The following discussion of our results of operations and cash flows for the years endedDecember 31, 2022 and 2021 and financial condition as ofDecember 31, 2022 should be read in conjunction with our financial statements and the related notes included elsewhere in this report.
Results of Operations - Year Ended
The following table sets forth information from our statements of comprehensive
income for the year ended
Year Ended December 31, Change 2022 2021 (Amount) (Percent)
Sales revenue$ 150,136,738 $ -$ 150,136,738 * % Cost of Goods Sold (9,722,341 ) - (9,722,341 ) * % Gross Profit 140,414,397 - 140,414,397 * % Operating Expenses (124,350,261 ) (738,234 ) (123,612,027 ) 16,744 % Operating Income (Loss) 16,064,136 (738,234 ) 16,802,370 (2,276 )%
Interest Income (Expense) 22,890 (4,970 ) 27,860 (561 )% Other Income (Expense) (805,421 ) (4,321 ) (801,100 ) 18,540 % Income Tax Provision (Benefit) (3,309,931 ) - (3,309,931 ) * % Net Income (Loss) 11,971,674 (747,525 ) 12,719,199 (1,702 )% Comprehensive Income (loss)$ 11,706,439 $ (783,816 )
$ 12,490,255 (1,594 )% Revenues We generated$150,136,738 and$0 in revenues for the year endedDecember 31, 2022 and 2021, respectively. The Company did not generate any revenue during the year endedDecember 31, 2021 due to the impact of COVID-19. During the year endedDecember 31, 2022 , sales of dandelion teas, certain nutraceutical products, and water treatment accessories generated$21,323,222 in revenue, constituting approximately 14.2% of the total revenue for that year, and sales of water purifiers generated$128,813,516 in revenue, representing approximately 85.8% of the total revenue for such year. The following is the sales breakdown by segment during the year endedDecember 31, 2022 and 2021: For the year ended December 31, 2022 2021 Dandelion teas$ 21,323,222 14.2 % $ - - % Water purifier 128,813,516 85.8 % - - % Total$ 150,136,738 100.0 % $ - - % Cost of Goods Sold Our cost of goods sold was$9,722,341 and$0 for the year endedDecember 31, 2022 and 2021, respectively. During the year endedDecember 31, 2022 , cost of sales of dandelion teas, certain nutraceutical products, and water treatment accessories was$2,456,221 , constituting approximately 25.3% of the total cost of goods sold, and cost of sales of water purifiers was$7,266,120 , representing approximately 74.7% of the total cost of goods sold of such year. The Company did not incur any cost in the year endedDecember 31, 2021 because there were no sales during the year of 2021. 24
The following is the cost of goods sold breakdown by segment during the year
ended
For the year endedDecember 31, 2022 2021
Dandelion teas$ 2,456,221 25.3 % $ - - % Water purifier 7,266,120 74.7 % - - % Total$ 9,722,341 100.0 % $ - - % Gross Profit Our gross profit was$140,414,397 and$0 for the year endedDecember 31, 2022 and 2021, respectively. The gross profit as a percentage of net revenue for the Dandelion teas was 88.5% for the year endedDecember 31, 2022 . The gross profit as a percentage of net revenue for the Water purifiers was approximately 94.4% for the year endedDecember 31, 2022 . The following table presents gross profit by segment for year endedDecember 31, 2022 and 2021: For the year ended December 31, 2022 2021 Dandelion teas$ 18,867,001 88.5 % $ - - % Water purifier 121,547,396 94.4 % - - % Total$ 140,414,397 93.5 % $ - - %
Selling and Marketing Expenses
Our selling and marketing expenses primarily consist of sales commission, advertising and product promotional expenses.
Our selling and marketing expenses were$123,157,529 for the year endedDecember 31, 2022 as compared to$28,499 for the year endedDecember 31, 2021 . Our total selling and marketing expenses increased by$123,129,030 or 432,047% during the year endedDecember 31, 2022 , compared to the same period in 2021. Such increase in selling and marketing expenses was mainly due to the significant increase in sales commission.
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$1,192,732 for the year endedDecember 31, 2022 as compared to$709,735 for the year endedDecember 31, 2021 . Our general and administrative expenses increased by$482,997 or 68% during the year endedDecember 31, 2022 , compared to the same period in 2021. 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 andSEC public disclosures. 25 Interest income (expense) Interest income was$22,890 for the year endedDecember 31, 2022 as compared to interest loss of$4,970 for the year endedDecember 31, 2021 . Our total interest income increased by$27,860 or 561% during the year endedDecember 31, 2022 , compared to the same period in 2021. The increase in interest income was primarily due to the interest earned from the Company's bank savings accounts. Income tax provision
Income tax provision was$3,309,931 for the year endedDecember 31, 2022 as compared to$0 for the year endedDecember 31, 2021 . There was no income tax provision in the year of 2021 because the Company had loss before provision
for income tax. Net Income (Loss)
Our net income was
Foreign Currency Translation Loss
We had foreign currency translation loss of$265,235 during the year endedDecember 31, 2022 as compared to foreign currency translation loss of$36,291 during the year endedDecember 31, 2021 , reflecting a change of$228,944 or 631%. Such increase in foreign currency translation gain was primarily caused by the currency exchange rate fluctuation.
Liquidity and Capital Resources
Working Capital December 31, December 31, Change 2022 2021 (Amount) (Percent) Current Assets$ 50,569,077 $ 4,628,531 $ 45,940,546 993 % Current Liabilities 43,656,963 16,316,116 27,340,847 168 % Working Capital (deficit) 6,912,114 (11,687,585 ) 18,599,699 (159 )% Our working capital was$6,912,114 as ofDecember 31, 2022 as compared to working capital deficit of$11,687,585 as ofDecember 31, 2021 , an increase in working capital of$18,599,699 or 159%. The increase in working capital is primarily due to the increase in cash inflow from revenue and the increase in the loans to third parties that are related to our operating activities during the year endedDecember 31, 2022 .
Cash Flow from Operating Activities
Our net cash provided by operating activities were$1,347,451 for the year endedDecember 31, 2022 as compared to$561,297 of net cash used in operating activities for the year endedDecember 31, 2021 , reflecting an increase of$1,908,748 or 340%. The increase was primarily due to the increase in net income, the decrease in inventories, prepaid taxes, and increase in accounts payable and taxes payable, partially offset by the increase in loan to third parties during the year endedDecember 31, 2022 compared to the year endedDecember 31, 2021 .
Cash Flow from Investing Activities
Our net cash used in investing activities was$503,802 for the year endedDecember 31, 2022 as compared to that of$20,599 for the year endedDecember 31, 2021 , reflecting an increase of$483,203 or 2,346%. The increase in net cash used in investing activities was primarily due to the increase in an equity investment during the year endedDecember 31, 2022 as compared to those items in the year endedDecember 31, 2021 . 26
Cash Flow from Financing Activities
Our net cash provided by financing activities were$1,776,551 for the year endedDecember 31, 2022 as compared to$860,718 of net cash provided by financing activities for the year endedDecember 31, 2021 , representing a decrease of$915,833 or 106%. The increase was primarily due to the proceeds received from issuance of the Company's stock shares, offsetting by repayment of loans from related parties, during the year endedDecember 31, 2022 .
Off-Balance Sheet Arrangements
As ofDecember 31, 2022 , 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") ofthe 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 ofDecember 31, 2022 andDecember 31, 2021 , the allowance for obsolete inventories was$36,299 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 three and year endedDecember 31, 2022 and 2021. 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 ofDecember 31, 2022 and 2021 was$7,734,862 and$8,726,299 , respectively. 27 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. During the three and year endedDecember 31, 2022 , the Company also engaged in the sale of certain nutraceutical products and water treatment accessories. 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 audited consolidated financial statements for the years ending
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