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MarketScreener Homepage  >  Equities  >  OTC Bulletin Board - Other OTC  >  Porter Holding International Inc    ULNV

PORTER HOLDING INTERNATIONAL INC

(ULNV)
Delayed Quote. Delayed OTC Bulletin Board - Other OTC - 08/09 09:42:31 am
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PORTER INTERNATIONAL : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)

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08/14/2019 | 01:49pm EDT
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 March 30,
2018, 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;


?    "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.

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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.



On April 7, 2017, we completed the acquisition of PGL pursuant to the share
purchase agreement. As a result of the acquisition, PGL became our wholly-owned
subsidiary and the former shareholders of PGL became the holders of
approximately 98.4% of our issued and outstanding capital stock on a
fully-diluted basis. 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"), under which
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.



As a newly established 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 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 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.



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 in the 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.



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Results of Operations


Comparison of Three Months Ended June 30, 2019 and 2018




The following table sets forth key components of our results of operations
during the three months ended June 30, 2019 and 2018, both in dollars and as a
percentage of our revenue.



                                                   Three Months Ended June 30,
                                              2019                            2018
                                                      % of                            % of
                                     Amount          Revenue         Amount          Revenue
Revenue                            $   985,493          100.00     $   539,014          100.00
Cost of revenue                       (273,845 )        (27.79 )       (46,559 )         (8.64 )
Gross profit                           711,648           72.21         492,455           91.36
Operating expenses
General and administrative
expenses                              (673,669 )        (68.36 )      (471,301 )        (87.44 )
Income from operations                  37,979            3.85          21,154            3.92
Other income                             2,414            0.24             105            0.02
Net Income before income taxes          40,393            4.10          21,259            3.94
Income tax benefit                      14,575            1.48             247            0.05
Net income                         $    54,968            5.58     $    21,506            3.99
Less: Net loss attributable to
non-controlling interests               (4,913 )         (0.50 )             -               -
Net income attributable to
Porter Holding International
Inc. common stockholders           $    59,881            6.08     $    21,506            3.99




Revenue. Our revenue was $985,493 for the three months ended June 30, 2019,
compared to $539,014 for the same period last year. Starting from the second
quarter of 2018, we commenced 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, and we received service
income from the provision of these consulting services totaled $927,780 and
$476,213 for the three months ended June 30, 2019 and 2018, respectively.
Through Porter Consulting we also promoted the payment service of a third-party
payment service provider to merchants in Shenzhen and in return share a portion
of the processing fees earned by the third-party payment service provider as
commission. Our commission totaled $22,303 and $58,224 for the three months
ended June 30, 2019 and 2018, respectively. The Company also generated $22,534
and nil from cosmetic trading business for the three months ended June 30, 2019
and 2018, respectively.



Cost of revenue.  Our cost of revenue was $273,845 for the three months ended
June 30, 2019, compared to $46,559 for the same period last year. Cost of
revenue refers to the cost of consulting services, third-party payment service
and other business. The increase was in line with the growth of consulting
services. The cost of consulting service refers to the shell acquisition, legal
and accounting advisory service outsourced to third-party service providers.



Gross profit and gross margin. Our gross profit was $711,648 for the three
months ended June 30, 2019, compared to $492,455 for the same period last year.
Gross profit as a percentage of revenue (gross margin) was 72.21% for the three
months ended June 30, 2019, compared to 91.36% for the same quarter last year.
The increase of gross profit was mainly due to more consulting services that we
provided in 2019.



General and administrative expenses. 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 $202,368 to $673,669 for the three months ended June 30, 2019,
compared to $471,301 for the same period in 2018. Legal and professional fees
increased due to change in auditors and consultants in 2019. Increase in salary
and other was due to the fact that we paid more professional staff salaries as
we expanded our consulting services to customers.



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                                                  Three months ended June 30,
                                 2019                        2018                     Fluctuation
                         Amount           %          Amount           %          Amount           %
Salary and staff
benefits                $ 313,721         46.57     $ 288,176         61.14     $  25,545          5.42
Lease and management
fee                        71,298         10.58        71,593         15.19          (295 )       (0.06 )
Legal and
professional fees         208,030         30.88        79,019         16.77       129,011         27.37
Dep and amortization        5,950          0.88         4,506          0.96         1,444          0.31
Others                     74,670         11.09        28,007          5.94        46,663          9.90
Total G&A               $ 673,669        100.00     $ 471,301        100.00     $ 202,368         42.94



Income tax benefit. Our Income tax benefit was $14,575 for the three months ended June 30, 2019, compared to $247 for the same period last year.

Net income/ (loss). As a result of the cumulative effect of the factors described above, our net income was $54,968 for the three months ended June 30, 2019, compared with a net income of $21,506 for the same period in 2018.

Comparison of Six Months Ended June 30, 2019 and 2018

The following table sets forth key components of our results of operations during the six months ended June 30, 2019 and 2018, both in dollars and as a percentage of our revenue.



                                                    Six Months Ended June 30,
                                               2019                            2018
                                                       % of                            % of
                                      Amount          Revenue         Amount          Revenue
Revenue                            $  1,694,439          100.00     $   582,380          100.00
Cost of revenue                        (799,418 )        (47.18 )       (66,152 )        (11.36 )
Gross profit                            895,021           52.82         516,228           88.64
Operating expenses
General and administrative
expenses                             (1,163,092 )        (68.64 )      (882,645 )       (151.56 )
Loss from operations                   (268,071 )        (15.82 )      (366,417 )        (62.92 )
Other income                              7,583            0.45             161            0.03
Loss before income taxes               (260,488 )        (15.37 )      (366,256 )        (62.89 )
Income tax benefit/(expense)            (45,730 )         (2.70 )           160            0.03
Net loss                           $   (306,218 )        (18.07 )   $  (366,096 )        (62.86 )
Less: Net income attributable to
non-controlling interests                 3,316            0.20               -               -
Net loss attributable to Porter
Holding International Inc.
common stockholders                    (309,534 )        (18.27 )      (366,096 )        (62.86 )




Revenue. Our revenue was $1,694,439 for the six months ended June 30, 2019,
compared to $582,380 for the same period last year. Starting from the second
quarter of 2018, we commence 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, and service income from
the provision of these consulting services totaled $1,261,010 and $476,213 for
the six months ended June 30, 2019 and 2018, respectively. Moreover, starting
from the first quarter of 2019, the Company provides various training services
to its clients, primarily related to e-commerce platform operation, expansion of
channels and promotion strategy, through live and online sessions. The service
income from providing training services totaled $308,243 for the six months
ended June 30, 2019. Through Porter Consulting we also promote the payment
service of a third-party payment service provider to merchants in Shenzhen and
in return share a portion of the processing fees earned by the third-party
payment service provider as commission. Our commission totaled $48,101 and
$99,189 for the six months ended June 30, 2019 and 2018, respectively. The
Company also generated $31,666 and nil from cosmetic trading business for the
six months ended June 30, 2019 and 2018, respectively.



Cost of revenue.  Our cost of revenue was $799,418 for the three months ended
June 30, 2019, compared to $66,152 for the same period last year. Cost of
revenue refers to the cost of consulting services, third-party payment service
and other business. The increase was in line with the growth of consulting
services. The cost of consulting service refers to the shell acquisition, legal
and accounting advisory service outsourced to third-party service providers.



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Gross profit and gross margin. Our gross profit was $895,021 for the six months
ended June 30, 2019, compared with a gross profit of $516,228 for the same
period last year. Gross profit as a percentage of revenue (gross margin) was
52.82% for the six months ended June 30, 2019, compared to 88.64% for the six
months ended June 30, 2018. The increase of gross profit was mainly due to more
consulting services that we provided in 2019.



General and administrative expenses. 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 $280,447 to $1,163,092 for the six months ended June 30, 2019, from
$882,645 for the same period in 2018. Legal and professional fees increased due
to the change in auditors and consultants in 2019. Increase in salary and other
was due to the fact that we paid more professional staff salaries as we expanded
our consulting services to customers.



                                                    Six months ended June 30,
                                  2019                         2018                     Fluctuation
                          Amount            %          Amount           %          Amount           %
Salary and staff
benefits                $   626,255         53.84     $ 534,902         60.60     $  91,353         10.35
Lease and management
fee                         143,172         12.31       148,220         16.79        (5,048 )       (0.57 )
Legal and
professional fees           281,178         24.18       143,101         16.21       138,077         15.64
Dep and amortization         11,944          1.03         7,316          0.83         4,628          0.52
Others                      100,543          8.64        49,106          5.57        51,437          5.83
Total G&A               $ 1,163,092        100.00     $ 882,645        100.00     $ 280,447         31.77




Income tax expense. Our Income tax expense was $45,730 for the six months ended
June 30, 2019, compared to income tax benefit of $160 for the same period last
year. The fluctuation was mainly due to the fact that PPBGL generated $337,108
of net income and $44,657 tax expenses accrued accordingly for the current
period.



Net loss. As a result of the cumulative effect of the factors described above,
our net loss decreased by $59,878, to $306,218 for the six months ended June 30,
2019 from $366,096 for the same period in 2018.



Limited Operating History; Need for Additional Capital




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
establishment 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 $150,000 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.



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Liquidity and Capital Resources



Working Capital



                              June 30, 2019       December 31, 2018
Current Assets               $     1,925,872     $         1,486,197
Current Liabilities                2,985,711               2,192,678

Working Capital Deficiency $ (1,059,839 ) $ (706,481 )





As of June 30, 2019, we had cash and cash equivalents of $549,714. To date, we
have financed our operations primarily through borrowings from our stockholders,
related and unrelated parties.



Going Concern Uncertainties



The accompanying condensed consolidated financial statements have been prepared
assuming we will continue as a going concern. We have incurred net loss of
$306,218 during the six months ended June 30, 2019, resulting in an accumulated
deficit of $1,936,130 as of June 30, 2019, and we currently have net working
capital deficit of $1,059,839. These conditions raise substantial doubt about
our ability to continue as a going concern. The ability to continue as a going
concern is dependent upon generating profitable operations in the future and/or
obtaining the necessary financing to meet our obligations and repay our
liabilities arising from normal business operations when they become due. We may
have to rely on additional debt financing, loans from existing directors and
shareholders and private placements of capital stock for additional funding. Our
sources of capital in the past have included borrowings from our stockholders
and related parties. 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. If we are unable
to generate profitable operations and/ or obtaining the necessary financing, we
may be forced to curtail operations.



                                                         Six Months Ended June 30,
                                                         2019                  2018
Net cash used in operating activities               $      (716,899 )$     (235,816 )
Net cash used in investing activities                        (1,137 )            (62,626 )
Net cash provided by financing activities                   546,512         

295,832

Effect of exchange rate changes on cash and cash
equivalents                                                  (6,883 )       

1,197

Net decrease in cash and cash equivalents                  (178,407 )             (1,413 )
Cash and cash equivalents at the beginning of
period                                                      728,121         

240,072

Cash and cash equivalents at the end of period $ 549,714 $

     238,659




Operating Activities



Net cash used in operating activities was $716,899 for the six months ended June
30, 2019, as compared to $235,816 net cash used in operating activities for the
six months ended June 30, 2018. The net cash used in operating activities for
the six months ended June 30, 2019 was mainly due to our net loss of $306,218,
an increase in account receivables of $623,243 and a decrease in operating lease
liability of $105,966, partially offset by the increase in accruals and other
payables of $138,927. The net cash used in operating activities in the first
half of 2018 was mainly due to our net loss of $366,096 and an increase in
accounts receivable of $298,512, partially offset by an increase in deferred
revenue of $475,979.



Investing Activities



Net cash used in investing activities was $1,137 for the six months ended June
30, 2019, as compared to $62,626 net cash used in investing activities for the
six months ended June 30, 2018. The net cash used in investing activities in the
first half of 2019 was mainly attributable to the purchase of property, plant
and equipment. The net cash used in investing activities in the first half of
2018 was mainly attributable to purchase of property, plant and equipment.



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Financing Activities



Net cash provided by financing for the six months ended June 30, 2019 was
$546,512, as compared to $295,832 for the six months ended June 30, 2018. In the
first half of 2019, we obtained advances of $3,906,022 from shareholders and
repaid $3,355,088 to shareholders. In the first half of 2018, we obtained
advances of $1,643,895 from shareholders and repaid $1,449,397 to related
parties.



Contractual Obligations and Commercial Commitments




We had the following contractual obligations and commercial commitments as of
June 30, 2019:



                                                  Less than 1                                     More than 5
Contractual Obligations              Total            year         1-3 years      3-5 years          years
Amounts due to shareholders       $ 2,197,371$  2,197,371              -              -     $           -
Amount due to related parties          56,911           56,911              -              -                 -
Leases                                806,975          220,084        440,168        146,723                 -
TOTAL                             $ 3,061,257$  2,474,366$  440,168$  146,723     $           -




We believe that our current cash and financing from our existing stockholders
are adequate to support operations for at least 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 $1,137 and $62,626 in the six months ended June 30, 2019 and 2018, respectively.

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
with U.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.



The Company's accounting policies were revised in connection with the
implementation of ASC 842. See Note 2, "Summary of Significant Accounting
Policies" in Part I, Item 1, of this Quarterly Report on Form 10-Q for a further
discussion of the implementation of ASC 842. There were no other material
changes to the critical accounting policies previously disclosed in our audited
consolidated financial statements for the year ended December 31, 2018 included
in the Annual Report on Form 10-K filed on April 15, 2019.



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