PORTER HOLDING INTERNATIONAL, INC. Investors are cautioned that you are not buying shares of a China-based operating company but instead are buying shares of a shell company issuer that maintains contractual arrangements with the associated operating company. Our PRC subsidiary has nominal operations or assets. We conduct our business inChina through our consolidated VIE and its subsidiaries. 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 inU.S. dollars and in accordance withU.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 onApril 13, 2022 , 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 theSEC . 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
and variable interest entities;
? "PGL" are to
wholly-owned subsidiary;
? "PPBGL" are to
and wholly-owned subsidiary of PGL;
? "Qianhai Porter" are to
company and wholly-owned subsidiary of PPBGL;
? "Portercity" are to
PRC company;
? "Porter E-Commerce" are to
PRC company and wholly-owned subsidiary of Portercity;
? "
PRC company and 85% owned subsidiary of Portercity;
? "Porter Commercial" are to
Ltd., a PRC company and wholly-owned subsidiary of Portercity;
? "Weifang Portercity" are to
Limited, a PRC company and a 60% owned subsidiary of Portercity. Weifang
Portercity was dissolved on April 22, 2021 .
? "Xinsanmao Wine" are to
51% owned subsidiary of Porter E-Commerce.
22--------------------------------------------------------------------------------
Table of Contents
? "Guizhou Yueqian" are to
company and a 52% owned subsidiary of Porter Consulting .
? "VIEs" means our consolidated variable interest entities, including
Portercity, and its subsidiaries (i.e. Porter E-Commerce,
Porter Commercial, Xinsanmao Wine and Guizhou Yueqian), unless the context
otherwise indicates;
? "Hong Kong" refers to the
People's Republic of China ; ? "China" and "PRC" refer tothe People's Republic of China ; ? "Renminbi" and "RMB" refer to the legal currency of China;
? "
States;
? "SEC" are to the U.S. Securities and Exchange Commission ;
? "Exchange Act" are to the Securities Exchange Act of 1934, as amended; and
? "Securities Act" are to the Securities Act of 1933, as amended. OverviewPorter Holding International, Inc. is a holding company incorporated inNevada ,the United States . As a holding company with no material operations of its own,Porter Holding International, Inc. conducts its business through the VIEs inChina . The VIEs contributed 100% of our consolidated results of operations and cash flows for the three months endedMarch 31, 2022 and 2021, respectively. As ofMarch 31, 2022 andDecember 31, 2021 , the VIEs accounted for 100% of our consolidated total assets and total liabilities. Since 2016, through our VIE entity,Porter Consulting , we have partnered withChina 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 inShenzhen and in return share a portion of the processing fees earned by China Payment as commission.Porter Consulting also partners withShenzhen Xinghua Tongfu Technology Co., Ltd. , a third-party online payment service provider ("Shenzhen Tongfu"), wherebyPorter Consulting agreed to promote Shenzhen Tongfu's online payment platform, including the Point of Sale (POS) system, to companies and businesses inChina and in return obtain a certain amount of commission based on the volume of trading through such online payment platform. As a company with limited operation history, we are at the early stage of developing our O2O business and our goal is to become a leading innovative O2O business platform operator providing both online E-commerce and offline physical business facilities to our merchant customers, where they can conduct business, interact with their existing and potential end-consumers face to face. Different from most other O2O companies, which often lack of integrated platforms, 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 intend to offer products and services including both (i) 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 (ii) managing and operating physical business facilities that our online merchant clients can utilize to conduct their businesses offline. We are currently developing merchant clients who are engaged in businesses including manufacturing, real estate, trade and financing. 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. In addition, we are planning to collaborate with key opinion leaders ("KOLs") to promote the merchandises on our e-commerce platform. According to the development demand and future 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 inthe United States . At present, in our customer pool, many small and medium-sized enterprises have increased their 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 themselves 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 will make full use of our expertise and resources in the capital markets to assist these customers to achieve their goals. 23
--------------------------------------------------------------------------------
Table of Contents Update on COVID-19 The ongoing coronavirus pandemic has had a material adverse effect on our industry and the markets in which we operate. Most of our revenues and our workforce are concentrated inChina . The pandemic also impeded our ability to recruit new clients and made us postpone providing services to existing clients. Travel restrictions from time to time also limited clients' ability to visit and meet us in person, which made it harder to build trust and engage clients. Updates of products information on our e-commerce platform and the delivery of goods were also delayed due to interruptions to operations of manufacturers caused by local lockdowns. The imported goods on our platform face more challenges as the pandemic continues outside China, and our distribution channel has been disrupted as the operations of our distributors are interrupted by the outbreak. The foregoing adverse impacts might be mitigated as the Chinese government has rolled out an array of favorable fiscal measures. However, as the coronavirus outbreak continues globally, the extent to which the coronavirus impacts our operations and results in the long-term will depend on future developments, including, among others, actions of the Chinese government to contain imported infections, which are highly uncertain and cannot be reasonably predicted. The outbreak has resurged locally from time to time. At present, management is actively looking for a business breakthrough to increase revenue in 2022. We will continue to monitor and mitigate developments affecting our workforce, our customers, and the public at large to the extent we are able to do so. Results of Operations
Comparison of Three Months Ended
The following table sets forth key components of our results of operations
during the three months ended
Three Months Ended March 31,
2022 2021 Fluctuation
Amount Amount Amount %
Revenue $ 25,670 $ 14,487 11,183 77.19 %
Cost of revenue (3,730 ) (6,844 ) 3,114 (45.50 )%
Gross profit 21,940 7,643 14,297 187.06 %
Operating expenses
General and administrative expenses (202,568 ) (301,637 ) 99,069 (32.84 )%
Loss from operations (180,628 ) (293,994 ) 113,366 (38.56 )%
Other income 399 536,416 (536,017 ) (99.93 %
(Loss) income before income taxes (180,229 ) 242,422 (422,651 ) (174.35 )%
Income tax expense - - - -
Net (loss) income (180,229 ) 242,422 (422,651 ) (174.35 )%
Less: Net loss attributable to
non-controlling interests (14,951 ) (3,404 ) (11,547 ) 339.22 %
Net (loss) income attributable to Porter
Holding International Inc. common
stockholders $ (165,278 ) $ 245,826 (411,104 ) (167.23 )%
Revenue. Our revenue was $25,670 for the three months ended March 31, 2022 ,
compared to $14,487 for the same period last year. One of our revenue sources is
to provide 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 . Service income from the provision of these consulting
services totaled $nil and $nil for the three months ended March 31, 2022 and
2021, respectively. This was mainly attributable to the impacts of COVID-19 and
depressed market demand. 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 $19,692 and $1,947 for the three months ended March
31, 2022 and 2021. Through Porter Consulting , we also promote 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 the third-party payment
service providers in the form of commission. Our commission totaled $4,001 and
$8,609 for the three months ended March 31, 2022 and 2021, respectively. The
approximately 53.53% decline in commission for the first quarter of 2022 was
also the result of the COVID-19 pandemic. Revenues of $646 and $3,236 were
generated from trading business for the three months ended March 31, 2022 and
2021, respectively. The Company started the wine sales business in late 2021 and
revenue of wine sales was $1,331 and $nil for the three months ended March 31,
2022 and 2021, respectively. Revenue of others were $nil and $695 for the three
months ended March 31, 2022 and 2021, respectively.
24--------------------------------------------------------------------------------
Table of Contents
Cost of revenue. Our cost of revenue was
Gross profit and gross margin. Our gross profit was$21,940 for the three months endedMarch 31, 2022 , compared to$7,643 for the same period last year. Gross profit as a percentage of revenue (gross margin) was 85.47% for the three months endedMarch 31, 2022 , compared to 52.76% for the same quarter last year. The increase in gross profit was in line with an increase in revenue and mainly due to the increase of revenue from providing training services which has a higher profit margin. General and administrative expenses. As shown below, our general and administrative expenses consist primarily of bad debt provision, 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$99,069 to$202,568 for the three months endedMarch 31, 2022 , compared to$301,637 for the same period of 2021. Decrease was mainly due to a decrease in salary and staff benefit, legal and professional fees and other expenses by$26,950 ,$40,214 and$29,739 , respectively, compared to corresponding period in prior year. The decrease was mostly due to the depressed market demand and the cost reduction strategy of the Company as a result of the impact of COVID-19. Three months ended March 31, 2022 2021 Fluctuation Amount % Amount % Amount % Salary and staff benefit$ 67,109 33.13$ 94,059 31.18$ (26,950 ) (28.65 ) Lease and management fee 70,762 34.93 72,068 23.89 (1,306 ) (1.81 ) Legal and professional fee 56,358 27.82 96,572 32.02 (40,214 ) (41.64 ) Depreciation and amortization 2,117 1.05 2,977 0.99 (860 ) (28.89 ) Others 6,222 3.07 35,961 11.92 (29,739 ) (82.70 ) Total$ 202,568 100.00$ 301,637 100.00$ (99,069 ) (32.84 ) Other income. Our other income was$399 and$536,416 for the three months endedMarch 31, 2022 and 2021. The other income for the three months endedMarch 31, 2021 was primarily comprise of the compensation received with the termination of the Weifang project in 2021. InJanuary 2021 , Weifang Portercity agreed with the local government to terminate the project, which was signed onAugust 25, 2018 for Weifang Portercity to facilitate investment and promote business opportunities for the Weifang region. As the local government changed its development strategy, it determined to terminate the Weifang project. Consequently, Weifang Portercity received a non-recurring compensation ofRMB3,474,828 (approximately$536,101 ) from the local government to compensate its upfront establishment expenses including expenditure relating to office renovation, office equipment and supplies in the first quarter of 2021.
Income tax expense. Our Income tax expense was $nil and $nil for the three
months ended
Net loss. As a result of the cumulative effect of the factors described above,
there was a net loss of
Liquidity and Capital Resources
Working Capital
March 31, 2022 December 31, 2021
Current Assets $ 520,606 $ 438,456
Current Liabilities 4,031,477 3,763,925
Working Capital Deficiency $ (3,510,871 ) $ (3,325,469 ) As of
25
--------------------------------------------------------------------------------
Table of Contents Going Concern Uncertainties
The accompanying unaudited condensed consolidated financial statements have been prepared assuming we will continue as a going concern.
We have considered whether there is substantial doubt about our ability to continue as a going concern given (1) our loss from operations approximately$180,628 for the three months endedMarch 31, 2022 , (2) our accumulated deficit of approximately$4,663,876 as ofMarch 31, 2022 and (3) the fact that we had negative operating cash flows of approximately$5,654 for the three months endedMarch 31, 2022 . As ofMarch 31, 2022 , our cash balance was$108,892 and our current liabilities exceed current assets by$3,510,871 . Our cash balance as ofMarch 31, 2022 is not sufficient to support our operations for the next 12 months after the date that the financial statements were issued. The negative operating results of cash flow and working capital deficiency for the quarter endedMarch 31, 2022 raise substantial doubt about our ability to continue as a going concern. Our continued operations are highly dependent upon our ability to increase revenues and if needed, to complete equity and/or debt financing. In evaluating if there is substantial doubt about our ability to continue as a going concern, we are trying to alleviate the going concern risk through (1) increasing cash generated from operations by controlling operating expenses and increasing more live steaming e-commerce events to bring up e-commerce revenue, (2) financing from domestic banks and other financial institutions, and (3) equity or debt financing. We have certain plans to mitigate these adverse conditions and to increase the liquidity of the Company. However, if we are unable to obtain the necessary additional capital on a timely basis and on acceptable terms, we will be unable to implement our current plans for expansion, repay debt obligations or respond to competitive market pressures, which will have negative impacts upon our business, prospects, financial condition and results of operations. On an on-going basis, the Company also received and will continue to receive financial support commitments from the Company's related parties. Three Months EndedMarch 31, 2022 2021
Net cash used in operating activities
- -
Net cash provided by financing activities 80,124
810,639
Effect of exchange rate changes on cash 3,227 (10,629 ) Net increase (decrease) in cash 77,696
637,085
Cash at the beginning of period 31,196 24,912 Cash at the end of period$ 108,892 $ 661,997 Operating Activities Net cash used in operating activities was$5,654 for the three months endedMarch 31, 2022 , as compared to$162,925 net cash used in operating activities for the three months endedMarch 31, 2021 . The net cash used in operating activities for the three months endedMarch 31, 2022 was mainly due to our net loss of$180,229 and a decrease in operating lease liabilities of$73,804 , partially offset by the increase in amortization of operating lease right-of-use assets of$64,105 , an increase in deferred revenue of$109,219 and an increase in accruals and other payables of$77,484 . The net cash used in operating activities for the three months endedMarch 31, 2021 was mainly due to our net income of$242,422 , partially offset by the decrease in accruals and other payables of$379,121 and deferred revenue of$64,461 . Investing Activities Net cash provided by investing activities was $nil for the three months endedMarch 31, 2022 , as compared to $nil net cash provided by investing activities for the three months endedMarch 31, 2021 . Financing Activities Net cash provided by financing for the three months endedMarch 31, 2022 was$80,124 , as compared to$810,639 for the three months endedMarch 31, 2021 . For the three months endedMarch 31, 2022 , we obtained advances of$97,846 from shareholders and repaid$17,723 to shareholders. For the three months endedMarch 31, 2021 , we obtained advances of$1,530,917 from shareholders and repaid$720,278 to shareholders. 26
--------------------------------------------------------------------------------
Table of Contents
Critical Accounting Policies and Estimates
Our unaudited condensed consolidated financial information has been prepared in accordance withU.S. GAAP, which requires us 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, we evaluate our 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. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application. There were no other material changes to the critical accounting policies previously disclosed in our audited consolidated financial statements for the year endedDecember 31, 2021 included in the Annual Report on Form 10-K filed onApril 13, 2022 .
Recent Accounting Pronouncements
Please refer to "Note 2. Basis of Presentation and Summary of Significant Accounting Policies-Recent Accounting Pronouncements" to our condensed consolidated financial statements, for a discussion of relevant pronouncements.
27--------------------------------------------------------------------------------
Table of Contents
© Edgar Online, source
