Porter Holding International, Inc. - FORM 10-Q

Attached files

file	filename
EX-32.1 - EXHIBIT 32.1 - Porter Holding International, Inc.	ex_189114.htm
EX-31.1 - EXHIBIT 31.1 - Porter Holding International, Inc.	ex_189113.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10−Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

Commission File Number: 333-196336

PORTER HOLDING INTERNATIONAL, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada		42-1777496
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

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

Luohu District, Shenzhen, Guangdong, China, 518001

(Address of principal executive offices, Zip Code)

+86-755-22230666

(Registrant’s telephone number, including area code)

_____________________________________________________

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

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
N/A		N/A		N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of each of the issuer’s classes of common stock, as of June 24, 2020 is as follows:

Class of Securities		Shares Outstanding
Common Stock, $0.001 par value		508,110,000

EXPLANATORY NOTE

Porter Holding International, Inc. ( the “Company”) is filing this quarterly report on Form 10-Q after the May 15, 2020 (the “Original Due Date”) deadline applicable to it for the filing of a Form 10-Q for the quarter ended March 31, 2020 (the “Quarterly Report”) in reliance on the 45-day extension provided by an order issued by the U.S. Securities and Exchange Commission (the “SEC”) under Section 36 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), dated March 4, 2020 (Release No. 34-88318), as modified and superseded by a new SEC order issued on March 25, 2020 (Release No. 34-88465) (collectively, the “Order”).

On May 13, 2020, the Company filed a Current Report on Form 8-K to indicate its intention to rely on the Order for such extension. Consistent with its statements made in the Form 8-K, the Company was unable to file the Quarterly Report by the Original Due Date, and therefore relied on the Order. Due to the circumstances and uncertainty surrounding the effects of the COVID-19 pandemic on the business, employees, consultants and service providers of the Company, and considering the lack of time for the compilation, dissemination and review of the information required to be presented and the importance of markets and investors receiving materially accurate information in the Quarterly Report, the Quarterly Report is hereby filed before the extended due date permitted under the Order, i.e., 45 days after the Original Due Date, or June 29, 2020.

PORTER HOLDING INTERNATIONAL, INC.

TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION

Item 1.	Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30

Item 4.	Controls and Procedures	30

PART II
OTHER INFORMATION

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 3.	Defaults Upon Senior Securities	31

Item 4.	Mine Safety Disclosures	31

Item 5.	Other Information	31

Item 6.	Exhibits	31

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED).

PORTER HOLDING INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

	Page Number

Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	5

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2020 and 2019	6

Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three Months Ended March 31, 2020 and 2019	7

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019	8

Notes to Condensed Consolidated Financial Statements	9

Table of Contents

PORTER HOLDING INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In U.S. dollars)

	March 31, 2020			December 31, 2019

ASSETS
CURRENT ASSETS
Cash	$	142,729		$	224,733
Accounts receivable, net of $3,065 and $3,065 allowance for doubtful accounts as of March 31, 2020 and December 31, 2019, respectively		901,370			1,079,316
Prepayments and other receivables		123,988			94,161
Total current assets		1,168,087			1,398,210

NON-CURRENT ASSETS
Long-term rental deposits		62,871			63,946
Long-term prepayments		3,221			5,589
Equipment, net		45,222			49,936
Intangible assets, net		264,230			257,141
Operating lease right-of-use assets		802,729			891,733
Goodwill		33,721			34,297
Total non-current assets		1,211,994			1,302,642

TOTAL ASSETS	$	2,380,081		$	2,700,852

LIABILITIES AND STOCKHOLDERS’ DEFICIT

CURRENT LIABILITIES
Accounts payable	$	126,902		$	134,798
Accruals and other payables		252,735			120,692
Deferred revenue		339,405			288,330
Taxes payable		112,581			134,405
Amounts due to shareholders		1,585,599			1,433,151
Amounts due to related parties		1,087			1,106
Operating lease liabilities – current		325,920			323,403
Total current liabilities		2,744,229			2,435,885

NON-CURRENT LIABILITIES
Operating lease liabilities - non-current		510,243			604,597
TOTAL LIABILITIES		3,254,472			3,040,482

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ DEFICIT
Preferred stock, par value $0.001 per share 250,000,000 shares authorized and nil shares issued as of March 31, 2020 and December 31, 2019		-			-
Common stock, par value $0.001 per share; 750,000,000 shares authorized, 508,110,000 shares issued and outstanding as of March 31, 2020 and December 31, 2019		508,110			508,110
Additional paid-in capital		1,077,986			1,077,986
Accumulated deficit		(2,752,999	)		(2,200,932	)
Accumulated other comprehensive income		115,830			92,800
Total Porter Holding International, Inc. stockholders’ deficit		(1,051,073	)		(522,036	)

Non-controlling interests		176,682			182,406
Total stockholders’ deficit		(874,391	)		(339,630	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	2,380,081		$	2,700,852

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

Table of Contents

PORTER HOLDING INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(Unaudited)

(In U.S. dollars)

	Three Months Ended March 31,
	2020			2019

REVENUE	$	427,266		$	708,946

COST OF REVENUE		(373,974	)		(525,573	)

GROSS PROFIT		53,292			183,373

OPERATING EXPENSES		(628,074	)		(489,423	)

LOSS FROM OPERATIONS		(574,782	)		(306,050	)

OTHER INCOME, NET		20,018			5,169

NET LOSS BEFORE TAXES		(554,764	)		(300,881	)

Income tax expense		-			(60,305	)

NET LOSS		(554,764	)		(361,186	)

Less: Net (loss) income attributable to non-controlling interests		(2,697	)		8,229

Net loss attributable to Porter Holding International, Inc. common stockholders		(552,067	)		(369,415	)

Other comprehensive (loss) income
Foreign currency translation income		20,003			(14,714	)

Total Comprehensive (loss) income		(534,761	)		(375,900	)
Less: comprehensive (loss) income attributable to non-controlling interests		(5,724	)		9,637

Comprehensive loss attributable to Porter Holding International, Inc. common stockholders	$	(529,037	)	$	(385,537	)

Basic and diluted loss per share	$	-	*	$	-	*

Weighted average number of common shares outstanding - basic and diluted		508,110,000			508,110,000

* Less than $0.01 per share

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

Table of Contents

PORTER HOLDING INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE THREE MONTHS ENDED March 31, 2020 and 2019

(Unaudited)

(In U.S. dollars)

	Common stock				Additional					Accumulated other			Non-
	Number				paid-in		Accumulated			comprehensive			controlling
	of shares		Amount		capital		deficit			income (loss)			interests		Total
Balance at December 31, 2018		508,110,000	$	508,110	$	400,561	$	(1,626,596	)	$	93,674		$	55,817	$	(568,434	)

Net (loss) income		-		-		-		(369,415	)		-			8,229		(361,186	)

Capital contribution		-		-		125,353		-			-			-		125,353

Foreign currency translation adjustment		-		-		-		-			(16,122	)		1,408		(14,714	)

Balance at March 31, 2019		508,110,000	$	508,110	$	525,914	$	(1,996,011	)	$	77,552		$	65,454	$	(818,981	)

	Common stock				Additional					Accumulated other		Non-
	Number				paid-in		Accumulated			comprehensive		controlling
	of shares		Amount		capital		deficit			income (loss)		interests			Total
Balance at December 31, 2019		508,110,000	$	508,110	$	1,077,986	$	(2,200,932	)	$	92,800	$	182,406		$	(339,630	)

Net loss		-		-		-		(552,067	)		-		(2,697	)		(554,764	)

Foreign currency translation adjustment		-		-		-		-			23,030		(3,027	)		20,003

Balance at March 31, 2020		508,110,000	$	508,110	$	1,077,986	$	(2,752,999	)	$	115,830	$	176,682		$	(874,391	)

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

Table of Contents

PORTER HOLDING INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In U.S. dollars)

	Three Months Ended March 31,
	2020			2019

Cash flows from operating activities
Net loss	$	(554,764	)	$	(361,186	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		13,432			5,994
Gain on disposal of equipment		-			(51	)
Amortization of operating lease right-of-use assets		75,102			50,218
Allowance (recovery) for doubtful accounts		164,082			(6,097	)
Changes in assets and liabilities
Accounts receivable		(941	)		(185,789	)
Prepayments and other receivables		(29,508	)		(17,185	)
Operating lease liabilities		(77,359	)		(52,758	)
Accounts payable		(5,713	)		78,719
Accruals and other payables		109,735			148,812
Deferred revenue		42,410			241,921
Tax payable		(19,858	)		11,391
Net cash used in operating activities		(283,382	)		(86,011	)

Cash flows from investing activities
Purchase of equipment		(21,078	)		(1,144	)
Net cash used in investing activities		(21,078	)		(1,144	)

Cash flows from financing activities
Advances from related parties		-			3,848
Repayments to related parties		-			(4,448	)
Advances from shareholders		1,002,142			1,411,933
Repayments to shareholders		(818,933	)		(1,339,937	)
Net cash provided by financing activities		183,209			71,396

Effect of exchange rates on cash		39,247			(32,182	)

Net decrease in cash		(82,004	)		(47,941	)

Cash at beginning of period		224,733			728,121

Cash at end of period	$	142,729		$	680,180

Supplemental of cash flow information
Cash paid for interest expenses	$	-		$	-
Cash paid for income tax	$	-		$	-
Non-cash financing activities:
Operating lease asset obtained in exchange for operating lease obligation	$	-		$	1,032,608
Capital contribution	$	-		$	125,353

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

Table of Contents

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars)

1.	ORGANIZATION AND BUSINESS

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

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

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

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

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

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

The Company and its subsidiaries and VIE entities (collectively referred to as the “Company”) focus its business as an innovative O2O (Online to Offline) business platform operator covering both online E-commerce and offline commercial chain entity of three dimensional synchronous operation together with integrated comprehensive services for merchant clients, service income from organizing and delivering an event and forum, and third-party payment service. Starting from the second quarter of 2018, the Company provides investment and corporate management consulting services to its clients.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

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

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

Table of Contents

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars)

Going Concern

The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred net loss of $554,764 during the three-month period ended March 31, 2020, resulting in an accumulated deficit of $2,752,999 as of March 31, 2020, and it currently has net working capital deficit of $1,576,142. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. The Company may have to rely on additional debt financing, loans from existing directors and shareholders and private placements of capital stock for additional funding. There can be no assurance that the Company will be successful in its plans described above or in attracting equity or alternative financing on acceptable terms, or if at all.

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

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

Use of Estimates

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

The COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further business slowdowns or shutdowns, depress demand for the Company’s business, and adversely impact its results of operations. During the three months ended March 31, 2020, the Company faced increasing uncertainties around its estimates of revenue collectability and accounts receivable credit losses. The Company expects uncertainties around its key accounting estimates to continue to evolve depending on the duration and degree of impact associated with the COVID-19 pandemic. Its estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in its consolidated financial statements.

VIE Consolidation

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

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

Table of Contents

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars)

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

	March 31, 2020		December 31, 2019
ASSETS
CURRENT ASSETS
Cash	$	117,714	$	203,037
Accounts receivable, net		843,132		1,021,078
Prepayments and other receivables		123,890		94,116
Amount due from the Company and its non-VIE subsidiaries (1)		275,257		205,856
Total current assets		1,359,993		1,524,087

NON-CURRENT ASSETS
Long term rental deposit		62,871		63,946
Long term prepayment		3,221		5,589
Equipment, net		43,975		48,566
Intangible assets, net		264,230		257,141
Operating lease right-of-use assets		802,729		891,733
Goodwill		33,721		34,297
Total non-current assets		1,210,747		1,301,272

TOTAL ASSETS	$	2,570,740	$	2,825,359

CURRENT LIABILITIES
Accounts payable	$	126,902	$	134,798
Accruals and other payables		230,983		99,836
Deferred revenue		325,282		288,330
Tax payable		112,565		134,394
Amounts due to shareholders of the Company		1,772,081		1,618,720
Operating lease liability - current		325,920		323,403
Total current liabilities		2,893,733		2,599,481

NON-CURRENT LIABILITIES
Operating lease liability - non-current		510,243		604,597
TOTAL LIABILITIES	$	3,403,976	$	3,204,078

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

Table of Contents

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars)

	Three months ended March 31,
	2020			2019

Net revenue	$	377,313		$	391,698
Net loss	$	(464,933	)	$	(599,337	)

	Three months ended March 31,
	2020			2019

Net cash used in operating activities	$	(171,314	)	$	(36,530	)
Net cash used in investing activities		(21,078	)		(1,144	)
Net cash provided by financing activities		109,283			172,083

Revenue Recognition

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

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

The Company via Porter Consulting earns commissions of $12,450 and $25,798 for the three months ended March 31, 2020 and 2019 respectively, primarily from a third-party payment service provider when China UnionPay card transactions are completed and settled. Revenue related to commissions is recognized in the statement of operation at the time when the underlying transaction is completed.

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

Starting from the second quarter of 2018, the Company via Portercity provides various consulting services to its clients, especially to those who have the intention to be publicly listed in the stock exchanges in the United States and other countries. The Company categorizes its consulting services into three phases:

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

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

Table of Contents

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars)

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

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

Depending on the complexity of the underlying service arrangement and related terms and conditions, significant judgments, assumptions and estimates may be required to determine when substantial delivery of contract elements has occurred, whether any significant ongoing obligations exist subsequent to contract execution, whether amounts due are collectible and the appropriate period or periods in which, or during which, the completion of the earnings process occurs. Depending on the magnitude of specific revenue arrangements, adjustment may be made to the judgments, assumptions and estimates regarding contracts executed in any specific period. Service income from consulting services, totaled $305,660 and $333,230 for the three months period ended March 31, 2020 and 2019, is recognized when the service is performed.

Regarding the trading business, the Company evaluates whether it is appropriate to record the gross amount of product sales and related costs or the net amount as commissions in accordance with ASC 606,. When the Company is primarily obligated in a transaction, is subject to inventory risk, has latitude in establishing prices and selecting suppliers, or has several but not all of these indicators, revenues should be recorded on a gross basis. When the Company is not the primary obligor, does not bear the inventory risk and does not have the ability to establish the price, revenues are recorded on a net basis. The Company determined that it is not the primary obligor in its trading business. For the three months period ended March 31, 2020 and 2019, the Company recognized a net revenue of $11,928 and $9,132, when control of the products has transferred, being at the point the products are delivered to the customer and the customer has accepted the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products.

Starting from the first quarter of 2019, the Company, via PPBGL, Maihuolang E-commerce and Porter Commercial, provides various training services to its clients, primarily related to e-commerce platform operation, expansion of channels and promotion strategy, and capital market operation, via live and online sessions. Under ASC Topic 606, in order to recognize revenue, the Company is required to identify an approved contract with commitments to perform respective obligations, identify rights of each party in the transaction regarding goods to be transferred, identify the payment terms for the goods transferred, verify that the contract has commercial substance and verify that collection of substantially all consideration is probable. The fees associated with the course of training sessions are clearly identified in service agreements. Training service revenue is recognized at the time when the training sessions stipulated in the contract are completed. The Company recognized $77,778 and $308,117 for the three months period ended March 31, 2020 and 2019.

Practical expedients and exemption

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

Other service income is earned when services have been rendered.

Table of Contents

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars)

Revenue by major product line

	For Three Months Ended March 31,
	2020		2019

Investment and corporate management consulting services	$	305,660	$	333,230
Training service		77,778		308,117
Third-party payment service		12,450		25,798
Trading business		11,928		9,132
Others		19,450		32,669
	$	427,266	$	708,946

Revenue by recognition over time vs point in time

	For Three Months Ended March 31,
	2020		2019

Revenue by recognition over time	$	305,660	$	333,230
Revenue by recognition at a point in time		121,606		375,716
	$	427,266	$	708,946

Executed contracts with fixed-price terms

	March 31, 2020
	Contract Amount		Future Estimated Revenue

Investment and corporate management consulting services	$	26,156,135	$	20,475,135

Foreign Currency and Foreign Currency Translation

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

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

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

Table of Contents

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars)

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

Balance sheet items, except for equity accounts
March 31, 2020	RMB7.0808 to $1	HKD7.7513 to $1
December 31, 2019	RMB6.9618 to $1	HKD7.7894 to $1

Statement of operation and cash flows items
For the three-month period ended March 31, 2020	RMB6.9786 to $1	HKD7.7708 to $1
For the three-month period ended March 31, 2019	RMB6.7447 to $1	HKD7.8460 to $1

Net loss per share of common stock

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

	Three Months Ended March 30,
	2020			2019

Net loss attributable to Porter Holding International, Inc.	$	(552,067	)	$	(369,415	)

Weighted average number of common shares outstanding - basic and diluted		508,110,000			508,110,000

Basic and diluted loss per share	$	-		$	-

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

Segments

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

Fair Value of Financial Instruments

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

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

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

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

Table of Contents

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars)

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

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

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

Leases

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

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

Recent Accounting Pronouncements

Accounting Pronouncements Issued But Not Yet Adopted

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

Table of Contents

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars)

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

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

3.	BUSINESS COMBINATIONS

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

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

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

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

	Fair Value
Cash	$	4,761
Prepayments		280
Other receivables		27,026
Intangible assets		233,455
Long-term deferred assets		607
Operating lease right-of-use assets		158,004
Goodwill		33,375
Total assets		457,508

Accrued payroll		(4,094	)
Accrued tax		(18	)
Other payables		(290,687	)
Operating lease liability - current		(88,217	)
Operating lease liability - non-current		(74,492	)
Total liabilities		(457,508	)
Net assets acquired	$	-

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

Table of Contents

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars)

4.	ACCOUNTS RECEIVABLE, NET

Accounts receivable consist of the following:

	March 31, 2020			December 31, 2019

Billed	$	61,303		$	61,303
Unbilled		843,132			1,021,078
Accounts receivable		904,435		$	1,082,381
Less: allowance for doubtful accounts		(3,065	)		(3,065	)
	$	901,370		$	1,079,316

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

	March 31, 2020			December 31, 2019

Beginning	$	3,065		$	-
Additions		164,082			476,694
Write off		(164,082	)		(470,696	)
Exchange rate difference		-			(2,933	)
Balance	$	3,065		$	3,065

During May and June 2020, the Company encountered further uncertainties of collectability due to impact of COVID-19, and hence took legal action in attempt to recover the accounts receivables. As such, as of March 31, 2020, the Company wrote off $164,082 of uncollectible accounts receivable accordingly.

5.	PREPAYMENTS AND OTHER RECEIVABLES

Prepayments and other receivables consist of the following:

	March 31, 2020		December 31, 2019

Prepayments	$	5,895	$	53,998
Deposits		43,780		-
Others		74,313		40,163
	$	123,988	$	94,161

6.	EQUIPMENT, NET

Equipment, net consist of the following:

	March 31, 2020			December 31, 2019

Office and computer equipment	$	168,592		$	170,455
Less: Accumulated depreciation		(123,370	)		(120,519	)
	$	45,222		$	49,936

Table of Contents

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars)

Depreciation expenses charged to the statements of operations for the three months ended March 31, 2020 and 2019 were $4,949 and $4,985, respectively. Gain on disposal of equipment for the three months ended March 31, 2020 and 2019 was nil and $51.

7.	INTANGIBLE ASSETS, NET

Intangible assets, net, consist of the following:

	March 31, 2020			December 31, 2019

Software copyright	$	249,407		$	233,560
Domain names and trademarks		45,382			46,158
Intangible asset		294,789			279,718
Less: Accumulated amortization		(30,559	)		(22,577	)
	$	264,230		$	257,141

Amortization charged to the statements of operations for the three months period ended March 31, 2020 and 2019 were $8,483 and $1,009, respectively.

8.	GOODWILL

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

	Maihuolang E-commerce
Balance as of December 31, 2019	$	34,297
Goodwill acquired through acquisitions		-
Foreign currency translation adjustment		(576	)
Balance as of March 31, 2020	$	33,721

9.	ACCRUALS AND OTHER PAYABLES

Accruals and other payables consist of the following:

	March 31, 2020		December 31, 2019

Salary payables	$	113,469	$	69,557
Refund to a third party		63,270		-
Accrued professional fees		19,778		19,778
Accrued rental expenses		45,161		8,868
Others		11,057		22,489
	$	252,735	$	120,692

Table of Contents

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars)

10.

BALANCES WITH RELATED PARTIES

	Note	March 31, 2020		December 31, 2019
Due to related parties
Mr. Kezhan Ma	(a)	$	1,087	$	1,106

Due to shareholders
Mr. Zonghua Chen (the Company’s Chairman, Chief Executive Officer, Chief Financial Officer and President)		$	1,437,602	$	1,284,061
Mr. Zongjian Chen (brother of Mr. Zongjian Chen)			147,997		149,090
		$	1,585,599	$	1,433,151

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

All the above balances are due on demand, interest-free and unsecured. The Company used the funds for its operations. For the three months ended March 31, 2020, the Company had transactions amounted $1,002,142 from shareholders and $818,933 to shareholders, comparing to $1,411,933 from shareholders and $1,339,937 to shareholders for the same period in 2019. For the three months ended March 31, 2020, the Company had transactions amounted nil from related parties and to related parties, comparing to $3,848 from related parties and $4,448 to related parties for the same period in 2019.

11.

INCOME TAXES

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

ULNV is incorporated in the State of Nevada and is subject to the U.S. federal tax and has incurred net operating loss for income tax purposes through March 31, 2020. As of March 31, 2020, future net operating losses of approximately $45,437 from ULNV are available to offset future taxable income. Accumulated deficit as of March 31, 2020 and December 31, 2019 was approximately $2.8 million and $2.2 million, respectively.

The 2017 Tax Act created a new requirement that, for the periods beginning after January 1, 2018, certain income (referred to as global intangible low taxed income or “GILTI”) earned by foreign subsidiaries in excess of a deemed return on tangible assets of foreign corporations must be included in U.S. taxable income. The GILTI income is eligible for a deduction, which lowers the effective tax rate to 10.5% for calendar years 2018 through 2025 and 13.125% after 2025. Under U.S. GAAP, companies are allowed to make an accounting policy election to either (i) account for GILTI as a component of tax expense in the period in which a company is subject to the rules – the period cost method, or (ii) account for GILTI in a company’s measurement of deferred taxes – the deferred method. The Company elected to account for GILTI in the period the tax is incurred. The Company did not generate any GILTI during the three-month period ended March 31, 2020.

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

PPBGL is subject to Hong Kong profits tax rate of 16.5%. For the three-month period ended March 31, 2020, it did not have any assessable profits arising in or derived from Hong Kong and accordingly no provision for Hong Kong profits tax was made. For the three months ended March 31, 2019, it generated $317,090 of net profit and $41,358 tax expenses accrued accordingly.

PRC Tax

The Company’s subsidiary and consolidated VIEs in China are subject to corporate income tax (“CIT”) at 25% for the three-month period ended March 31, 2020 and 2019. As of March 31, 2020, the Company had approximately $3.4 million of net operating loss carried forward from the foreign subsidiaries which will expire in various years through 2023.

Table of Contents

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars)

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

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

	Three Months Ended March 31,
	2020			2019
Loss before income taxes	$	(554,764	)	$	(300,881	)
United States statutory income tax rate		21	%		21	%
Income tax benefit computed at statutory corporate income tax rate		(116,500	)		(63,185	)
Reconciling items:
Effect of different tax jurisdictions		(31,380	)		1,080
Non-deductible expenses		52,697			110,321
Change in valuation allowance		95,183			12,089
Income tax (benefit) expense	$	-		$	60,305

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

	March 31, 2020			December 31, 2019

Deferred tax assets:
Net operating loss carryforwards:
- United States of America	$	9,542		$	9,542
- Hong Kong		14,006			2,504
- PRC		853,039			586,509
		876,587			598,555
Less: Valuation allowance		(876,587	)		(598,555	)
Acquisition:
- PRC		-			182,849
Less: Valuation allowance		-			(182,849	)
	$	-		$	-

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

12.

CHINA CONTRIBUTION PLAN

The Company’s subsidiaries and consolidated VIEs in China participate in a government-mandated multi-employer defined contribution plan pursuant to which certain retirement, medical and other welfare benefits are provided to employees. Chinese labor regulations require the Company’s subsidiaries and consolidated VIEs to pay to the local labor bureau a monthly contribution at a stated contribution rate based on the monthly compensation of qualified employees. The relevant local labor bureau is responsible for meeting all retirement benefit obligations; the Company’s China-based subsidiaries and consolidated VIEs have no further commitments beyond their monthly contributions. For the three months ended Mach 31, 2020 and 2019, the Company’s China based subsidiaries and consolidated VIEs contributed a total of $7,188 and $12,202, respectively, to these funds.

Table of Contents

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars)

13.

OPERATING LEASE

The Company has operating leases for its office facilities. The Company's leases have remaining terms of approximately four years. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company does not separate non-lease components from the lease components to which they relate, and instead accounts for each separate lease and non-lease component associated with that lease component as a single lease component for all underlying asset classes.

The Company subleases certain office space to a third party that has a remaining term of less than 12 months.

The following table provides a summary of leases by balance sheet location as of March 31, 2020:

Assets/liabilities	March 31, 2020		December 31, 2019
Assets
Operating lease right-of-use assets	$	802,729	$	891,733

Liabilities
Current
Operating lease liability - current	$	325,920	$	323,403

Long-term
Operating lease liability - non-current		510,243		604,597
Total lease liabilities	$	836,163	$	928,000

The operating lease expenses for the three months ended March 31, 2020 and 2019 were as follows:

	Three months ended March 31,
Lease Cost	2020		2019
Operating lease cost	$	93,104	$	70,520

Maturities of operating lease liabilities at March 31, 2020 were as follows:

Maturity of Lease Liabilities	Operating Leases
12 months ending March 31,
2021	$	381,069
2022		295,655
2023		255,170
Total lease payments		931,894
Less: interest		(95,731	)
Present value of lease payments	$	836,163

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

Table of Contents

PORTER HOLDING INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In U.S. dollars)

Future minimum lease payments, which do not include the non-lease components, as of March 31, 2020 were as follows:

12 months ending March 31,
2021	$	295,500
2022		227,235
2023		195,595
Total	$	718,330

Lease Term and Discount Rate	March 31, 2020
Weighted-average remaining lease term (years)
Operating leases--- Shenzhen Development Center, 36/F, LuoHu, Shenzhen		2.92
Operating leases--- Room 02,20/F,Saixi Technology Building, Nanshan, Shenzhen		1.17

Weighted-average discount rate (%)
Operating leases		8	%

14.

CONCENTRATIONS AND CREDIT RISK

(a)	Concentrations

In the three months ended March 31, 2020, two customers accounted for 72% and 12% of the Company’s revenues, respectively.

In the three months ended March 31, 2019, three customers accounted for 35%, 24% and 14% of the Company’s revenues.

No other customer accounts for more than 10% of the Company’s revenue in the three months ended March 31, 2020 and 2019.

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

(b)	Credit risk

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

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

15.

SUBSEQUENT EVENT

During May and June 2020, the Company encountered further uncertainties of collectability due to impact of COVID-19, and hence took legal action in attempt to recover the accounts receivables. As such, as of March 31, 2020, the Company wrote off $0.16 million of uncollectible accounts receivable accordingly.

The Company has analyzed its operations subsequent to March 31, 2020 to the date these condensed consolidation financial statements were issued and has determined that it does not have any other material subsequent events to disclose in these condensed consolidated financial statements.

Table of Contents

ITEM 2.

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

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

Special Note Regarding Forward Looking Statements

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

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

Use of Terms

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

●	“Company”, “we”, “us” and “our” are to the combined business of Porter Holding International, Inc., a Nevada corporation, and its consolidated subsidiaries and variable interest entities;
●	“PGL” are to Porter Group Limited, a Republic of Seychelles company and our wholly-owned subsidiary;
●	“PPBGL” are to Porter Perspective Business Group Limited, a Hong Kong company and wholly-owned subsidiary of PGL;
●	“Qianhai Porter” are to Shenzhen Qianhai Porter Industrial Co. Ltd., a PRC company and wholly-owned subsidiary of PPBGL;
●	“Portercity” are to Shenzhen Portercity Investment Management Co. Ltd., a PRC company;
●	“Porter E-Commerce” are to Shenzhen Porter Warehouse E-Commerce Co. Ltd., a PRC company and wholly-owned subsidiary of Portercity;
●	“Porter Consulting” are to Shenzhen Yihuilian Information Consulting Co. Ltd., a PRC company and wholly-owned subsidiary of Portercity;
●	“Porter Commercial” are to Shenzhen Porter Commercial Perspective Network Co., Ltd., a PRC company and wholly-owned subsidiary of Portercity;
●	“Weifang Portercity” are to Weifang Porter City Commercial Management Company Limited, a PRC company and a 60% owned subsidiary of Portercity;
●	“Maihuolang E-Commerce” are to Shenzhen Qianhai Maihuolang E-Commerce Co., Ltd., a PRC company and a 57% owned subsidiary of Porter E-Commerce;
●	“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.

Table of Contents

Overview

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

Moreover, we have been developing our O2O business by providing 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. 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.

Starting from the first quarter of 2019, the Company via PPBGL provides various training services to its clients, primarily related to e-commerce platform operation, expansion of channels and promotion strategy, via live and online sessions.

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 $281,680, or 39.7% for the first quarter of 2020, compared to $708,946 for the same period of 2019. Therefore, the Company has changed to receive cash prior to performing certain consulting services, in order to enhance collection of consideration. The Company expects uncertainties around its key accounting estimates to continue to evolve depending on the duration and degree of impact associated with the COVID-19.

Results of Operations

Comparison of Three Months Ended March 31, 2020 and 2019

The following table sets forth key components of our results of operations during the three months ended March 31, 2020 and 2019, both in dollars and as a percentage of our revenue.

	Three Months Ended March 31,
	2020						2019
	Amount			% of Revenue			Amount			% of Revenue
Revenue	$	427,266			100.00		$	708,946			100.00
Cost of revenue		(373,974	)		(87.53	)		(525,573	)		(74.13	)
Gross profit		53,292			12.47			183,373			25.87
Operating expenses
General and administrative expenses		(628,074	)		(147.00	)		(489,423	)		(69.04	)
Loss from operations		(574,782	)		(134.53	)		(306,050	)		(43.17	)
Other income		20,018			4.69			5,169			0.73
Net loss before income taxes		(554,764	)		(129.84	)		(300,881	)		(42.44	)
Income tax expenses		-			-			(60,305	)		(8.51	)
Net loss	$	(554,764	)		(129.84	)	$	(361,186	)		(50.95	)
Less: Net (loss) income attributable to non-controlling interests		(2,697	)		(0.63	)		8,229			1.16
Net loss attributable to Porter Holding International Inc. common stockholders	$	(552,067	)		(129.21	)	$	(369,415	)		(52.11	)

Table of Contents

Revenue. Our revenue was $427,266 for the three months ended March 31, 2020, compared to $708,946 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 $305,660 and $333,230 for the three months ended March 31, 2020 and 2019. 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 $77,778 and $308,117 for the three months ended March 31, 2020 and 2019. The significant decrease was mainly attributable to the impacts of COVID-19 and depressed market demand. 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 $12,450 and $25,798 for the three months ended March 31, 2020 and 2019, respectively. The approximately 50% decline in commission for the first quarter of 2020 was also the result of the COVID-19 pandemic and nationwide economic slowdowns. Revenues of $11,928 and $9,132 were generated from trading business for the three months ended March 31, 2020 and 2019, respectively.

Due to the impact of COVID-19, the Company, starting from first quarter of 2020, determines to receive cash prior to performing investment and corporate management consulting services in order to ensure probable collection of consideration and hence existence of a contract.

Cost of revenue. Our cost of revenue was $373,974 for the three months ended March 31, 2020, compared to $525,573 for the same period last year. Cost of revenue refers to the cost of consulting services, third-party payment service and other business. The cost of consulting service refers to the shell acquisition, 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 $53,292 for the three months ended March 31, 2020, compared to $183,373 for the same period last year. Gross profit as a percentage of revenue (gross margin) was 12.47% for the three months ended March 31, 2020, compared to 25.87% for the same quarter last year. The decrease of gross profit was mainly due to the decrease of training service income which brings high gross profit among the services.

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 $138,651 to $628,074 for the three months ended March 31, 2020, compared to $489,423 for the same period in 2019. Increase was mainly due to $164,082 of allowance for doubtful accounts was reserved during the three months ended March 31, 2020. Due to the impact of COVID-10, the Company encountered further uncertainties of collectability during May and June 2020, and hence took legal action in attempt to recover the accounts receivables. This led to addition of allowance for doubtful accounts. Besides, there was an increase of legal and professional fees and lease and management fee by $71,703 and $22,729, respectively, compared to corresponding period in prior year. On the other hand, salary and staff benefits decreased $120,328 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.

	Three months ended March 31,
	2020				2019						Fluctuation
	Amount		%		Amount			%			Amount			%
Salary and staff benefits	$	192,206		30.60	$	312,534			63.86		$	(120,328	)		(38.50	)
Lease and management fee		94,603		15.06		71,874			14.69			22,729			31.62
Legal and professional fees		144,851		23.06		73,148			14.95			71,703			98.02
Depreciation and amortization		13,562		2.16		5,994			1.22			7,568			126.26
Bad debt provision (recovery)		164,082		26.12		(6,097	)		(1.25	)		170,179			(2,791.19	)
Others		18,770		3.00		31,970			6.53			(13,200	)		(41.29	)
Total G&A	$	628,074		100.00	$	489,423			100.00		$	138,651			28.33

Income tax expense. Our Income tax expense was nil for the three months ended March 31, 2020, compared to income tax expense $60,305 for the same period last year.

Net loss. As a result of the cumulative effect of the factors described above, our net loss was $554,764 and $361,186 for the three months ended March 31, 2020 and 2019, respectively.

Table of Contents

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 $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

	March 31, 2020			December 31, 2019
Current Assets	$	1,168,087		$	1,398,210
Current Liabilities		2,744,229			2,435,885
Working Capital Deficiency	$	(1,576,142	)	$	(1,037,675	)

As of March 31, 2020, we had cash of $142,729. 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 $554,764 during the three months ended March 31, 2020, resulting in an accumulated deficit of $2,752,999 as of March 31, 2020, and we currently have net working capital deficit of $1,576,142. 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.

Table of Contents

	Three Months Ended March 31,
	2020			2019
Net cash used in operating activities	$	(283,382	)	$	(86,011	)
Net cash used in investing activities		(21,078	)		(1,144	)
Net cash provided by financing activities		183,209			71,396
Effect of exchange rate changes on cash		39,247			(32,182	)
Net decrease in cash		(82,004	)		(47,941	)
Cash at the beginning of period		224,733			728,121
Cash at the end of period	$	142,729		$	680,180

Operating Activities

Net cash used in operating activities was $283,382 for the three months ended March 31, 2020, as compared to $86,011 net cash used in operating activities for the three months ended March 31, 2019. The net cash used in operating activities for the three months ended March 31, 2020 was mainly due to our net loss of $554,764, an increase in prepayments and other receivables of $29,508 and a decrease in operating lease liability of $77,359, partially offset by the increase in accruals and other payables of $109,735 and deferred revenue of $42,410. The net cash used in operating activities for the three months ended March 31, 2019 was mainly due to our net loss of $361,186, an increase in account receivables of $185,789, partially offset by the increase in deferred revenue of $241,921, accruals and other payables of $148,812, and accounts payable of $78,719.

Investing Activities

Net cash used in investing activities was $21,078 for the three months ended March 31, 2020, as compared to $1,144 net cash used in investing activities for the three months ended March 31, 2019. The net cash used in investing activities for the three months ended March 31, 2020 and 2019 were attributable to the purchase of equipment.

Financing Activities

Net cash provided by financing for the three months ended March 31, 2020 was $183,209, as compared to $71,396 for the three months ended March 31, 2019. For the three months ended March 31, 2020, we obtained advances of $1,002,142 from shareholders and repaid $818,933 to shareholders. During the three months ended March 31, 2019, we obtained advances of $1,411,933 from shareholders, and repaid $1,339,937 to shareholders.

Contractual Obligations and Commercial Commitments

We had the following contractual obligations and commercial commitments as of March 31, 2020:

Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Amounts due to shareholders	$	1,585,599	$	1,585,599	$	-	$	-	$	-
Amount due to related parties		1,087		1,087		-		-		-
Leases		718,330		295,500		422,830		-		-
TOTAL	$	2,305,016	$	1,882,186	$	422,830	$	-	$	-

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.

Table of Contents

Capital Expenditures

We incurred capital expenditures of $21,078 and $1,144 for the three months ended March 31, 2020 and 2019, 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. 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, 2019 included in the Annual Report on Form 10-K filed on May 1, 2020.

Table of Contents

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2020. Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures.

Management conducted its evaluation of disclosure controls and procedures under the supervision of our chief executive officer and chief financial officer. Based upon, and as of the date of this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were ineffective as of March 31, 2020 due to the following material weaknesses that our management identified in our internal control over financial reporting as of March 31, 2020:

(1) We did not hold shareholders meetings during the last fiscal year;

(2) We do not have an audit committee;

(3) We do not have sufficient and skilled accounting personnel with an appropriate level of technical accounting knowledge and experience in the application of accounting principles generally accepted in the United States commensurate with our financial reporting requirements;

(4) We do not have appropriate policies and procedures in place to evaluate the proper accounting and disclosures of key documents and agreements of revenue process;

(5) We have not maintained sufficient internal controls over cash related controls, including failure to segregate cash handling and accounting functions and did not require dual signature on the Company’s bank accounts. Alternatively, the effects of poor cash controls were mitigated by the fact that we had limited transactions in our bank accounts; and

(6) We retain copies of all financial data and material agreements; however, there is no formal procedure or evidence of normal backup of our data or off-site storage of data in the event of theft, misplacement, or loss due to unmitigated factors. We did not implement appropriate information technology controls.

A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual financial statements will not be prevented or detected in a timely basis.

We plan to take steps to remediate these material weaknesses as soon as practicable by implementing a plan to improve our internal control over financial reporting including, but not limited to, hiring additional staff and/or outside consultants experienced in US GAAP financial reporting as well as in SEC reporting requirements. Our management team will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements.

Our management does not believe that these material weaknesses had a material effect on our financial condition or results of operations or caused our condensed consolidation financial statements as of and for the period ended March 31, 2020 to contain a material misstatement.

Changes in Internal Control over Financial Reporting

Except for the matters described above, there were no changes in our internal controls over financial reporting during the quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. We are currently not aware of any legal proceedings or claims that would require disclosure under Item 103 of Regulation S-K. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

ITEM 1A.

RISK FACTORS.

Not applicable.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.

MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5.

OTHER INFORMATION.

None.

ITEM 6.

EXHIBITS.

The following exhibits are filed as part of this report or incorporated by reference:

Exhibit No.		Description

31.1		Certifications of Principal Executive Officer and Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certifications of Principal Executive Officer and Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: June 25, 2020

PORTER HOLDING INTERNATIONAL, INC.

By:	/s/ Zonghua Chen
	Zonghua Chen
	Chief Executive Officer and Chief Financial Officer

Porter Holding International, Inc. - FORM 10-Q - June 25, 2020

Attached files

Porter Holding International, Inc. Reports