|
|
|
$
|
3,458,753
|
|
As of September 30,
2018, a total of 278 sets of artwork were listed for trade on our platform —comprising 54 sets of paintings and calligraphies
from famous Chinese, Russian and Mongolian artists, with a total listing value of $24,628,845 (HK$193,100,000); 35 pieces of jewelry
with a total listing value of $9,267,384 (HK$72,660,000); 134 pieces of precious stones with a total listing value of $16,267,027
(HK$127,540,000); 29 pieces of amber with a total listing value of $12,690,679 (HK$99,500,000); 4 pieces of antique mammoth ivory
carvings with a total listing value of $663,231 (HK$5,200,000); 2 pieces of porcelain pastel paintings with a total listing value
of $331,616 (HK$2,600,000); 6 pieces of porcelains with a total listing value of $956,584 (HK$7,500,000); 6 sets of Unit+ products
with a total listing value of $1,315,494 (HK$10,314,000); 1 piece of Yixing collectable with a listing value of $127,545 (HK$1,000,000);
and 7 pieces of Sports memorabilia with a listing value of $1,085,327 (HK$8,509,400), of which 22.5%-48% (for 54 sets of paintings),
24%-48.5% (for the 134 pieces of precious stones), 29%-48% (for the 35 pieces of jewelry), 47%-48.5% (for 4 piece of antique mammoth
ivory carvings), 32%-48% (for the 29 pieces of amber), 45%-46% (for the 2 pieces of porcelain pastel paintings), 44.94%-48% (for
the 6 pieces of porcelains), 30.25%-45% (for the 6 sets of Unit+ products), 45% (1 piece of Yixing collectable) and 45% (for the
7 pieces of Sports memorabilia) of the listed values were charged as listing fees, respectively.
During the three months
ended September 30, 2018, there were no more artworks listed on our platform.
The decrease in listing
fees charged during the three months ended September 30, 2018 compared to the same period ended September 30, 2017 due to the
downsizing of online fine art and collectibles platforms, tightening of liquidity in China, and the Company’s decision of
suspending the new artwork listing activities that was announced in a press release furnished in the current report on Form 8-K
dated August 13, 2018.
|
|
(ii)
|
Commission fee revenue
|
We generate commission
fee from non-VIP traders and selected traders as follows:
For non-VIP traders,
the commission revenue was calculated based on a percentage of transaction value of artworks, where we charge trading commissions
for the purchase and sale of the ownership shares of the artworks. The commission is typically 0.3% of the total amount of each
transaction, but as an initial promotion, we currently charge a reduced fee of 0.2% (resulting in an aggregate of 0.4% for both
buy and sell transactions) of the total transaction amount with the minimum charge of $0.13 (HK$1). The commission is accounted
for as revenue and immediately deducted from the proceeds from the sales of artwork units when a transaction is complete.
For selected traders,
starting April 1, 2016, we charged a predetermined monthly fee allowing unlimited trades for specific artworks. These traders
are selected by authorized agents and reviewed by us. After review, we negotiate individually with each reviewed trader to determine
a fixed monthly fee. Different traders may have different rates but once negotiated and agreed to, the monthly fee is fixed. Using
the output method, we recognize the monthly commission revenue, whereby the selected traders receive access to our trading platform
where they can make unlimited trades for specific artworks.
We defined a selected
trader as an inactive trader who meets one of the following criteria:
|
|
·
|
The trader has been default in making monthly commission payment over
three months.
|
|
|
·
|
The trader has not incurred any sales or purchase transactions in the
month of reassessment.
|
|
|
·
|
The offering agent confirms that the respective selected trader is inactive.
|
Commission rebate
programs are offered to traders and service agents. We pay to existing traders 5% of the commission earned from the transactions
of new traders referred by them. The rebate was adjusted from 15% to 5%, starting January 1, 2017. For service agents, we rebate
a total of 40% to 68% of the commission earned from transactions with new traders to the service agents when they bring in an
agreed number of traders to the trading platform. For service agents who have individual referrers referring traders to us, we
will, after rebating such individual referrers 5% of the commission earned from the transactions of new traders they referred,
deduct such 5% of the commission from the rebates payable to the service agents to which such individual referrers relate. The
commission rebate is recognized as reduction of the commission revenue prior to January 1, 2018 under Topic 605. Starting January
1, 2018, we account for the commission rebate as cost of revenue under Topic 606.
The rebates and
discounts are recognized in the same period the related revenue is recognized.
Total commission revenue
decreased by $1,243,495 or 83% for the three months ended September 30, 2018 to $253,331 compared to $1,496,826 for the three
months ended September 30, 2017 primarily because of the suspension of new listings of products, with the decrease of trading
activity on the artwork platform.
|
|
(iii)
|
Management fee revenue
|
We charge traders
a management fee to cover the costs of insurance, storage, and transportation for artwork and trading management of artwork units,
which are calculated at $0.0013 (HK$0.01) per 100 artwork units per day. The management fee is deducted from proceeds from the
sale of artwork units.
During the three-month
period ended September 30, 2018, management fee revenue decreased by $294,642, from $402,547 for the three months ended September
30, 2017 to $107,905, due to the decrease in trading transactions in the current quarter.
During the three-month
period ended September 30, 2018, annual fee revenue decreased by $86, from $140 for the three-month period ended September 30,
2017 to $54.
Since the second quarter of 2018, we have
provided an offering of artwork and artwork related merchandise for sale on our online platform.
Sales of artwork: The
sale of artwork consists of fees charged to third-party merchants that the Company provides access to the online platform for sales
of their artworks ,which are primarily paintings. The Company is not the primary obligor on these transactions, the Company does
not bear the inventory risk, does not have the ability to establish prices, and does not provide any fulfillment services since
the goods are shipped directly from third-party merchants to end customers. Upon successful sales on the Company's online platform,
the Company charges the third-party merchants commission fees based on the agreed percentage of the total selling price. Commission
fees are recognized on a net basis when the artwork sales order is completed.
Sales of artwork related
merchandise: The Company also offers its own artwork related merchandise through its online platform. Revenue is recognized when
control of the goods is transferred to the customer, which generally occurs upon our delivery to the carrier or the customer.
During the three-month period ended September
30, 2018, online artwork sales were $2,244.
Revenue by customer type
The following table presents our revenue
by customer type:
|
|
|
Three months ended
September 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Artwork owners
|
|
$
|
-
|
|
|
$
|
1,455,498
|
|
|
Non - VIP traders
|
|
|
140,581
|
|
|
|
199,929
|
|
|
VIP traders
|
|
|
220,709
|
|
|
|
1,699,584
|
|
|
Online artwork sales
|
|
|
2,244
|
|
|
|
-
|
|
|
Total
|
|
$
|
363,534
|
|
|
$
|
3,355,011
|
|
Cost of Revenue
|
|
|
Three months ended
September 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Commission rebate to service agent
|
|
$
|
2,094
|
|
|
$
|
-
|
|
|
Depreciation
|
|
|
163,736
|
|
|
|
100,769
|
|
|
Internet service charge
|
|
|
53,676
|
|
|
|
139,174
|
|
|
Artwork insurance
|
|
|
50,983
|
|
|
|
43,818
|
|
|
Artwork storage
|
|
|
27,533
|
|
|
|
8,407
|
|
|
Others
|
|
|
1,460
|
|
|
|
-
|
|
|
Total
|
|
$
|
299,482
|
|
|
$
|
292,168
|
|
Cost
of revenue for the three months ended September 30, 2018 and September 30, 2017 was $299,482 and $292,168, respectively. The increase
in cost of revenue, for the three months ended September 30, 2018 compared to September 30, 2017, was mainly due to the increase
in the commission rebates to service agents by $2,094, subject to the new trader transaction, which is pursuant to the commission
rebate program. During the three months ended September 30, 2017, the Company paid to existing traders and service agents a referral
rebate of $103,742 at a predetermined referral rate of commission earned from the transactions of new traders referred by those
existing traders and service agents. (See
Adoption of ASC Topic 606, “Revenue from Contracts with Customers”)
The commission rebate is recognized as a reduction of the commission revenue prior to January 1, 2018 under Topic 605. Despite
the increase in commission rebate, the increase in cost of revenue was also due to increases in the depreciation and amortization
of hardware and software for our trading platform by $62,967 due to the termination of the software development team and amortization
of all of the “work in process” items at one time during the third quarter of 2018, the decrease in the internet services
charge by $85,498 due to the termination of two network lines between Macau and Hong Kong; the increase in artwork insurance by
$7,165; and the increase in artwork storage by $19,126, because of the number of artwork listed increased. Our cost of revenue
primarily includes the commission rebate to service agents, internet service charge, artwork insurance, artwork storage and depreciation
and amortization of hardware and software for our trading platform.
Gross Profit
Gross
profit was $64,052 for the three months ended September 30, 2018, compared to $3,062,843 for the three months ended September 30,
2017. The decrease was due to the significant decrease in listing fee revenue and commission revenue earned in the three months
ended September 30, 2018.
Listing
fees contributed 0% of the total revenue for the quarter ended September 30, 2018 compared to 43.4% in the corresponding period
in 2017, while commission revenue contributed 69.7% for the quarter ended September 30, 2018 compared to 44.6% in the corresponding
period in 2017. Compared to the same period in 2017, there was a significant decrease in listing fee revenue and commission revenue.
Consequently, we posted a comparable gross profit margin of 17.6% for the three months ended September 30, 2018 compared to 91.3%
for the same period in 2017.
Operating Expenses
General and administrative
expenses for the three months ended September 30, 2018 were $2,208,264 compared to $2,498,848 for the three months ended September
30, 2017. A slight decrease in general and administrative expense by $290,584 was primarily due to a decrease in the following
items: legal and professional fees by $52,204, office expenses and rental by $68,645, traveling and accommodation by $110,414,
stock-based compensation by $73,351, depreciation by $12,145, bad debt expense by $241,226 and others by $26,509,which was offset
by an increase in consultancy fee of $30,133, salary and welfare of $225,956 and non-deductible input VAT expense of $37,821.
In the three months ended September 30, 2017, the Company wrote off the receivables related to listing revenue. In the three months
ended September 30, 2018, the increase in salary and welfare was driven by the severance packages paid during the reduction in
the workforce.
The following table
sets forth the main components of the Company’s general and administrative expenses for the three months ended September
30, 2018 and September 30, 2017.
|
|
|
Three months ended
September 30, 2018
|
|
|
Three months ended
September 30, 2017
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
Amount($)
|
|
|
% of Total
|
|
|
Amount($)
|
|
|
% of Total
|
|
|
Consultancy fee
|
|
|
76,192
|
|
|
|
3
|
%
|
|
|
46,059
|
|
|
|
2
|
%
|
|
Legal and professional fees
|
|
|
165,862
|
|
|
|
8
|
%
|
|
|
218,066
|
|
|
|
9
|
%
|
|
Salary and welfare
|
|
|
1,234,692
|
|
|
|
56
|
%
|
|
|
1,008,736
|
|
|
|
40
|
%
|
|
Office, insurance and rental expenses
|
|
|
361,402
|
|
|
|
16
|
%
|
|
|
430,047
|
|
|
|
17
|
%
|
|
Non-deductible input VAT expenses
|
|
|
44,745
|
|
|
|
2
|
%
|
|
|
6,924
|
|
|
|
0
|
%
|
|
Traveling and accommodation fees
|
|
|
77,366
|
|
|
|
4
|
%
|
|
|
187,780
|
|
|
|
8
|
%
|
|
Share-based compensation
|
|
|
64,810
|
|
|
|
3
|
%
|
|
|
138,161
|
|
|
|
6
|
%
|
|
Depreciation
|
|
|
77,712
|
|
|
|
4
|
%
|
|
|
89,857
|
|
|
|
3
|
%
|
|
Bad debt expenses
|
|
|
22
|
|
|
|
0
|
%
|
|
|
241,248
|
|
|
|
10
|
%
|
|
Other
|
|
|
105,461
|
|
|
|
4
|
%
|
|
|
131,970
|
|
|
|
5
|
%
|
|
Total general and administrative expense
|
|
$
|
2,208,264
|
|
|
|
100.0
|
%
|
|
$
|
2,498,848
|
|
|
|
100.0
|
%
|
Other income (loss) and expenses
Other loss and expenses
for the three months ended September 30, 2018 were $1,004,552, compared to other income of $211,852 for the three months ended
September 30, 2017. The significant increase in other expenses was primarily attributable to the exchange loss incurred in the
three months ended September 30, 2018 by $870,218. The exchange loss arose from the fluctuation of exchange rate between the Renminbi
and the US dollar.
Income tax benefit (expense)
The Company’s
effective tax rate varies due to its multiple jurisdictions where pre-tax income or losses occur. The Company is subject to a
Hong Kong profits tax rate of 16.5%, PRC enterprise income tax rate of 25% and U.S. income tax rate of 34% prior to January 1,
2018, whereas 21% after January 1, 2018 due to the Tax Cuts and Jobs Act enacted on December 22, 2017.
The effective tax
rates for the three months ended September 30, 2018 and 2017 were 20.5% and 82.2%, respectively.
Income tax benefit
for the three months ended September 30, 2018 was $742,670 and income tax expense for the three months ended September 30, 2017
was $124,662.
Net (Loss) Income
We had a net loss
for the three months ended September 30, 2018 of $2,881,356 compared to net income of $27,034 for the three months ended September
30, 2017.
The decrease in net
income during this current period was predominately due to a fall in revenue by $2,991,477, an increase in impairment loss on
CIP by $326,227 and an increase of exchange loss by $1,047,870, as discussed in the previous paragraphs.
The reason for the
decrease in revenue is because of the following: the Company announced, on August 13, 2018, the suspension of new listings of
its art products, the company faced the downside of a downturn in the online fine art and collectibles platforms space, downturns
in A-shares, and the tightening of liquidity in China.
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2018 COMPARED TO NINE-MONTH
PERIOD ENDED SEPTEMBER 30, 2017
The following tables set forth our condensed
consolidated statements of income data:
|
|
|
Nine Months
Ended
September 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Revenue
|
|
$
|
8,191,828
|
|
|
$
|
10,545,677
|
|
|
Cost of revenue
|
|
|
(2,173,296
|
)
|
|
|
(822,335
|
)
|
|
Selling expense
|
|
|
(851,173
|
)
|
|
|
(1,272,010
|
)
|
|
General and administrative expenses
|
|
|
(7,791,747
|
)
|
|
|
(7,311,128
|
)
|
|
Impairment loss – construction-in-progress
|
|
|
(326,227
|
)
|
|
|
-
|
|
|
Total costs and expenses
|
|
|
(11,142,443
|
)
|
|
|
(9,405,473
|
)
|
|
(Loss) income from operations
|
|
|
(2,950,615
|
)
|
|
|
1,140,204
|
|
|
Interest and other (expenses) income, net
|
|
|
(1,166,045
|
)
|
|
|
511,311
|
|
|
(Loss) income before income taxes
|
|
|
(4,116,660
|
)
|
|
|
1,651,515
|
|
|
Income tax benefit (expense)
|
|
|
574,202
|
|
|
|
(594,377
|
)
|
|
Net (loss) income
|
|
$
|
(3,542,458
|
)
|
|
$
|
1,057,138
|
|
The following tables set forth our condensed
consolidated statements of income data (as a percentage of revenue):
|
|
|
Nine Months
Ended
September 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Revenue
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Cost of revenue – Direct revenue
|
|
|
(27
|
)
|
|
|
(8
|
)
|
|
Selling expense
|
|
|
(10
|
)
|
|
|
(12
|
)
|
|
General and administrative expenses
|
|
|
(95
|
)
|
|
|
(69
|
)
|
|
Impairment loss
– construction-in-progress
|
|
|
(4
|
)
|
|
|
-
|
|
|
Total costs and expenses
|
|
|
(136
|
)
|
|
|
(89
|
)
|
|
(Loss) income from operations
|
|
|
(36
|
)
|
|
|
11
|
|
|
Interest and other (expenses) income, net
|
|
|
(14
|
)
|
|
|
5
|
|
|
(Loss) income before income taxes
|
|
|
(50
|
)
|
|
|
16
|
|
|
Income tax benefit (expense)
|
|
|
7
|
|
|
|
(6
|
)
|
|
Net (loss) income
|
|
|
(43
|
)%
|
|
|
10
|
%
|
Revenue
For comparative purpose, we adjusted the
revenue for nine months ended September 30, 2017 as if retrospectively adopting ASC 606.
The following table set forth our condensed
consolidated revenue by revenue source:
|
|
|
Nine months ended
September 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
As previously
reported
|
|
|
Adjustments
|
|
|
Adjusted
|
|
|
Listing fee revenue
|
|
$
|
3,978,735
|
|
|
$
|
4,606,649
|
|
|
|
-
|
|
|
$
|
4,606,649
|
|
|
Commission
|
|
|
3,557,411
|
|
|
|
4,970,651
|
|
|
|
201,524
|
|
|
|
5,172,175
|
|
|
Management fee revenue
|
|
|
455,133
|
|
|
|
967,518
|
|
|
|
-
|
|
|
|
967,518
|
|
|
Authorized agent subscription revenue
|
|
|
191,623
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Annual fee revenue
|
|
|
378
|
|
|
|
859
|
|
|
|
-
|
|
|
|
859
|
|
|
Online artwork sales
|
|
|
8,548
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Total
|
|
$
|
8,191,828
|
|
|
$
|
10,545,677
|
|
|
$
|
201,524
|
|
|
$
|
10,747,201
|
|
As of September 30,
2018, a total of 278 sets of artwork were listed for trade on our platform —comprising 54 sets of paintings and calligraphies
from famous Chinese, Russian and Mongolian artists, with a total listing value of $24,628,845 (HK$193,100,000); 35 pieces of jewelry
with a total listing value of $9,267,384 (HK$72,660,000); 134 pieces of precious stones with a total listing value of $16,267,027
(HK$127,540,000); 29 pieces of amber with a total listing value of $12,690,679 (HK$99,500,000); 4 pieces of antique mammoth ivory
carvings with a total listing value of $663,231 (HK$5,200,000); 2 pieces of porcelain pastel paintings with a total listing value
of $331,616 (HK$2,600,000); 6 pieces of porcelains with a total listing value of $956,584 (HK$7,500,000); 6 sets of Unit+ products
with a total listing value of $1,315,494 (HK$10,314,000); 1 piece of Yixing collectable with a listing value of $127,545 (HK$1,000,000);
and 7 pieces of Sports memorabilia with a listing value of $1,085,327 (HK$8,509,400), of which 22.5%-48% (for 54 sets of paintings),
24%-48.5% (for the 134 pieces of precious stones), 29%-48% (for the 35 pieces of jewelry), 47%-48.5% (for 4 piece of antique mammoth
ivory carvings), 32%-48% (for the 29 pieces of amber), 45%-46% (for the 2 pieces of porcelain pastel paintings), 44.94%-48% (for
the 6 pieces of porcelains), 30.25%-45% (for the 6 sets of Unit+ products), 45% (1 piece of Yixing collectable) and 45% (for the
7 pieces of Sports memorabilia) of the listed values were charged as listing fees, respectively.
During the nine months
ended September 30, 2018, there were 14 sets of paintings, 8 pieces of precious stones, 4 pieces of porcelains, 5 sets of Unit+
products and 6 pieces of Sports memorabilia listed on our platform. Their total listing values were $5,229,325 (HK$41,000,000)
for the paintings, $984,644 (HK$7,720,000) for the precious stones, $854,548 (HK$6,700,000) for the porcelains, $1,163,971 (HK$9,126,000)
for the Unit+ products, and $957,202 (HK$7,505,000) for the Sports memorabilia, of which 41.67%-47.3% (for the paintings), 24%-46%
(for the precious stones), 44.94%-48% (for porcelains), 45% (for the Unit+ products), and 45% (for the Sports memorabilia) of
the listed values were charged as listing fees, respectively.
The decrease in the
listing of artworks during the nine months ended September 30, 2018, compared to the same period ended September 30, 2017, resulted
in a decrease in the listing fee value in the current period, the cause of which was announced in a press release furnished in
the Company’s current report on Form 8-K dated August 13, 2018.
|
|
(ii)
|
Commission fee revenue
|
We generate a commission
fee from non-VIP traders and selected traders as follows:
For non-VIP traders,
the commission revenue was calculated based on a percentage of transaction value of artworks, which we charge trading commissions
for the purchase and sale of the ownership shares of the artworks. The commission is typically 0.3% of the total amount of each
transaction, but as an initial promotion, we currently charge a reduced fee of 0.2% (resulting in an aggregate of 0.4% for both
buy and sell transactions) of the total transaction amount with the minimum charge of $0.13 (HK$1). The commission is accounted
for as revenue and immediately deducted from the proceeds from the sales of artwork units when a transaction is 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
commission rebate is recognized as reduction of the commission revenue prior to January 1, 2018 under Topic 605. Starting January
1, 2018, we account for the commission rebate as cost of revenue under Topic 606.
The rebates and
discounts are recognized in the same period the related revenue is recognized.
Total commission revenue
decreased by $1,413,240 or 28.4% for the nine months ended September 30, 2018 to $3,557,411 compared to $4,970,651 for the nine
months ended September 30, 2017 primarily because of a decrease in selected traders commission revenue by $3,309,553 and an increase
in transaction commission revenue by $1,700,029 resulting from the implementation of an A-tier model, which led to an increase
in the number of traders and new product categories.
|
|
(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 nine-month
period ended September 30, 2018, management fee revenue decreased by $512,385, from $967,518 for the nine months ended September
30, 2017 to $455,133, due to the promotions we conducted during that period. We waived management fees for certain VIP traders.
We recognized these promotions as a reduction of revenue, which was recognized upon the completion of the transactions.
During the nine-month period ended September
30, 2018, annual fee revenue decreased by $481, from $859 for the nine-month period ended September 30, 2017 to $378.
|
|
(v)
|
Authorized
agent subscription revenue
|
During the nine-month period ended September
30, 2018, authorized agent subscription revenue was $191,623, compared to $0 for the same period ended in 2017.
|
|
(vi)
|
Online
artwork sales
|
From the second quarter
of 2018, we launched an offering of artwork and artwork related merchandise for sales on our online platform.
Sales of artwork:
The sale of artwork consists of fees charged to third-party merchants that the Company provides access to the online platform
for sales of their artworks, which are primarily paintings. The Company is not the primary obligor on these transactions, the
Company does not bear the inventory risk, does not have the ability to establish prices, and does not provide any fulfillment
services since the goods are shipped directly from third-party merchants to end customers. Upon successful sales on the Company's
online platform, the Company charges the third-party merchants commission fees based on the agreed percentage of the total selling
price. Commission fees are recognized on a net basis when the artwork sales order is completed.
Sales of artwork related
merchandise: The Company also offers its own artwork related merchandise through the online platform. Revenue is recognized when
control of the goods is transferred to the customer, which generally occurs upon our delivery to the carrier or the customer.
During the nine-month
period ended September 30, 2018, online artwork sales was $8,548 comparing to $0 for the nine months ended September 30, 2017.
Revenue by customer type
The following table
presents our revenue by customer type:
|
|
|
Nine months ended
September 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Artwork owners
|
|
$
|
3,978,735
|
|
|
$
|
4,606,649
|
|
|
Non - VIP traders
|
|
|
2,235,789
|
|
|
|
779,208
|
|
|
VIP traders
|
|
|
1,777,133
|
|
|
|
5,159,820
|
|
|
Authorized agents
|
|
|
191,623
|
|
|
|
-
|
|
|
Online artwork sales
|
|
|
8,548
|
|
|
|
-
|
|
|
Total
|
|
$
|
8,191,828
|
|
|
$
|
10,545,677
|
|
Cost of Revenue
|
|
|
Nine months ended
September 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Commission rebate to service agent
|
|
$
|
1,207,104
|
|
|
$
|
-
|
|
|
Depreciation
|
|
|
491,297
|
|
|
|
301,538
|
|
|
Internet service charge
|
|
|
240,165
|
|
|
|
344,986
|
|
|
Artwork insurance
|
|
|
155,635
|
|
|
|
126,789
|
|
|
Artwork storage
|
|
|
74,110
|
|
|
|
49,022
|
|
|
Others
|
|
|
4,985
|
|
|
|
-
|
|
|
Total
|
|
$
|
2,173,296
|
|
|
$
|
822,335
|
|
Cost
of revenue for the nine months ended September 30, 2018 and September 30, 2017 was $2,173,296 and $822,335, respectively. The increase
in cost of revenue by $1,350,961 was mainly due to the increase in commission rebates to service agents by $1,207,104, subject
to the trader transaction, which is pursuant to the commission rebate program. During the nine months ended September 30, 2017,
the Company paid to existing traders and service agents a referral rebate of $201,524 at a predetermined referral rate of commission
earned from the transactions of new traders referred by those existing traders and service agents. (See
Adoption of ASC Topic
606, “Revenue from Contracts with Customers”
.) The commission rebate is recognized as a reduction of the commission
revenue prior to January 1, 2018 under Topic 605. Despite the increase in commission rebates, the increase in cost of revenue
was also due to increases in the depreciation and amortization of hardware and software for our trading platform by $189,759, due
to the termination of the software development team and amortization of all of the “work in process” items at one time
during the third quarter of 2018; the decrease in the internet services charge by $104,821, due to the termination of two network
lines between Macau and Hong Kong; the increase in artwork insurance by $28,846; and the increase in artwork storage by $25,088,
because of the number of artwork listed increased. Our cost of revenue primarily includes the commission rebates to service agents,
the internet services charge, artwork insurance, artwork storage, and depreciation and amortization of hardware and software for
our trading platform.
Gross Profit
Gross
profit was $6,018,532 for the nine months ended September 30, 2018, compared to $9,723,342 for the nine months ended September
30, 2017. The decrease was mainly due to the increase in service agent rebates and a decrease in listing fee and commission revenue.
Overall
total revenue for the nine months ended September 30, 2018 reduced by $2,353,849 or 22% compared to the same period in 2017. The
decrease in revenue was chiefly attributable to fewer listing of artwork and lower trading transactions in the third quarter of
2018. The shrinkage in gross profit was also triggered by the rise in the cost of revenue for the nine months ended September
30, 2018. In the current period, the cost of revenue increased by $1,350,961 or 164% compared to the same period in 2017. Consequently,
we posted a comparable gross profit margin of 73% for the nine months ended September 30, 2018 compared to 92% for the same period
in 2017.
Operating Expenses
General and administrative
expenses for the nine months ended September 30, 2018 were $7,791,747 compared to $7,311,128 for the nine months ended September
30, 2017. The significant increase in general and administrative expense of $480,619 was primarily due to increases in the following
items: salary and welfare by $732,253, non-deductible input VAT expense by $321,596, consultancy fee by $103,552, legal and professional
fees by $21,584, and others by $142,709, which was offset by a decrease in stock-based compensation by $344,953, bad debt expense
by $317,650, traveling and accommodation by $134,910, office expenses and rental by $29,204, and depreciation by $14,358. In the
nine months ended September 30, 2017, the Company wrote off the receivables related to listing revenue. In the nine months ended
September 30, 2018, the increase in salary and welfare was driven by the severance packages paid during the reduction in the workforce.
The following table
sets forth the main components of the Company’s general and administrative expenses for the nine months ended September
30, 2018 and September 30, 2017.
|
|
|
Nine months ended
September 30, 2018
|
|
|
Nine months ended
September 30, 2017
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
Amount($)
|
|
|
% of Total
|
|
|
Amount($)
|
|
|
% of Total
|
|
|
Salary and welfare
|
|
|
3,898,932
|
|
|
|
50.0
|
%
|
|
|
3,166,679
|
|
|
|
43.3
|
%
|
|
Office, insurance and rental expenses
|
|
|
1,223,357
|
|
|
|
15.7
|
%
|
|
|
1,252,561
|
|
|
|
17.1
|
%
|
|
Legal and professional fees
|
|
|
755,050
|
|
|
|
9.7
|
%
|
|
|
733,466
|
|
|
|
10.0
|
%
|
|
Traveling and accommodation fees
|
|
|
545,040
|
|
|
|
7.0
|
%
|
|
|
679,950
|
|
|
|
9.3
|
%
|
|
Non-deductible input VAT expense
|
|
|
337,965
|
|
|
|
4.3
|
%
|
|
|
16,369
|
|
|
|
0.2
|
%
|
|
Consultancy
|
|
|
290,782
|
|
|
|
3.7
|
%
|
|
|
187,230
|
|
|
|
2.6
|
%
|
|
Share based compensation
|
|
|
217,231
|
|
|
|
2.8
|
%
|
|
|
562,184
|
|
|
|
7.7
|
%
|
|
Depreciation
|
|
|
222,636
|
|
|
|
2.9
|
%
|
|
|
236,994
|
|
|
|
3.2
|
%
|
|
Bad debt expense
|
|
|
(76,402
|
)
|
|
|
(1.0
|
)%
|
|
|
241,248
|
|
|
|
3.3
|
%
|
|
Other
|
|
|
377,156
|
|
|
|
4.9
|
%
|
|
|
234,447
|
|
|
|
3.3
|
%
|
|
Total general and administrative expense
|
|
$
|
7,791,747
|
|
|
|
100.0
|
%
|
|
$
|
7,311,128
|
|
|
|
100.0
|
%
|
Other income (loss) and expenses
Other loss and expenses
for the nine months ended September 30, 2018 was $1,166,045, compared to other income of $511,311 for the nine months ended September
30, 2017. The significant increase in other expenses for the nine months ended September 30, 2018 was primarily attributed to
the exchange loss arising from the fluctuation of the exchange rate between Renminbi and the US dollar. Such increase was slightly
offset by the interest earned from the short-term investments in the current period.
Income Taxes Expenses
The Company’s
effective tax rate varies due to its multiple jurisdictions where pre-tax income or losses occur. The Company is subject to a
Hong Kong profits tax rate of 16.5%, PRC enterprise income tax rate of 25% and U.S. income tax rate of 34% prior to January 1,
2018 while 21% after January 1, 2018 due to the Tax Cuts and Jobs Act enacted on December 22, 2017.
The effective tax
rates for the nine months ended September 30, 2018 and 2017 were 13.9% and 36.0%, respectively.
Income taxes benefit
for the nine months ended September 30, 2018 was $574,202 and income taxes expense for the nine months ended September 30, 2017
was $594,377.
Net Income
We had a net loss
for the nine months ended September 30, 2018 of $3,542,458 compared to a net income of $1,057,138 for the nine months ended September
30, 2017.
The net loss after
income tax expense incurred during this current period was predominantly driven by a decrease in gross profit by $3,704,810, an
increase of general and administrative expense of $480,619, an increase of impairment loss on CIP of $326,227, and an increase
of exchange loss of $1,659,113, as discussed in the previous paragraphs.
Liquidity and Capital Resources
The following tables
set forth our consolidated statements of cash flow:
|
|
|
Nine months
ended
September 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Net cash used in operating activities
|
|
$
|
(18,589,823
|
)
|
|
$
|
(1,657,103
|
)
|
|
Net cash used in investing activities
|
|
|
(4,377,285
|
)
|
|
|
(561,510
|
)
|
|
Net cash provided by financing activities
|
|
|
2,425,220
|
|
|
|
-
|
|
|
Effect of exchange rate change on cash and cash equivalents
|
|
|
(664,016
|
)
|
|
|
1,025,539
|
|
|
Net decrease in cash, cash equivalents and restricted cash
|
|
|
(21,205,904
|
)
|
|
|
(1,193,074
|
)
|
|
Cash, cash equivalents and restricted cash, beginning balance
|
|
|
37,140,582
|
|
|
|
35,138,697
|
|
|
Cash, cash equivalents and restricted cash, ending balance
|
|
$
|
15,934,678
|
|
|
$
|
33,945,623
|
|
Sources of Liquidity
During the nine months
ended September 30, 2018, net cash used in operating activities totaled $18,589,823,which resulted from the implementation of ASU2016-18
since the beginning of 2018. In fact, there was a decline in client deposits by $17,757,757 which influenced the drop of the amount
due to clients simultaneously. The Company assessed and evaluated that it was really a presentation issue and there should be no
actual impact to the operating activities. Net cash used in investing activities totaled $4,377,285. Net cash generated from financing
activities totaled $2,425,220. The resulting change in cash for the period was a decrease of $21,205,904. The cash balance at the
beginning of the period was $37,140,582. The cash balance on September 30, 2018 was $15,934,678.
During the nine months
ended September 30, 2017, net cash used in operating activities totaled $1,657,103. Net cash used in investing activities totaled
$561,510. No cash was generated from financing activities during the period. The resulting change in cash for the period was a
decrease of $1,193,074. The cash balance at the beginning of the period was $35,138,697. The cash balance on September 30, 2017
was $33,945,623.
As of September 30,
2018, the Company had $18,508,676 in total current liabilities, which comprised of $623,472 in accrued expense and other payables,
$7,515,860 in customers’ deposits, $14,355 in advance from customer, $3,950,099 in short-term borrowings from third parties,
$6,389,042 in amount due to related party, and $15,848 in tax payables. As of December 31, 2017, the Company had $34,910,711 in
total current liabilities, which included $1,461,858 in accrued expense and other accruals, $25,273,617 in customers’ deposits,
$170,078 in advance from customers, $7,208,761 in short-term borrowings from third parties, $483,822 in amount due to related
party, and $312,575 in tax payables.
The Company is aware
of events or uncertainties which may affect its future liquidity because of capital controls in the PRC. The RMB is only currently
convertible under the "current account," which includes dividends, trade and service-related foreign exchange transactions,
but not under the "capital account," which includes foreign direct investment and loans, including loans we may secure
from our onshore subsidiaries or variable interest entities. Currently, our PRC subsidiaries, which are wholly-foreign owned enterprises,
may purchase foreign currency for settlement of "current account transactions," including payment of dividends to us,
without the approval of the State Administration of Foreign Exchange (“SAFE”) by complying with certain procedural
requirements. However, the relevant PRC governmental authorities may limit or eliminate our ability to purchase foreign currencies
in the future for current account transactions. The existing and future restrictions on currency exchange may limit our ability
to utilize revenue generated in Renminbi to fund our business activities outside of the PRC or pay dividends in foreign currencies
to our stockholders, including holders of our shares of common stock. Foreign exchange transactions under the capital account
remain subject to limitations and require approvals from, or registration with, SAFE and other relevant PRC governmental authorities.
This could affect our ability to obtain foreign currency through debt or equity financing for our PRC subsidiaries.
Applicable PRC law
permits payment of dividends to us by our operating subsidiaries in China only out of their net income, if any, determined in
accordance with PRC accounting standards and regulations. Our operating subsidiaries in China are also required to set aside a
portion of their net income, if any, each year to fund general reserves for appropriations until such reserves have reached 50%
of the subsidiary's registered capital. These reserves are not distributable as cash dividends. In addition, registered share
capital and capital reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held in each
operating subsidiary. In contrast, there is no foreign exchange control or restrictions on capital flows into and out of Hong
Kong. Hence, our Hong Kong operating subsidiary is able to transfer cash without any limitation to the U.S. under normal circumstances.
If our operating subsidiaries
were to incur additional debt on their own behalf in the future, the instruments governing the debt may restrict the ability of
our operating subsidiaries to transfer cash to our U.S. investors.
Off-Balance Sheet Arrangements
We have no off-balance
sheet arrangements, including arrangements that would affect our liquidity, capital resources, market risk support, and credit
risk support or other benefits.
Future Financings
Although we are suffering
downside business including a decrease in trading volume and customer deposits, we are also undergoing a company restructuring,
including re-evaluating the company’s Unit business and a downsize of 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 common shares
in order to fund further expansion and growth of our business. Issuances of additional shares will result in dilution to existing
stockholders. There is no assurance that we will achieve any sales of the equity securities to fund expansion and other activities,
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 3 to the
financial statements included herewith and Note 2 to the financial statements on Form 10-K for the fiscal year ended December
31, 2017, previously filed with the SEC.
Recent Accounting Pronouncements
See Note 3 to the
financial statements included herewith and Note 2 to the financial statements on Form 10-K for the fiscal year ended December
31, 2017, previously filed with the SEC.