WISEMAN GLOBAL LIMITED The information contained in this quarter report on Form 10-Q is intended to update the information contained in our Form 10-K datedMay 12, 2020 , for the year endedDecember 31, 2019 and presumes that readers have access to, and will have read, the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q. The following discussion contains certain statements that may be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, "Management's Discussion and Analysis of Financial Condition and Results of Operations." These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarter report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Form S-1/A registration statement, filed onDecember 12, 2018 , in the section entitled "Risk Factors" for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarter report on Form 10-Q. The following should also be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto that appear elsewhere in this report. Company Overview We are a household appliances and related domestic appliances products company in the PRC. Our principal business activity is the provision of household appliances products and related domestic appliances products. Our products improve the home lifestyle and living solutions experience, predominately through power savings, resources efficiencies and functionalities of products. We sell our products to corporate customers, retail customers and independent distributors predominately in the PRC and intend to expand our business in other countries around the world. Our products are typically used in a home setting of consumers of all demographics on a daily basis and meet the convenience-oriented preferences of today's consumer across a broad range of household activities. We help make daily life easier through a broad range of products that offer multi-purpose functions. Our diverse product portfolio includes televisions, air-conditioners, laundry appliances, refrigerators and freezers, cooking appliances, dishwashers, mixers and other small domestic appliances. Our products are known for their quality, which is recognized by our consumers, retail customers, and corporate customers alike. We believe our customers know they can depend on our trusted brand. These factors generate loyalty which empowers us to develop and launch new products that expand application scenarios and transforms our product portfolio into the smart household appliances category. Our business has three main divisions and revenue streams, namely, (i) sales of household appliances and related domestic appliances products; (ii) consultancy; and (iii) integration and installation services. Virtually all of our products are manufactured by independent original equipment manufacturers ("OEMs") in the PRC. For the three months endedMarch 31, 2020 , our revenue was$101,681 , and our gross profit was approximately$44,583 . For the three months endedMarch 31, 2019 , our revenue was$76,127 , and our gross profit was approximately$20,385 . We conduct our business throughShenzhen Wiseman Smart Industrial Co., Limited and its subsidiaries which are founded in the PRC and ourHong Kong subsidiary,Wiseman Global Limited ("Wiseman HK"). -3-
Results of operations for the three months ended
Three Months Ended March 31, Increase (decrease) in 2020
2020 2019 compared to 2019
(In U.S. dollars, except for percentages)
Revenue $ 101,681 100.0 % $ 76,127 100 % $ 25,554 33.6 %
Cost of revenues (57,098 ) (56.2 )% (55,742 ) (73.2 )% (1,356 ) (2.4 )%
Gross profit 44,583 43.8 % 20,385 26.8 % 24,198 118.7 %
Operating expenses (197,439 ) (194.2 )% (15,743 ) (20.7 )% (181,696 ) (1,154.1 )%
Other income, net 73,471 72.3 % 19 0.0 % 73,452 386,589 %
Income (Loss) from
operations (79,385 ) (78.1 )% 4,661 6.1 % (84,046 ) (1,803.2 )%
Net finance income 33 0.0 % - - 33 - %
Income tax expense - - % - - - - %
Net profit (loss) $ (79,352 ) (78.1 )% $ 4,661 6.1 % $ (84,013 ) (1,802.5 )%
Revenues
For the three months ended
Cost of Revenue Cost of revenue for the three months endedMarch 31, 2020 amounted to approximately$57,098 as compared to$55,742 for the three months endedMarch 31, 2019 , representing an increase of approximately 2.4%. The significant increase of cost of revenue was a result of the overall growth of our business and relatively in line with the rapid growth of net revenues. The cost of revenue was predominantly the cost of manufactured goods sold to customers.
Gross profit Our gross profit significantly increased from$20,385 for three months endedMarch 31, 2019 to approximately$44,583 for three months endedMarch 31, 2020 , representing a significant increase of approximately 118%. The significant increase was primarily attributable to our sales growth. The increase in gross margin was primarily due to the economies of scale and a significant increase in net revenues contribution from other product categories. Operating Expenses For the three months endedMarch 31, 2020 and 2019, we had operating expenses in the amount of$197,439 and$15,743 , respectively, representing a significant increase of approximately 1,154.1%. The significant increase was primarily attributable to the increase in leases expense, salary, other professional fees and advertising and promotion. Income tax expenses
For the three months ended
Net Profit (Loss) For the three months endedMarch 31, 2020 , we had a net loss of$79,352 while we had a net profit of$4,661 for the three months endedMarch 31, 2019 , representing a significant decrease of approximately 1,802.5%. The significant decrease was primarily attributable to the significant increase in operating expenses.
Liquidity and Capital Resources
Summary cash flows information for the three months endedMarch 31, 2020 and 2019 are as follow: 2020 2019 (InU.S. dollars)
Net cash used in operating activities
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Cash Used in Operating Activities
For the three months endedMarch 31, 2020 and 2019, net cash used in operating activities was$22,944 and$17,123 , respectively. The cash used in operating activities was attributable to operating expenses which included leases expense, salary, other professional fees and advertising and promotion.
Cash Provided by Financing Activities
For the three months ended
For the three months ended
Off-balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders as ofMarch 31, 2020 . Contractual Obligations
As ofMarch 31, 2020 , the Company's subsidiary lease an office inCambodia under a non-cancellable operating lease for five years commencing fromAugust 1, 2019 and expiring onJuly 31, 2024 . AsMarch 31, 2020 , the future minimum rental payments under this lease aggregate approximately$1,040,000 and due as stated in the table below. Year Ending Operating Lease 2020 (remaining 9 months) $ 180,000 2021 240,000 2022 240,000 2023 240,000 2024 (first 7 months of the year) 140,000 Total lease payments$ 1,040,000
As ofMarch 31, 2020 , the Company's subsidiary lease an office inPeople's Republic of China under an operating lease for two years commencing fromJanuary 1, 2020 and expiring onDecember 31, 2021 . AsMarch 31, 2020 , the future minimum rental payments under this lease aggregate approximately$70,623 and due as stated in the table below. Year Ending Operating Lease 2020 (remaining 9 months) $ 30,267 2021 40,356 Total lease payments $ 70,623 Critical Accounting Policies
Recent accounting pronouncements
InFebruary 2016 , theFinancial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required recognize the following for all leases (with the exception of short-term leases) at the commencement date: 1) A lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and 2) A right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. The amendments in this ASU are effective for fiscal years beginning afterDecember 15, 2018 , including interim periods within those years. This standard takes effect for fiscal years, and interim periods within those fiscal years, beginning afterDecember 15, 2018 . According to this new standard, the Company should record both right-of-use asset and lease liability of$1,002,720 on its consolidated financial statements for the period endedMarch 31, 2020 . InJune 2016 , the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326). ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses ("CECL") to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 is effective for the Company beginningJanuary 1, 2023 ,
and early adoption is permitted.
The Company reviews new accounting standards as issued. Management has not identified any other new standards that it believes will have a significant impact on the Company's consolidated financial statements.
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