The information contained in this Form 10-Q is intended to update the
information contained in our Annual Report on Form 10-K for the year ended
December 31, 2020 filed with the Securities and Exchange Commission on April 26,
2021 (the "Form 10-K") 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 guaranteed 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 quarterly 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 10-K 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 quarterly report on Form 10-Q. The
following should also be read in conjunction with the unaudited Financial
Statements and notes thereto that appear elsewhere in this report.
Overview
Fortune Valley Treasures, Inc. (the "Company," "we," "our" or "us") was
incorporated in the State of Nevada on March 21, 2014. We were initially
incorporated to offer users with up-to-date information on digital currencies.
We engage in the food supply chain operations and management through a service
platform. Through various acquisitions of high-quality upstream and downstream
companies in the industry, the Company creates a complete industrial chain to
reduce costs and enhance competitiveness. The company mainly focuses on online
and offline sales targeting regional wholesalers, retailers, supermarkets and
major food and beverage ("F&B") chains.
During the nine months ended September 30, 2021, the Company conducted its
business in one revenue stream: product sales - wine, water and oil and other
F&B products.
Results of Operations
Three Months Ended September 30, 2021 and 2020
Three Months Ended September 30,
2021 2020 Change
Revenue $ 2,005,390 $ 283,560 $ 1,721,830
Cost of revenue (875,418 ) (245,504 ) (629,914 )
Gross profit 1,129,972 38,056 1,091,916
Operating expense (521,892 ) (185,101 ) (336,791 )
Other income 2,512 78,541 (76,029 )
Other expense (4,327 ) (5,221 ) 894
Income taxes (156,402 ) (3,415 ) (152,987 )
Net income (loss) 449,863 (77,140 ) 527,003
Net income (loss) attributable to
noncontrolling interests 59,875 (2,518 ) 62,393
Net income (loss) attributable to
Fortune Valley Treasures, Inc. $ 389,988 $ (74,622 ) $ 464,610
Nine Months Ended September 30, 2021 and 2020
Nine Months Ended September 30,
2021 2020 Change
Revenue $ 5,474,894 $ 374,787 $ 5,100,107
Cost of revenue (2,402,685 ) (299,847 ) (2,102,838 )
Gross profit 3,072,209 74,940 2,997,269
Other operating income 166 - 166
Operating expense (1,500,499 ) (423,593 ) (1,076,906 )
Other income 3,280 80,727 (77,447 )
Other expense (13,814 ) (10,201 ) (3,613 )
Income taxes (319,024 ) (3,415 ) (315,609 )
Net income (loss) 1,242,318 (281,542 ) 1,523,860
Net income (loss) attributable to
noncontrolling interests 132,601 (17,187 ) 149,788
Net income (loss) attributable to
Fortune Valley Treasures, Inc. $ 1,109,717 $ (264,355 ) $ 1,374,072
16
Revenue
Revenue was $2,005,390 for three months ended September 30, 2021, reflecting an
increase of $1,721,830, or 607%, from $283,560 for the three months ended
September 30, 2020. The reason for the increase was the Company started
generating online sales from WeChat Application named Fu Gu Online in April
2021.
Revenue was $5,474,894 for nine months ended September 30, 2021, reflecting an
increase of $5,100,107, or 1,361%, from $374,787 for nine months ended September
30, 2020. The reason for the increase was the Company added its water and oil
business, which increased our sales volume.
Cost of Revenue
Cost of revenue was $875,418 for the three months ended September 30, 2021,
reflecting an increase of $629,914, or 257%, from $245,504 for the three months
ended September 30, 2020.
Cost of revenue was $2,402,685 for the nine months ended September 30, 2021,
reflecting an increase of $2,102,838, or 701%, from $299,847 for the nine months
ended September 30, 2020. The increase in cost of revenue was due to the
increase of our revenue.
Gross Profit
Gross profit was $1,129,972 and $38,056 for the three months ended September 30,
2021 and 2020, respectively, reflecting an increase of $1,091,916, or 2,869%.
Gross profit was $3,072,209 and $74,940 for the nine months ended September 30,
2021 and 2020, respectively, reflecting an increase of $2,997,269, or 4,000%.
The increase of gross profit was due to the addition of the revenue from our
water and oil business, where gross profit was higher.
Operating Expenses
Operating expense was $521,892 for the three months ended September 30, 2021,
reflecting an increase of $336,791 or 182%, from $185,101 for the three months
ended September 30, 2020.
Operating expense was $1,500,499 for the nine months ended September 30, 2021,
reflecting an increase of $1,076,906, or 254%, from $423,593 for the nine months
ended September 30, 2020, due to the increase in professional service fees and
general administrative costs in connection with the business of bottling and
distributing of drinking water in China.
Net Income (loss)
For the three months ended September 30, 2021, net income was $449,863, compared
to net loss $77,140 for the three months ended September 30, 2020.
For the nine months ended September 30, 2021, net income was $1,242,318,
compared to net loss $281,542 for the nine months ended September 30, 2020. The
increase in net income was a result of the factors described above.
Net income (loss) attributable to noncontrolling interests
The Company records net income (loss) attributable to noncontrolling interests
in the consolidated statements of operations for any noncontrolling interests of
consolidated subsidiaries.
For the three months ended September 30, 2021 and 2020, the Company recorded net
income attributable to a noncontrolling interest of $59,875 and net loss
attributable to a noncontrolling interest of $2,518, respectively.
For the nine months ended September 30, 2021 and 2020, the Company recorded net
income attributable to a noncontrolling interest of $132,601 and net loss
attributable to a noncontrolling interest of $17,187, respectively.
17
Liquidity and Capital Resources
Working Capital
September 30, December 31,
2021 2020 Change
Total current assets $ 4,886,661 $ 4,231,054 $ 655,607
Total current liabilities 2,108,115 1,996,446 111,669
Working capital $ 2,778,546 $ 2,234,608 $ 543,938
As of September 30, 2021, we had working capital of $2,778,546, as compared to
working capital of $2,234,608 as of December 31, 2020. We had total current
assets of $4,886,661, consisting of cash on hand of $150,189, Inventory of
$353,549, prepayments and other current assets of $2,352,728, accounts
receivable of $2,003,170 and amount due from related party of $27,025, compared
to total current assets of $4,231,054 as of December 31, 2020. The increase was
mainly due to the increase in prepayments and other current assets, offset by
the decrease in accounts receivable and due from related parties. We had current
liabilities of $2,108,115, consisting of accounts payable of $321,528, customer
advances $538,829, income tax payable $222,183, due to related parties of
$744,231 and accrued liabilities of $121,451.
Although our cash balance at September 30, 2021 decreased to $150,189, as
compared to $249,837 at December 31, 2020. We estimate the Company currently has
sufficient cash available to meet its anticipated working capital for the next
twelve months, without raising additional capital. The Company is continuing to
look for different financing opportunities in order to increase sufficient
working capital and improve liquidity.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. During the nine
months ended September 30, 2021, the Company had a net income of $1,242,318 and
used cash in operations of $712,200 and at September 30, 2021, the Company had a
working capital of $2,778,546. The Company's independent registered public
accounting firm expressed in its report on the Company's financial statement for
the year ended December 31, 2020 a substantial doubt about the Company's ability
to continue as a going concern. Based on the Company's effort in improving its
operations and the significant working capital generated as of September 30,
2021, the management believes that the substantial doubt has been alleviated.
Despite the increased working capital of the Company, no assurance can be given
that any future financing, if needed, will be available or, if available, that
it will be on terms that are satisfactory to the Company. Even if the Company is
able to obtain additional financing, if needed, it may contain undue
restrictions on its operations, in the case of debt financing, or cause
substantial dilution for its shareholders, in the case of equity financing.
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