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 six months ended June 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 June 30, 2021 and 2020
Three Months Ended June 30,
2021 2020 Change
Revenue $ 1,825,344 $ 69,176 $ 1,756,168
Cost of revenue (797,524 ) (39,917 ) (757,607 )
Gross profit 1,027,820 29,259 998,561
Other operating income 166 - 166
Operating expense (469,476 ) (127,631 ) (341,845 )
Other income 572 1,400 (828 )
Other expense (5,934 ) (4,862 ) (1,072 )
Income taxes (96,267 ) - (96,267 )
Net income (loss) 456,881 (101,834 ) 558,715
Net income (loss) attributable to
noncontrolling interests 42,406 (14,669 ) 57,075
Net income (loss) attributable to Fortune
Valley Treasures, Inc. $ 414,475 $ (87,165 ) $ 501,640
Six Months Ended June 30, 2021 and 2020
Six Months Ended June 30,
2021 2020 Change
Revenue $ 3,469,504 $ 91,227 $ 3,378,277
Cost of revenue (1,527,267 ) (54,343 ) (1,472,924 )
Gross profit 1,942,237 36,884 1,905,353
Other operating income 166 - 166
Operating expense (978,607 ) (238,492 ) (740,115 )
Other income 768 2,186 (1,418 )
Other expense (9,487 ) (4,980 ) (4,507 )
Income taxes (162,622 ) - (162,622 )
Net income (loss) 792,455 (204,402 ) 996,857
Net income (loss) attributable to
noncontrolling interests 72,726 (14,669 ) 87,395
Net income (loss) attributable to Fortune
Valley Treasures, Inc. $ 719,729 $ (189,733 ) $ 909,462
16
Revenue
Revenue was $1,825,344 for three months ended June 30, 2021, reflecting an
increase of $1,756,168, or 2,539%, from $69,176 for the three months ended June
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 $3,469,504 for six months ended June 30, 2021, reflecting an
increase of $3,378,277, or 3,703%, from $91,227 for six months ended June 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 $797,524 for the three months ended June 30, 2021,
reflecting an increase of $757,607, or 1,898%, from $39,917 for the three months
ended June 30, 2020.
Cost of revenue was $1,527,267 for the six months ended June 30, 2021,
reflecting an increase of $1,472,924, or 2,710%, from $54,343 for the six months
ended June 30, 2020. The increase in cost of revenue was due to the increase of
our revenue.
Gross Profit
Gross profit was $1,027,820 and $29,259 for the three months ended June 30, 2021
and 2020, respectively, reflecting an increase of $998,561, or 3,413%.
Gross profit was $1,942,237 and $36,884 for the six months ended June 30, 2021
and 2020, respectively, reflecting an increase of $1,905,353, or 5,166%. 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 $469,475 for the three months ended June 30, 2021,
reflecting an increase of $341,845, or 268%, from $127,631 for the three months
ended June 30, 2020.
Operating expense was $978,607 for the six months ended June 30, 2021,
reflecting an increase of $740,115, or 310%, from $238,492 for the six months
ended June 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 June 30, 2021, net income was $456,881, compared to
net loss $101,834 for the three months ended June 30, 2020.
For the six months ended June 30, 2021, net income was $792,455, compared to net
loss $204,402 for the six months ended June 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 June 30, 2021 and 2020, the Company recorded net
income attributable to a noncontrolling interest of $42,406 and net loss
attributable to a noncontrolling interest of $14,669, respectively.
For the six months ended June 30, 2021 and 2020, the Company recorded net income
attributable to a noncontrolling interest of $72,726 and net loss attributable
to a noncontrolling interest of $14,669, respectively.
17
Liquidity and Capital Resources
Working Capital
June 30, December 31,
2021 2020 Change
Total current assets $ 4,353,686 $ 4,231,054 $ 122,632
Total current liabilities 1,993,288 1,996,446 (3,158 )
Working capital $ 2,360,398 $ 2,234,608 $ 125,790
As of June 30, 2021, we had working capital of $2,360,398, as compared to
working capital of $2,234,608 as of December 31, 2020. We had total current
assets of $4,353,686, consisting of cash on hand of $420,400, Inventory of
$136,361, prepayments and other current assets of $2,577,516, accounts
receivable of $1,189,597 and amount due from related party of $29,812, 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 $1,993,288, consisting of accounts payable of $204,012, customer
advances $695,695, income tax payable $113,964, due to related parties of
$729,258 and accrued liabilities of $108,236.
Our cash balance at June 30, 2021 increased to $420,400, 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 six
months ended June 30, 2021, the Company had a net income of $792,455 and used
cash in operations of $689,467 and at June 30, 2021, the Company had a working
capital of $2,360,398. 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 June 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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