Company Quick10K Filing
Porter Holding International
Price3.98 EPS-0
Shares508 P/E-3,379
MCap2,022 P/FCF-1,865
Net Debt-0 EBIT-1
TEV2,022 TEV/EBIT-3,645
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-08-14
10-Q 2020-03-31 Filed 2020-06-25
10-K 2019-12-31 Filed 2020-05-01
10-Q 2019-09-30 Filed 2019-11-19
10-Q 2019-06-30 Filed 2019-08-14
10-Q 2019-03-31 Filed 2019-05-15
10-K 2018-12-31 Filed 2019-04-15
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-14
10-K 2017-12-31 Filed 2018-03-30
10-Q 2017-09-30 Filed 2017-11-14
10-Q 2017-06-30 Filed 2017-08-14
10-K 2017-02-28 Filed 2017-03-23
10-Q 2016-11-30 Filed 2017-01-20
10-Q 2016-08-31 Filed 2016-10-21
10-Q 2016-05-31 Filed 2016-08-25
10-K 2016-02-29 Filed 2016-08-12
10-Q 2015-11-30 Filed 2016-07-28
10-Q 2015-08-31 Filed 2016-07-26
10-Q 2015-05-31 Filed 2016-07-20
10-K 2015-02-28 Filed 2016-06-21
10-Q 2014-11-30 Filed 2016-06-01
10-Q 2014-08-31 Filed 2014-10-10
8-K 2020-07-15 Enter Agreement, Exhibits
8-K 2020-05-13
8-K 2020-03-26
8-K 2019-03-04

ULNV 10Q Quarterly Report

Part I
Item 1. Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 ex_198466.htm
EX-32.1 ex_198467.htm

Porter Holding International Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
0.10.10.0-0.0-0.1-0.12014201620182020
Assets, Equity
0.10.10.0-0.0-0.1-0.12014201620182020
Rev, G Profit, Net Income
0.10.10.0-0.0-0.1-0.12014201620182020
Ops, Inv, Fin

10-Q 1 porter20200630_10q.htm FORM 10-Q porter20200630_10q.htm

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, 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: 333-196336

 

PORTER HOLDING INTERNATIONAL, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Nevada

 

42-1777496

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

36th Floor, Shenzhen Development Center, #2010, Renmin South Road

Luohu District, Shenzhen, Guangdong, China, 518001

(Address of principal executive offices, Zip Code)

 

+86-755-22230666

(Registrant’s telephone number, including area code)

 

_____________________________________________________

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

 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

N/A

 

N/A

 

N/A

 

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. 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). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 filer  ☐                                     Smaller reporting company ☒     

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).  Yes ☐ No ☒

 

The number of shares outstanding of each of the issuer’s classes of common stock, as of August 13, 2020 is as follows:

 

Class of Securities

 

Shares Outstanding

Common Stock, $0.001 par value

 

508,110,000

 

 

 

PORTER HOLDING INTERNATIONAL, INC.

 

TABLE OF CONTENTS

 

PART I

FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements

3

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

 

 

 

Item 4.

Controls and Procedures

33

 

 

 

PART II

OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

34

 

 

 

Item 1A.

Risk Factors

34

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

34

 

 

 

Item 3.

Defaults Upon Senior Securities

34

 

 

 

Item 4.

Mine Safety Disclosures

34

 

 

 

Item 5.

Other Information

34

 

 

 

Item 6.

Exhibits

34

 

 

PART I

FINANCIAL INFORMATION

 

ITEM 1.          FINANCIAL STATEMENTS (UNAUDITED)

 

PORTER HOLDING INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

 

 

 

 

 

PORTER HOLDING INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In U.S. dollars)

 

   

June 30, 2020

   

December 31, 2019

 
                 

ASSETS

               

CURRENT ASSETS

               

Cash

  $ 63,468     $ 224,733  

Accounts receivable, net of $3,065 and $3,065 allowance for doubtful accounts as of June 30, 2020 and December 31, 2019, respectively

    901,132       1,079,316  

Due from shareholders

    283,082       -  

Prepayments and other receivables

    90,056       94,161  

Total current assets

    1,337,738       1,398,210  
                 

NON-CURRENT ASSETS

               

Long-term rental deposits

    63,011       63,946  

Long-term prepayments

    2,695       5,589  

Equipment, net

    40,940       49,936  

Intangible assets, net

    238,759       257,141  

Operating lease right-of-use assets

    728,792       891,733  

Goodwill

    -       34,297  

Total non-current assets

    1,074,197       1,302,642  
                 

TOTAL ASSETS

  $ 2,411,935     $ 2,700,852  
                 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

               
                 

CURRENT LIABILITIES

               

Accounts payable

  $ 128,426     $ 134,798  

Accruals and other payables

    507,023       120,692  

Deferred revenue

    387,064       288,330  

Taxes payable

    91,263       134,405  

Amounts due to shareholders

    1,776,281       1,433,151  

Amounts due to related parties

    1,090       1,106  

Operating lease liabilities – current

    325,596       323,403  

Total current liabilities

    3,216,743       2,435,885  
                 

NON-CURRENT LIABILITIES

               

Operating lease liabilities - non-current

    433,960       604,597  

TOTAL LIABILITIES

    3,650,703       3,040,482  
                 

COMMITMENTS AND CONTINGENCIES

               
                 

STOCKHOLDERS’ DEFICIT

               

Preferred stock, par value $0.001 per share 250,000,000 shares authorized and nil shares issued as of June 30, 2020 and December 31, 2019

    -       -  

Common stock, par value $0.001 per share; 750,000,000 shares authorized, 508,110,000 shares issued and outstanding as of June 30, 2020 and December 31, 2019

    508,110       508,110  

Additional paid-in capital

    1,077,986       1,077,986  

Accumulated deficit

    (3,095,511

)

    (2,200,932

)

Accumulated other comprehensive income

    110,345       92,800  

Total Porter Holding International, Inc. stockholders’ deficit

    (1,399,070

)

    (522,036

)

                 

Non-controlling interests

    160,302       182,406  

Total stockholders’ deficit

    (1,238,768

)

    (339,630

)

                 

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

  $ 2,411,935     $ 2,700,852  

 

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

 

 

PORTER HOLDING INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(Unaudited)

(In U.S. dollars)

 

   

Three Months Ended June 30,

   

Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 
                                 

REVENUE, NET

  $ 43,667     $ 985,493     $ 470,933     $ 1,694,439  
                                 

COST OF REVENUE

    (5,830

)

    (273,845

)

    (379,804

)

    (799,418

)

                                 

GROSS PROFIT

    37,837       711,648       91,129       895,021  
                                 

TOTAL OPERATING EXPENSES

    (398,461

)

    (673,669

)

    (1,026,535

)

    (1,163,092

)

                                 

(LOSS) INCOME FROM OPERATIONS

    (360,624

)

    37,979       (935,406

)

    (268,071

)

                                 

TOTAL OTHER INCOME, NET

    1,281       2,414       21,299       7,583  
                                 

NET (LOSS) INCOME BEFORE TAXES

    (359,343

)

    40,393       (914,107

)

    (260,488

)

                                 

Income tax benefit (expense)

    -       14,575       -       (45,730

)

                                 

NET (LOSS) INCOME

    (359,343

)

    54,968       (914,107

)

    (306,218

)

                                 

Less: Net (loss) income attributable to non-controlling interests

    (16,831

)

    (4,913

)

    (19,528

)

    3,316  
                                 

Net (loss) income attributable to Porter Holding International, Inc. common stockholders

    (342,512

)

    59,881       (894,579

)

    (309,534

)

                                 

Other comprehensive (loss) income

                               

Foreign currency translation (loss) income

    (5,034

)

    19,574       14,969       4,860  
                                 

Total Comprehensive (loss) income

    (364,377

)

    74,542       (899,138

)

    (301,358

)

Less: comprehensive (loss) income attributable to non-controlling interests

    (16,380

)

    (6,275

)

    (22,104

)

    3,362  
                                 

Comprehensive (loss) income attributable to Porter Holding International, Inc. common stockholders

  $ (347,997

)

  $ 80,817     $ (877,034

)

  $ (304,720

)

                                 

Basic and diluted earnings (loss) per share

  $ -

*

  $ -

*

  $ - *   $ -

*

                                 

Weighted average number of common shares outstanding - basic and diluted

    508,110,000       508,110,000       508,110,000       508,110,000  

 

* Less than $0.01 per share 

 

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

 

 

PORTER HOLDING INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 and 2019

(Unaudited)

(In U.S. dollars)

 

   

Common stock

   

Additional

           

Accumulated other

   

Non-

         
   

Number

           

paid-in

   

Accumulated

   

comprehensive

   

controlling

   

Total

 
   

of shares

   

Amount

   

capital

   

deficit

   

income (loss)

   

interests

   

Deficit

 

Balance at December 31, 2018

    508,110,000     $ 508,110     $ 400,561     $ (1,626,596

)

  $ 93,674     $ 55,817     $ (568,434

)

                                                         

Net (loss) income

    -       -       -       (369,415

)

    -       8,229       (361,186

)

                                                         

Capital contribution

    -       -       125,353       -       -       -       125,353  
                                                         

Foreign currency translation adjustment

    -       -       -       -       (16,122

)

    1,408       (14,714

)

                                                         

Balance at March 31, 2019

    508,110,000       508,110       525,914       (1,996,011

)

    77,552       65,454       (818,981

)

                                                         

Net income (loss)

    -       -       -       59,881       -       (4,913

)

    54,968  
                                                         

Foreign currency translation adjustment

    -       -       -       -       20,936       (1,362

)

    19,574  
                                                         

Balance at June 30, 2019

    508,110,000     $ 508,110     $ 525,914     $ (1,936,130

)

  $ 98,488     $ 59,179     $ (744,439

)

 

 

   

Common stock

   

Additional

           

Accumulated other

   

Non-

         
   

Number

           

paid-in

   

Accumulated

   

comprehensive

   

controlling

         
   

of shares

   

Amount

   

capital

   

deficit

   

income (loss)

   

interests

   

Total

 

Balance at December 31, 2019

    508,110,000     $ 508,110     $ 1,077,986     $ (2,200,932

)

  $ 92,800     $ 182,406     $ (339,630

)

                                                         

Net loss

    -       -       -       (552,067

)

    -       (2,697

)

    (554,764

)

                                                         

Foreign currency translation adjustment

    -       -       -       -       23,030       (3,027

)

    20,003  
                                                         

Balance at March 31, 2020

    508,110,000       508,110       1,077,986       (2,752,999

)

    115,830       176,682       (874,391

)

                                                         

Net loss

    -       -       -       (342,512

)

    -       (16,831

)

    (359,343

)

                                                         

Foreign currency translation adjustment

    -       -       -       -       (5,485

)

    451       (5,034

)

                                                         

Balance at June 30, 2020

    508,110,000     $ 508,110     $ 1,077,986     $ (3,095,511

)

  $ 110,345     $ 160,302     $ (1,238,768

)

 

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

 

 

PORTER HOLDING INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In U.S. dollars)

 

   

Six Months Ended June 30,

 
   

2020

   

2019

 
                 

Cash flows from operating activities

               

Net loss

  $ (914,107

)

  $ (306,218

)

Adjustments to reconcile net loss to cash used in operating activities:

               

Depreciation and amortization

    26,591       11,944  

Impairment on goodwill

    33,954       -  

Impairment on intangible asset

    17,691       -  

Gain on disposal of property, plant and equipment

    -       (51

)

Amortization of operating lease right-of-use assets

    150,604       100,915  
Bad debt expense     162,831       17,006  

Changes in assets and liabilities

               

Accounts receivable

    1,188       (623,243

)

Prepayments and other receivables

    5,653       (14,653

)

Operating lease liabilities

    (155,600

)

    (105,966

)

Accounts payable

    (4,421

)

    (91

)

Accruals and other payable

    97,444       138,927  

Deferred revenue

    74,991       35,842  

Tax payable

    (41,359

)

    28,689  

Net cash used in operating activities

    (544,540

)

    (716,899

)

                 

Cash flows from investing activities

               

Purchase of equipment

    (1,379

)

    (1,137

)

Purchase of intangible asset

    (19,908

)

    -  

Net cash used in investing activities

    (21,287

)

    (1,137

)

                 

Cash flows from financing activities

               

Repayment to related parties

    -       (4,422

)

Advances from shareholders

    1,407,975       3,906,022  

Repayment to shareholders

    (1,076,193

)

    (3,355,088

)

Net cash provided by financing activities

    331,782       546,512  
                 

Effect of exchange rates on cash

    72,780       (6,883

)

                 

Net decrease in cash

    (161,265

)

    (178,407

)

                 

Cash at beginning of period

    224,733       728,121  
                 

Cash at end of period

  $ 63,468     $ 549,714  
                 

Supplemental of cash flow information

               

Cash paid for interest expenses

  $ -     $ -  

Cash paid for income tax

  $ -     $ -  

Non-cash financing activities:

               

Operating lease asset obtained in exchange for operating lease obligation

  $ -     $ 1,032,608  

Capital contribution

  $ -     $ 125,353  

 

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

 

 

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars) 

 

1.

ORGANIZATION AND BUSINESS

 

Porter Holding International, Inc. (formerly known as Uni Line Corp., “ULNV” or the “Company”) was incorporated in the State of Nevada on September 5, 2013.

 

As of June 30, 2020, the Company has subsidiaries incorporated in countries and jurisdictions including the People’s Republic of China (“PRC”), Hong Kong, and Seychelles As of December 31, 2019, the Company also effectively controls a number of variable interest entities (“VIEs”) through the Primary Beneficiaries, as defined below. The VIEs include:

 

(a)     Shenzhen Porter Warehouse E-Commerce Co. Ltd. (“Porter E-Commerce”);

 

(b)     Shenzhen Yihuilian Information Consulting Co. Ltd. (“Porter Consulting”); and

 

(c)     Shenzhen Porter Commercial Perspective Network Co. Ltd. (“Porter Commercial”).

 

As a result of the above contractual arrangements, or the Contractual Arrangements, PGL has substantial control over the VIE Entities’ daily operations and financial affairs, election of their senior executives and all matters requiring shareholder approval. Furthermore, as the primary beneficiary of the VIE Entities, the Company is entitled to consolidate the financial results of the VIE Entities in its own consolidated financial statements under Financial Accounting Standards Board Accounting Standard Codification (“ASC”) Topic 810 and related subtopics related to the consolidation of variable interest entities, or ASC Topic 810.

 

In August 2019, Porter E-Commerce acquired 60% of the equity interest in Shenzhen Qianhai Maihuolang E-commerce Co., Ltd. (“Maihuolang E-commerce”), which is engaged in the business of online E-commerce (See Note 3 – Business combinations). In October 2019, the shareholders of Maihuolang E-commerce resolved that the registered capital from RMB 5,000,000 ($718,205) to RMB 5,263,157 ($756,005), and such increase in registered capital would be contributed by the non-controlling interest shareholder. Consequently, the equity interest in Maihuolang E-commerce owned by the Company was changed to 57%.

 

The Company and its subsidiaries and VIE entities (collectively referred to as the “Company”) focus its business as an innovative O2O (Online to Offline) business platform operator covering both online E-commerce and offline commercial chain entity of three dimensional synchronous operation together with integrated comprehensive services for merchant clients, service income from organizing and delivering an event and forum, and third-party payment service. The Company provides investment and corporate management consulting services to its clients.

 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States of America generally accepted accounting principles (“U.S. GAAP”). The unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries and its variable interest entities. All significant inter-company transactions and balances have been eliminated in consolidation. 

 

The interim unaudited condensed consolidated financial information as of June 30, 2020 and December 31, 2019, and for the three and six months periods ended June 30, 2020 and 2019 have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures, which are normally included in consolidated financial statements prepared in accordance with U.S. GAAP have not been included. The interim unaudited condensed consolidated financial information should be read in conjunction with the Consolidated Financial Statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, previously filed with the SEC on May 1, 2020.

 

In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these unaudited condensed consolidated financial statements, which are of a normal and recurring nature, have been included. The results reported in the condensed consolidated financial statements for any interim periods are not necessarily indicative of the results that may be reported for the entire year.

 

 

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars) 

 

Going Concern

 

The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred net loss of $914,107 during the six-month period ended June 30, 2020, resulting in an accumulated deficit of $3,095,511 as of June 30, 2020, and it currently has net working capital deficit of $1,879,005. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. The Company may have to rely on additional debt financing, loans from existing directors and shareholders and private placements of capital stock for additional funding. There can be no assurance that the Company will be successful in its plans described above or in attracting equity or alternative financing on acceptable terms, or if at all.

 

In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. The COVID-19 pandemic has negatively impacted the global economy, workforces, customers, and created significant volatility and disruption of financial markets. It has also disrupted the normal operations of many businesses, including the Company’s. This outbreak could decrease spending, adversely affect demand for the Company’s services and harm its business and results of operations. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on its business or results of operations at this time.

 

These unaudited condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Use of Estimates

 

The preparation of these unaudited condensed consolidation financial statements requires management of the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an on-going basis, the Company evaluates its estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Identified below are the accounting policies that reflect the Company’s most significant estimates and judgments, and those that the Company believes are the most critical to fully understanding and evaluating its condensed consolidated financial statements.

 

The COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further business slowdowns or shutdowns, depress demand for the Company’s business, and adversely impact its results of operations. During the three months ended June 30, 2020, the Company faced increasing uncertainties around its estimates of revenue collectability and accounts receivable credit losses. The Company expects uncertainties around its key accounting estimates to continue to evolve depending on the duration and degree of impact associated with the COVID-19 pandemic. Its estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in its unaudited condensed consolidated financial statements.

 

VIE Consolidation

 

The Company’s VIEs with the exception of Weifang Portercity, are wholly owned by Mr. Zonghua Chen and Ms. Xiaomei Xiong as nominee shareholders. For the consolidated VIEs, management made evaluations of the relationships between the Company and the VIEs and the economic benefit flow of contractual arrangements with the VIEs. In connection with such evaluation, management also took into account the fact that, as a result of such contractual arrangements, the Company controls the shareholders’ voting interests in these VIEs. As a result of such evaluation, management concluded that the Company is the primary beneficiary of its consolidated VIEs.

 

 

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars) 

 

PRC laws and regulations prohibit or restrict foreign ownership of companies that operate Internet information and content, Internet access, online games, mobile, value added telecommunications and certain other businesses in which the Company is engaged or could be deemed to be engaged. Consequently, the Company conducts certain of its operations and businesses in the PRC through its VIEs. The Company consolidates all of the VIEs of which the Company is the primary beneficiary.

 

The following financial information of the Company’s consolidated VIEs (including subsidiary of VIEs) is included in the accompanying condensed consolidated financial statements:

 

   

June 30, 2020

   

December 31, 2019

 

ASSETS

               

CURRENT ASSETS

               

Cash

  $ 49,935     $ 203,037  

Accounts receivable, net

    842,894       1,021,078  

Prepayments and other receivables

    89,925       94,116  

Due from shareholders

    283,082       -  

Amount due from the Company and its non-VIE subsidiaries (1)

    313,364       205,856  

Total current assets

    1,579,200       1,524,087  
                 

NON-CURRENT ASSETS

               

Long term rental deposit 

    63,011       63,946  

Long term prepayment

    2,695       5,589  

Equipment, net

    39,792       48,566  

Intangible assets, net

    238,759       257,141  

Operating lease right-of-use assets

    728,792       891,733  

Goodwill

    -       34,297  

Total non-current assets

    1,073,049       1,301,272  
                 

TOTAL ASSETS

  $ 2,652,249     $ 2,825,359  
                 

CURRENT LIABILITIES

               

Accounts payable

  $ 128,426     $ 134,798  

Accruals and other payables

    485,475       99,836  

Deferred revenue

    358,756       288,330  

Tax payable

    91,263       134,394  

Amounts due to shareholders of the Company

    1,925,290       1,618,720  

Operating lease liability - current

    325,596       323,403  

Total current liabilities

    3,314,806       2,599,481  
                 

NON-CURRENT LIABILITIES

               

Operating lease liability - non-current

    433,960       604,597  

TOTAL LIABILITIES

  $ 3,748,766     $ 3,204,078  

 

(1) Amount due from the Company and its non-VIE subsidiaries consists of intercompany from other non-VIE subsidiaries within the Company. 

 

 

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars) 

 

   

Three months ended June 30,

   

Six months ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 
                                 

Net revenue

  $ 43,601     $ 962,833     $ 420,914     $ 1,354,531  

Net (loss) income

  $ (242,260

)

  $ 128,785     $ (707,193

)

  $ (470,552

)

 

   

Six months ended June 30,

 
   

2020

   

2019

 
                 

Net cash used in operating activities

  $ (350,296

)

  $ (539,104

)

Net cash used in investing activities

    (21,287

)

    (1,137

)

Net cash provided by financing activities

    220,748       544,084  

 

Revenue Recognition

 

The Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. The Company recognizes revenues following the five step model prescribed under Accounting Standards Update (“ASU”) No. 2014-09: (i) identify contract(s) with a customer: Due to impact of COVID-19, the Company, starting from first quarter of 2020, determines to receive cash prior to performing investment and corporate management consulting services in order to ensure probable collection of consideration and hence existence of a contract; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) the Company satisfies the performance obligation.

 

Revenues are recognized when control of the promised goods or services is transferred to the customers, which may occur at a point in time or over time depending on the terms and conditions of the agreement, in an amount that reflects the consideration the Company expect to be entitled to in exchange for those goods or services.

 

The Company via Porter Consulting earns commissions of $11,145 and $23,595 for the three and six months ended June 30, 2020 respectively, primarily from a third-party payment service provider when China UnionPay card transactions are completed and settled. Commissions of $22,303 and $48,101 for the three and six months ended June 30, 2019 respectively. Revenue related to commissions is recognized in the statement of operation at the time when the underlying transaction is completed.

 

The third-party payment provider is a China UnionPay card acquiring institution and earns processing fees from China UnionPay card transactions. The Company’s performance obligation is to promote, via Porter Consulting, the payment service of the third-party payment service provider to merchants in Shenzhen, for which the Company shares a portion of the processing fees earned by the third-party payment service provider from China UnionPay, as commission.

 

The Company via Portercity provides various consulting services to its clients, especially to those who have the intention to be publicly listed in the stock exchanges in the United States and other countries. The Company categorizes its consulting services into three phases:

 

Phase I consulting services primarily include due diligence review, market research and feasibility study, business plan drafting, accounting record review, and business analysis and recommendations etc. Management estimates that Phase I normally takes around three months to complete based on its past experiences.

 

Phase II consulting services primarily include reorganization, pre-listing education and tutoring, talent search, legal and audit firm recommendation and coordination, VIE contracts and other public-listing related documents review, merger and acquisition planning, investor referral and pre-listing equity financing source identification and recommendation, independent directors and audit committee candidates recommendation; shell company identification and recommendation for customers expecting to become publicly listed through reverse merger transaction; etc. Management estimates that Phase II normally takes about five months to complete based its past experiences.

 

 

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars) 

 

Phase III consulting services primarily include assistance in preparation of customers’ registration statement under IPO transactions or Form 8-K under reverse merger transactions; assistance in answering comments and questions received from regulatory agencies etc. Management believes it is very difficult to estimate the timing of this phase of service as the completion of Phase III services is not within the Company’s control.

 

Under ASC Topic 606, in order to recognize revenue, the Company is required to identify an approved contract with commitments to perform respective obligations, identify rights of each party in the transaction regarding goods to be transferred, identify the payment terms for the goods transferred, verify that the contract has commercial substance and verify that collection of substantially all consideration is probable. Each phase of consulting services is standalone and fees associated with each phase are usually clearly identified in service agreements. Revenue from providing Phase I and Phase II consulting services to customers is recognized based on the output methods, including surveys of performance completed to date or milestones reached of each phase only when the Company has an enforceable right to payment for performance completed to date. Otherwise, such revenue is recognized at a point in time when services are delivered and accepted by customers. Revenue from providing Phase III consulting services to customers is recognized upon completion of reverse merger transaction or IPO transaction, which is evidenced by filing of 8-K for reverse merger transaction or receipt of effective notice from regulatory agencies for IPO transaction. Revenue that has been billed and not yet recognized is reflected as deferred revenue on the condensed consolidated balance sheets.

 

Depending on the complexity of the underlying service arrangement and related terms and conditions, significant judgments, assumptions and estimates may be required to determine when substantial delivery of contract elements has occurred, whether any significant ongoing obligations exist subsequent to contract execution, whether amounts due are collectible and the appropriate period or periods in which, or during which, the completion of the earnings process occurs. Depending on the magnitude of specific revenue arrangements, adjustment may be made to the judgments, assumptions and estimates regarding contracts executed in any specific period. Service income from consulting services, totaled $626 and $306,286 for the three and six months ended June 30, 2020, is recognized when the service is performed. Service income from consulting services, totaled $927,780 and $1,261,010 for the three and six months ended June 30, 2019.

 

Regarding the trading business, the Company evaluates whether it is appropriate to record the gross amount of product sales and related costs or the net amount as commissions in accordance with ASC 606. When the Company is primarily obligated in a transaction, is subject to inventory risk, has latitude in establishing prices and selecting suppliers, or has several but not all of these indicators, revenues should be recorded on a gross basis. When the Company is not the primary obligor, does not bear the inventory risk and does not have the ability to establish the price, revenues are recorded on a net basis. The Company determined that it is not the primary obligor in its trading business. For the three and six months ended June 30, 2020, the Company recognized a net revenue of $nil and $11,928, when control of the products has transferred, being at the point the products are delivered to the customer and the customer has accepted the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. For the three and six months ended June 30, 2019, the Company recognized a net revenue of $22,534 and $31,666.

 

Starting from the first quarter of 2019, the Company, via PPBGL, Maihuolang E-commerce and Porter Commercial, provides various training services to its clients, primarily related to e-commerce platform operation, expansion of channels and promotion strategy, and capital market operation, via live and online sessions. Under ASC Topic 606, in order to recognize revenue, the Company is required to identify an approved contract with commitments to perform respective obligations, identify rights of each party in the transaction regarding goods to be transferred, identify the payment terms for the goods transferred, verify that the contract has commercial substance and verify that collection of substantially all consideration is probable. The fees associated with the course of training sessions are clearly identified in service agreements. Training service revenue is recognized at the time when the training sessions stipulated in the contract are completed. The Company recognized $11,865 and $89,643 for the three and six months ended June 30, 2020. The Company recognized $126 and $308,243 for the three and six months ended June 30, 2019.

 

Practical expedients and exemption

 

The company has not incurred any costs to obtain contracts, and does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

 

Other service income is earned when services have been rendered.

 

 

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars) 

 

Revenue by major product line

 

   

For Three Months Ended June 30,

   

For Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 
                                 

Investment and corporate management consulting services

  $ 626     $ 927,780     $ 306,286     $ 1,261,010  

Training service

    11,865       126       89,643       308,243  

Third-party payment service

    11,145       22,303       23,595       48,101  

Trading business

    -       22,534       11,928       31,666  

Others

    20,031       12,750       39,481       45,419  
    $ 43,667     $ 985,493     $ 470,933     $ 1,694,439  

 

Revenue by recognition over time vs point in time

 

   

For Three Months Ended June 30,

   

For Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 
                                 

Revenue by recognition over time

  $ 626     $ 927,780     $ 306,286     $ 1,261,010  

Revenue by recognition at a point in time

    43,041       57,713       164,647       433,429  
    $ 43,667     $ 985,493     $ 470,933     $ 1,694,439  

 

Revenue by gross vs net

 

   

For Three Months Ended June 30,

   

For Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 
                                 

Revenue by gross

  $ 43,667     $ 962,959     $ 459,005     $ 1,662,773  

Revenue by net

    -       22,534       11,928       31,666  
    $ 43,667     $ 985,493     $ 470,933     $ 1,694,439  

 

Executed contracts with fixed-price terms

 

   

June 30, 2020

 
   

Contract Amount

   

Future Estimated Revenue

 
                 

Investment and corporate management consulting services

  $ 28,156,135     $ 22,475,135  

 

Foreign Currency and Foreign Currency Translation

 

The functional currency of the Company and PGL is the United States dollar (“US dollar”). The functional currency of the PPBGL is the Hong Kong dollar. The Company’s subsidiary and VIEs with operations in PRC uses the local currency, the Chinese Yuan (“RMB”), as their functional currencies. An entity’s functional currency is the currency of the primary economic environment in which it operates, normally that is the currency of the environment in which the entity primarily generates and expends cash. Management’s judgment is essential to determine the functional currency by assessing various indicators, such as cash flows, sales price and market, expenses, financing and inter-company transactions and arrangements.

 

 

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars) 

 

Foreign currency transactions denominated in currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are re-measured at the applicable rates of exchange in effect at that date. Gains and losses resulting from foreign currency re-measurement are included in the statements of comprehensive loss.

 

The condensed consolidated financial statements are presented in U.S. dollars. Assets and liabilities are translated into U.S. dollars at the current exchange rate in effect at the balance sheet date, and revenues and expenses are translated at the average of the exchange rates in effect during the reporting period. Stockholders’ equity accounts are translated using the historical exchange rates at the date the entry to stockholders’ equity was recorded, except for the change in retained earnings during the period, which is translated using the historical exchange rates used to translate each period’s statement of operation. Differences resulting from translating functional currencies to the reporting currency are recorded in accumulated other comprehensive income in the condensed consolidated balance sheets.

 

Translation of amounts from RMB into U.S. dollars has been made at the following exchange rates:

 

Balance sheet items, except for equity accounts

 

 

 

June 30, 2020

 

RMB7.0651 to $1

HKD7.7501 to $1

December 31, 2019

 

RMB6.9618 to $1

HKD7.7894 to $1

 

 

 

 

Income statement and cash flows items

 

 

 

For the six-month period ended June 30, 2020

 

RMB7.0322 to $1

HKD7.7608 to $1

For the six-month period ended June 30, 2019

 

RMB6.7836 to $1

HKD7.8428 to $1

For the three-month period ended June 30, 2020

 

RMB7.0841 to $1

HKD7.7510 to $1

For the three-month period ended June 30, 2019

 

RMB6.8195 to $1

HKD7.8399 to $1

 

Net loss per share of common stock

 

The Company has adopted ASC Topic 260, “Earnings per Share,” (“EPS”) which requires presentation of basic EPS on the face of the statement of operation for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation. In the accompanying condensed consolidation financial statements, basic earnings (loss) per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.

 

   

Three Months Ended June 30,

   

Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 
                                 

Net (loss) income attributable to Porter Holding International, Inc.

  $ (342,512

)

  $ 59,881     $ (894,579

)

  $ (309,534

)

                                 

Weighted average number of common shares outstanding - basic and diluted

    508,110,000       508,110,000       508,110,000       508,110,000  
                                 

Basic and diluted loss per share

  $ -     $ -     $ -     $ -  

 

The Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding.

 

Segments

 

The Company evaluates a reporting unit by first identifying its operating segments, and then evaluates each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meets the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated. The Company has only one major reportable segment in the periods presented.

 

 

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars) 

 

Fair Value of Financial Instruments

 

U.S. GAAP establishes a three-tier hierarchy to prioritize the inputs used in the valuation methodologies in measuring the fair value of financial instruments. This hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three-tier fair value hierarchy is:

 

Level 1 – observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

Level 2 – include other inputs that are directly or indirectly observable in the market place.

 

Level 3 – unobservable inputs which are supported by little or no market activity.

 

The carrying value of the Company’s financial instruments, including cash, accounts and other receivables, other current assets, accounts and other payables, and other short-term liabilities approximate their fair value due to their short maturities.

 

In accordance with ASC 825, for investments in financial instruments with a variable interest rate indexed to performance of underlying assets, the Company elected the fair value method at the date of initial recognition and carried these investments at fair value. Changes in the fair value are reflected in the accompanying condensed consolidated statements of operations and comprehensive loss as other income (expense). To estimate fair value, the Company refers to the quoted rate of return provided by banks at the end of each period using the discounted cash flow method. The Company classifies the valuation techniques that use these inputs as Level 2 of fair value measurements.

 

As of June 30, 2020 and December 31, 2019, the Company had no investments in financial instruments.

 

Goodwill

 

The Company allocates goodwill from business combinations to reporting units based on the expectation that the reporting unit is to benefit from the business combination. The Company evaluates its reporting units on an annual basis and, if necessary, reassigns goodwill using a relative fair value allocation approach. Goodwill is tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit.

 

Application of the goodwill impairment test requires judgments, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and the determination of the fair value of each reporting unit. The Company first assesses qualitative factors to determine whether it is more likely than not that goodwill is impaired. If the more likely than not threshold is met, the Company performs a quantitative impairment test.

 

As of June 30, 2020 and December 31, 2019, the Company performed goodwill impairment testing. Base on the impairment test result per the fact that the considerations to be received for the disposal of 57% ownership of Maihuolang E-Commerce in July 2020 was lower than the related net carrying value, the Company fully impaired the goodwill of $33,954 as of June 30, 2020.

 

Impairment for long-lived assets

 

Long-lived assets, including property and equipment with finite lives and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recover-ability of the assets based on the non-discounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated discounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values.

 

 

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars) 

 

As of June 30, 2020 and December 31, 2019, $17,609 and $nil of impairment of intangible assets was recognized, respectively. Since the considerations to be received for the disposal of 57% ownership of Maihuolang E-Commerce in July 2020 was lower than the related net carrying value, impairment was made to the intangible assets, on top of the full impairment of goodwill.

 

Apart from intangible assets, the Company recognized no impairment loss for other long-lived assets as of June 30, 2020 and December 31, 2019.

 

Leases

 

The Company determines if an arrangement is a lease or contains a lease at inception. Operating lease liabilities are recognized based on the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. As the rate implicit in the lease is not readily determinable for the operating lease, the Company generally uses an incremental borrowing rate based on information available at the commencement date to determine the present value of future lease payments. Operating lease right-of-use (“ROU assets”) assets represent the Company’s right to control the use of an identified asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are generally recognized based on the amount of the initial measurement of the lease liability. The lease has remaining lease term of approximately four years. Lease expense is recognized on a straight-line basis over the lease term. The Company elected the package of practical expedients permitted under the transition guidance to combine the lease and non-lease components as a single lease component for operating leases associated with the Company’s office space lease, and to keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the consolidated statements of income on a straight-line basis over the lease term.

 

ROU assets are reviewed for impairment when indicators of impairment are present. ROU assets from operating and finance leases are subject to the impairment guidance in ASC 360, Property, Plant, and Equipment, as ROU assets are long-lived nonfinancial assets.

 

ROU assets are tested for impairment individually or as part of an asset group if the cash flows related to the ROU asset are not independent from the cash flows of other assets and liabilities. An asset group is the unit of accounting for long-lived assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.

 

The Company recognized no impairment of ROU as of June 30, 2020 and December 31, 2019.

 

The operating lease is included in operating lease right-of-use assets, operating lease liabilities-current and operating lease liabilities-non-current on the condensed consolidated balance sheets.

 

Recent Accounting Pronouncements

 

Accounting Pronouncements Issued But Not Yet Adopted 

 

In May 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several consequential amendments to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial Instruments— Credit Losses—Available-for-Sale Debt Securities. The amendments in this ASU address those stakeholders’ concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement users with decision-useful information. ASU 2019-05 is effective for the Company for fiscal year beginning after December 15, 2022. The Company is currently evaluating the impact of this new standard on its condensed consolidated financial statements and related disclosures.

 

 

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars) 

 

In December 2019, the FASB issued ASU 2019-12: Simplifying the Accounting for Income Taxes (Topic 740), which removes certain exceptions to the general principles in Topic 740 and improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. The Company is evaluating the effect of adopting this new accounting guidance but does not expect adoption will have a material impact on the Company's unaudited condensed consolidated financial statements and related disclosures.

 

Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have material impact on the consolidated financial position, statements of operations and cash flows. 

 

3.

 BUSINESS COMBINATIONS

 

On August 25, 2019, Porter E-Commerce entered into a share purchase agreement (the “Maihuolang Agreement”) with Mr. Kezhan Ma, former controlling shareholder of Maihuolang E-commerce (“Maihuolang Seller”). Neither Porter E-Commerce nor its affiliates have any material relationship with the Maihuolang Seller other than with respect to the Maihuolang Agreement.

 

Pursuant to the Maihuolang Agreement, Porter E-Commerce agreed to acquire 60% of the capital stock of Maihuolang E-commerce collectively held by the Maihuolang Seller, for an aggregate consideration of RMB 1 ($0.1) in cash.

 

The Company’s acquisition of Maihuolang E-commerce was accounted for as a business combination in accordance with ASC 805. The Company has allocated the purchase price of Maihuolang E-commerce based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. The Company estimated the fair values of the assets acquired and liabilities assumed at the acquisition date in accordance with the business combination standard issued by the FASB with the valuation methodologies using cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed and intangible assets identified as of the acquisition date and considered a number of factors including valuations from independent appraisers. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense.

 

The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date, which represents the net purchase price allocation at the date of the acquisition of Maihuolang E-commerce based on a valuation performed by an independent valuation firm engaged by the Company:

 

   

Fair Value

 

Cash

  $ 4,761  

Prepayments

    280  

Other receivables

    27,026  

Intangible assets

    233,455  

Long-term deferred assets

    607  

Operating lease right-of-use assets

    158,004  

Goodwill

    33,375  

Total assets

    457,508  
         

Accrued payroll

    (4,094

)

Accrued tax

    (18

)

Other payables

    (290,687

)

Operating lease liability - current

    (88,217

)

Operating lease liability - non-current

    (74,492

)

Total liabilities

    (457,508

)

Net assets acquired

  $ -  

 

$33,375 of goodwill arising from the acquisition consists largely of synergies expected from combining the operations of Porter E-Commerce and Maihuolang E-commerce. None of the goodwill is expected to be deductible for income tax purposes. 

 

 

 

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars) 

 

4.

 ACCOUNTS RECEIVABLE, NET

 

Accounts receivable consist of the following:

 

   

June 30, 2020

   

December 31, 2019

 
                 

Billed

  $ 61,303     $ 61,303  

Unbilled

    842,894       1,021,078  

Accounts receivable

    904,197     $ 1,082,381  

Less: allowance for doubtful accounts

    (3,065

)

    (3,065

)

    $ 901,132     $ 1,079,316  

  

The following table sets forth the movement of allowance for doubtful accounts:

 

   

June 30, 2020

   

December 31, 2019

 
                 

Beginning

  $ 3,065     $ -  

Additions

    162,831       476,694  

Write off

    (162,831

)

    (470,696

)

Exchange rate difference

    -       (2,933

)

Balance

  $ 3,065     $ 3,065  

 

During May and June 2020, the Company encountered further uncertainties of collectability due to impact of COVID-19, and hence took legal action in attempt to recover the accounts receivables. As such, for the three and six months ended June 30, 2020, the Company wrote off $nil and $162,831 of uncollectible accounts receivable, respectively.

 

5.

PREPAYMENTS AND OTHER RECEIVABLES

 

Prepayments and other receivables consist of the following:

 

   

June 30, 2020

   

December 31, 2019

 
                 

Prepayments

  $ 29,211     $ 53,998  

Deposits

    10,616       -  

Others

    50,229       40,163  
    $ 90,056     $ 94,161  

 

6.

EQUIPMENT, NET

 

Equipment, net consist of the following:

 

   

June 30, 2020

   

December 31, 2019

 
                 

Office and computer equipment

  $ 169,335     $ 170,455  

Less: Accumulated depreciation

    (128,395

)

    (120,519

)

    $ 40,940     $ 49,936  

 

 

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars) 

 

Depreciation expenses charged to the statements of operations for the six months ended June 30, 2020 and 2019 were $9,683 and $9,938, respectively. Depreciation expenses charged to the statements of operations for the three months ended June 30, 2020 and 2019 were $4,734 and $4,953, respectively. Gain on disposal of property, plant and equipment for the six months ended June 30, 2020 and 2019 were $nil and $51, respectively.

 

7.

INTANGIBLE ASSETS, NET

 

Intangible assets, net, consist of the following:

 

   

June 30, 2020

   

December 31, 2019

 
                 

Software copyright

  $ 249,961     $ 233,560  

Domain names and trademarks

    45,483       46,158  

Intangible asset

    295,444       279,718  

Less:

               

Accumulated amortization

    (39,076

)

    (22,577

)

Impairment

    (17,609

)

    -  
    $ 238,759     $ 257,141  

 

Amortization charged to the statements of operations for the six months period ended June 30, 2020 and 2019 were $16,908 and $2,006, respectively. Amortization charged to the statements of operations for the three months period ended June 30, 2020 and 2019 were $8,425 and $997, respectively.

 

As of June 30, 2020 and December 31, 2019, $17,609 and $nil of impairment of intangible assets was recognized, respectively.

 

8.

GOODWILL

 

The changes in the carrying amount of goodwill are as follows:

 

   

Maihuolang E-commerce

 

Balance as of December 31, 2019

  $ 34,297  

Goodwill acquired through acquisitions

    -  

Impairment

    (33,954

)

Foreign currency translation adjustment

    (343

)

Balance as of June 30, 2020

  $ -  

 

As of June 30, 2020, the Company fully impaired the goodwill of $33,954.

 

9.

ACCRUALS AND OTHER PAYABLES

 

Accruals and other payables consist of the following:

 

   

June 30, 2020

   

December 31, 2019

 
                 

Salary payables

  $ 95,961     $ 69,557  

Refund to third parties

    306,436       -  

Accrued professional fees

    19,778       19,778  

Accrued rental expenses

    74,090       8,868  

Others

    10,758       22,489  
   

$

507,023

    $ 120,692  

 

 

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars) 

 

10.

BALANCES WITH RELATED PARTIES

 

 

Note

 

June 30, 2020

   

December 31, 2019

 

Due from shareholders

                 

Mr. Zongjian Chen and Ms. Xiaomei Xiong (wife of Mr. Zongjian Chen)

(a)

  $ 283,082     $ -  
                   

Due to related parties

                 

Mr. Kezhan Ma

(b)

  $ 1,090     $ 1,106  
                   

Due to shareholders

                 

Mr. Zonghua Chen (the Company’s Chairman, Chief Executive Officer, Chief Financial Officer and President)

    $ 1,590,589     $ 1,284,061  

Mr.  Zongjian Chen (brother of Mr.  Zonghua Chen)

      185,692       149,090  
      $ 1,776,281     $ 1,433,151  

 

(a)

On April 13, 2020, Henan Longji Real Estate Development Co., Ltd. (“Longji Real Estate”) filed an action against Porter E-Commerce, Zongjian Chen and Xue’an Yan related to certain loan of RMB 2 million (approximately $283,082) which loan occurred before Porter E-Commerce merged with the Company. On May 10, 2020, Porter E-Commerce, Zongjian Chen, Xue’an Yan and Longji Real Estate reached a settlement under which Porter E-Commerce agreed to pay off the loan principal of RMB 2 million in two installments before June 30, 2021 and interest accrued on unpaid principal since January 1, 2020 at a rate of 6% per annum. In addition, under the settlement, Zongjian Chen and Xue’an Yan, the two original shareholders of Porter E-Commerce agreed to be severally and jointly liable for the payoff of the principal and interest of the loan. Porter E-Commerce, Zongjian Chen and Xue’an Yan were also jointly liable for the litigation costs of RMB11,400 (approximately $1,614).

(b)

Mr. Kezhan Ma is a 38% minority shareholder of Maihuolang E-commerce.

 

All the above balances are due on demand, interest-free and unsecured. The Company used the funds for its operations. For the six months ended June 30, 2020, the Company had transactions amounted $1,407,975 from shareholders and $1,076,193 to shareholders, comparing to $3,906,022 from shareholders and $3,355,088 to shareholders for the same period in 2019. For the six months ended June 30, 2020, the Company had transactions amounted $nil from and to related parties, comparing to $4,422 to related parties for the same period in 2019.

 

11.

INCOME TAXES

 

The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.

 

ULNV is incorporated in the State of Nevada and is subject to the U.S. federal tax and has incurred net operating loss for income tax purposes through June 30, 2020. As of June 30, 2020, future net operating losses of approximately $45,437 from ULNV are available to offset future taxable income. Accumulated deficit as of June 30, 2020 and December 31, 2019 was approximately $3.1 million and $2.2 million, respectively.

 

The 2017 Tax Act created a new requirement that, for the periods beginning after January 1, 2018, certain income (referred to as global intangible low taxed income or “GILTI”) earned by foreign subsidiaries in excess of a deemed return on tangible assets of foreign corporations must be included in U.S. taxable income. The GILTI income is eligible for a deduction, which lowers the effective tax rate to 10.5% for calendar years 2018 through 2025 and 13.125% after 2025. Under U.S. GAAP, companies are allowed to make an accounting policy election to either (i) account for GILTI as a component of tax expense in the period in which a company is subject to the rules – the period cost method, or (ii) account for GILTI in a company’s measurement of deferred taxes – the deferred method. The Company elected to account for GILTI in the period the tax is incurred. The Company did not generate any GILTI during the six months period ended June 30, 2020.

 

PGL is registered as an international business company and is exempted from corporation tax in Seychelles.

 

PPBGL is subject to Hong Kong profits tax rate of 16.5%. For the six-month period ended June 30, 2020, it did not have any assessable profits arising in or derived from Hong Kong and accordingly no provision for Hong Kong profits tax was made. For the six-month period ended June 30, 2020, it generated $158,488 of net loss. For the six-month period ended June 30, 2019, it generated $337,108 of net income and $44,657 tax expenses accrued accordingly.

 

 

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars) 

 

PRC Tax

 

The Company’s subsidiary and consolidated VIEs in China are subject to corporate income tax (“CIT”) at 25% for the six-month period ended June 30, 2020 and 2019. As of June 30, 2020, the Company had approximately $3.5 million of net operating loss carried forward from the foreign subsidiaries which will expire in various years through 2025.

 

The Ministry of Finance (“MOF”) and State Administration of Taxation (“SAT”) on January 17, 2019 jointly issued Cai Shui 2019 No. 13. This clarified that from January 1, 2019 to December 31, 2021, eligible small enterprises whose taxable income falls under RMB1,000,000 (previously RMB500,000), may pay CIT on 25% of their whole income at a rate of 20% (i.e., effective rate is 5%).  

 

A reconciliation of the income tax expense determined at the statutory income tax rate to the Company’s income taxes is as follows:

 

   

Three Months Ended June 30,

   

Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

(Loss)/Profit before income taxes

  $ (359,343

)

  $ 40,393     $ (914,107

)

  $ (260,488

) 

United States statutory income tax rate

    21

%

    21

%

    21

%

    21

%

Income tax (benefit)/expense computed at statutory corporate income tax rate

    (75,462

)

    8,483       (191,962

)

    (54,702

)

Reconciling items:

                               

Effect of different tax jurisdictions

    15,551       (122,316

)

    (15,829

)

    (121,236

)

Non-deductible expenses

    23,492       (73,446

)

    76,189       36,875  

Change in valuation allowance

    36,419       172,704       131,602       184,793  

Income tax (benefit) expense

  $ -     $ (14,575

)

  $ -     $ 45,730  

 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of June 30, 2020 and December 31, 2019 are presented below

 

   

June 30, 2020

   

December 31, 2019

 
                 

Deferred tax assets:

               

Net operating loss carryforwards:

               

- United States of America

  $ 9,542     $ 9,542  

- Hong Kong

    28,398       2,504  

- PRC

    875,066       586,509  
      913,006       598,555  

Less: Valuation allowance

    (913,006

)

    (598,555

)

Acquisition:

               

- PRC

    -       182,849  

Less: Valuation allowance

    -       (182,849

)

    $ -     $ -  

  

Management believes that it is more likely than not that the Company will not realize these potential tax benefits as these operations will not generate any operating profits in the foreseeable future. As a result, a valuation allowance was provided against the full amount of the potential tax benefits.

 

 

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars) 

 

12.

CHINA CONTRIBUTION PLAN

 

The Company’s subsidiaries and consolidated VIEs in China participate in a government-mandated multi-employer defined contribution plan pursuant to which certain retirement, medical and other welfare benefits are provided to employees. Chinese labor regulations require the Company’s subsidiaries and consolidated VIEs to pay to the local labor bureau a monthly contribution at a stated contribution rate based on the monthly compensation of qualified employees. The relevant local labor bureau is responsible for meeting all retirement benefit obligations; the Company’s China-based subsidiaries and consolidated VIEs have no further commitments beyond their monthly contributions. For the six months ended June 30, 2020 and 2019, the Company’s China based subsidiaries and consolidated VIEs contributed a total of $11,263 and $24,977, respectively, to these funds. For the three months ended June 30, 2020 and 2019, the Company’s China based subsidiaries and consolidated VIEs contributed a total of $4,075 and $12,775, respectively, to these funds.

 

13.

OPERATING LEASE

 

The Company has operating leases for its office facilities. The Company's leases have remaining terms of approximately four 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 Company subleases certain office space to a third party that has a remaining term of less than 12 months.

 

The following table provides a summary of leases by balance sheet location as of June 30, 2020:

 

Assets/liabilities

 

June 30, 2020

   

December 31, 2019

 

Assets

               

Operating lease right-of-use assets

  $ 728,792     $ 891,733  
                 

Liabilities

               

Operating lease liability - current

  $ 325,596     $ 323,403  

Operating lease liability - non-current

    433,960       604,597  

Total lease liabilities

  $ 759,556     $ 928,000  

 

The operating lease expenses were as follows:

 

     

Three Months Ended June 30,

   

Six Months Ended June 30, 

 

Lease Cost

Classification

 

2020

   

2019

   

2020

   

2019

 

Operating lease cost

General and administrative expenses

  $ 91,684     $ 69,710     $ 184,788     $ 140,230  

 

Maturities of operating lease liabilities at June 30, 2020 were as follows:

 

Maturity of Lease Liabilities

 

Operating Leases

 

12 months ending June 30,

       

2021

  $ 374,281  

2022

    278,986  

2023

    185,990  

Total lease payments

    839,257  

Less: interest

    (79,701

)

Present value of lease payments

  $ 759,556  

 

 

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars) 

 

Lease liabilities include lease and non-lease component such as management fee. 

 

Future minimum lease payments, which do not include the non-lease components, as of June 30, 2020 were as follows:

 

12 months ending June 30,

       

2021

  $ 290,241  

2022

    213,850  

2023

    142,567  

Total

  $ 646,658  

 

Lease Term and Discount Rate

 

June 30, 2020

 

Weighted-average remaining lease term (years)

       

Operating leases--- Shenzhen Development Center, 36/F, LuoHu, Shenzhen

    2.67  

Operating leases--- Room 02,20/F,Saixi Technology Building, Nanshan, Shenzhen

    0.92  
         

Weighted-average discount rate (%)

       

Operating leases

    8

%

 

14.

CONCENTRATIONS AND CREDIT RISK

 

(a)

Concentrations

In the three months ended June 30, 2020, no customer accounted for over 10% of the Company’s revenues, respectively. In the six months ended June 30, 2020, two customers accounted for 65% and 11% of the Company’s revenues, respectively.

 

In the three months ended June 30, 2019, three customers accounted for 29%, 22% and 18% of the Company’s revenues, respectively. In the six months ended June 30, 2019, four customers accounted for 18%, 17%, 15% and 14% of the Company’s revenues, respectively.

 

No other customer accounts for more than 10% of the Company’s revenue in the three and six months ended June 30, 2020 and 2019.

 

As of June 30, 2020, three customers accounted for 75% of the Company’s accounts receivable. As of December 31, 2019, four customers accounted for 86% of the Company’s accounts receivable.

 

(b)

Credit risk

Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash. As of June 30, 2020, and December 31, 2019, substantially all of the Company’s cash were held by major financial institutions located in the PRC, which management believes are of high credit quality.

 

For the credit risk related to trade accounts receivable, the Company performs ongoing credit evaluations of its customers and, if necessary, maintains reserves for potential credit losses. Historically, such losses have been within management’s expectations.

 

15.

CONTINGENCIES

 

During May 2020, a claim was filed against Porter E-Commerce related to a debt dispute of RMB 2 million (approximately $283,082) whereas the debt took place before its merger with the Company. The two original shareholders of Porter E-Commerce guaranteed to settle the related principal, interest and penalty. If the amount would not be settled by the two original shareholders, Porter E-Commerce will be held responsible for this debt settlement.

 

 

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars) 

 

16.

SUBSEQUENT EVENT

 

On July 15, 2020, Porter E-Commerce entered into an Equity Transfer Agreement (the “Agreement”) with Mr. Kezhan Ma, whereby Porter E-Commerce transferred its 57% equity interests in Maihuolang E-Commerce to Mr. Kezhan Ma, for cash consideration of RMB 650,000 (approximately $92,002) which amount is payable in one-time payment within eight months of the filing of the equity transfer with the local Business Registration agency. The disposal of Maihuolang E-Commerce was not considered significant nor strategic shifts on the Company’s operations, and the related assets and liabilities were not separately presented as discontinued operations as per ASC 205-20-45-1E.

 

The Company has analyzed its operations subsequent to June 30, 2020 to the date these condensed consolidation financial statements were issued and has determined that it does not have any other material subsequent events to disclose in these condensed consolidated financial statements.

 

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following management’s discussion and analysis should be read in conjunction with our financial statements and the notes thereto and the other financial information appearing elsewhere in this report. Our financial statements are prepared in U.S. dollars and in accordance with U.S. GAAP.

 

Special Note Regarding Forward Looking Statements

 

In addition to historical information, this report contains forward-looking statements. We use words such as “believe,” “expect,” “anticipate,” “project,” “target,” “plan,” “optimistic,” “intend,” “aim,” “will” or similar expressions which are intended to identify forward-looking statements. Such statements include, among others, those concerning market and industry segment growth; any projections of earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those identified in our Annual Report on Form 10-K filed on May 1, 2020, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements.

 

Readers are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.

 

Use of Terms

 

Except as otherwise indicated by the context and for the purposes of this report only, references in this report to:

 

“Company”, “we”, “us” and “our” are to the combined business of Porter Holding International, Inc., a Nevada corporation, and its consolidated subsidiaries and variable interest entities;

“PGL” are to Porter Group Limited, a Republic of Seychelles company and our wholly-owned subsidiary;

“PPBGL” are to Porter Perspective Business Group Limited, a Hong Kong company and wholly-owned subsidiary of PGL;

“Qianhai Porter” are to Shenzhen Qianhai Porter Industrial Co. Ltd., a PRC company and wholly-owned subsidiary of PPBGL;

“Portercity” are to Shenzhen Portercity Investment Management Co. Ltd., a PRC company;

“Porter E-Commerce” are to Shenzhen Porter Warehouse E-Commerce Co. Ltd., a PRC company and wholly-owned subsidiary of Portercity;

“Porter Consulting” are to Shenzhen Yihuilian Information Consulting Co. Ltd., a PRC company and wholly-owned subsidiary of Portercity;

“Porter Commercial” are to Shenzhen Porter Commercial Perspective Network Co., Ltd., a PRC company and wholly-owned subsidiary of Portercity;

“Weifang Portercity” are to Weifang Porter City Commercial Management Company Limited, a PRC company and a 60% owned subsidiary of Portercity;

“Maihuolang E-Commerce” are to Shenzhen Qianhai Maihuolang E-Commerce Co., Ltd., a PRC company and a 57% owned subsidiary of Porter E-Commerce until July 15, 2020;

“VIEs” means our consolidated variable interest entities, including Portercity and its subsidiaries, Porter E-Commerce, Porter Consulting and Porter Commercial as depicted in our organizational chart below;

“Hong Kong” refers to the Hong Kong Special Administrative Region of the People’s Republic of China;

“China” and “PRC” refer to the People’s Republic of China;

“Renminbi” and “RMB” refer to the legal currency of China;

“U.S. dollars,” “dollars” and “$” refer to the legal currency of the United States;

“SEC” are to the U.S. Securities and Exchange Commission;

“Exchange Act” are to the Securities Exchange Act of 1934, as amended;

“Securities Act” are to the Securities Act of 1933, as amended.

 

 

Overview

 

We were incorporated in the State of Nevada on September 5, 2013. Our original business plan was to sell freshly squeezed juices from mobile stands in London, United Kingdom, but this business was not successful and we did not generate any revenue from this business. Since 2016, through our VIE entity, Porter Consulting, we have partnered with China Payment Technology Co., Ltd., a third-party online payment service provider (“China Payment”) to promote China Payment’s online payment platform to companies and businesses in Shenzhen and in return share a portion of the processing fees earned by China Payment as commission. Porter Consulting also partners with Shenzhen Xinghua Tongfu Technology Co., Ltd., a third-party online payment service provider (“Shenzhen Tongfu”), whereby Porter Consulting agreed to promote Shenzhen Tongfu’s online payment platform, including the Point of Sale (POS) system, to companies and businesses in China and in return obtain a certain amount of commission based on the volume of trading through such online payment platform.

 

Moreover, we have been developing our O2O (Online to Offline) business by serving as an O2O business platform operator that provides both online E-commerce and offline physical business facilities to our merchant customers where they can conduct business and interact with their existing and potential end-consumers face to face. Our goal is to provide one-stop services for our customers through our integrated online and offline platforms. As described fully below, we are developing and offering our O2O products and services including hosting our online marketplaces (www.pt37.com and www.17yugo.com) for our merchant clients to post and sell their products and services online and managing and operating physical business facilities, Porter City, that our online merchant clients can utilize to conduct their businesses offline. We currently focus on merchant clients who are engaged in manufacturing, real estate, trade and financing sectors. In the future, we intend to expand our merchant client base to industries of big data, new materials, new energy, green food and environment protection.

 

According to the development demands and goals of our customers, in 2018, we started to offer a series of services such as business planning, financial guidance, business matching and guidance for listing primarily in the United States. At present, in our customer pool, many small and medium-sized enterprises have gained certain public awareness. They are seeking the potential advantages of being a listed company and striving for obtaining the recognition of international capital to accelerate their corporate expansion. However, many enterprises may not be familiar with the listing requirements, laws and regulations of different capital markets, and the process of obtaining financing from overseas markets.

 

In order to help our customers who intend to access overseas capital markets, we have a team of experienced professionals who have professional knowledge of the listing rules and regulations of various capital markets. We capitalize on our expertise and resources in the capital markets to assist these customers to achieve their goals.

 

Starting from the first quarter of 2019, we via PPBGL provide various training services to our clients, primarily those related to e-commerce platform operation, expansion of channels and promotion strategies, via live and online sessions.

 

During the first half of 2020, the COVID-19 pandemic has caused economic slowdowns, depressed demand for the Company’s services, and adversely impacted the Company’s operating results. The Company’s revenue decreased by $1,223,506, or 72.21% for the six months of 2020, compared to $1,694,439 for the same period of 2019. Therefore, the Company changed to require upfront cash payments prior to performing certain consulting services, in order to enhance collection of accounts receivable. The Company expects uncertainties around its key accounting estimates to continue to evolve depending on the duration and degree of impact associated with the COVID-19. 

 

 

Results of Operations

 

Comparison of Three Months Ended June 30, 2020 and 2019

 

The following table sets forth key components of our results of operations during the three months ended June 30, 2020 and 2019, both in dollars and as a percentage of our revenue.

 

   

Three Months Ended June 30,

 
   

2020

   

2019

 
   

Amount

   

% of

Revenue

   

Amount

   

% of

Revenue

 

Revenue, net

  $ 43,667       100.00     $ 985,493       100.00  

Cost of revenue

    (5,830

)

    (13.35

)

    (273,845

)

    (27.79

)

Gross profit

    37,837       86.65       711,648       72.21  

Operating expenses

                               

General and administrative expenses

    (398,461

)

    (912.50

)

    (673,669

)

    (68.36

)

(Loss) income from operations

    (360,624

)

    (825.85

)

    37,979       3.85  

Other income

    1,281       2.93       2,414       0.24  

Net (loss) income before income taxes

    (359,343

)

    (822.92

)

    40,393       4.10  

Income tax benefits

    -       -       14,575       1.48  

Net (loss) income

  $ (359,343

)

    (822.92

)

  $ 54,968       5.58  

Less: Net loss attributable to non-controlling interests

    (16,831

)

    (38.55

)

    (4,913

)

    (0.50

)

Net (loss) income attributable to Porter Holding International Inc. common stockholders

  $ (342,512

)

    (784.37

)

  $ 59,881       6.08  

 

Revenue, net. Our revenue was $43,667 for the three months ended June 30, 2020, compared to $985,493 for the same period last year. Starting from the second quarter of 2018, we commenced providing various consulting services to our customers, especially those who have the intention to be publicly listed primarily on the stock exchanges in the United States, and we received service income from the provision of these consulting services totaled $626 and $927,780 for the three months ended June 30, 2020 and 2019. The significant decrease was mainly attributable to the impacts of COVID-19 and depressed market demand. Moreover, starting from 2019, the Company provides various training services to its clients, primarily related to e-commerce platform operation, expansion of channels, promotion strategy and capital market operation, via live and online sessions. The service income from providing training services totaled $11,865 and $126 for the three months ended June 30, 2020 and 2019. Through Porter Consulting we also have promoted the payment service of third-party payment service providers to merchants in Shenzhen and in return share a portion of the processing fees earned by such third-party payment service providers as commission. Our commission totaled $11,145 and $22,303 for the three months ended June 30, 2020 and 2019, respectively. The approximately 50% decline in commission for the second quarter of 2020 was also the result of the COVID-19 pandemic and nationwide economic slowdowns. Revenues of $nil and $22,534 were generated from trading business for the three months ended June 30, 2020 and 2019, respectively. Revenue of others were $20,031 and $12,750 for the three months ended June 30, 2020 and 2019, respectively.

 

Due to the impact of COVID-19, the Company, starting from the first quarter of 2020, determines to require upfront payments prior to performing investment and corporate management consulting services in order to ensure collection of service fees.

 

Cost of revenue.  Our cost of revenue was $5,830 for the three months ended June 30, 2020, compared to $273,845 for the same period last year. Cost of revenue refers to the cost incurred in performing consulting services, third-party payment service and other business. The cost of consulting service arises from shell acquisitions, and legal and accounting advisory service outsourced to third-party service providers. The decrease of cost of revenue is in line with the decrease of revenue.

 

Gross profit and gross margin. Our gross profit was $37,837 for the three months ended June 30, 2020, compared to $711,648 for the same period last year. Gross profit as a percentage of revenue (gross margin) was 86.65% for the three months ended June 30, 2020, compared to 72.21% for the same quarter last year. The decrease of gross profit was mainly due to the decrease of business demand and suspension of business as a result of the impacts of COVID-19. 

 

 

General and administrative expenses. As shown below, our general and administrative expenses consist primarily of compensation and benefits to our general management, finance and administrative staff, professional fees and other expenses incurred in connection with general operations.  Our general and administrative expenses decreased by $275,208 to $398,461 for the three months ended June 30, 2020, compared to $673,669 for the same period in 2019. Salary and staff benefits decreased $209,428 due to the reduction of the basic salary as a result of fewer working days than usual as employees had to stay at home caused by COVID-19 since the beginning of 2020. Besides, there was a decrease of legal and professional fees by $85,814, compared to corresponding period in prior year. Moreover, a total of $51,645 of impairment related to the goodwill and intangible assets of Maihuolang E-Commerce was recognized for the three months ended June 30, 2020.

 

   

Three months ended June 30,

 
   

2020

   

2019

   

Fluctuation

 
   

Amount

   

%

   

Amount

   

%

   

Amount

   

%

 

Salary and staff benefits

  $ 104,293       26.17     $ 313,721       46.57     $ (209,428

)

    (66.76

)

Lease and management fee

    93,157       23.38       71,298       10.58       21,859       30.66  

Legal and professional fees

    122,216       30.67       208,030       30.88       (85,814

)

    (41.25

)

Depreciation and amortization

    13,029       3.27       5,950       0.88       7,079       118.97  

Bad debt (recovery) provision

    (1,251

)

    (0.31

)

    23,103       3.43       (24,354

)

    (105.41

)

Impairment

    51,645       12.96       -       -       51,645       -  

Others

    15,372       3.86       51,567       7.66       (36,195

)

    (70.19

)

Total general and administrative expenses

  $ 398,461       100.00     $ 673,669       100.00     $ (275,208

)

    (40.85

)

 

Income tax benefit. Our Income tax expense was $nil for the three months ended June 30, 2020, compared to income tax benefit $14,575 for the same period last year.

 

Net loss. As a result of the cumulative effect of the factors described above, our net loss was $359,343 for the three months ended June 30, 2020, compared with a net income of $54,968 for the same period in 2019.

 

Comparison of Six Months Ended June 30, 2020 and 2019

 

The following table sets forth key components of our results of operations during the six months ended June 30, 2020 and 2019, both in dollars and as a percentage of our revenue.

 

   

Six Months Ended June 30,

 
   

2020

   

2019

 
   

Amount

   

% of
Revenue

   

Amount

   

% of
Revenue

 

Revenue, net

  $ 470,933       100.00     $ 1,694,439       100.00  

Cost of revenue

    (379,804

)

    (80.65

)

    (799,418

)

    (47.18

)

Gross profit

    91,129       19.35       895,021       52.82  

Operating expenses

                               

General and administrative expenses

    (1,026,535

)

    (217.98

)

    (1,163,092

)

    (68.64

)

Loss from operations

    (935,406

)

    (198.63

)

    (268,071

)

    (15.82

)

Other income

    21,299       4.52       7,583       0.45  

Loss before income taxes

    (914,107

)

    (194.11

)

    (260,488

)

    (15.37

)

Income tax expense

    -       -       (45,730

)

    (2.70

)

Net loss

  $ (914,107

)

    (194.11

)

  $ (306,218

)

    (18.07

)

Less: Net (loss) income attributable to non-controlling interests