SHORT-TERM BORROWINGS FROM THIRD PARTIES

9 Months Ended

Sep. 30, 2016

10. SHORT-TERM BORROWINGS FROM THIRD PARTIES

On July 15, 2016, Hong Kong Takung entered into a loan agreement with Merit Crown Limited, a Hong Kong company, to borrow US$1.5 million to meet its working capital needs. Interest shall accrue at a rate of 8% per annum pro-rated to the actual loan period, which shall be from the date the loan amount is made through December 31, 2016. Merit Crown is a non-related party to the Company.

On August 24, 2016, an additional US$2 million was borrowed by Hong Kong Takung from Merit Crown to meet its working capital needs. Interest shall accrue at a rate of 8% per annum pro-rated to the actual loan period, which shall be from the date the loan amount is made through December 31, 2016.

The US Dollar Loans are to provide Hong Kong Takung with sufficient US Dollar-denominated currency to meet its working capital requirements. It is “secured” by the aforementioned RMB Loans (See Note 4) of equivalent amount by its subsidiary to an individual and guarantor affiliated with the lender of the US Dollar Loans. It is the understanding between the parties that when the US Dollar Loans are repaid, the RMB Loans will similarly be repaid.

As of September 30, 2016 and December 31, 2015, the Company has $3,519,580 of and nil short-term borrowings from Merit Crown Limited, respectively.

The weighted average interest rate of short-term borrowings outstanding was 8% and nil per annum as of September 30, 2016 and December 31, 2015. The fair values of the short-term borrowings approximate their carrying amounts. The weighted average short-term borrowings was $742,251 and nil for the nine months ended September 30, 2016 and 2015 respectively, $2,226,753 and nil for the three months ended September 30, 2016 and 2015.