WISEMAN GLOBAL LIMITED The information contained in this quarter report on Form 10-Q is intended to update the information contained in our Form 10-K datedMay 12, 2020 , for the year endedDecember 31, 2019 and presumes that readers have access to, and will have read, the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q. The following discussion contains certain statements that may be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, "Management's Discussion and Analysis of Financial Condition and Results of Operations." These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarter report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Form S-1/A registration statement, filed onDecember 12, 2018 , in the section entitled "Risk Factors" for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarter report on Form 10-Q. The following should also be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto that appear elsewhere in this report. Company Overview We are a household appliances and related domestic appliances products company in the PRC. Our principal business activity is the provision of household appliances products and related domestic appliances products. Our products improve the home lifestyle and living solutions experience, predominately through power savings, resources efficiencies and functionalities of products. We sell our products to corporate customers, retail customers and independent distributors predominately in the PRC and intend to expand our business in other countries around the world. Our products are typically used in a home setting of consumers of all demographics on a daily basis and meet the convenience-oriented preferences of today's consumer across a broad range of household activities. We help make daily life easier through a broad range of products that offer multi-purpose functions. Our diverse product portfolio includes televisions, air-conditioners, laundry appliances, refrigerators and freezers, cooking appliances, dishwashers, mixers and other small domestic appliances. Our products are known for their quality, which is recognized by our consumers, retail customers, and corporate customers alike. We believe our customers know they can depend on our trusted brand. These factors generate loyalty which empowers us to develop and launch new products that expand application scenarios and transforms our product portfolio into the smart household appliances category. Our business has three main divisions and revenue streams, namely, (i) sales of household appliances and related domestic appliances products; (ii) consultancy; and (iii) integration and installation services. Virtually all of our products are manufactured by independent original equipment manufacturers ("OEMs") in the PRC. For the three months endedSeptember 30, 2020 , our revenue was$105,775 and our gross profit was$18,756 . For the three months endedSeptember 30, 2019 , our revenue was$1,809,370 , and our gross profit was$640,483 . We conduct our business throughShenzhen Wiseman Smart Industrial Co., Limited and its subsidiaries which are founded in the PRC and ourHong Kong subsidiary,Wiseman Global Limited ("Wiseman HK"). -3-
Results of operations for the three months ended
Increase (decrease)
Three Months Ended September 30, in 2020
2020 2019 compared to 2019
(In U.S. dollars, except for percentages)
Revenue $ 105,775 100.0 % $ 1,809,370 100.0 % $ (1,703,595 ) (94.2 )%
Cost of revenues (87,019 ) (82.3 )% (1,168,887 ) (64.6 )% 1,081,868 92.6 %
Gross profit 18,756 17.7 % 640,483 35.4 % (621,727 ) (97.1 )%
Operating expenses (424,622 ) (401.4 )% (159,322 ) (8.8 )% (265,300 ) (166.5 )%
Other income, net 14,265 13.5 % 14,636 0.8 % 371 (2.5 )%
Income (Loss) from operations (391,601 ) (370.2 )% 495,797 27.4 % (887,398 ) (179.0 )%
Net finance income 35 0.0 % 43 0.0 % (8 ) (18.6 )%
Income tax expense - - % (28,292 ) (1.6 )% 28,292 100 %
Net profit (loss) $ (391,566 ) (370.2 )% $ 467,548 25.8 % $ (859,114 ) (183.8 )%
Revenues
For the three months ended September 30, 2020 and 2019, the Company generated
revenue in the amount of $105,775 and $1,809,370 , respectively, representing a
significant decrease of approximately 94.2%. The revenue was generated from the
sales of household appliances and related products, and integration and
installation services in China . The significant decrease of revenue was a result
of the overall decline of our business due to the impact of COVID-19 pandemic.
Cost of Revenue
Cost of revenue for the three months ended
Gross profit Our gross profit decreased from$640,483 for three months endedSeptember 30, 2019 to approximately$18,756 for three months endedSeptember 30, 2020 , representing a significant decrease of approximately 97.1%. The significant decrease was primarily attributable to our sales decrease, the higher cost of manufactured goods sold, and most of the sales were generated from products
with lower gross profit margins. Operating Expenses For the three months endedSeptember 30, 2020 and 2019, we had operating expenses in the amount of$424,622 and$159,322 , respectively, representing a significant increase of approximately 166.5%. The significant increase was primarily attributable to the increase in leases expense, loss on disposal of leased offices, salary, other professional fees, and advertising and promotion. Other Income, net For the three months endedSeptember 30, 2020 , we recorded an amount of$14,265 as other income, net as compared to$14,636 other income, net for the three months endedSeptember 30, 2019 . The increase was primarily attributable to the income from face mask trading and distribution income.
The face mask trading is a temporary business, which the Company expects to discontinue at the fiscal year end of 2020 due to the low profit margin in a highly competitive market in face mask trading during COVID-19 pandemic.
The net other income incurred during the three months ended
Income tax expenses
For the three months ended
Net Profit / Loss For the three months endedSeptember 30, 2020 , we had a net loss of$391,566 while we had a net profit of$467,548 for the three months endedSeptember 30, 2019 , representing a significant increase of net loss of approximately 183.8%. The significant increase on the net loss was primarily attributable to the significant increase in operating expenses and the overall decline of our business. -4-
Results of operations for the nine months ended
Increase (decrease)
Nine Months Ended September 30, in 2020
2020 2019 compared to 2019
(In U.S. dollars, except for percentages)
Revenue $ 242,006 100.0 % $ 2,323,165 100.0 % $ (2,081,159 ) (89.6 )%
Cost of revenues (161,845 ) (66.9 )% (1,561,237 ) (67.2 )% 1,399,392 89.6 %
Gross profit 80,161 33.1 % 761,928 32.8 % (681,767 ) (89.5 )%
Operating expenses (850,768 ) (351.5 )% (301,684 ) (13.0 )% (549,084 ) (182.0 )%
Other income, net 215,915 89.2 % 25,417 1.1 % 190,498 749.5 % Income (Loss) from operations
(554,692 ) (229.2 )% 485,661 20.9 % (1.040,353 ) (214.2 )%
Net finance income 104 0.0 % 105 0.0 % (1 ) (0.9 )%
Income tax expense (3,014 ) (1.3 )% (28,292 ) (1.2 )% 25,278 89.3 %
Net profit (loss) $ (557,602 ) (230.5 )% $ 457,474 19.7 % $ (1,015,076 ) (221.9 )%
Revenues
For the nine months ended September 30, 2020 and 2019, the Company generated
revenue in the amount of $242,006 and $2,323,165 , respectively, representing a
significant decrease of approximately 89.6%. The revenue was generated from the
sales of household appliances and related products, and integration and
installation services in China . The significant decrease of revenue was a result
of the overall decline of our business due to the impact of COVID-19 pandemic.
Cost of Revenue
Cost of revenue for the nine months ended September 30, 2020 amounted to
approximately $161,845 as compared to $1,561,237 for the nine months ended
September 30, 2019 , representing a significant decrease of approximately 89.6%.
The significant decrease of cost of revenue was a result of the overall decline
of our business due to the impact of COVID-19 pandemic. The cost of revenue was
predominantly the cost of manufactured goods sold to customers.
Gross profit
Our gross profit decreased from
Operating Expenses For the nine months endedSeptember 30, 2020 and 2019, we had operating expenses in the amount of$850,768 and$301,684 , respectively, representing a significant increase of approximately 182.0%. The significant increase was primarily attributable to the increase in leases expense, loss on disposal of leased offices, salary, other professional fees, and advertising and promotion. Other Income, net For the nine months endedSeptember 30, 2020 , we recorded an amount of$215,915 as other income, net as compared to$25,417 other income, net for the nine months endedSeptember 30, 2019 . The increase was primarily attributable to the rental income, income from face mask trading, and distribution income.
The face mask trading is a temporary business, which the Company expects to discontinue at the fiscal year end of 2020 due to the low profit margin in a highly competitive market in face mask trading during COVID-19 pandemic.
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The net other income incurred during the nine months ended
Income tax expenses
For the nine months ended
Net Profit / Loss
For the nine months endedSeptember 30, 2020 , we had a net loss of$557,602 while we had a net profit of$457,474 for the nine months endedSeptember 30, 2019 , representing a significant increase of net loss of approximately 221.9%. The significant increase on the net loss was primarily attributable to the significant increase in operating expenses and the overall decline of our business.
Liquidity and Capital Resources
OnMarch 11, 2020 , theWorld Health Organization orWHO declared the corona virus or COVID-19 a pandemic. Due to the outbreak first reported onDecember 31, 2019 and in response to the outbreak, the municipal government ofGuangdong Province has taken strict control measures to prevent the further outbreak of the disease sinceJanuary 28, 2020 . As a result, a notice issued by the municipal government ofGuangdong Province that most of the business entities, including commercial banks, hotels, public transportation and express delivery companies, except for those related to epidemic prevention supply, utility supply, supermarkets, etc., inShenzhen City were not allowed to resume operations beforeFebruary 9, 2020 , and all of our employees (including staff in our accounting department) were not able to come back to the office. The Company resumed its operation fromFebruary 10 to February 13, 2020 . However, onFebruary 14, 2020 , the Company decided to temporarily shut down its operations as new infected cases dramatically increased on or around that same time. The Company fully resumed its operations onMarch 2, 2020 . Substantially all of the Company's revenues are concentrated in the PRC. Consequently, its results of operations will likely be adversely, and may be materially, affected, to the extent that the COVID-19 or any other epidemic harms the PRC and global economy in general. Any potential impact to its results will depend on, to a large extent, future developments and new information that may emerge regarding the duration and severity of the COVID-19 and the actions taken by government authorities and other entities to contain the COVID-19 or treat its impact, almost all of which are beyond its control. Potential impacts include, but are not limited to, the following:
? temporary closure of offices, travel restrictions, financial impact of the
Company's customers or suspension supplies may negatively affected, and could
continue to negatively affect, the demand for the Company's product;
? the Company may have to provide significant sales incentives to its customers
during the outbreak, which may in turn materially adversely affect its
financial condition and operating results; and
any disruption of the Company's supply chain, logistics providers or customers
could adversely impact its business and results of operations, including causing
the Company or its suppliers to cease manufacturing for a period of time or
materially delay delivery to its customers, which may also lead to loss ofits customers.
Because of the uncertainty surrounding the COVID-19 outbreak, the financial impact related to the outbreak of and response to the COVID-19 cannot be reasonably estimated at this time. There is no guarantee that the Company's total revenues will grow or remain at the similar level year over year in the remaining period of 2020.
The following summarizes the key components of our cash flows for the nine
months ended
2020 2019
(In U.S. dollars)
Net cash used in operating activities
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Cash Used in Operating Activities
For the nine months ended
Cash Used in Investing Activities
For the nine months ended
Cash Provided by Financing Activities
For the nine months endedSeptember 30, 2020 and 2019, the Company had advances of$53,937 and repaid$59,212 to our chief executive officer and director,
Mr.Lai Jinpeng .
For the nine months ended
Off-balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders as ofSeptember 30, 2020 . Contractual Obligations
As a smaller reporting company, we are not required to provide the aforementioned information.
Critical Accounting Policies
Recent accounting pronouncements
InFebruary 2016 , theFinancial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required recognize the following for all leases (with the exception of short-term leases) at the commencement date: 1) A lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and 2) A right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. The amendments in this ASU are effective for fiscal years beginning afterDecember 15, 2018 , including interim periods within those years. This standard takes effect for fiscal years, and interim periods within those fiscal years, beginning afterDecember 15, 2018 . According to this new standard, the Company should record both right-of-use asset and lease liability of$77,206 on its consolidated financial statements for the period endedSeptember 30, 2020 . InJune 2016 , the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326). ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses ("CECL") to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 is effective for the Company beginningJanuary 1, 2023 ,
and early adoption is permitted.
The Company reviews new accounting standards as issued. Management has not identified any other new standards that it believes will have a significant impact on the Company's consolidated financial statements.
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