PORTER HOLDING INTERNATIONAL, INC.
AND ANALYSIS
OF FINANCIAL
CONDITION
AND RESULTS
OF
OPERATIONS.
Investors are cautioned that you are not buying shares of a China-based
operating company but instead are buying shares of a shell company issuer that
maintains contractual arrangements with the associated operating company. Our
PRC subsidiary has nominal operations or assets. We conduct our business in
China through our consolidated VIE and its subsidiaries.
The following management's discussion and analysis should be read in conjunction
with our financial statements and the notes thereto and the other financial
information appearing elsewhere in this report. Our financial statements are
prepared 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 onApril 15, 2021 , as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made by us in this report and our other filings with theSEC . These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events. Use of Terms
Except as otherwise indicated by the context and for the purposes of this report only, references in this report to:
? "Company", "we", "us" and "our" are to the combined business of
and variable interest entities;
? "PGL" are to
wholly-owned subsidiary;
? "PPBGL" are to
and wholly-owned subsidiary of PGL;
? "Qianhai Porter" are to
company and wholly-owned subsidiary of PPBGL;
? "Portercity" are to
PRC company;
? "Porter E-Commerce" are to
PRC company and wholly-owned subsidiary of Portercity;
? "
PRC company and 85% owned subsidiary of Portercity;
? "Porter Commercial" are to
Ltd., a PRC company and wholly-owned subsidiary of Portercity;
? "Weifang Portercity" are to
Limited, a PRC company and a 60% owned subsidiary of Portercity. Weifang
Portercity was dissolved on April 22, 2021 .
? "Xinsanmao Wine" are to
51% owned subsidiary of Porter E-Commerce.
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? "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
People's Republic of China ; ? "China" and "PRC" refer tothe People's Republic of China ; ? "Renminbi" and "RMB" refer to the legal currency of China;
? "
States;
? "SEC" are to the U.S. Securities and Exchange Commission ;
? "Exchange Act" are to the Securities Exchange Act of 1934, as amended; and
? "Securities Act" are to the Securities Act of 1933, as amended. Overview Our PRC subsidiary has nominal operations or assets. We conduct our business inChina through our consolidated VIE and its subsidiaries. The following overview of our operations is an overview of the operations of our consolidated VIE and its subsidiaries. See "Item 1. Business-Our Corporate Structure" of our most recent Annual Report on Form 10-K filed onApril 15, 2021 for a summary of the contractual arrangements between our PRC subsidiary and VIE, and "Item 1A. Risk Factors-Risks Relating to Our Commercial Relationship with VIEs" of our most recent Annual Report on Form 10-K filed onApril 15, 2021 for certain risks related to the contractual arrangements and our corporate structure. We were incorporated in theState of Nevada onSeptember 5, 2013 . Our original business plan was to sell freshly squeezed juices from mobile stands inLondon, United Kingdom , but this business was not successful and we did not generate any revenue from this business. Since 2016, through our VIE entity,Porter Consulting , we have partnered withChina Payment Technology Co., Ltd. , a third-party online payment service provider ("China Payment") to promote China Payment's online payment platform to companies and businesses inShenzhen and in return share a portion of the processing fees earned by China Payment as commission.Porter Consulting also partners withShenzhen Xinghua Tongfu Technology Co., Ltd. , a third-party online payment service provider ("Shenzhen Tongfu "), wherebyPorter Consulting agreed to promote Shenzhen Tongfu's online payment platform, including the Point of Sale (POS) system, to companies and businesses inChina and in return obtain a certain amount of commission based on the volume of trading through such online payment platform. Our wholly-owned PRC subsidiary, Qianhai Porter, as a foreign investment enterprise under PRC laws, is not eligible to operate Internet information and content, Internet access, online games, mobile, value added telecommunications and certain other businesses. As a result, we conduct our business inChina through our consolidated VIE, Portercity, and its subsidiaries. Qianhai Porter has nominal operations or assets and controls and receives 100% of the economic benefits of our VIE through contractual arrangements. Portercity contributed 100% of our consolidated results of operations and cash flows and accounted for 100% of our consolidated total assets and total liabilities. OnJuly 15, 2020 , Porter E-Commerce entered into an Equity Transfer Agreement (the "Agreement") with Mr. Kezhan Ma, whereby Porter E-Commerce transferred its 57% equity interests in Maihuolang E-Commerce to Mr. Kezhan Ma, for cash consideration ofRMB 650,000 (approximately$101,020 ). An impairment loss of$51,936 and a disposal gain of$4,730 were recognized. Moreover, we have been developing our O2O (Online to Offline) business by serving as an O2O business platform operator that provides both online E-commerce and offline physical business facilities to our merchant customers where they can conduct business and interact with their existing and potential end-consumers face to face. Our goal is to provide one-stop services for our customers through our integrated online and offline platforms. As described fully below, we are developing and offering our O2O products and services including hosting our online marketplaces (www.pt37.com and www.17yugo.com) for our merchant clients to post and sell their products and services online and managing and operating physical business facilities, Porter City, that our online merchant clients can utilize to conduct their businesses offline. We currently focus on merchant clients who are engaged in manufacturing, real estate, trade and financing sectors. In the future, we intend to expand our merchant client base to industries of big data, new materials, new energy, green food and environment protection. 25
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According to the development demands and goals of our customers, in 2018, we started to offer a series of services such as business planning, financial guidance, business matching and guidance for listing primarily inthe United States . At present, in our customer pool, many small and medium-sized enterprises have gained certain public awareness. They are seeking the potential advantages of being a listed company and striving for obtaining the recognition of international capital to accelerate their corporate expansion. However, many enterprises may not be familiar with the listing requirements, laws and regulations of different capital markets, and the process of obtaining financing from overseas markets. In order to help our customers who intend to access overseas capital markets, we have a team of experienced professionals who have professional knowledge of the listing rules and regulations of various capital markets. We capitalize on our expertise and resources in the capital markets to assist these customers to achieve their goals. In addition, starting from the first quarter of 2019, we via PPBGL provide various training services to our clients, primarily those related to e-commerce platform operation, expansion of channels and promotion strategies, via live and online sessions.
In
Since the first half of 2020, the COVID-19 pandemic has depressed demand for the Company's services, and adversely impacted the Company's operating results. The Company's revenue decreased by$470,979 , or 88.91% to$58,748 for the nine months endedSeptember 30, 2021 , compared to$529,727 for the same period of 2020. The Company has changed to require upfront cash payments prior to performing certain consulting services, in order to enhance collection of accounts receivable. The Company expects uncertainties around its key accounting estimates to continue to evolve depending on the duration and degree of impact associated with COVID-19.
Recent Regulatory Developments in
OnJuly 6, 2021 , the PRC government issued the Opinions on Strictly Cracking Down on Illegal Securities Activities, calling for: (i) tightening oversight of data security, cross-border data flow and administration of classified information, as well as amendments to relevant regulation to specify responsibilities of overseas listed Chinese companies with respect to data security and information security; (ii) enhanced oversight of overseas listed companies as well as overseas equity fundraising and listing by Chinese companies; and (iii) extraterritorial application of China's securities laws. As the Opinions on Strictly Cracking Down on Illegal Securities Activities were recently issued, there are great uncertainties with respect to the interpretation and implementation thereof. We will closely monitor further developments. In addition, onJuly 10, 2021 , theCyberspace Administration of China issued the Measures for Cybersecurity Review (Revision Draft for Comments), or the Measures, for public comments, which propose to authorize the relevant government authorities to conduct cybersecurity review on a range of activities that affect or may affect national security, including listings in foreign countries by companies that possess the personal data of more than one million users. The Measures are soliciting comments and subject to change. As we have less than one million users, we believe that the Measures are not applicable to us even after they take effect in current form. The PRC government is increasingly focused on data security, recently launching cybersecurity review against a number of mobile apps operated by several US-listed Chinese companies and prohibiting these apps from registering new users during the review period. There are great uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations regarding data and privacy security. We may be required to change our data and other business practices and be subject to regulatory investigations, penalties, increased cost of operations, or declines in user growth or engagement as a result of these laws and policies. Further, our consulting business with respect to overseas listing and capital raising may be adversely affected. 26
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Table of Contents Results of Operations
Comparison of Three Months Ended
The following table sets forth key components of our results of operations
during the three months ended
Three Months Ended September 30,
2021 2020
% of % of
Amount Revenue Amount Revenue
Revenue, net $ 31,786 100.00 $ 58,794 100.00
Cost of revenue (14,146 ) (44.50 ) (11,570 ) (19.68 )
Gross profit 17,640 55.50 47,224 80.32
Operating expenses
General and administrative expenses (216,511 ) (681.15 ) (604,678 ) (1,028.47 )
Loss from operations (198,871 ) (625.66 ) (557,454 ) (948.15 )
Other income 702 2.21 6,927 11.78
Net loss before income taxes (198,169 ) (623.45 ) (550,527 ) (936.37 )
Income tax expense - - - -
Net loss $ (198,169 ) (623.45 ) $ (550,527 ) (936.37 )
Less: Net loss attributable to
non-controlling interests (1,536 ) (4.83 ) (3,175 ) (5.40 )
Net loss attributable to Porter Holding
International Inc. common stockholders $ (196,633 ) (618.62 ) $ (547,352 ) (930.97 )
Revenue. Our revenue was $31,786 for the three months ended September 30, 2021 ,
compared to $58,794 for the same period last year. One of our revenue sources is
to provide various consulting services to our customers, especially those who
have the intention to be publicly listed, primarily on the stock exchanges in
the United States . Service income from the provision of these consulting
services totaled nil and nil for the three months ended September 30, 2021 and
2020, respectively. This was mainly attributable to the impacts of COVID-19 and
depressed market demand. Starting from 2019, the Company provides various
training services to its clients, primarily related to e-commerce platform
operation, expansion of channels, promotion strategy and capital market
operation, via live and online sessions. The service income from providing
training services totaled $16,100 and $42,447 for the three months ended
September 30, 2021 and 2020. Through Porter Consulting , we also promoted the
payment service of third-party payment service providers to merchants in
Shenzhen and in return share a portion of the processing fees earned by the
third-party payment service providers in the form of commission. Our commission
totaled $5,422 and $11,087 for the three months ended September 30, 2021 and
2020, respectively. The approximately 51.1% decline in commission for the third
quarter of 2021 was also the result of the COVID-19 pandemic. Revenues of $4,435
and nil were generated from trading business for the three months ended
September 30, 2021 and 2020, respectively. Revenue of others were $5,829 and
$5,260 for the three months ended September 30, 2021 and 2020, respectively.
Revenue of others for the three months ended September 30, 2021 included
revenues from the new wine trading business.
Due to the impact of COVID-19, the Company, starting from the first quarter of 2020, requests to receive cash prior to performing investment and corporate management consulting services in order to ensure collection of payment.
Cost of revenue. Our cost of revenue was$14,146 for the three months endedSeptember 30, 2021 , compared to$11,570 for the same period last year. Cost of revenue includes the costs incurred in performing consulting services, third-party payment service and other business. The cost of consulting service arises from shell acquisitions, and legal and accounting advisory service outsourced to third-party service providers. The increase of cost of revenue is due to smaller margins of trading business. Gross profit and gross margin. Our gross profit was$17,640 for the three months endedSeptember 30, 2021 , compared to$47,224 for the same period last year. Gross profit as a percentage of revenue (gross margin) was 55.50% for the three months endedSeptember 30, 2021 , compared to 80.32% for the same quarter last year. The decrease of gross profit was mainly due to the decrease of business demand as a result of COVID-19. 27
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General and administrative expenses. As shown below, our general and administrative expenses consist primarily of bad debt provision, compensation and benefits to our general management, finance and administrative staff, professional fees and other expenses incurred in connection with general operations. Our general and administrative expenses decreased by$388,167 to$216,511 for the three months endedSeptember 30, 2021 , compared to$604,678 for the same period of 2020. Decrease was mainly due to no allowance for doubtful accounts reserved during the three months endedSeptember 30, 2021 . Due to the impact of COVID-19, the Company assessed that the collectability being not probable and hence provide bad debt provision for majority of receivable from the investment and corporate management consulting services for the six months period last year. Besides, there was a decrease in salary and staff benefit, lease and management fee and legal and professional fees of$26,933 ,$10,284 and$13,329 , respectively, compared to corresponding period in prior year. The decrease was mostly due to the depressed market demand and the cost reduction strategy of the Company as a result of the impact of COVID-19. Three Months Ended September 30, 2021 2020 Fluctuation Amount % Amount % Amount % Salary and staff benefits$ 77,255 35.68$ 104,188 17.23$ (26,933 ) (25.85 ) Lease and management fee 68,040 31.43 78,324 12.95 (10,284 ) (13.13 ) Legal and professional fees 55,573 25.67 68,902 11.39 (13,329 ) (19.34 ) Depreciation and amortization 2,742 1.27 5,816 0.96 (3,074 ) (52.86 ) Bad debt provision - - 335,187 55.43 (335,187 ) (100.00 ) Impairment - - 291 0.05 (291 ) (100.00 ) Others 12,901 5.96 11,970 1.99 931 7.78 Total general and administrative expenses$ 216,511 100.00$ 604,678 100.00$ (388,167 ) (64.19 )
Other income. Our other income was
Income tax expense. Our Income tax expense was nil and nil for the three months
ended
Net loss. As a result of the cumulative effect of the factors described above,
there was a net loss of
Comparison of Nine Months Ended
The following table sets forth key components of our results of operations during the nine months endedSeptember 30, 2021 and 2020, both in dollars and as a percentage of our revenue. Nine Months Ended September 30, 2021 2020 % of % of Amount Revenue Amount Revenue Revenue, net$ 58,748 100.00$ 529,727 100.00 Cost of revenue (29,554 ) (50.31 ) (391,374 ) (73.88 ) Gross profit 29,194 49.69 138,353 26.12 Operating expenses General and administrative expenses (792,376 ) (1,348.77 ) (1,631,213 ) (307.94 ) Loss from operations (763,182 ) (1,299.08 ) (1,492,860 ) (281.82 ) Other income 633,878 1,078.98 28,226 5.33 Net loss before income taxes (129,304 ) (220.10 ) (1,464,634 ) (276.49 ) Income tax expense - - - - Net loss$ (129,304 ) (220.10 )$ (1,464,634 ) (276.49 ) Less: Net loss attributable to non-controlling interests (1,398 ) (2.38 ) (22,703 ) (4.29 ) Net loss attributable to Porter Holding International Inc. common stockholders (127,906 ) (217.72 ) (1,441,931 ) (272.20 ) 28
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Revenue, net. Our revenue was$58,748 for the nine months endedSeptember 30, 2021 , compared to$529,727 for the same period last year. Starting from the second quarter of 2018, we commenced providing various consulting services to our customers, especially those who have the intention to be publicly listed primarily on the stock exchanges inthe United States , and we received service income from the provision of these consulting services totaled nil and$306,286 for the nine months endedSeptember 30, 2021 and 2020, respectively. The significant decrease of revenue in the nine months of 2021 was mainly attributable to the impacts of COVID-19 and depressed market demand. Starting from 2019, the Company provides various training services to its clients, primarily related to e-commerce platform operation, expansion of channels, promotion strategy and capital market operation, via live and online sessions. The service income from providing training services totaled$18,047 and$132,090 for the nine months endedSeptember 30, 2021 and 2020. ThroughPorter Consulting we have also promoted the payment service of third-party payment service providers to merchants inShenzhen and in return share a portion of the processing fees earned by such third-party payment service providers as commission. Our commission totaled$20,604 and$34,682 for the nine months endedSeptember 30, 2021 and 2020, respectively. The approximately 40.59% decline in commission for the nine months endedSeptember 30, 2021 was also the result of the COVID-19 pandemic. Revenues of$13,094 and$11,928 were generated from trading business for the nine months endedSeptember 30, 2021 and 2020, respectively. Revenue of others were$7,003 and$44,741 for the nine months endedSeptember 30, 2021 and 2020, respectively. Revenue of others for the nine months endedSeptember 30, 2021 included revenues from the new wine trading business. Cost of revenue. Our cost of revenue was$29,554 for the nine months endedSeptember 30, 2021 , compared to$391,374 for the same period last year. Cost of revenue refers to the cost incurred in performing consulting services, third-party payment service and other business. The cost of consulting service arises from shell acquisitions, and legal and accounting advisory service outsourced to third-party service providers. The decrease of cost of revenue in the nine months endedSeptember 30, 2021 is in line with the decrease of revenue. Gross profit and gross margin. Our gross profit was$29,194 for the nine months endedSeptember 30, 2021 , compared to$138,353 for the same period last year. Gross profit as a percentage of revenue (gross margin) was 49.69% for the nine months endedSeptember 30, 2021 , compared to 26.12% for the same quarter last year. The decrease of gross profit was mainly due to the decrease of business demand as a result of the impacts of COVID-19. General and administrative expenses. As shown below, our general and administrative expenses consist primarily of compensation and benefits to our general management, finance and administrative staff, professional fees and other expenses incurred in connection with general operations. Our general and administrative expenses decreased by$838,837 to$792,376 for the nine months endedSeptember 30, 2021 , compared to$1,631,213 for the same period in 2020. Decrease was mainly due to that allowance for doubtful accounts decreased$482,648 , from$498,018 to$15,370 during the nine months endedSeptember 30, 2021 and 2020. Due to the impact of COVID-19, the Company assessed that the collectability being not probable and hence provide bad debt provision for majority of receivable from the investment and corporate management consulting services for the nine months period last year. Besides, no impairment reserved during the nine months endedSeptember 30, 2021 . An impairment of$51,936 related to the goodwill and intangible assets of Maihuolang E-Commerce was recognized for the nine months endedSeptember 30, 2020 . Moreover, there was a decrease in salary and staff benefit, lease and management fee and legal and professional fees of$139,881 ,$58,383 and$99,861 , respectively, compared to corresponding period in prior year. The decrease was mostly due to the depressed market demand and the cost reduction strategy of the Company as a result of the impact of COVID-19. Nine Months Ended September 30, 2021 2020 Fluctuation Amount % Amount % Amount % Salary and staff benefits$ 260,806 32.91$ 400,687 24.56$ (139,881 ) (34.91 ) Lease and management fee 207,702 26.21 266,085 16.31 (58,383 ) (21.94 ) Legal and professional fees 236,107 29.80 335,968 20.60 (99,861 ) (29.72 ) Depreciation and amortization 8,856 1.12 32,406 1.99 (23,550 ) (72.67 ) Bad debt provision 15,370 1.94 498,018 30.53 (482,648 ) (96.91 ) Impairment - - 51,936 3.18 (51,936 ) (100.00 ) Others 63,535 8.02 46,113 2.83 17,422 37.78 Total general and administrative expenses$ 792,376 100.00$ 1,631,213 100.00$ (838,837 ) (51.42 ) Other income. Our other income was$633,878 and$28,226 for the nine months endedSeptember 30, 2021 and 2020. The increase was primarily due to the compensation received with the termination of the Weifang project. DuringJanuary 2021 , Weifang Portercity agreed with the local government to terminate a project, which was signed onAugust 25, 2018 for Weifang Portercity to facilitate investment and promote business opportunities for the Weifang region. As the local government changed its development strategy, it determined to terminate the Weifang project. Consequently, Weifang Portercity received a compensation of approximately$0.5 million from the local government to compensate its upfront establishment expenses including expenditure relating to office renovation, office equipment and supplies. Weifang Portercity was dissolved onApril 22, 2021 . Besides,$61,823 investment gain was recognized during the nine months endedSeptember 30, 2021 . 29
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Income tax expense. Our Income tax expense was nil and nil for the nine months
ended
Net loss. As a result of the cumulative effect of the factors described above,
there was a net loss of
Liquidity and Capital Resources
Need forAdditional Capital Our business is subject to risks such as 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 unaudited 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 a similar 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 may also need to hire additional employees in order to provide new services and accommodate new clients. Working Capital September 30, 2021 December 31, 2020 Current Assets $ 476,453 $ 425,149 Current Liabilities 3,862,193 3,539,288 Working Capital Deficiency $ (3,385,740 )$ (3,114,139 )
As of
Going Concern Uncertainties
The accompanying unaudited condensed consolidated financial statements have been prepared assuming we will continue as a going concern.
We have considered whether there is substantial doubt about our ability to continue as a going concern given (1) our loss from operations approximately$763,182 for the nine months endedSeptember 30, 2021 , (2) our accumulated deficit of approximately$4,617,322 as ofSeptember 30, 2021 and (3) the fact that we had negative operating cash flows of approximately$535,250 for the nine months endedSeptember 30, 2021 . 30
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As ofSeptember 30, 2021 , our cash balance was$85,767 and our current liabilities exceed current assets by$3,385,740 . Our cash balance as ofSeptember 30, 2021 is not sufficient to support our operations for the next 12 months after the date that the financial statements issued. The negative operating results of cash flow and working capital deficiency for the quarter endedSeptember 30, 2021 raise substantial doubt about our ability to continue as a going concern. Our continued operations are highly dependent upon our ability to increase revenues and if needed, to complete equity and/or debt financing. In evaluating if there is substantial doubt about our ability to continue as a going concern, we are trying to alleviate the going concern risk through (1) increasing cash generated from operations by controlling operating expenses and increasing more live steaming e-commerce events to bring up e-commerce revenue, (2) financing from domestic banks and other financial institutions, and (3) equity or debt financing. We have certain plans to mitigate these adverse conditions and to increase the liquidity of the Company. However, if we are unable to obtain the necessary additional capital on a timely basis and on acceptable terms, we will be unable to implement our current plans for expansion, repay debt obligations or respond to competitive market pressures, which will have negative impacts upon our business, prospects, financial condition and results of operations. On an on-going basis, the Company also received and will continue to receive financial support commitments from the Company's related parties. Nine Months EndedSeptember 30, 2021 2020
Net cash used in operating activities
- 66,638
Net cash provided by financing activities 599,376
554,482
Effect of exchange rate changes on cash (3,271 ) (55,129 ) Net increase (decrease) in cash 60,855 (190,112 ) Cash at the beginning of period 24,912 224,733 Cash at the end of period $ 85,767 $ 34,621 Operating Activities Net cash used in operating activities was$535,250 for the nine months endedSeptember 30, 2021 , as compared to$756,103 net cash used in operating activities for the nine months endedSeptember 30, 2020 . The net cash used in operating activities for the nine months endedSeptember 30, 2021 was mainly due to our net loss of$129,304 , a decrease in operating lease liabilities of$147,035 and a decrease in accruals and other payables of$423,545 , partially offset by the increase in amortization of operating lease right-of-use assets of$176,866 . The net cash used in operating activities for the nine months endedSeptember 30, 2020 was mainly due to our net loss of$1,464,634 , a decrease in operating lease liabilities of$221,963 and tax payable of$44,614 , partially offset by the increase in bad debt expense of$498,018 , accruals and other payables of$125,212 and deferred revenue of$63,361 . Investing Activities Net cash provided by investing activities was nil for the nine months endedSeptember 30, 2021 , as compared to$66,638 net cash used in investing activities for the nine months endedSeptember 30, 2020 . The net cash provided by investing activities for the nine months endedSeptember 30, 2020 was attributable to the disposal of investments of$90,207 , partially offset by the purchase of$3,548 of equipment and$20,021 of intangible assets. Financing Activities Net cash provided by financing for the nine months endedSeptember 30, 2021 was$599,376 , as compared to$554,482 for the nine months endedSeptember 30, 2020 . For the nine months endedSeptember 30, 2021 , we obtained advances of$2,379,122 from shareholders and repaid$1,779,746 to shareholders. For the nine months endedSeptember 30, 2020 , we obtained proceeds from sales of non-controlling interests of$71,502 , advances of$3,243,880 from shareholders and repaid$2,760,900 to shareholders. 31
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Contractual Obligations and Commercial Commitments
We had the following contractual obligations and commercial commitments as ofSeptember 30, 2021 : Less than 1 More than 5 Contractual Obligations Total year 1-3 years 3-5 years years Amounts due to shareholders$ 2,671,046 $ 2,671,046 $ - $ - $ - Leases 332,186 234,484 97,702 - - TOTAL$ 3,003,232 $ 2,905,530 $ 97,702 $ - $ - We believe that our current cash and financing from our existing stockholders are adequate to support operations for the next 12 months. We may, however, in the future, require additional cash resources due to changed business conditions, implementation of our strategy to expand our business or other investments or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects. Capital Expenditures
We incurred capital expenditures of nil and
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 unaudited condensed consolidated financial information has been prepared in accordance withU.S. GAAP, which requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application. There were no other material changes to the critical accounting policies previously disclosed in our audited consolidated financial statements for the year endedDecember 31, 2020 included in the Annual Report on Form 10-K filed onApril 15, 2021 . 32
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