The following discussion of our results of operations and cash flows for the
years ended December 31, 2021 and 2020 and financial condition as of
December 31, 2021 should be read in conjunction with our financial statements
and the related notes included elsewhere in this report.
Results of Operations - Year Ended December 31, 2021 Compared to Year Ended
December 31, 2020.
Revenues
We generated $0 and $290 in revenues for the years ended December 31, 2021 and
2020, respectively. The Company did not generate any revenue during the year
ended December 31, 2021 due to the impact of COVID-19.
Cost of Goods Sold
Our cost of goods sold was $0 and $58 for the years ended December 31, 2021 and
2020, respectively. The Company did not incur any cost in the year ended
December 31, 2021 because there were no sales during the year of 2021.
Selling and Marketing Expenses
Our selling and marketing expenses primarily consist of advertising and product
promotion expenses. Our selling and marketing expenses were $28,499 for the year
ended December 31, 2021 as compared to $68,804 for the year ended December 31,
2020. Our total selling and marketing expenses decreased by $40,305 or 58.6%
during the year ended December 31, 2021, compared to the same period in 2020.
Such decrease in selling and marketing expenses was mainly due to the decrease
in promotion conference expense.
General and administrative expenses
Our general and administrative expenses primarily consist of payroll and benefit
costs for corporate employees, legal, consulting, professional expenses, rental
expenses and other corporate overhead costs.
The general and administrative expenses was $709,735 for the year ended December
31, 2021 as compared to $597,873 for the year ended December 31, 2020. Our
general and administrative expenses increased by $111,862 or 18.7% during the
year ended December 31, 2021, compared to the same period in 2020. Such increase
in general and administrative expenses was mainly due to the increase in legal,
accounting, printing, and stock transfer agent fees that were associated with
the Company's merger and acquisition activities and SEC filings.
Interest expense
Interest expense was $4,970 for the year ended December 31, 2021 as compared to
$15,102 for the year ended December 31, 2020. Our total interest expense
decreased by $10,132 or 67.1% during the year ended December 31, 2021, compared
to the same period in 2020. The decrease in interest expense was primarily due
to the repayment of short-term bank loan on March 17, 2021.
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Other Income (expense), net
Other expense, net was $4,321 for the year ended December 31, 2021 as compared
to other expense, net of $9,339 for the year ended December 31, 2020. The
decrease of $5,018, or 53.7% was principally caused by the disposal of inventory
in 2020.
Net Loss
Our net loss was $747,525 for the year ended December 31, 2021 as compared to
$690,886 for the year ended December 31, 2020, increased by $56,639 or 8.2% as a
result of the above factors.
Foreign Currency Translation Loss
We had $36,291 in foreign currency translation loss during the year ended
December 31, 2021 as compared to $68,201 in foreign currency translation loss
during the year ended December 31, 2020, reflecting a change of $31,910 or
46.8%. Such decrease in foreign currency translation loss was primarily caused
by the currency exchange rate fluctuation.
Liquidity and Capital Resources
Working Capital
For the Years ended
December 31, Change
2021 2020 (Dollars) (Percent)
Current Assets $ 4,628,531 $ 3,834,747 793,784 20.7 %
Current Liabilities $ 16,316,116 $ 14,206,129 2,109,987 14.9 %
Working Capital (deficit) $ (11,687,585 ) $ (10,371,382 ) (1,316,203 ) 12.7 %
Our working capital deficit was $11,687,585 for the year ended December 31, 2021
as compared to $10,371,382 for the year ended December 31, 2020, an increase of
$1,316,203 or 12.7%. The increase in working capital deficiency is primarily due
to an increase in loan from related parties and from third parties.
Cash Flow from Operating Activities
Our net cash used in operating activities were $561,297 for the year ended
December 31, 2021 as compared to $473,534 for the year ended December 31, 2020,
an increase of $87,763 or 18.5%. The increase was primarily due to the increased
net loss, increased cash outflow in prepaid taxes and advance to suppliers
during the year ended December 31, 2021 compared to the year ended December 31,
2020.
Cash Flow from Investing Activities
Our net cash used in investing activities was $20,599 for the year ended
December 31, 2021 as compared to $181,531 for the year ended December 31, 2020,
an decrease of $160,932 or 88.7%. The decrease was primarily due to the cash
receipt from reverse merger, partially offset by the increase in payment for
construction in progress and equipment during the year ended December 31, 2021
as compared to the year ended December 31, 2020.
Cash Flow from Financing Activities
Our net cash provided by financing activities were $860,718 for the year ended
December 31, 2021 as compared to $591,635 for the year ended December 31, 2020,
an increase of $269,083 or 45.5%. The increase was primarily due to the increase
in loans from related parties, partially offset by the repayment of short-term
bank loan and loans from third parties during the year ended December 31, 2021
compared to the year ended December 31, 2020.
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Off-Balance Sheet Arrangements
As of December 31, 2021, we did 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.
Critical Accounting Policies and Estimates
We prepare our financial statements in conformity with Generally Accepted
Accounting Principles ("GAAP") of the United States, which requires management
to make certain estimates and apply judgments. We base our estimates and
judgments on historical experience, current trends and other factors that
management believes to be important at the time the financial statements are
prepared. On a regular basis, we review our accounting policies and how they are
applied and disclosed in our financial statements.
While we believe that the historical experience, current trends and other
factors considered support the preparation of our financial statements in
conformity with GAAP, actual results could differ from our estimates and such
differences could be material.
Inventories
Our inventories primarily consist of dandelion teas and water purifiers.
Inventories are valued at the lower of cost (determined on a weighted average
basis) and net realizable value. Inventories consist of raw materials, goods in
process, and finished goods. We review our inventories regularly for possible
obsolete goods and establishes reserves when determined necessary. As of
December 31, 2021 and 2020, the allowance for obsolete inventories was $0 and
$0, respectively.
Construction in Progress
Construction in progress represents direct costs of construction, interest and
design fees incurred. No interest was capitalized for the years ended December
31, 2021 and 2020. Capitalization of these costs ceases and the construction in
progress is transferred to property, plant, and equipment when substantially all
the activities necessary to prepare the assets for their intended use are
completed. No depreciation is recognized until it is completed and ready for
intended use. Construction in progress as of December 31, 2021 and 2020 was
$8,726,299 and $8,283,595, respectively.
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606, Revenue from
Contracts with Customers. To determine the revenue to be recognized, the Company
applies the following five-step model:
? identify arrangements with customers;
? identify performance obligations;
? determine transaction price;
? allocate transaction price to the separate performance obligations in the
arrangement, if more than one exists; and
? recognize revenue as performance obligations are satisfied.
The Company generates revenues mainly from sales of packaged dandelion teas and
water purifiers. Revenue from the sales of goods is recognized when the control
over the promised goods is transferred to customers.
Cash payments received or due from customers before revenue recognized are
recorded as advances from customers. The advance from customers is recognized as
revenue when the Company's performance obligation is completed.
Related parties
The Company follows ASC 850, "Related Party Disclosures," for the identification
of related parties and disclosure of related party transactions. Parties are
related if one party has the ability, directly or indirectly, to control the
other party or exercise significant influence over the other party in making
financial and operating decisions. Parties are also considered to be related if
they are subject to common control or significant influence, such as a family
member or relative, shareholder, or a related corporation.
Recent Accounting Pronouncements
See Note 3 to our audited, consolidated, and condensed financial statements for
the fiscal years ending December 31, 2021 and 2020.
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