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. Prior to trading on the OTC Pink Market quotation system under the symbol “FVTI,” our common stock traded on the OTCQB marketplace (“OTCQB”) under the symbol “FVTI.” OTC Pink Market securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTC Pink Market securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTC Pink Market 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 April 26, 2021, there were 396 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 do 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 We have not adopted or approved an equity compensation plan. No options, warrants or other convertible securities have been granted outside of an approved equity compensation plan . Transfer Agent The transfer agent for our capital stock is TranShare Securities Transfer and Registrar, with an address at 12849 Executive Drive, Suite 200 Clearwater, Fl. 33762, telephone number is (303) 662-1112. 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. 27 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. Company Overview Fortune Valley Treasures, Inc. (the “Company” or “FVTI”), was incorporated in the State of Nevada on M arch 21, 2014. We engage in the food supply chain 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 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 ended December 31, 2020, an increase of $4,730,475, or 1,719%, as compared to that for the year ended December 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 $1,673,367 for the year ended December 31, 2020, an increase of $1,457,145, or 674%, as compared to that of 2019. The increase in cost of revenue was due to the increase of our revenue. Gross Profit Gross profit was $3,332,327 and $58,997 for the years ended December 31, 2020 and 2019, respectively. Gross profit margin increased to 67% for the year ended December 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 ended December 31, 2020, an increase of $6,082,860, or 1,385%, as compared to year ended December 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 ended December 31, 2020, an increase of $3,269,597, of 866%, as compared to that for the year ended December 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 ended December 31, 2020 was $1,236,265 as compared to the amount of $173,646 used in operating activities for the year ended December 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 ended December 31, 2020, compared to that of $0 for the year ended December 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 ended December 31, 2020, compared to cash flow provided by financing activities of $182,306 for the year ended December 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 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.