Fortune Valley Treasures, Inc. 10-K

Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information There is a limited public market for our common stock. Our common stock trades on the OTCQB marketplace (“OTCQB”) under the symbol “FVTI”. The OTCQB is a quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter equity securities. OTCQB securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTCQB securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTCQB issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange. Stockholders of Record As of May 13, 2020, there were 382 stockholders of all of our issued and outstanding shares of common stock. Dividends We have not declared any cash dividends with respect to our common stock and does not intend to declare dividends in the foreseeable future. There are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our common stock. Securities Authorized for Issuance under Equity Compensation Plans None. Recent Sales of Unregistered Securities None. Purchase of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. Selected Financial Data As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this item. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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 in U.S. Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. Coronavirus (COVID-19) Update Recently, there is an ongoing outbreak of a novel strain of coronavirus (COVID-19) first identified in China and has since spread rapidly globally. The pandemic has resulted in quarantines, travel restrictions, and the temporary closure of stores and business facilities globally for the past few months. In March 2020, the World Health Organization declared the COVID-19 as a pandemic. Given the rapidly expanding nature of the COVID-19 pandemic, and because substantially all of our business operations and our workforce are concentrated in China, our business, results of operations and financial condition have been and will continue to be adversely affected. Potential impact to our results of operations will also depend on 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 mitigate its impact, almost all of which are beyond our control. The impacts of COVID-19 on our business, financial condition, and results of operations include, but are not limited to, the following: ● We temporally closed our offices to adhere to the policy for approximately one month from late January 2020, as required by relevant PRC regulatory authorities. Our offices are slowly reopening pursuant to local guidelines. In the first quarter of 2020, the COVID-19 outbreak has caused disruptions in our operations and supply chains, which have resulted in delays in the shipment of products to certain of our customers. ● A large number of our employees have been or are in mandatory self-quarantine and the entire business operations of the Company has been restricted since January 2020. ● Our customers have been negatively impacted by the outbreak, which reduced the demand of our products. As a result, our revenue and income may be negatively impacted in 2020. ● The situation may worsen if the COVID-19 pandemic continues. We will continue to closely monitor our collections throughout 2020. A prolonged disruption or any further unforeseen delay in our operations and supply chains could continue to result in delays in the shipment of products to our customers, increased costs and reduced revenue. We cannot foresee whether the outbreak of COVID-19 will be effectively contained, nor can we predict the severity and duration of its impact. If the outbreak of COVID-19 is not effectively and timely controlled, our business operations and financial condition may be materially and adversely affected as a result of the deteriorating market outlook, the slowdown in regional and national economic growth, weakened liquidity and financial condition of our customers or other factors that we cannot foresee. Any of these factors and other factors beyond our control could have an adverse effect on the overall business environment, cause uncertainties in the regions where we conduct business, cause our business to suffer in ways that we cannot predict and materially and adversely impact our business, financial condition and results of operations. Results of Operations Years Ended December 31, 2019 2018 Change Revenue $ 275,219 100 % $ 95,849 100.0 % $ 179,370 187.14 % Cost of revenue 216,222 78.56 % 46,497 48.5 % 169,725 365.02 % Gross profit 58,997 21.44 % 49,352 51.5 % 9,645 19.54 % Operating expense 439,340 159.63 % 315,437 329.1 % 123,903 39.28 % Other income(expense) 2,669 0.97 % 847 0.9 % 1,822 215.11 % income taxes 82 0.03 % (2,814 ) (2.9 )% 2896 -102.91 % Net loss $ (377,756 ) (137.26 )% $ (262,424 ) (273.8 )% $ (115,332 ) 43.95 % 11 Revenue Revenue totaled $275,219 for the year ended December 31, 2019, an increase of $179,370, or 187.1%, as compared to that of 2018. The reason for the increase was our adoption of new sales and marketing strategies, including price reduction and online marketing, which increased our sales volume. Cost of Revenue Cost of revenue totaled $216,222 for the year ended December 31, 2019, an increase of $169,725, or 365.02%, as compared to that of 2018. The increase in cost of revenue was due to the increase of our revenue. The Company has not yet achieved economies of scale in its business, so it is not able to procure products at higher discount level from purchasing at higher volumes. Gross Profit Gross profit was $58,997 and $49,352 for the years ended December 31, 2019 and 2018, respectively. Gross profit margin decreased to 21.44% for the year ended December 31, 2019 from 51.5% for the corresponding period in 2018 primarily due to the decrease in the sales price of our products, as part of our strategies to promote more sales. Operating Expenses General and administrative expenses totaled $439,340 for the year ended December 31, 2019, an increase of $123,903, or 39.28%, as compared to that of 2018. The increase was primarily due to an increase in professional service fees. Net Loss Net loss totaled $377,756 for the year ended December 31, 2019, an increase of $115,332, of 43.95%, as compared to that of 2018, primarily as a result of the increase in cost of revenue and operating expenses. Liquidity and Capital Resources Working Capital December 31, 2019 2018 Change Total current assets $ 73,970 $ 338,305 $ (264,335 ) Total current liabilities 855,352 735,342 120,010 Working capital deficit (781,382 ) (397,037 ) 384,345 As of December 31, 2019, we had cash and cash equivalents in the amount of $38,137. We financed our operations primarily though borrowings from related parties. The Company’s current assets decreased significantly as a result of continued operating losses and net cash used in operating activities. Accordingly, the corresponding working capital deficit increased as a result of the decrease in current assets and the increase in current liabilities. Cash Flows Years Ended December 31, 2019 2018 Change Cash Flows (used in) generated in Operating Activities $ (173,646 ) $ (230,379 ) $ 56,733 Cash Flows used in Investing Activities - - - Cash Flows provided by (used in) Financing Activities 182,306 182,417 (111 ) Net (decrease) increase in Cash During Period $ 8,660 $ (47,962 ) $ 56,622 12 Cash Flow from Operating Activities Cash flow used in operating activities for the year ended December 31, 2019 was $173,646 as compared to that of $230,379 in 2018, reflecting an increase of $56,733. The change is a result of the Company liquidating its inventory in the amount of $206,785. The Company decreased its inventory position during the end of 2019 in order to generate and conserve cash, and did not commit additional cash to inventory which would mitigate the risk of impaired inventory as result of expected limited demand during the time when the COVID-19 pandemic was growing globally. Cash Flow from Financing Activities Cash flow provided by financing activities was $182,306 for the year ended December 31, 2019, compared to that of $182,417 in 2018. The decrease in net cash provided by financing activities was mainly due to decrease in the amount of loans from 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 with U.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. Item 7A. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, we are not required to provide the information required by this item. Item 8. Financial Statements and Supplementary Data The consolidated financial statements of the Company are included in this Annual Report on Form 10-K beginning on page F-1, which are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.