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Item 7. Management’s Discussion and Analysis

2024-04-15 compared with 2023-03-31 · 63 added, 74 removed, 60 unchanged (70% of the section changed)

21 unchanged sentences

Years ended December 31,

$ (4,997,514 )

Cost of revenues

1 unchanged sentence

Other expense

Net income (loss)

$ (2,156,679 )

Net loss attributable to noncontrolling interests

Net loss attributable to Fortune Valley Treasures, Inc.

$ (4,046,615 )

Net income (loss) attributable to noncontrolling interests

Net income (loss) attributable to Fortune Valley Treasures, Inc.

$ (1,942,723 )

$ (2,103,892 )

revenues totaled $9,234,079 for the year ended December 31, 2022, an increase of $1,212,256, or 15%, as compared to the revenue for the

year ended December 31, 2021.

The increase in net revenues was mainly due to an increase in sales of

liquor and water purifier products as a result of the business expansion of the liquor and water purifier business departments.

of revenues totaled $4,593,405 for the year ended December 31, 2022, an increase of $933,600, or 26%, as compared to for the year ended

December 31, 2021.

The increase in cost of revenue was due to the higher product sales volume in line with our revenue increase.

revenues totaled $4,236,565 and $9,234,079 for the years ended December 31, 2023 and 2022, respectively, reflecting a decrease of

$4,997,514, or 54 %.

The decrease in product sales was primarily due to a decline in market demand resulting from the sluggish economic environment

and slow recovery in China’s economy as compared to the same period of the prior year.

And in order to attract new customers, the

Company has lowered the unit sales prices of wine products since April 2023, which has also contributed to the decline in the net revenue.

of revenues totaled $2,255,306 and $4,593,405 for the years ended December 31, 2023 and 2022, respectively, representing a decrease

of $2,338,099, or 51%.

The decrease in the cost of revenues was due to the lower product sales volume in line with our revenue

profit was $1,981,259 and $4,640,674 for the years ended December 31, 2023 and 2022, respectively.

Gross profit margin decreased to 47%

for the year ended December 31, 2022 from 54% for the corresponding period in 2021 primarily due to the changing of customers’

preference from less popular brands to popular brand products.

Popular brands products incurred higher costs of revenue and resulted in

the decrease of gross profit.

General and administrative expenses

totaled $6,590,240 for the year ended December 31, 2022, an increase of $4,405,336, or 202%, as compared to the year ended December

The increase was primarily due to the increase in professional expense incurred in 2022 in connection with the Company’s proposed Nasdaq

listing and related securities offering transaction, bad debt expense incurred for allowance reserved for doubtful accounts, including prepayments and

deposits paid, and impairment loss on intangible asset and goodwill recognized in 2022.

totaled $2,156,679 for the year ended December 31, 2022, an increase of $4,120,148, of 210%, as compared to the net income of $1,963,469

for the year ended December 31, 2021.

The increase was primarily due to the allowance booked for doubtful accounts and impairment loss

on intangible asset and goodwill, while net income was generated in 2021.

for the year ended December 31, 2023 from 50% for the corresponding period in 2022 primarily due to the decrease in the net revenues.

and administrative expenses totaled $6,137,486 and $6,590,240 for the years ended December 31, 2023 and 2022, respectively, representing

a decrease of $452,574, or 7%.

The decrease in operating expenses was mainly due to the decrease in professional service fees, and impairment loss on goodwill.

loss totaled $4,271,199 and $2,156,679 for the years ended December 31, 2023 and 2022, respectively, representing an increase in net

loss of $2,114,520, of 98%.

The increase in net loss was a result of the factors described above.

and Capital Resources

1 unchanged sentence

Total current assets

$ (1,787,902 )

Total current liabilities

Working capital

As of December 31, 2022, we had working capital of

$4,386,509 as compared to working capital of $3,351,962 as of December 31, 2021.

We had total current assets of $6,871,091 consisting

of cash on hand of $165,685, accounts receivables of $4,797,564, inventory of $148,925, and prepayments and other current assets of $1,758,917,

compared to total current assets of $5,069,481 as of December 31, 2021.

The increase was mainly due to the increase in accounts receivable,

resulting from an increase in sales and the extension of payment term in 2022.

We had current liabilities of $2,484,582 consisting of

operating lease obligation from non-related parties of $110,201, operating lease obligation from related parties of $16,629, accounts

payable of $688,822, accrued liabilities of $502,389, current portion of bank and other borrowings of $422,653, income tax payable of

$38,879, customer advance of $139,334 and amount due to related parties of $565,675 compared to total current liabilities of $1,717,519

as of December 31, 2021.

The Company’s net loss was $2,156,679 and net

income $1,963,469 for the years ended December 31, 2022 and 2021, respectively.

Ended December 31,

flows provided by (used in) operating activities

flows provided by (used in) investing activities

flows provided by (used in) financing activities

of exchange rate changes on cash and cash equivalents

changes in cash and cash equivalents

$ (3,155,245 )

of December 31, 2023, we had working capital of $1,231,264 as compared to working capital of $4,386,509 as of December 31, 2022.

had total current assets of $5,083,189 consisting of cash on hand of $288,255, accounts receivables of $3,118,892, inventory of

$32,587, and prepayments and other current assets of $1,643,455, compared to total current assets of $6,871,091 as of December 31,

The decrease was mainly due to the decrease in accounts receivable, and prepayments and other current assets.

We had current

liabilities of $3,851,925 consisting of operating lease obligations of $136,619, accounts payable of $583,887, accrued liabilities

of $627,457, current portion of bank and other borrowings of $458,023, income tax payable of $1,453, customer advance of $1,364,260

and amount due to related parties of $680,226 compared to total current liabilities of $2,484,582 as of December 31,

Company’s net losses were $4,271,199 and $2,156,679, respectively, for the years ended December 31, 2023 and 2022.

Years Ended December 31,

Cash flows provided by (used in) operating activities

Cash flows provided by (used in) investing activities

Cash flows provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Net changes in cash and cash equivalents

Flow from Operating Activities

Cash flow provided by operating

activities for the year ended December 31, 2022 was $6,927 as compared to the amount of $457,142 used in operating activities for

the year ended December 31, 2021, reflecting a increment of $464,069.

The increase in net cash provided by operating activities was

mainly due to the fact that the bad debt expense and impairment losses on intangible asset and goodwill have no impact on cash

flows, offset by changes in accounts receivable and prepayments and other current assets, net.

Cash flow used in operating activities for the year ended December 31, 2023 was $179,210, as compared to the amount of $6,927 provided

by operating activities for the year ended December 31, 2022, reflecting a decrease of $186,137.

Such decrease was mainly due to less

net revenue we generated during the year of 2023 than 2022.

Flow from Investing Activities

flow used in investing activities was $10,110 for the year ended December 31, 2022, compared to the cash flow provided by investing activities

flow used in investing activities was $4,879 for the year ended December 31, 2023, compared to the cash flow used in investing activities

$10,110 for the year ended December 31, 2022.

The increase in net cash flow used in investing activities was mainly due

to the decrease in repayment of advance to related parties.

The decrease in net cash flow used in investing activities was mainly due to the less cash

used in purchase of fixed assets and intangible assets in the year of 2023 than 2022.

Flow from Financing Activities

Cash flow provided by financing activities was $66,120 for the year ended

December 31, 2022, compared to cash flow used in financing activities of $192,034 for the year ended December 31, 2021.

The increase in

net cash provided by used in financing activities was mainly due to the increase in net proceeds of bank and other borrowings.

flow provided by financing activities was $236,605 for the year ended December 31, 2023, compared to cash flow provided by financing

activities of $66,120 for the year ended December 31, 2022.

The increase in net cash provided by financing activities was mainly due

to the increase in net proceeds of bank and other borrowings.

requirement for short term and long term

6 unchanged sentences

Guangdong Nanyue Bank

Bank of Ningbo

Aggregate outstanding principal balances

2 unchanged sentences

Material Cash requirement

addition to the financing arrangements discussed above, FVTI is party to numerous contracts and arrangements obligating it to make cash

payments in future years.

addition to the financing arrangements discussed above, FVTI is a party to numerous contracts and arrangements obligating it to make

cash payments in future years.

FVTI expects current liabilities to be paid within the next twelve months.

In addition to the items already

discussed, the following represents material expected cash requirements recorded on FVTI’s Consolidated Balance Sheets at December

In addition to the items

already discussed, the following represents material expected cash requirements recorded on FVTI’s Consolidated Balance Sheets

at December 31, 2023.

Such obligations include:

4 unchanged sentences

Accounting Policies and Estimates

Our accounting policies are discussed in detail in

the footnotes to our financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2022.

consider our critical accounting policies to be those related to revenue recognition, allowance of doubtful accounts and impairment of

intangible asset and goodwill.

Our critical estimates include estimates used to review the Company’s

goodwill impairments and estimations of recoverability for intangible asset.

The Company bases its estimates on historical experience

and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making

judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

accounting policies are discussed in detail in the footnotes to our financial statements included in this Annual Report on Form 10-K

for the year ended December 31, 2023.

However, we consider our critical accounting policies to be those related to revenue recognition,

allowance of doubtful accounts and impairment of intangible asset and goodwill.

critical estimates include estimates used to review the Company’s goodwill impairments and estimations of recoverability for intangible

asset, and bad debt expense incurred for allowance reserved for doubtful accounts,

including prepayments and deposits paid .

The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in

the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that

are not readily apparent from other sources.

Quantitative and Qualitative Disclosures about Market Risk

a smaller reporting company, we are not required to provide the information required by this item.

Financial Statements and Supplementary Data

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.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis