FORTUNE VALLEY TREASURES, INC. The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this Annual Report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward- looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this Report. Our audited financial statements are stated inU.S. Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. Company Overview
During the year 2020, the Company conducted its business in generally one revenue stream: product sales - wine, water and oil and other F&B products.
Results of Operations
Years Ended December 31,
2020 2019 Change
Revenue $ 5,005,694 100 % $ 275,219 100 % $ 4,730,475 1,719 %
Cost of revenue (1,673,367 ) (33 )% (216,222 ) (79 )% (1,457,145 ) 674 %
Gross profit 3,332,327 67 % 58,997 21 % 3,273,330 5,548 %
Other operating income 35,164 1 % - - 35,164 100 % Operating expense (6,522,200 ) (130 )% (439,340
) (160 )% (6,082,860 ) 1,385 % Other income 27,639 1 % 2,680 1 % 24,959 931 % Other expense (213,355 ) (4 )% (11 ) (0 )% (213,344 ) 1,939,491 % Income taxes (306,928 ) (6 )% (82 ) (0 )% (306,846 ) 374,202 % Net loss$ (3,647,353 ) (73 )%$ (377,756 ) (137 )%$ (3,269,597 ) 866 % Net loss attributable to noncontrolling interests (391,789 ) (8 )% - - (391,789 ) 100 % Net loss attributable to Fortune Valley Treasures, Inc.$ (3,255,564 ) (65 )% $ (377,756
) (137 )%$ (2,877,808 ) 762 % 28 Revenue Revenue totaled$5,005,694 for the year endedDecember 31, 2020 , an increase of$4,730,475 , or 1,719%, as compared to that for the year endedDecember 31, 2019 . The reason for the increase was the Company increased its water and oil business department, which increased our sales volume. Cost of Revenue
Cost of revenue totaled
Gross Profit Gross profit was$3,332,327 and$58,997 for the years endedDecember 31, 2020 and 2019, respectively. Gross profit margin increased to 67% for the year endedDecember 31, 2020 from 21% for the corresponding period in 2019 primarily due to the increase in our water and oil business department, where gross profit is higher. Operating Expenses General and administrative expenses totaled$6,522,200 for the year endedDecember 31, 2020 , an increase of$6,082,860 , or 1,385%, as compared to year endedDecember 31, 2019 . The increase was primarily due to the impairment of goodwill and increase in marketing and professional service fees. Net Loss Net loss totaled$3,647,353 for the year endedDecember 31, 2020 , an increase of$3,269,597 , of 866%, as compared to that for the year endedDecember 31, 2019 , primarily as a result of the increase in impairment of goodwill and amortization of intangible asset.
Liquidity and Capital Resources
Working Capital
December 31,
2020 2019 Change
Total current assets $ 4,231,054 $ 73,970 $ 4,157,084
Total current liabilities 1,996,446 855,352 1,141,094
Working capital (deficit) 2,234,608 (781,382 ) 3,015,990
As of December 31, 2020 , we had working capital of $2,234,608 as compared to
working capital deficit of $781,382 as of December 31, 2019 . We had total
current assets of $4,231,054 consisting of cash on hand of $249,837 , Inventory -
wine and water of $144,565 and accounts receivables of $2,468,038 compared to
total current assets of $73,970 as of December 31, 2019 . The increase was due to
the prepayment to the vendors, advance to related parties and accounts
receivable from customers. We had current liabilities of $1,996,446 consisting
of accounts payable of $251,541 , customer advances $580,151 , income tax payable
$321,670 and accrued liabilities of $277,531 . The Company's net loss was
$3,647,353 and $377,756 for the years ended December 31, 2020 and 2019,
respectively. The increase in net loss was due to a significant increase in the
impairment of goodwill and amortization of intangible asset acquired in business
combination in 2020.
Cash Flows
Years Ended December 31,
2020 2019 Change
Cash Flows provided by (used in)
generated in Operating Activities $ 1,236,265 $ (173,646 ) $ 1,409,911
Cash Flows used in Investing Activities (948,031 ) - (948,031 )
Cash Flows (used in) provided by
Financing Activities (108,368 ) 182,306 (290,674 )
Effect of change rate changes in cash and
cash equivalents 31,834 (522 ) 32,356
Net Increase in Cash During the Year $ 211,700 $ 8,138 $ 203,562 29
Cash Flow from Operating Activities
Cash flow provided by operating activities for the year endedDecember 31, 2020 was$1,236,265 as compared to the amount of$173,646 used in operating activities for the year endedDecember 31, 2019 , reflecting an increase of$1,409,911 . The increase in net cash provided by operating activities was mainly due to an increase impairment loss on goodwill, changes in accrued liabilities and customer advances, offset by the increase in net loss, changes in accounts receivable and deposits paid.
Cash Flow from Investing Activities
Cash flow used in investing activities was$948,031 for the year endedDecember 31, 2020 , compared to that of$0 for the year endedDecember 31, 2019 . The increase in net cash used in investing activities was mainly due to an increase in advances to related parties and the purchase of property and equipment.
Cash Flow from Financing Activities
Cash flow used in financing activities was$108,368 for the year endedDecember 31, 2020 , compared to cash flow provided by financing activities of$182,306 for the year endedDecember 31, 2019 . The increase in net cash used in financing activities was mainly due to an increase in repayments to related parties.
Critical Accounting Policy and Estimates
In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements in conformity withU.S. generally accepted accounting principles. We base our estimates on historical experience, when available, and on other various assumptions that are believed to be reasonable under the circumstances. Actual results could differ significantly from those estimates under different assumptions and conditions.
Off-Balance Sheet Arrangements
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.
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