PORTER HOLDING INTERNATIONAL, INC. 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 onMay 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 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 Porter
Holding International, Inc., a
subsidiaries and variable interest entities;
? "PGL" are to
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
company and wholly-owned subsidiary of PPBGL;
? "Portercity" are to Shenzhen Portercity Business Management Co. Ltd.
(formerly Shenzhen Portercity Investment Management Co. Ltd. ), a PRC
company;
? "Porter E-Commerce" are to
PRC company and wholly-owned subsidiary of Portercity;
? "
(formerly named
company and 85% 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
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 theHong Kong Special Administrative Region of the
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.
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Table of Contents Overview We were incorporated in theState of Nevada onSeptember 5, 2013 . Our original business plan was to sell freshly squeezed juices from mobile stands inLondon, 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 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. OnJuly 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 ofRMB 650,000 (approximately$95,735 ). An impairment loss of$51,936 and a disposal gain of$4,730 were recognized. 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 inthe 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$1,532,265 , or 74.31% for the nine months of 2020, compared to$2,061,992 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. 28
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Table of Contents 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 September 30,
2020 2019
% of % of
Amount Revenue Amount Revenue
Revenue, net $ 58,794 100.00 $ 367,553 100.00
Cost of revenue (11,570 ) (19.68 ) (243,240 ) (66.18 )
Gross profit 47,224 80.32 124,313 33.82
Operating expenses
General and administrative
expenses (604,678 ) (1,028.47 ) (455,244 ) (123.86 )
Loss from operations (557,454 ) (948.15 ) (330,931 ) (90.04 )
Total other income, net 6,927 11.78 31,822 8.66
Net loss before income taxes (550,527 ) (936.37 ) (299,109 ) (81.38 )
Income tax benefits - - 1,968 0.54
Net loss $ (550,527 ) (936.37 ) $ (297,141 ) (80.84 )
Less: Net (loss) income
attributable to non-controlling
interests (3,175 ) (5.40 ) 44 0.01
Net loss attributable to Porter
Holding International Inc.
common stockholders $ (547,352 ) (930.97 ) $ (297,185 ) (80.85 )
Revenue, net. Our revenue was $58,794 for the three months ended September 30,
2020 , compared to $367,553 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 $nil and $329,000
for the three months ended September 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 $42,447
and $173 for the three months ended September 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 $11,087 and $19,801 for the three months
ended September 30, 2020 and 2019, respectively. The approximately 50% decline
in commission for the third quarter of 2020 was also the result of the COVID-19
pandemic and nationwide economic slowdowns. Revenues of $nil and $18 were
generated from trading business for the three months ended September 30, 2020
and 2019, respectively. Revenue of others were $5,260 and $18,561 for the three
months ended September 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 $11,570 for the three months ended
September 30, 2020 , compared to $243,240 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 $47,224 for the three months
ended September 30, 2020 , compared to $124,313 for the same period last year.
Gross profit as a percentage of revenue (gross margin) was 80.32% for the three
months ended September 30, 2020 , compared to 33.82% 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.
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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 increased by$149,434 to$604,678 for the three months endedSeptember 30, 2020 , compared to$455,244 for the same period in 2019. Salary and staff benefits decreased$164,409 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$9,700 , compared to corresponding period in prior year. On the other hand,$336,103 additional allowance for doubtful accounts was reserved during the three months endedSeptember 30, 2020 . Due to the impact of COVID-19, the Company encountered further uncertainties in accounts collectability during July andSeptember 2020 . This led to addition of allowance for doubtful accounts. Three months ended September 30, 2020 2019 Fluctuation
Amount % Amount % Amount %
Salary and staff
benefits $ 104,188 17.23 $ 268,597 59.00 $ (164,409 ) (61.21 )
Lease and management
fee 78,324 12.95 77,873 17.11 451 0.58
Legal and
professional fees 68,902 11.39 78,602 17.27 (9,700 ) (12.34 )
Depreciation and
amortization 5,816 0.96 7,827 1.72 (2,011 ) (25.69 )
Bad debt (recovery)
provision 335,187 55.43 (916 ) (0.20 ) 336,103 (36,692.47 )
Impairment 291 0.05 - - 291 -
Others 11,970 1.99 23,261 5.10 (11,291 ) (48.54 )
Total general and
administrative
expenses $ 604,678 100.00 $ 455,244 100.00 $ 149,434 32.83
Income tax benefit. Our Income tax expense was $nil for the three months ended
September 30, 2020 , compared to income tax benefit of $1,968 for the same period
last year.
Net loss. As a result of the cumulative effect of the factors described above,
our net loss was
Comparison of Nine Months Ended
The following table sets forth key components of our results of operations during the nine months endedSeptember 30, 2020 and 2019, both in dollars and as a percentage of our revenue. Nine Months Ended September 30, 2020 2019 % of % of Amount Revenue Amount Revenue Revenue, net$ 529,727 100.00$ 2,061,992 100.00 Cost of revenue (391,374 ) (73.88 ) (1,042,658 ) (50.57 ) Gross profit 138,353 26.12 1,019,334 49.43 Operating expenses General and administrative expenses (1,631,213 ) (307.94 ) (1,618,336 ) (78.48 ) Loss from operations (1,492,860 ) (281.82 ) (599,002 ) (29.05 ) Total other income, net 28,226 5.33 39,405 1.91 Loss before income taxes (1,464,634 ) (276.49 ) (559,597 ) (27.14 ) Income tax expense - - (43,762 ) (2.12 ) Net loss$ (1,464,634 ) (276.49 )$ (603,359 ) (29.26 ) Less: Net (loss) income attributable to non-controlling interests (22,703 ) (4.29 ) 3,360 0.16 Net loss attributable toPorter Holding International Inc. common stockholders (1,441,931 ) (272.20 ) (606,719 ) (29.42 ) 30
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Revenue, net. Our revenue was$529,727 for the nine months endedSeptember 30, 2020 , compared to$2,061,992 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 inthe United States , and we received service income from the provision of these consulting services totaled$306,286 and$1,590,010 for the nine months endedSeptember 30, 2020 and 2019, respectively. The significant decrease of revenue in the nine months of 2020 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$132,090 and$308,416 for the nine months endedSeptember 30, 2020 and 2019. ThroughPorter Consulting we have also promoted the payment service of third-party payment service providers to merchants inShenzhen and in return share a portion of the processing fees earned by such third-party payment service providers as commission. Our commission totaled$34,682 and$67,902 for the nine months endedSeptember 30, 2020 and 2019, respectively. The approximately 50% decline in commission for the first nine months of 2020 was also the result of the COVID-19 pandemic and nationwide economic slowdowns. Revenues of$11,928 and$31,684 were generated from trading business for the nine months endedSeptember 30, 2020 and 2019, respectively. Revenue of others were$44,741 and$63,980 for the nine months endedSeptember 30, 2020 and 2019, respectively. Cost of revenue. Our cost of revenue was$391,374 for the nine months endedSeptember 30, 2020 , compared to$1,042,658 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 in the nine months endedSeptember 30, 2020 is in line with the decrease of revenue. Gross profit and gross margin. Our gross profit was$138,353 for the nine months endedSeptember 30, 2020 , compared to$1,019,334 for the same period last year. Gross profit as a percentage of revenue (gross margin) was 26.12% for the nine months endedSeptember 30, 2020 , compared to 49.43% 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 increased by$12,877 to$1,631,213 for the nine months endedSeptember 30, 2020 , compared to$1,618,336 for the same period in 2019. Salary and staff benefits decreased$494,165 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$23,812 and an increase of lease and management fee by$45,040 , respectively, compared to corresponding period in prior year. On the other hand,$481,928 additional allowance for doubtful accounts was reserved during the nine months endedSeptember 30, 2020 . Due to the impact of COVID-19, the Company encountered further uncertainties in accounts collectability during July andAugust 2020 , and hence brought legal actions in attempt to recover the accounts receivable. This led to addition of allowance for doubtful accounts. Nine months ended September 30, 2020 2019 Fluctuation Amount % Amount % Amount % Salary and staff benefits$ 400,687 24.56$ 894,852 55.29$ (494,165 ) (55.22 ) Lease and management fee 266,085 16.31 221,045 13.66 45,040 20.38 Legal and professional fees 335,968 20.60 359,780 22.23 (23,812 ) (6.62 ) Depreciation and amortization 32,406 1.99 19,771 1.22 12,635 63.91 Bad debt provision 498,018 30.53 16,090 0.99 481,928 2,995.20 Impairment 51,936 3.18 - - 51,936 - Others 46,113 2.83 106,798 6.61 (60,685 ) (56.82 ) Total general and administrative expenses$ 1,631,213 100.00$ 1,618,336 100.00$ 12,877 0.80 Income tax expense. Our Income tax expense was $nil for the nine months endedSeptember 30, 2020 , compared to income tax expense$43,762 for the same period last year.
Net loss. As a result of the cumulative effect of the factors described above,
our net loss increased by
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Limited Operating History; Need for
There is limited historical financial information about us on which to base an evaluation of our performance. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the development of a new business enterprise, including limited capital resources, a narrow client base, limited sources of revenue, and possible cost overruns due to the price and cost increases in supplies and services.
Without additional funding, management believes that we will not have sufficient funds to meet our obligations beyond one year after the date our condensed consolidated financial statements are issued. These conditions give rise to substantial doubt as to our ability to continue as a going concern.
We have been, and intend to continue, working toward identifying and obtaining new sources of financing. To date we have been dependent on related parties for our source of funding. No assurances can be given that we will be successful in obtaining additional financing in the future. Any future financing that we may obtain may cause significant dilution to existing stockholders. Any debt financing or other financing of securities senior to common stock that we are able to obtain will likely include financial and other covenants that will restrict our flexibility. Any failure to comply with these covenants would have a negative impact on our business, prospects, financial condition, results of operations and cash flows. If adequate funds are not available, we may be required to delay, scale back or eliminate portions of our operations or obtain funds through arrangements with strategic partners or others that may require us to relinquish rights to certain of our assets. Accordingly, the inability to obtain such financing could result in a significant loss of ownership and/or control of our assets and could also adversely affect our ability to fund our continued operations and our expansion efforts. Currently, we spend approximately$200,000 per month for basic operations. During the next 12 months, we expect to incur the same amount of expenses each month. However, as we work to expand our operations, we expect to incur significant research, marketing and development costs and expenses on our online service platforms that meet the constantly evolving industry standards and consumer demands. We will also need to hire additional employees in order to provide new services and accommodate new clients.
Liquidity and Capital Resources
Working Capital
September 30, 2020 December 31, 2019
Current Assets $ 989,606 $ 1,398,210
Current Liabilities 3,214,361 2,435,885
Working Capital Deficiency $ (2,224,755 ) $ (1,037,675 ) As of
Going Concern Uncertainties
The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern.
As of
Net cash used in operating activities for the nine months endedSeptember 30, 2020 was$756,103 as compared to$1,084,098 for the nine months endedSeptember 30, 2019 . The decrease in net cash used in operating activities for the nine months endedSeptember 30, 2020 was primarily due to a decrease in accounts receivable, and prepayment and other receivables in the period. Net cash provided by investing activities for the nine months endedSeptember 30, 2020 was$66,638 as compared to$3,415 for the nine months endedSeptember 30, 2019 . The cash provided by investing activities for the nine months endedSeptember 30, 2020 was mainly from proceeds from disposal of investments. 32
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As ofSeptember 30, 2020 , our cash balance was$34,621 and our current liabilities exceed current assets by$2,224,755 which together with continued losses from operations raises substantial doubt about our ability to continue as a going concern. The Company's operating results for future periods are subject to uncertainties and it is uncertain if the management will be able to achieve profitability and continued growth for the foreseeable future. If the management is not able to increase revenue and manage operating expenses in line with revenue forecasts, the Company may not be able to achieve profitability. Historically, the Company financed its operations through loans from shareholders. The Company's actions to improve operation efficiency, cost reduction, and develop core cash-generating business include the following: seeking advances from the major shareholders, pursuing additional public and/or private issuance of securities, and looking for strategic business partners to optimize our operations. We have considered whether there is substantial doubt about our ability to continue as a going concern due to (1) our recurring losses from operations, including approximately$1,441,931 net loss attributable to our stockholders for the nine months endedSeptember 30, 2020 , (2) our accumulated deficit of approximately$3,642,863 as ofSeptember 30, 2020 and (3) the fact that we had negative operating cash flows of approximately$756,103 for the nine months endedSeptember 30, 2020 . 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 events, (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.
On an on-going basis, the Company also received and will continue to receive financial support commitments from the Company's related parties.
Our cash balance as ofSeptember 30, 2020 will not be sufficient to support our operations for the next 12 months after the date that the financial statements issued. We have several actions to implement as mentioned above. 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 influence upon our business, prospects, financial condition and results of operations. The negative operating results of cash flow and working capital in the nine months endedSeptember 30, 2020 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 complete equity and/or debt financing. We believe if we are unable to obtain our resources to fund operations, we may be required to delay, scale back or eliminate some or all of our planned operations, which may have a material adverse effect on our business, results of operations and ability to operate as a going concern. Nine Months EndedSeptember 30, 2020 2019
Net cash used in operating activities
66,638 3,415
Net cash provided by financing activities 554,482
718,381
Effect of exchange rate changes on cash (55,129 ) (99,047 ) Net decrease in cash (190,112 ) (461,349 ) Cash at the beginning of period 224,733 728,121 Cash at the end of period$ 34,621 $ 266,772 Operating Activities Net cash used in operating activities was$756,103 for the nine months endedSeptember 30, 2020 , as compared to$1,084,098 net cash used in operating activities for the nine months endedSeptember 30, 2019 . The net cash used in operating activities for the nine months endedSeptember 30, 2020 was mainly due to our net loss of$1,464,634 , an increase in bad debt expense of$498,018 , accruals and other payables of$125,212 and deferred revenue of$63,361 , partially offset by the decrease in operating lease liabilities of$221,963 and tax payable of$44,614 . The net cash used in operating activities for the nine months endedSeptember 30, 2019 was mainly due to our net loss of$603,359 , an increase in accounts receivable of$326,789 , an increase in prepayments and other receivables of$543,046 and a decrease in operating lease liability of$165,960 , partially offset by the increase in accruals and other payables of$166,934 and deferred revenue of$136,190 . 33
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Table of Contents Investing Activities Net cash provided by investing activities was$66,638 for the nine months endedSeptember 30, 2020 , as compared to$3,415 net cash provided by investing activities for the nine months endedSeptember 30, 2019 . The net cash used in investing activities for the nine months endedSeptember 30, 2020 was attributable to the purchase of$3,548 of equipment,$20,021 of intangible assets and$90,207 proceeds from disposal of investments. The net cash provided by investing activities for the nine months endedSeptember 30, 2019 was mainly attributable to the business combination of Maihuolang E-commerce. Financing Activities Net cash provided by financing for the nine months endedSeptember 30, 2020 was$554,482 , as compared to$718,381 for the nine months endedSeptember 30, 2019 . For the nine months endedSeptember 30, 2020 , we obtained proceeds from sales of non-controlling interests of$71,502 , advances of$3,243,880 from shareholders and repaid$2,760,900 to shareholders. For the nine months endedSeptember 30, 2019 , we obtained advances of$6,116,491 from shareholders and repaid$5,405,862 to shareholders, advances of$301,625 from related parties and repaid$293,873 to related parties.
Contractual Obligations and Commercial Commitments
We had the following contractual obligations and commercial commitments as ofSeptember 30, 2020 : Less than 1 More than 5 Contractual Obligations Total year 1-3 years 3-5 years years Amounts due to shareholders$ 1,904,212 $ 1,904,212 $ - $ - $ - Leases 537,776 222,528 315,248 - - Total$ 2,441,988 $ 2,126,740 $ 315,248 $ - $ - We believe that our current cash and financing from our existing stockholders are adequate to support operations for the next 12 months. We may, however, in the future, require additional cash resources due to changed business conditions, implementation of our strategy to expand our business or other investments or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects. Capital Expenditures
We incurred capital expenditures of
Off-Balance Sheet Transactions
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors. Critical Accounting Policies Our 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, 2019 included in the Annual Report on Form 10-K filed onMay 1, 2020 . 34
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